Category: Economics

Megan McArdle writes:

All of New York’s rebound has been paid for by the taxes on the financial industry–a few hundred thousand people in the industry pay the lion’s share of the taxes for the entire city.  Take them away, and the city will rapidly lurch back towards bankruptcy.

Of course, that’s not the sort of thing that happens overnight.  But the City and State of New York are remarkably business-unfriendly places; they usually end up ranked at the very bottom of the league tables in terms of the ease of doing business there.  That isn’t just taxes, though that’s part of it, but the massive, overgrown regulatory apparatus that can be perilous and expensive to negotiate.

Read the whole thing.  And after that, her post on rethinking regulation is quite worthwhile.

Tyler Cowen has explain to his mother why the price of gas is high because of Ike, and why that’s not a bad thing.  Sadly, it’s not just Tyler’s mother, but a lot of the politicians who run this country that need this basic lesson in economics.

Well, it look as if someone has proposed a scheme for a government car buyback.  Alex Tabarrok points out that this scheme will have the same economic problems that gun buyback schemes suffer from.

I’ve been reading Megan McArdle’s various posts about Ron Paul’s rather kooky idea about returning to the gold standard.  It seems to have brought the Ronulans out in force.  I love comments like this:

You are a clueless woman. I am just an engineer not an economist, and yet I know these things. A piece of sincere advice – you should stop posting on all matters economic. Focus on some birth control pills and stuff.

I am an engineer as well, and I also know a bit about economics, but I an also aware I know a tiny fraction of what Megan McArdle knows on the subject.   This sounds like a case of people hearing something they don’t want to believe, and attacking the messenger.  Truth hurts, I suppose.

You have to wonder if this sentiment is related to a string of faulty and dangerous products from China.

Clayton Cramer has this to say about the claim:

I find this claim implausible. Like nearly all human behavior changes caused by financial incentives, it operates at the margins. Where I live, the only regular destination that I can reach by foot rather than by car is my mailbox, which is a bit more than half a mile away. When I lived in West Boise, my job was 1 1/2 miles away. While I very occasionally walked or bicycled, cost was not a factor in the decision–simply because driving 1 1/2 miles was very, very cheap (about 3 1/2 gallons a month), and unless gasoline rose by $10 per gallon, the reduced driving cost was more than made up for with the inconvenience of not being to zip home to have lunch with my wife, and the cost of eating in the company cafeteria.

I agree.  One of the great ironies for me, when I was actively biking last year, was that I was spending more gas to bike than I would have if I just stayed home.   I enjoy both cycling and hiking, and both of them, for me, involve taking my bike, or my feet and backpack somewhere that I can do it.  I can cycle around my neighborhood, but that gets old.  To leave the neighborhood on the roads around here is taking your life into your hands.

So for me, higher gas prices mean less hiking and cycling, and thus I get fatter, not thinner.

Megan McArdle, writing at her blog’s new location over at the Atlantic, explains why she thinks WHO rankings of health care system quality are off. I’ve always been a fan of her health plan.

UPDATE: She has more here, here and here.

As long as some of us are blogging about “Sicko”, I thought I’d link to two great health care posts from my favorite econ blogger here and here:

In the United States, government at its various levels now accounts for roughly 45% of health care spending. (And by “now”, I mean 2004, the latest year for which OECD data are available. In 2004, of course, the government provided little prescription drug coverage. Remember that fact; it will become important later.) The United States spends about 15.3% of total GDP on healthcare. That means, for those following along at home, that government spending on health care consumes about 7.7% of GDP.

Canada spends 9.9% of GDP on healthcare. France spends 10.5% of GDP. What is the magic route by which we are going to cover all the people not currently covered by government insurance for 2.2-2.8% of GDP?

The answer to that I think is easy:  the government is going to ration health care down to that level if it’s determined to only spent 10% of GDP or thereabout on health care.  I doubt voters will be that determined, however.   Read the whole thing.

I should probably say, before I delve into the subject of gas prices, that I come from an oil family. My grandfather worked for an oil company. My father works for an oil company. So do my cousin and Aunt. I decided to make my career in another industry that’s hated for providing people with useful and essential products: pharmaceuticals.

Another blogger asks:

Speaking of Jericho, if people can go that NUTS over a TV series, why can’t John and Jane Q. Public stage an uprising against high gasoline prices? Are we sheep?

Because gas prices aren’t something that we can do anything about. They are driven by market factors that no individual or group of individuals control. Unless you want to pressure the President to nuke China and India, gas prices are going to be high.

Factors that are contributing to high gas prices:

1. High crude prices driven by volitility in the nations that provide it. Most world oil producers have shitty governments.
2. Demand from China and India driving up demand for existing oil supplies. That’s more than 2 billion people who all want to drive like Americans do.
3. Americans love to drive, and they like to drive big cars, and drive them a lot more in the summer.
4. Refinery shutdowns around the country that are a result of refiners not doing regular maintenance. Because gas prices are high, the costs of shutting down refinery units is high in terms of lost production.
5. We’ve switched from using MTBE as a anti-knock and oxygenating agent to the much more expensive Ethanol. Thanks corn lobby!
6. We haven’t built a new refinery in 29 years. Thanks EPA and NIMBYs!
7. A patchwork of environmental regulations prevents gas from one area being sold in another. The gas formulation for Philadelphia is different than for Houston.

But if you can find somewhere I can set nuts that would solve all these problems, I’d be willing to chip in.

UPDATE: A lot of folks have brought up the issue of the gasoline tax.  Getting rid of gasoline taxes, in the short term, would not lower prices.  In the long term, it would put more profit back into the industry and encourage more resources to be invested in refining and distribution, but over the short term the current price is set by where the supply equals the demand, and tax relief, in the short term, does nothing to increase the supply of gasoline.