Re: Median Wages
--- Cyril Morong wrote: If real median wages have fallen, especially over a long time, why would that be? The geoclassical explanation (Henry George, Nicolaus Tideman, Mason Gaffney, Harry Gunnison Brown) is that rising land rent (and thus the price of land) has absorbed most of the gains from greater productivity. Fred Foldvary Santa Clara University
Re: paid parking a market failure?
--- Robert A. Book [EMAIL PROTECTED] at a time X1, they price goes up to $Y per minute, and everybody whose car is on the lot at that time pays $Y per minute until either they leave, or the price goes down at time X2? Yes. In congestion pricing, every agent in the congested space pays the same amount at that time. And that all of X1, X2, and Y are known in advance with certainty? For analysis, let us assume this, to show what the efficient price is with certainty. Part of the problem here is that the number of spaces has to be an integer. This means that the marginal consumer, the marginal value, etc., are (strictly speaking) undefined. We can determine the efficient price if the number of spaces is a continous variable, then relax the premise to integers and see if there is any significant difference. The real world has integers: the next apple, the next pencil. If we rule out integers, we can't analyze the real world. These concepts require continuity. Then economic theory does not apply to the real world. When the lot is full, the price is high enough that nobody wants to pay for a space Nobody extra. If we assume that people have diverse subjective values for parking places, and so the demand curve slopes down, then those who paid for a space have a positive consumer surplus. If all have identical an marginal willingness to pay, then the price is such that all are indifferent between parking or not, so the lot fills up with those whose coin toss is park. Are you assuming that (a) the space stays empty for a while and everybody still in the lot pays zero for that time, Yes, so long as there is an empty space. or (b) that the price drops a bit, and somebody else immediately takes that space? After the peak time, demand falls, and parkers will leave spaces empty unless the price drops. It does not matter whether new cars replace previous parkers or the old ones stay. If you do this, I expect you will find that the price is sometimes zero (at periods of low demand), If it is a private lot, and parkers are willing to pay more than zero, there being no free alternative, why would the lot owner not charge a positive price? Fred Foldvary
Re: paid parking a market failure?
--- Ricardo Gambirasio [EMAIL PROTECTED] wrote: I fail to see what's so special about parking. Parking as such is indeed not a special case. It only illustrates the general case. also in software, I don't see how software, etc., are similar. With software, shoes, etc., I pay for actual use and also for their availability. In the case of parking, if a city government provides it, nobody is paying for empty spaces. The availableness of street parking increases the productivity of the area and increases the rentals charged to tenants. People pay for empty street spaces as higher land rent or land prices. If city-provided street parking is not congested, what is the efficient price for parking, zero or greater than zero? I guess a tougher question would be: where isn't there this kind of market failure? Are you saying there is, or is not, market failure? I can't see how that is any more of a waste I don't claim it is a waste of space. The question is whether charging for parking space when there is no congestion, is efficient. problem is: where do we find such a government? It seems to me that is a separate question. Mine is about economic theory. Fred
Re: paid parking a market failure?
I seem to recall learning that rather than demonstrating an inefficiency, the presence of inventories represents a form of insurance against uncertainty in demand. David Levenstam Right, but suppose that the parking lot is an evenly rotating economy, and the parking use is the same day after day. The parking lot is full at particular times and not full other times. There is no uncertainty. It is known how many cars will park at particular times. Unlike produced goods, the number of parking places is fixed. Now, is it efficient to charge for a parking place when the lot is not full? Fred Foldvary
Re: paid parking a market failure?
Robert A. Book [EMAIL PROTECTED] wrote: I think the problem is, that idea that marginal cost pricing is optimal is in some sense related to the assuming that marginal cost is rising at the optimal point. But suppose the marginal cost curve at that point is horizontal. Does marginal cost pricing cease to exist? Recall that many authors define the supply curve as the upward-sloping portion of the marginal cost curve. MC rises because MP falls. MP falls because in the short run, one factor is fixed. But MC can be zero. Textbooks also have an illustration of the Nash equilibrium for a duopoly of water provision, where the MC of water is zero. In perfect competition, the price of water is zero. In monopoly, revenue is profit, and is maximized where MR is zero, where MR=MC=0. what is the optimal (i.e., surplus-maximizing) price when MC is decreasing everywhere? -- he said it has to be long-run average cost and that it's not really an interesting problem. He was wrong. A hotel elevator has a zero MC for another user. The hotel prices the use at MC. Shuttles are often user-priced at zero. A restaurant bathroom is usually priced at zero (but not always). Drinking fountains have no charge. Lots of services are priced at zero. Fred Foldvary
Re: paid parking a market failure?
--- Xianhang Zhang [EMAIL PROTECTED] wrote: This would be true if it were possible to charge different people different prices for parking based on congestion. It is possible, and is done in practice. Many parking lots charge more during peak times than in other times. There is predictability, because the typical usage does not vary much. cost of admitting an extra person is NOT zero because it requires you to drop prices which means you lose the revenue from all the other parkers/theatre goers. I don't follow this. Why does charging zero at some times require a drop in price when the lot is full? Fred Foldvary
Re: paid parking a market failure?
--- Robert A. Book [EMAIL PROTECTED] 5 cars come at 1pm and SIX cars at 2pm. During that time, charge just high enough so that all who want to park, can. The last car in does get a space, if he is willing to pay. between. But there's another possible outcome -- everyone races to be the 9th to arrive and get the last free space. Everybody knows the price will go up at a particular time. Every car there will pay the price. The spaces are no longer free. I think you are (inadvertently) assuming that there is some non-price way of allocating spaces taht is superior to an allocation with prices. No, that is not a correct inference. Is the marginal consumer the last to get a space, or the first to be turned away? It is the next one to get a space. Nobody gets turned away, because when the lot is full, there is a positive price. Fred Foldvary
Re: Katrina and the Evacuation: Market Failure?
The government (local, State, and Federal)appropriated responsibility for the Mississippi River levy system, the drainage systems, the pumping systems, the road ways, and the bridges, but apparently, they left it to the market to provide the service of evacuating the poor and the infirm. --- Michael Giesbrecht Why do you think so? The federal government is being blamed for not sufficiently preparing and executing evacuations. This implies the general belief that this too is the responsibility of government. Governments have appropriated the means of evacuation, such as highways, public transit, and military resources. is this an example of market failure? No. The market is not operating in transportation and in emergency services, as it has been pre-empted by government. Only when the highways, public transit, and emergency services are voluntarized would the market be culpable. Today, everybody expects the cavalry that trots to the rescue to be governmental. Fred Foldvary
Re: Katrina and the Evacuation of the Poor and Infirm: Market Failure?
--- Jeffrey Rous [EMAIL PROTECTED] wrote: I recently saw a table of murder rates through time (maybe in Freakonomics) and, through that measure, it appears that we are living in a relatively low homocide era. Right, if you don't count the holocaust, Gulag deaths, China mass murders, Cambodia slaughters, Rwanda genocide, etc. Fred Foldvary
Re: Interest rates and housing
Are you saying that there's a real cycle of real estate that takes 18 years from (from peak to peak or from peak to trough?)? David That is the usual cycle, although there are exceptions. That seems different from your initial contention that the current bubble has been caused by monetary growth. My contention is that there are two causes, monetary and real (including fiscal), and the causes are complementary. The timing of the cycle is inherent in the nature of the real estate market for rentals and construction. then do you predict a collapse of real estate prices based on monetary or real factors, or both? Both Fred
Re: Interest rates and housing
If the real estate cycle is based on government expansion of money, David It is based on that and also on fiscal policy and the inherent nature of real estate rentals and construction. why has it been the same under three or four different monetary systems? It does not matter much to the economy why there is a monetary expansion. In the 1830s the expansion was caused by the state control of banks, including the prohibition of branch banking, and with banks having to buy state bonds, and excessively issuing currency. The effect was similar to today's expansion of money by the Fed. It's essentially the Austrian-school business cycle, with the higher-order capital goods consisting of real estate construction. See my paper referenced in the cycle table for further explanation. Fred
Re: Interest rates and housing
If government has caused a real estate price bubble by artificially lowering interest rates, how can it have an 18-year cycle, David Because real estate construction takes years, and recovery from a downturn takes years. An exception is an inflationary boom that is not a real economic recovery, such as the stagflation of the 1970s. That's why there was a real estate peak in 1979. Why does the money go into residential real estate and not into stocks or automobiles or other assets? The money goes into all real estate, not just residential. Of course it also goes into stocks, as with the tech boom of the 1990s, followed by the downturn of 2001, which was not caused by real estate. But the real-estate boom prevented the 2001 recession from becoming major. The big depressions have all followed real estate booms. Fred
Re: libertarian paternalism
--- Edi Grgeta [EMAIL PROTECTED] wrote: I am trying to decide whether it is moral for a designer to impose his benevolent will through menu design by exploiting imperfections in how people choose. It is not an imposition, because the user is not forced to choose one of the options, since another option is to exit the menu. For example, if the designer thinks that option B is best, and people presented with options ABC (in that order) choose A, but presented with options BAC (in that order) choose B, then is it moral to select the options order BAC rather than ABC or a random menu? No freedom is lost. It is not immoral, since there is no coercion. One situation where this question comes up is in designing 401k plans. What exactly is the moral issue? Fred Foldvary
Re: Private urban green space
--- Sampo Syreeni [EMAIL PROTECTED] wrote: ... libertarians are sure hostile to the public goods scene, because there the emphasis is on things that *need* to be solved publicly. Public goods means collective goods, used simultaneously by some group. This is a completely different meaning from public as in public sector. Collective goods can be provided by private firms or by government. Solved publicly is ambiguous because it can mean solved by a group or solved by government officials. Fred Foldvary
Re: Private urban green space
--- Jeffrey Rous [EMAIL PROTECTED] wrote: I do think that a lot of times, economists are hostile the the idea of a public good like a park if there is some way to make the good excludable (fenced parks in London, country clubs, etc.). -Jeff Economists are not hostile to public goods. Public goods are facts to which economists apply theory like any phenomenon. There is nothing inherently good or bad about public goods. Fred Foldvary
Re: Private urban green space
today I had a discussion with a friend about urban planing and the necessity of public provision of urban green space (parks etc.). Do you know cases of private provision of urban green space and in that case, how do they make money out of it. Steffen Many residential associations provide green space, as do land trusts and proprietary communities such as Walt Disney World. See my book * Public Goods and Private Communities *, chapters on Arden Village, the Reston Association and Walt Disney World. Fred Foldvary
Re: [armchair] Re: spamonomics
Fraud is not part of the market. Fred Foldvary --- Ron Baty [EMAIL PROTECTED] wrote: Fraud should not be part of the market but always has been and will likely continue to be part of any realistic market A pure market consists of voluntary economic acts, and theft, including fraud, has involuntary victims, so fraud is outside the pure free market. You are really saying that there will always be attacks on property rights; but these are violations of rather than part of a pure market. In a free market economy how would you eliminate fraud without limiting the free market or changing human nature? Of course no policy can eliminate fraud; rather, optimal policy seeks to minimize the net social cost of fraud. And is it not the presence of fraud, using a broad definition, that enhances the effect of reputation in market exchanges. I don't see why that would be the case. Fred Foldvary
Re: spamonomics
--- Christopher Auld [EMAIL PROTECTED] wrote: Followed closely by offers from extremely respectable officials in Nigeria who will give me hundreds of thousands of dollars merely for sending them my chequing account information. One can see how the first three products are highly complementary, but I don't see how the third relates. The complementarity is the belief in magic, that one can create something out of nothing, getting rich without work effort or getting something for your body beyond the natural possibilities frontier. This ultimately comes from parents teaching children that there is magic, e.g. Santa Claus and the tooth fairy. If parents would keep it real with children, children would be less likely to belive in getting something for nothing or something beyond the possibility frontier. Fred Foldvary
Re: increases money supply over time?
Fred Foldvary Wrote: The Fed buys bond and in effect pays with a check. john hull [EMAIL PROTECTED] wrote: To buy back bonds, it must have sold them at some time in the past. No. The Fed does not buy the bonds back. They buy bonds in the market, just as any buyer would. If you buy bonds, that does not imply that you sold them previously. I don't know anything about blue lines, Some emails in this list in HTML have a blue line at the left. When I reply, that verkakte blue line is still there. I turned it off in this reply by using plain text rather than HTML. Fred Foldvary
The blue line
You're at the bar with your buddies, and BillGates walks in through the door. Obviously the distribution of wealth hasbecome more unequal. But do you really feel worse off?--- I'd like to know how the annoying blue line at the left gets put into email, why one would inset it, and whether onecan removeit in replying. Fred Foldvary
Re: Too many choices
--- [EMAIL PROTECTED] wrote: He says that as the number of choices we have grows (for products) we become less happy, Is he just guessing, or is there evidence for this? that it is too hard to know which toothpaste, for example, to buy. That seems ridiculous. People tend to settle on one brand and stick to it. All of this affluence and choices has made us less happy. Another conclusion from thin air? Could it not be something like less satisfactory relationships, or worry about war, or more stress? It seems that as we become freer to pursue and do whatever we want, we get less and less happy. What data makes it seem so? What do list members think of this? Where's the evidence? If people are too affluent, could they give some of their money away and become happier? This is in fact what many of them do. Fred Foldvary = [EMAIL PROTECTED]
Re: why aren't we smarter?
--- [EMAIL PROTECTED] wrote: American Jews tested below average on Army intelligence tests conducted around the turn of the last century (1900) I suspect this was not a pure IQ test but had a bias towards education, and at that time, American Jews, especially recent immigrants, many not have been so well educated, and now they are. I do wonder about the meaning of IQ tests. I test out in the top 1% of the IQ distribution but have been singularly unsuccessful. Although it's anedotal, I know many other unsuccesful high IQ people as well. Clearly high IQ and success don't automatically go hand in hand. David Levenstam Success in what? Many high-IQ persons do not have wealth as their highest goal. Also, chance falls equally on the high and low IQs. Fred Foldvary = [EMAIL PROTECTED]
Re: Why is a dollar today worth more than a dollar tomorrow?
--- John Morrow [EMAIL PROTECTED] wrote: By the way, there have been times and places where the measured real interest rate was essentially zero; I think this happened in Japan in the 1990s. So the question is, why at the zero rate was there not greater demand to borrow? The answer may well be that the expected future inflation and real interest rates were highly uncertain, and the transaction costs of getting and exiting from a loan were high, and there was a high level of risk aversion. What counts is not just the cost of borrowing but also the expected return on the borrowings, and if business conditions are bad, then the demand for loanable funds may be low because of uncertain earnings or asset appreciation. The inflation part of the nominal interest has to be paid in actual dollars, and so high rates of inflation may well deter demand. A low real rate of interest induces more borrowing, other things equal, but with higher inflation and greater business uncertatainty, other things may not be equal. Fred Foldvary = [EMAIL PROTECTED]
tax credit for housing?
--- Tigger [EMAIL PROTECTED] wrote: I support an alternate way for the gov't to support housebuying: 50% tax credit on house payments (interest and principle), with some lifetime maximum ($2, 3, 400 000?). Tom This tax-credit subsidy will add to demand and further increase the price of housing, which then requires a bigger credit. The credit reduces tax revenue, and so for a given budget, other taxes get increased, so the result is further distortion of prices and a greater excess burden on the economy. This treats the symptom rather than cure the cause. Fred Foldvary = [EMAIL PROTECTED]
Re: Why is a dollar today worth more than a dollar tomorrow?
--- Marko Paunovic [EMAIL PROTECTED] wrote: OK. Then, as long as the expected profit from building a factory is higher than zero, I would not lend the money at zero interest rate. If at a zero rate of interest, the quantity of savings exceeds the quantity of borrowings, savers would earn zero interest. Borrowers would just pay the overhead costs and a risk premium and an inflation premium. You as lender would earn a wage for engaging in the lending business, but the pure interest rate would be zero. The reason the interest rate is positive is that at a zero rate, the quantity of funds demanded for loans exceeds the quantity of loanable funds from savings, so this scarcity drives up the rate just as with other prices. Fred Foldvary = [EMAIL PROTECTED]
Re: Real wages constant since 1964?!
If you measure wages in desk calculators instead of dollars, I'm sure they've gone up substantially! ;-) --Robert And if you measure wages in units of a real-estate price index, they have gone down substantially! Fred Foldvary = [EMAIL PROTECTED]
Re: Why is a dollar today worth more than a dollar tomorrow?
On 2003-12-05, john hull uttered: For some reason, I can't get it straight in my head why the risk-free rate of interest would be higher than zero. The easiest example I know of is, would you be happy saving all of your income for the next year, without receiving a formidable compensation? Sampo Syreeni, aka decoy - mailto:[EMAIL PROTECTED], tel:+358-50-5756111 That does not explain it, because many folks would save SOME of their income even if the interest rate were zero. Fred Foldvary = [EMAIL PROTECTED]
Re: Why is a dollar today worth more than a dollar tomorrow?
--- Marko Paunovic [EMAIL PROTECTED] wrote: In a risk-free world I can't fail. Risk-free interest is quite different from a risk-free world. We need to assume the usual risky world, but a loan that is sure to be repaid and with the interest sure to be paid, which US treasury bonds currently come close to. Fred Foldvary = [EMAIL PROTECTED]
Re: Inflation-Free Currency
--- john hull [EMAIL PROTECTED] wrote: Some sources of info claim that currencies can be made to be resistant/immune to inflation. Yes, if the unit of account is an hour of unskilled labor or a commodity. If we use an Hours model, then the currency is worth 1 hour of (anybody's) labor _or_ $10 in terms of real dollars. Next year, it is worth one hour or $9.70, let's say, in real dollars. So if the value in dollars is declared by fiat, then it needs to be changed periodically to maintain purchasing power. The local currency unit is still the hour, so it does not matter how hours exchange with dollars or euros. They are trading an hour of labor for a pound of carrots regardless of the exchange rates with fiat money. Fred Foldvary = [EMAIL PROTECTED]
Re: Why is local currency good or bad or neither?
--- Sampo Syreeni [EMAIL PROTECTED] wrote: On 2003-10-30, Fred Foldvary uttered: So basically this is a response to credit constraints. Another reason people may be inclined to use local currencies is that the narrow circulation and informal accounting usually associated with them make it difficult to collect taxes on the associated transactions. At least in some cases we can analyse local currencies as instances of tax evasion. So why not just use federal paper dollars for that? Another common reason why local currencies are used is unemployment. When people are unable to earn a living on the open market, they'll have to rely on friends and neighbours for help, which easily leads to reciprocal trade in services. That can easily spread and give rise to a new, local currency when bilateral trade no longer suffices. From this perspective local currencies can also be a means to circumvent labor market rigidities. Again, why not just use federal cash? What I can't fathom is why these people engage in indirect trade, use what is essentially money and even compete, but still think that it's somehow more neighbourly or human to do all this in an alternative currency. What is more neighbourly is the local organization and the relationships it fosters. The use of LETS or local currencies is incidental to this. Fred Foldvary = [EMAIL PROTECTED]
Re: financial leverage
--- Tyl [EMAIL PROTECTED] wrote: I don't see how bond would be a loser if interest rates goes higher since I will locking in a bond that yields a higher coupon rate than the borrowed rate. If you can borrow money at a lower interest rate than what the bonds pay, and you hold the bonds until maturity, then yes, you will have a profit if the inflation rate has not risen to offset the after-tax gain. If the interest you pay on your borrowed funds is tax-deductible but the interest you receive is not taxable, so much the better. Fred Foldvary = [EMAIL PROTECTED]
Re: Why is local currency good or bad or neither?
--- Burns, Erik [EMAIL PROTECTED] wrote: and also of e-gold (which is still around: www.e-gold.com), all of which use tokens rather than dollars (which are tokens too). Gold is not a token. Gold is a real commodity. Tokens are substances of little intrinsic value which can be exchanged for something of real value, like a ticket to a movie, or like fiat paper money. What we call coins today are really tokens rather than true coining of precious metal. these always seemed to me to be ADDING a step to transactions rather than making them easier. What step does it add to exchange in terms of gold ounces rather than dollars? It is a step to translate from dollars to gold, but if you reckon in terms of gold ounces, then the extra step is to translate to dollars. and the argument that e-gold solves the fiat money problem is, to me, false because you're stuck with gold's value being determined by a market that's priced in ... dollars. The fiat problem is the arbitrary inflating of the amount of currency, which does not take place with gold. Gold's value is relative to everything else, not just dollars. Those who had their money as gold during the past couple of years are not crying. Fred Foldvary = [EMAIL PROTECTED]
Re: Why is local currency good or bad or neither?
People also often suffer from a confusion between income and money. They tend to think of the two as synonymous, that anything not received in money isn't income and therefore isn't taxable. Precisely. If we drop the distinction, we can for instance easily see that all sex is actually prostitution of one kind or another. Sampo Syreeni, aka decoy - mailto:[EMAIL PROTECTED], tel:+358-50-5756111 No, prostitution is sex in exchange for money or goods, when there is no emotional or relational benefit from it. If one obtains psychic income from sex, one has not really prostituted oneself. Fred Foldvary = [EMAIL PROTECTED]
Re: gold rush
What do you feel is the main reason why there has been such a steep rise in the price of gold in recent times? Chris Macrae One reason is that Chinese residents are now able to buy gold, where it was formerly more restricted. Also, I have read that the government of China is buying gold. Also, the price of gold was depressed for so long that once demand rose, others took note and bought. Fred Foldvary = [EMAIL PROTECTED]
Re: intellectual property
--- Barney Hamish [EMAIL PROTECTED] wrote: How does the market decide that the _thought_ creation belongs to the creator as you state? The publisher includes a contract with the book that states that the seller agrees not to copy the book, and not to transfer it to anyone unless the next owner also agrees not to sell the book. It would be like a covenant that goes with the book. Fred Foldvary = [EMAIL PROTECTED]
Re: immigration: net gain or net drain?
--- Bryan Caplan [EMAIL PROTECTED] wrote: All it claims is that immigrants reduce wages. But this is by definition balanced by the extra surplus enjoyed by employers. If the surplus is general to the economy, then is it not the case that in industries with competitive markets for labor and capital goods, and with substantial competition in the goods markets, providers of labor and capital goods earn their marginal products and firms have zero economic profits, so the surplus goes to land rent? If so then it is not employers qua firms who get the surplus, but the landowners. Firms which rent their premises would get no surplus from being employers. Fred Foldvary = [EMAIL PROTECTED]
Re: Horses and Subsistence Farming
The issue is marginal productivity, not average productivity. The subsistence scenario is one where the supply curve of laborers is low and fat. The demand curve may rise to great heights, but eventually if falls down to meet such a low supply curve. Robin Hanson [EMAIL PROTECTED] http://hanson.gmu.edu Even when horses increase marginal productivity, that may not lift farmers above subsistence. If they don't own the land, they pay rent to a landlord, who might be able to absorb the wealth above the subsistence level, if there is no free land available of that quality. Every farmer gets a horse, but that is to achieve, rather than rise above, subsistence. Fred Foldvary = [EMAIL PROTECTED]
