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Free exchange

Economics

  • Putting a price on Radiohead

    by The Economist | WASHINGTON

    CRITICALLY acclaimed and wildly successful British rock band Radiohead left news organisations and music industry types scratching their chins this week after announcing that it would essentially be giving its latest album away. Fans can currently pre-order the album at the band's website, but clicking through to the checkout page, a buyer finds himself confronted by blank boxes. The amount to be paid is, according to the site, "up to you." Presumably, that amount might well be zero dollars and cents, or pounds and pence, give or take the credit card processing fee.

  • Handicapping Harlem

    by The Economist | NEW YORK

    LAND, particularly in large cities, is a scarce resource; and should, in theory, be sold to whoever pays the market clearing price. However, certain kinds of development--for example, building an oil refinery in the middle of Manhattan--justly raises many environmental concerns because they incur negative externalities.

    Negative environmental externalities may make a compelling case for market interference, but the case for tempering the “social externalities” of gentrification, is surely harder to justify.

  • Prepare for a food crunch

    by The Economist | WASHINGTON

    MARK THOMA directs our attention to an opinion piece written by poverty guru Jeffrey Sachs, who paints a pretty dire picture for the world's poorest citizens. Mr Sachs writes that the world faces a growing triple threat--rising food prices, conversion of food into fuel, and global warming--which will hit those living in the least developed nations hardest.

    It isn't particularly difficult to see where he's coming from. Wheat prices have been navigating unknown territory recently, due in part to high food demand but also to reduced wheat acreage in response to high prices, and high subsidies, for fuel crops.

  • Runway gridlock

    by The Economist | WASHINGTON

    IF IT WORKS for gridlocked city streets and and clogged highways, why not for airports? That's the question being posed by members of the Department of Transportation and the Federal Aviation Authority in response to the worst seven months for airline passenger delays since data has been collected. It's bad, and it's getting worse. In July, on-time arrival rates fell below 70 percent, and delays between August and October of last year were up 20 percent over the same period the year before.

    The problem seems to be similar to that faced by urban transportation departments.

  • Zimbabwe's problem: cruelty to animals?

    by Free Exchange | Washington, DC

    THE following headline is definitely one of those "laugh so you don't cry" sort of things:

    Hungry Zimbabweans Try to Eat Giraffe

    This AP report says that police had to stop villagers on the outskirts of Harare from slaughtering and eating a wandering giraffe. These people are of course reduced to girafficide by Zimbabwe's deadly economic policy: 

    Independent estimates put real inflation closer to 25,000 percent and the International Monetary Fund forecast it reaching 100,000 percent by the end of the year.

  • Give me a sugar buzz or give me detention!

    by Free Exchange | Washington, DC

    NEVER let it be said that the Canadian soul suffers from a deficit of defiance. Students at Winnipeg's Kelvin High School are fighting a junk food ban with some transgressive capitalism and showing how economic and political entrepreneurism can go hand in hand.

    Locker 188 is said to be the place to go for a can of Coke or Sprite, sold at the reasonable price of $1 each, which is cheaper than the cans of juice and bottles of water for sale in the vending machines. Juice sells for $1.25 a can, while water is $1.75.

    Even at discount prices, Grade 12 student Julian Schioler said he's making a tidy profit off his classmates' addictions.

    "I'm dealing in caffeine and sugar," he said.

    Clearly, not only is Kelvin High trying to dictate what it's students consume, but it's also trying to cash in on its local monopoly position. Young Mr Schioler can at once undercut the monopoly prices (giving fellow students more of what they want for less), line his pockets, and strike a blow for freedom.

    For, as the Globe and Mail reports, these black market sugar-mongers are motivated as much by the spirit of resistance as by the spirit of capitalism. "The issue is no longer sugar, but freedom," one student said.

    That said,

    Others have accused their classmates of blowing things out of proportion. If someone really wants candy, they point out, it's easy to find. But it's not necessarily the role of the school to make it widely available.If someone really wants candy, they point out, it's easy to find. But it's not necessarily the role of the school to make it widely available.

    Fair enough. But neither is it necessarily the job of schools to make juice and bottled water available. (How exactly do high-calorie drinks like fruit juice really differ in meaningful nutritional terms from soft drinks?) Anyway, as long as the school refrains from cracking down on its intrepid Coke dealers, these moderates will have a strong point. It is not up to the school to feed students' cravings. But will it actively prevent them from arranging among themselves to get what they want? Will locker 188 be treated to a no-knock raid? Will Kelvin High do nothing to protect its vending machine monopoly?

    We anxiously await the next report, for Manitoba high schools truly are the world writ small.     

  • State of the union

    by The Economist | WASHINGTON

    THE United Auto Workers strike, declared against General Motors after talks between the union and the carmaker broke down, turned out to be short-lived. It was announced today that an agreement between the parties had been reached, in which management of the auto workers' enormous health-care expenses is shifted from GM to the union. In all, the walk-out lasted a mere two days, but that was long enough to elicit contemplations on the state of American unions from a number of economics journalists.

    The Washington Post's Steven Pearlstein, for instance, wrote today that:

  • The value of spillovers

    by The Economist | WASHINGTON

    POOR Ezra Klein wrote an unfortunate post on urban development (which he later helpfully clarified). On the bright side of things, the post touched off a bevy of commentary on the forces that shape urban structures, some of which was quite good. Reihan Salam, for instance, makes an excellent point in writing:

    Ezra said something very interesting in this thread.
    But all in all, it's a post I rather wish I hadn't written, and had instead just said at a bar, so people could take apart the point privately. Ah well.

    This is a reminder of the value of agglomeration.

  • The happiness gender gap

    by Free Exchange | Washington, DC

    BACK in the golden age of polyester flare slacks and burnt orange shag carpeting, women were more likely than men to report themselves "very happy." No longer: women's happiness advantage has gone the way of decorative macrame owls. As the New York Times reports today, separate studies by economists Alan Krueger, and Betsey Stevenson and Justin Wolfers reveal a flip flop in who's happiest.

    The obvious explanation—that men, who used to relish their weekly stress-induced heart attacks, have become sissified by a shallow therapeutic culture and now grin shamefully while shaving their chests, whereas the stock of giddily gin- and valium-soaked housewives spared the terrible anxieties of overrated opportunity has rapidly dwindled—is strangely neglected. Instead, we are offered responsible social sciencce:

    Mr. Krueger, analyzing time-use studies over the last four decades, has found an even starker pattern. Since the 1960s, men have gradually cut back on activities they find unpleasant. They now work less and relax more.

    Over the same span, women have replaced housework with paid work — and, as a result, are spending almost as much time doing things they don’t enjoy as in the past. Forty years ago, a typical woman spent about 23 hours a week in an activity considered unpleasant, or 40 more minutes than a typical man. Today, with men working less, the gap is 90 minutes.

    I think the various commentators in the Times article have the diagnosis largely right. With improved equity in opportunity, women's expectations for themselves have risen, which makes it harder to meet them. A good part of this is also vestigial sexist expectations about women as homemakers and caretakers. But it is also the case that, as Alex Tabarrok puts it in his post on the subject, "opportunity brings opportunity cost." Increased opportunity is good, but it is not surprising if there is some lag in the development of the art of managing new tradeoffs. 

    As far as prescription goes, the Times' David Leonhardt offers a whopping dollop of government: universal preschool and state-mandated paid parental leave. Perhaps there is data showing these policies makes women happier, though he offers none, and I am aware of none.

    Alternatively, Mr Tabarrok's highly accomplished wife advises that women "just get over it"—"it" being the double bind of feeling guilty about neglecting hearth and home when on the job and about neglecting the job when attending to hearth and home. This is sage advice. I will never gainsay the importance of individuals taking responsibility for their choices, and it is often open to us  (more often than we think) to choose whether we will conform to or resist social expectations.

    However, resisting a social expectation—whether it is rooted in gender norms or consumption norms—is easier the weaker the expectation. If an expectation is unfair, it may be incumbent upon us, as a matter of justice, to help those who wish to buck it by making it easier to buck. Telling women to "get over it" doesn't mean that we shouldn't also strongly and repeatedly reinforce the point that women should not have to do so much of the unpleasant domestic and child- and parent-care work. It seems to me our culture remains awash in quasi-Victorian super-sentimenal romanticism about the mother-child bond, which makes women feel guilty if they approach childrearing with the same sort of genial detachment of even attentive, involved, and loving dads. Surely many men ought to do more of this work. But I think men doing more is less important than women doing less. Neither women nor men ought not be made to feel guilty if they outsource this work to daycare, nannies, or assisted-living facilities. 

    The happiness studies show that men now spend less time unpleasantly occupied than they used to. That's good! Our focus should not be on the equitible distribution of unpleasantness, but on an overall reduction. The best path is cultural change that lowers to women the cost of opting out of unfair social expectations—expectations that lead them to spend too much of their time devoted to unpleasant acts of altruism.

    And with that I resign my aspirations to become an advisor to the Mitt Romney presidential campaign.

  • The global back office

    by The Economist | WASHINGTON

    "WHO are the winners and losers from outsourcing?" ask Ingo Geischecker and Holger Goerg in a paper summarised at VoxEU. According to their research, the highly skilled win and the unskilled lose:

    Against the background of nearly constant relative wages on aggregate, the authors find from the micro-level data that international outsourcing has, nevertheless, had a marked impact on wages. Distinguishing three skill categories, there is evidence that outsourcing reduced the real wages for workers in the lowest skill categories; with the results being similar when applying a skill grouping that is based on either required on-the-job skills or educational attainment.

  • How far is far?

    by The Economist | WASHINGTON

    IN RESPONSE to my take on density differences between America and Europe, Megan McArdle writes:

    I don't think the relevant criteria is the density of cities at the turn of the century; it's the distance between them. Much of Europe looks like the denser bits of the American east coast because those densely populated urban centers were relatively close to each other, limiting the scope of urban expansion. Both are areas that were fully agriculturally exploited pre-industrialization, and have the resulting small distances between major cities.

  • Lennonist economics

    by Free Exchange | Washington, DC

    MANY economists aspire to the exalted status of the scientist. Some fuddy-duddies criticize the scientific aspirations of economics on the grounds that the human soul and its inscrutable choices cannot be quantified. Well, that's silly. But economics does contain a good deal of puzzling pseudo-science. Foremost in my mind is the baffling role the nation-state plays in welfare, trade and macro- economics, as if the national level is the "natural" level of analysis.

  • The cost of living extremely well

    by Free Exchange | Washington, DC

    SURE, incomes for the wealthiest are rising at a faster rate than for the rest of us, but before you unleash your virulent class resentments, stop and ask yourself, "Do I really know how hard it is to be immensely rich these days?" Well, do you? According to Forbes' "Cost of Living Extremely Well Index" the price of luxury goods rose by six percent this year, twice the rate of inflation. Living it up has never cost so much, its seems. Sad, really.

    However, the Forbes' representative in this Reuters report raises a fascinating question:

  • The density of nations

    by The Economist | WASHINGTON

    ON THE occasion of duelling climate conferences in New York and Washington, Megan McArdle explains why America faces more of an uphill battle than Europe in building a strong consensus to fight global climate change. Mostly, this is related to lower American population density. Low density and a heavy reliance on automobiles mean that American demand for driving—and by extension, for gasoline and emissions—is more inelastic than it is for Europe. As such, the cost of driving must rise by more for Americans than for Europeans to induce a drop in emissions of the same amount.

  • We talk back: more on single-payer care

    by The Economist | WASHINGTON

    IN RESPONSE to our take on Tyler Cowen's assessment of equity in single-payer systems, the Marginal Revolutionary himself visits the Free Exchange comment section:

    If we compare Canada and the United States, the best evidence we have is that the answer is no, a single payer system does not lead to more equity of health care outcomes with regard to income. Other than mentioning uncertainty about the data (and then switching to another and different question), the post doesn't much contest that.

    If the best evidence is not very good, then we need to be careful about drawing hard conclusions, and more careful still about "screaming them from the rooftop.

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Our economics correspondents consider the fluctuations in the world economy and the policies intended to produce more booms than busts

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