• Organ Markets

    Dec 8 • Demand, Supply, and Markets, Economic History, Regulation, Thinking Economically • 800 Views

    When a San Francisco court said that certain bone marrow donors could be paid, they did not have to focus on medicine. Instead, the 3 judge panel could have discussed the market.

    The court said it was all about new technology that made bone marrow donation more similar to giving blood than an organ. While it is legal to pay a blood donor, compensating someone for an organ is a felony.

    Instead though, we could say the case was about the size of the market. The judges’ decision, if it is not reversed, has expanded the bone marrow market. Originally, prohibited, now demand and supply will play a role in determining availability and price for bone marrow donations.

    The Economic Lesson

    The size of markets can differ and change. With prohibition, the size of the market for alcohol diminished. For votes, substitute SAT test takers and kidneys, markets are illegal. In Why Things Should Not Be For Sale, philosopher Debra Satz suggests 4 criteria that “make particular markets noxious” (p. 9).

    • Looking at participants, she cites 1) people who might be so poor or desperate that they are especially vulnerable and also those with little information that she characterizes as 2) having “weak agency.”
    • Looking at a market’s results, she suggests being aware of “extremely harmful outcomes” 3) for individuals and 4) for society.

    With economist Russ Roberts, Dr. Satz discusses her perspective while in this Teaching Company lecture (#29), you might enjoy listening to a half hour discussion of issues that relate to organ transplant markets.

    An Economic Question: Thinking of Dr. Satz’s criteria and others that emphasize the lives that would be saved if organs could be bought and sold, would you expand the market for human organs?

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    Why Might People Cheat?

    Dec 7 • Behavioral Economics, Businesses, Economic Thinkers, Financial Markets, Households, International Trade and Finance, Labor, Regulation, Thinking Economically • 662 Views

    When are people more likely to cheat? Behavioral economist Dan Ariely says to look at sweatshirts, the Ten Commandments, dollar bills and cans of Coca-Cola.

    In one experiment, Ariely discovered that more students would copy someone’s seemingly dishonest behavior during an exam when that person was wearing their (elite) school’s sweatshirt. Ariely’s conclusion? People are more likely to replicate dishonesty if it comes from a group with which they want to identify.

    In this fascinating TED talk, he also connected minimal recall of the Ten Commandments to (less) cheating and explained why we take cans of Coke rather than dollar bills from a communal refrigerator.

    Our bottom line? Ariely’s research provides insight about the cheating and corruption that disrupt economic activity.

    The Economic Lesson

    In the World Bank’s “Doing Business” Index, Greece has a relatively low rank.  I wonder whether it is tougher to do business there because its macro statistics have been “misreported,” taxes are “under-collected” and the underground economy abounds.

    An Economic Question: Explain why corruption and cheating affect the ease of starting businesses.

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    Corn Counters

    Dec 6 • Businesses, Demand, Supply, and Markets, Developing Economies, Government, International Trade and Finance, Macroeconomic Measurement, Thinking Economically • 710 Views

    To estimate the size of the corn crop, the U.S. Department of Agriculture (USDA) hires corn counters. Calculating stalk stats and assessing cob size, they observe 15 foot sections in thousands of fields. Add to that weather predictions, yield trends, and other pertinent data and you get an estimate for how much corn will be harvested. Once you also know about stockpiles (corn in silos and other storage facilities), a picture of the supply side of the market emerges.

    What happens then? In corn (futures) markets, prices respond.

    According to the WSJ, inaccurate USDA forecasting has led to more corn price volatility. June 30, 2010 for example, when the USDA said stockpiles were smaller than expected, prices spiked and a rancher had to paid an extra $200,000 for his feed. When prices fell, China was observed “swooping in.” 

    Do you want to better understand futures markets? This is a clear explanation of how the orange crop affected prices in (Eddie Murphy’s) Trading Places wonderful climax. A more academic discussion is here.

    Our bottom line? Discussed in an econlife post, according to Michael Pollan, more than one-quarter of all supermarket items are affected by the price of corn.

    The Economic Lesson

    The three basic economic systems are tradition, command and the market. Reflected by corn futures, in reality, most economies are mixtures.

    An Economic Question: Name several economies you believe have much more of a market than government influence. Then check the Index of Economic Freedom to see if you are correct.

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    Do You Care If You’ve Got Mail?

    Dec 5 • Businesses, Demand, Supply, and Markets, Economic Debates, Economic History, Government, Households, Innovation, Labor, Macroeconomic Measurement, Thinking Economically • 638 Views

    In Canada, when postal workers went on strike because of wage cut proposals, many people were saying, “Who Cares?”

    In the U.S., Hallmark and Amazon have said that they do care about the future of the Postal Service. If asked, approximately 650,000 postal service employees would have agreed.

    The problem is money. Last year, the USPS lost $5.1 billion. And that total would have been double if Congress had not postponed retiree prefunding payments that were due.

    The USPS is a huge business. One of the largest US employers, they run more than 32,000 post offices and target 150 million points of delivery. And yet, the US Congress makes their big decisions. Just to decide the fate of Saturday mail delivery, a Senate bill has required 2 years of studies. (How long would FedEx have pondered the issue?)

    Here, here and here, other econlife posts discuss USPS problems.

    The Economic Lesson

    As Deputy Postmaster for the Colonies, Ben Franklin established our first home mail delivery system, diminished to a single day the letter delivery time between New York and Philadelphia, and to 6 days between Philadelphia and Boston. When the British fired Franklin for his rebellious political activity, the postal system was making a profit.

    Crucial for U.S. economic development, the information infrastructure that Ben Franklin initiated was only the beginning. For a history of The Information, this James Gleick book is superb. Also, this Teaching Company lecture (#28) ideally conveys the issues.

    An Economic Question: Why are USPS cutbacks such a dilemma?

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    Why Can’t the U.S. Postal Service Think Outside the Box?

    Dec 5 • Behavioral Economics, Economic Debates, Government, Households, Innovation, Labor, Regulation, Thinking Economically • 562 Views

    Do you wear a Yankee hat or a college sweatshirt? Our society approves of adopting a superior team or attending an elite college. According to NY Times journalist David Brooks, for sports and schools, we can aspire to the top. In addition, inequality is okay for physical fitness and

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