Fresh-made gefilte fish is hard to find this Passover season, because the harsh winter restricted fishing on the Great Lakes, sharply decreasing the supply of an essential input—whitefish. While this delicacy is not required by ritual, it is traditional—and with fresh-ground horseradish it is a mouth- (and eye-) watering treat. One would think that a rising price would equilibrate the market, but it hasn’t—apparently merchants did not want to antagonize customers by raising prices. Indeed, the nature-induced shortage in the market for fresh gefilte fish has increased the demand in the related market for the pre-made Manischewitz product, so that is hard to find too. Pretty sad when you can’t find gefilte fish even in Manhattan!
The new exhibition on the Vikings at the British Museum illustrates behavior along supply curves. The local Anglo-Saxons decided that the best way to keep Viking raiders at bay was to buy them off—to pay tribute. Perhaps unsurprisingly, this extra payoff merely induced a movement up the supply curve of Viking raids, as more raiding parties realized that there was money to be made by raiding English villages. Perhaps this is a lesson for modernity: don’t negotiate with terrorists! Read More »
We are arranging a car to take us from our flat to Heathrow Airport early Saturday morning, then return us on Monday evening. The price going to the airport is ₤28, the price returning is ₤38. Why the difference?
One possibility is cost-based price discrimination: the driver may have to wait at Heathrow, since the plane and retrieving our baggage may be delayed. Another is that the prices are set to match the differential set by metered taxis to reflect waiting time for fares at Heathrow (although I would think that competition among car services would eliminate that differential). I don’t see how this differential could arise from demand-based price discrimination; and neither of the other explanations seems very satisfying.
On a visit to the London Science Museum, my oldest grandson explained to me how 3D printing works. I expressed doubt about its economic value, but he pointed out this sign. “Aha,” I said, “here is a clear-cut case of a technological change that should reduce long-run average cost (by saving on materials).”
And despite the last sentence of the picture, this saving will eventually be passed onto consumers in the form of lower ticket prices, but probably not fully in the oligopolistic aircraft manufacturing industry.
At the British Library, the special exhibition about Georgian England has a concession (old folks) price of ₤7, but also a listed concession (gift) price of ₤8. With the latter, one gets a receipt and can deduct the ₤8 from one’s income at tax time. If one is in the 20 percent bracket (taxable income from almost nothing up to ₤32,000), the net admission price is ₤6.40. So the incidence of the subsidy is typically shared nicely by the library and the taxpayer. But for the highest-income visitors — tax rate of 40 percent — the overwhelming share of the benefit goes to the taxpayer. I’ve never seen this double-pricing scheme made so explicit — and the sharing of the gains made so clear — in the U.S.
The picture below is of a “beer” I drank at a friend’s house this past weekend. It actually tasted pretty good; but why 0.5 percent alcohol, which surely added to the cost of production, but couldn’t, I think, have added to the taste? Including the minuscule amount of alcohol would certainly exclude teetotalers from consumption; and to get any kind of buzz a real beer drinker would need to drink at least several gallons. Read More »
Watching the Olympics in a foreign country (the U.K.) brings out the super-patriot in me. I’m cheering for the U.S. athletes in each event, and I don’t even care about the games!
Is this patriotism unusual? Actually, we Americans are outliers in this regard. In a recent set of World Values Surveys, 71 percent of Americans responded positively when asked if they were very proud of their country. Among 16 other rich countries in the surveys, the average was only 45 percent. And only Australians and Irish were as proud as we seem to be. The jingoism of the networks in the U.S. during the Olympics caters to, and perhaps reinforces, our attitudes.
A recent New York Times article discussed a meeting being held to protest a “tiered wage” that averages $1,000 per week for performers in touring productions of Broadway musicals — compared to a “full wage” of $1,800 for the Broadway productions of the same show.
Why shouldn’t the pay be the same for the same effort? The article gets the answer correct: the pay must equal the marginal revenue product for the production to be profitable; and even compared to performances in cultural capitals like Austin, Tex., the revenue-per-seat-filled on Broadway is much higher. A touring company just cannot, as the article notes, make a profit or perhaps not break even paying the same wages as on Broadway. Perhaps not fair to the performers, but this is good economics. With this difference in pay, however, the quality of the touring companies is unlikely to be as good as the Broadway company.