• 19th Century Urban Transport Was An Environmental Problem

    An Environmental Law

    Jan 20 • Behavioral Economics, Demand, Supply, and Markets, Developing Economies, Environment, Macroeconomic Measurement, Regulation, Thinking Economically • 535 Views

    Asked if they want lower gasoline taxes that make more driving affordable, people typically say, “Yes.” Told that the only electricity for a village in India is from coal-fired plants, most people will say it’s okay.

    When making decisions about driving and electricity, we tend to observe the iron law of climate policy. Choosing between economic growth and reducing emissions, we take growth. Or, as a Chinese climate negotiator said during a Peking University speech, “I cannot accept someone from a developed nation having more right than me to consume energy…We do not want to pollute as they [the Americans] did, but we have the right to pursue a better life.” Correspondingly, The Economist asked people in the U.S. how much they would be willing to spend, per household, per year, on a climate bill. While $80 got majority support, $170 did not, and, at $770, opposition was overwhelming.

    As The Climate Fix author, University of Colorado professor Roger A. Pielke said, “The iron law of climate policy says that even if people are willing to bear some costs to reduce emissions, they are willing to go only so far.”

    How then to break the “iron law?” We will look at proposals tomorrow.

    The Economic Lesson

    Entering the realm of behavioral economics, science writer Jonah Lehrer suggests that we are less willing to select alternatives that provide short term loss and long term gratification. His example, in How We Decide, was people’s credit card excesses and how “…our emotions…tend to overvalue immediate gains (like a new pair of shoes) at the cost of future expenses (high interest rates).

    An Economic Question: How does Jonah Lehrer’s credit card example relate to climate change policy?

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  • India's UID Program Uses Fingerprints and Iris Scans

    Identity Checks

    Jan 19 • Developing Economies, Economic History, Government, Households, Labor, Macroeconomic Measurement • 671 Views

    Opening a savings account? You need to confirm your identity. Enrolling for Social Security or Medicare? They check your credentials.

    But what if you cannot prove who you are?

    Signing up for India’s Unique Identity (UID) program has enabled many millions of Indian citizens to pass an identity check for the first time. Described by the Economist, from the top down, the program is building a biometric data base. From the bottom up, so far, it has empowered more than 110 million people. Rising by 20 million a month, the numbers represent people getting eye and finger scans in municipalities across the country.

    With the scan, you can prove that you are you.  

    As a result, people can engage in financial transactions that previously had been impossible. Welfare payments can no longer be stolen with fake IDs. Cash can be placed into bank accounts. People can save and write checks and get credit. They can apply for jobs more efficiently.

    However, in addition to identity, aren’t we talking about economic growth?

    Maybe, we can even say that the Indian program resembles the onset of Social Security during the 1930s. Yes, the U.S. program was a social safety net. But also, didn’t we secure a fundamental source of proving our identity?

    The Economic Lesson

    The Indian UID has been successful because of the appropriate incentives. Employees of the private firm implementing the program are given sign-up quotas and then receive their pay when UID numbers are issued. So, instead of an inefficient massive government bureaucracy stumbling, as the program’s agents, the private sector is achieving success.

    An Economic Question: How do people in the U.S. prove their identity?

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    Schools, Budget Cuts, and Music

    Jan 18 • Government, Labor, Thinking Economically • 706 Views

    By Mira Korber, guest blogger.

    The story is familiar. With a tight economy and insufficient funds, public schools have to cut back. Music, physical education, and language classes are the first to go. And along with the classes go the teachers; since 2008, over 294,000 teaching positions have evaporated.

    While some believe retaining core classes — English, History, Math — is more important than a substantial music program, studies show that kids who study the arts actually have greater success in academic fields including reading and writing.

    In fact, global music programs, such as the famous “El Sistema” in Venezuela, have shown their music students have a drop-out rate of 7% versus the national 25%.

    This doesn’t solve the global music education vs. budget problem. But it does show that the opportunity cost of cutting music classes could be high.

    The Economic Lesson

    When you make a decision, you always give something up, which is otherwise known as your opportunity cost. With budget cuts already in place and more on the way, school boards have to choose what stays in school and what doesn’t. When a school board makes a decision, there’s always some kind of trade-off. For example:

    Eliminate music teachers and keep the same number of math teachers to avoid larger classes. Use older editions of textbooks to keep teachers of any subject employed.

    Yet in terms of long-run consequences, cutting music classes may have negative effects on students’ academic success.

    An Economic Question: Do you think it is possible to balance the arts with an economically viable school budget?


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    There’s No Such Thing as Free Music…

    Jan 17 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Economic Debates, Innovation • 634 Views

    By Mira Korber, guest blogger.

    You are a young musician on the brink of your professional career. Graduation is in May, orchestra auditions are around the corner, and where do you go to begin preparing? The IMSLP, of course.

    The what? The “International Music Score Library Project” (IMSLP) is the largest, open source, wiki-style website to which anyone can upload public domain sheet music and recordings. It’s the easiest, fastest, and cheapest (free!) source of downloadable scores — and while originally little known, is now considered the ultimate online musician’s resource. With over 150,000 scores and 7,000 recordings, it’s easy to see why.

    What’s the catch? IMSLP scores are in the public domain, therefore violate no copyright laws, but sometimes the site finds itself in a sticky intellectual property and publishing rights situation. With everything public — from uploading to managing the sheet music — the site is “crowd-sourced,” according to the founder, conservatory graduate and Harvard law student, Edward Guo.

    But the site’s history reflects copyright struggles with music publishing companies, who say IMSLP damages their hard-copy music sales. This article (from 2007) describes the IMSLP battle with Universal Edition, which successfully demanded the site be taken down due to copyright infringements in Europe but not in Canada, Guo’s home country.

    Eight months later, after volunteers perused all scores for copyright offense, the site was up and running again — until 2011, when the Music Publishers Association forced closure of IMSLP for one day. However, it is again accessible to all musicians seeking public domain scores; even professionals are using the site’s resources for their performances.

    And in an age of struggling orchestras, free parts are certainly welcome.

    The Economic Lesson

    “There is no such thing as free lunch” (TINSTAAFL) refers to hidden costs associated with something that may appear “free,” just like the music on IMSLP. Anything, from downloadable sheet music to a relaxing park costs someone something. Therefore, when considering something that appears “free,” remember there is always an opportunity cost, or sacrifice, made to access it. Even though IMSLP provides resources for the social good, its founder may pay the price in legal copyright hassle, and music companies in sales they lose.

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    An Annoying Penny

    Jan 16 • Behavioral Economics, Businesses, Money and Monetary Policy, Thinking Economically • 1011 Views

    People do not want to pay $2.01 for a tall coffee at Starbucks. No, the problem is not the $2.00.

    The problem is the penny.

    Starbucks recently raised the price of a tall coffee to $1.85 in NYC. With tax, the total is $2.01. As a result, baristas are dipping into their tips. Rather than giving 99 cents back for an extra dollar, they are pulling the penny from their tips jar.

    Or, as one person said, “I can’t believe it. Now I need to walk around with pennies?”

    Penny facts:

    • Worth 2 cents, a penny minted before 1982 is 95% copper.
    • Worth .005 cents, a 2011 minted penny is 2.5% copper.
    • Selling its pennies for a penny each to the Federal Reserve, the U.S. Mint loses .7 cents for each one. The yearly loss (called negative seignorage) is $50 million.
    • 11 pounds of pennies pay for $20 of groceries.

    Watch a “snappy” video, “Death to Pennies,” here.

    Our bottom line: Should we eliminate the penny?

    The Economic Lesson

    Perhaps, though, the biggest cost of the penny is its opportunity cost. How much time is lost cumulatively, across the U.S., from standing behind someone counting pennies at the cash register?

    An Economic Question: How might the elimination of the penny affect our economy?

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