Tuesday, November 27, 2012

Assorted Thoughts & Links

1) This week I am covering moral hazard in my intermediate microeconomics class. Here's an article on the moral hazard of federal flood insurance and rebuilding after Sandy via the WSJ.

2) Speaking of hurricane economics, how do goods like gas get rationed in shortages when prices are prevented from rising (e.g. "price gauging" laws prevent fast increases in prices in some states like New Jersey)? Usually by waiting in line. But that is very costly as Tony makes clear

3) Microeconomic theorists (good ones!) at tech firms have a big impact. 
The desire to use theory to challenge conventional thinking is one reason economists are valuable to firms, says Susan Athey, of Stanford University and Microsoft.
They get better access to data to test theory, too!

4) For stimulus spending to work it needs to be temporary (otherwise it's not really stimulus!). John Taylor produces a graph that is further evidence the stimulus spending has become permanent. Note the "pro-growth" proposed path is what should have been the default path if the stimulus bill was a true temporary stimulus. The fact that stimulus spending has become permanent and increased government spending without Congress (really, the Senate) passing a budget in 3 years is a scandal. The fact that this never became a big story in the news is sad. 

5) Elect-a-Dictator game: There is one fair election, then the winner becomes dictator for life! This is worse for the decisive voter's welfare than regular elections with quality challengers because there is no electoral pressure on the dictator to behave or any ability for the people to throw out a particularly bad leader. Is Egypt playing the elect-a-dictator game?

Tuesday, November 20, 2012

No More Twinkies?

Hostess has declared its intent to go into Chapter 7 bankruptcy (liquidation of the company). Assuming the last minute negotiations between the company and the baker's union mediated by a federal judge fall through and the company is liquidated, does this mean that all 18,000+ jobs and 30 iconic American brands (including Twinkies!) will all just disappear?  Should the company be bailed out by the government in order to save the jobs of the bakers?

Thursday, November 8, 2012

Why Vote (in Local Elections)?

Because if you don't vote, and you find out your vote would have been pivotal, you feel bad. Really, really, really bad. (HT: Cheap Talk)

"I told her I didn't think one vote would matter." Well, he can still win the coin toss....

Saturday, November 3, 2012

Why Vote?

"Don’t boo – vote....Voting is the best revenge." -- Barack Obama

"I ask the American people to vote for love of country." -- Mitt Romney

A political back and forth from the campaign trail this weekend. I noticed neither one said, "Vote because your vote could be pivotal, break a tie, and decide the election!" If the election is close, well, I bet the campaigns would rather rely on a good lawyer than the actual median voter* siding with him.

* in Ohio