Out of Context, Issue 3 (or Who's Afraid of Comparative Advantage?)

"There are two technologies for producing automobiles in America. One is to manufacture them in Detroit, and the other is to grow them in Iowa. Everybody knows about the first technology; let me tell you about the second. First you plant seeds, which are the raw materials from which automobiles are constructed. You wait a few months until wheat appears. Then you harvest the wheat, load it onto ships, and sail the ships westward into the Pacific Ocean. After a few months, the ships reappear with Toyotas on them."

Landsburg, S. (1993). The Armchair Economist. As cited by Bryan Caplan in The 4 Boneheaded Biases of Stupid Voters, reasononline, October 2007.

The Economics of Congestion Pricing

Bloomberg's traffic reduction plan has won federal grant money to the tune of $350 million (Daily News). Why they need a federal grant to charge more money is beyond me, but let us examine the logic of congestion pricing as a traffic reduction plan.

Bloomberg argues that a congested city will not attract business as well and this will hurt New York's economy. He therefore proposes a plan to charge tolls for cars and trucks entering the city to reduce the amount of traffic and make the city more appealing.

The catch is obvious: The only way the fee will reduce traffic is if its cost is higher than the cost of sitting in traffic! If people would rather shell out than sit in traffic, the city will be clogged anyway. And if the fee is high enough that it is worse than the traffic, then it will drive people (and business) away faster than grid-lock. So what gives?

Economics of our Environment

This is an issue we will be hearing more about. Global environmental factors create our economic situation; the current rates of production and consuption, in turn, reflect back on the environment in a giant cycle that affects everyone in totally unpredictable ways. Exciting! And there are loads of funny people who think they understand it. Which makes for great comedy. We can sit and laugh at people like Sir Nicholas as they scream like headless chickens. That is not to say we should ignore the issues, rather caution is the buzzword. Try not to spend 1/2 the GDP on a dubious "environmental" project.

Should we just plant lots of trees and see what happens? Dell Computer began doing just that in an effort to offset environmental damage caused by its electronic devices. The catch: they want customers to pay ($2 extra for a laptop, $6 for a desktop). Michael Dell has called on fellow electronics companies to follow suit. See the LA Times article on the Gates Foundation to see why this may be at best a gimmick, at worst, folly.

Economics diversifies its portfolio: see story, see also Freakonomics.

Build a brain research institute. It's become a popular hobby today among people with cash to burn. Check back here for the list of those who have done it.

Happiness, the final frontier. The Economist ran a front page article, "Happiness (and how to measure it)," in its Christmas issue. The NY Times discussed Happiness 101, the new so-called Positive Psychology that has become the rage on college campuses across the country.

Economics was always about money, psychology dealt with mental illnes. Now, these disciplines are turning their tools on a goal so elusive, the DoI promised only the right to pursue it, never to attain it.

Howard Stern is earning almost $600 million for luring record subscribers on satellite radio.

To recap: environment, economics, neuroscience, and radio