I called a taxi for a short trip in Melbourne, Australia. When I paid the price on the meter, the driver added a $2 booking fee. This is standard here, unlike in the U.S. where the price is the same whether you hail or call a taxi.
The Australian system may be a sensible way to set price to cover marginal cost. The booking service generates costs; and in many cases the booked driver “dead-heads” to pick up the passenger, using his valuable time without generating revenue. On the other hand, having a booked fare saves the driver time waiting in a queue or cruising, so perhaps the impact on marginal cost isn’t so clear. Is this monopoly pricing, or price reflecting cost?
We bought a box of Anzac biscuits — a very tasty cookie with no eggs or fat, thus not too many calories and easily preserved. The company, Unibic, states on the box that “4% of sales (revenue) go to the RSL (Returned and Services League).” This reminds me of Newman’s salad dressings, which advertise that all profit goes to charity.
It’s not clear which method would provide more money for charity generally, but I prefer the percent of revenue approach—it removes any incentive to raise costs (executive pay, for example). Either way, though, it’s nice that a few companies support charity so well and so openly. What other examples are there of products that support charity? And which method (percent of revenue or profit) is preferable?
The July issue of Qantas Magazine has an article on Akubra hats. The company has a problem: the price of a crucial input into its hats, rabbit skins, has risen by 125 percent in the past three years due to a virus that killed many Aussie rabbits. The rabbit population has been increasing again, but its previous decline caused a much longer-run decrease in the supply of rabbit shooters, who permanently left this occupation for other jobs in this low-unemployment economy.
These two factors—the short-run decrease in supply of rabbits and the long-run decrease in the supply of rabbit shooters—have caused a rise in Akubra’s costs and thus a decrease in supply in the related hat market. This is a nice example of a shock in one market causing a general equilibrium set of adjustments. Good for rabbits in the long run, not so good for bald guys who need hats to protect against the Australian sun!
A friend of mine received three prestigious academic awards in the same year. I asked him, “Wouldn’t you have been happier getting them in separate years? After all, the marginal utility of an award probably is decreasing within a particular period of time. So wouldn’t getting these awards in separate years have increased your lifetime utility?”
He said that my observation was probably correct. However, he was so surprised to receive even one of them, and the increase in his happiness was so great, that he just wasn’t able to think in this narrow economic way. I guess there are occasions (probably very few!) where even simple economics isn’t 100 percent relevant.
There’s a story in the July 3 edition of The Australian about the Fox Footy (Australian Rules Football) Channel. That the channel exists illustrates how changing technology increases well-being. With the plummeting cost of TV production and transmission has come a great growth in the number of specialized channels. When I was a kid, the U.S. had three networks and a few independent channels in big cities. Today, things like the Fox Footy Channel have increased the ability of the medium to cater to specialized tastes.
Since I’m not the only American who likes Australian football, or footy, I expect to see the channel on U.S. TVs soon — thus increasing variety, increasing my total utility. Any thoughts on likely future channels that will cater to even more specific tastes?
Every time I visit Australia, one of the first things I see in the news is a discussion of minimum wages. Pay rates in Australia are to some extent set by the government; these days by the Fair Work Commission. Today there is a news story that a labor union will seek to have teenagers paid the same wage as adults for the same job. This increase in youth wages will decrease the quantity of young workers demanded, especially as that demand is typically quite elastic. Worse still, this will prevent some kids from obtaining job experience, thus reducing their human capital and making them less employable in the future. As Peter Seeger sang, “When Will They Ever Learn?”
We have to have Wi-Fi available everywhere — I have withdrawal symptoms if I can’t do my email and check the web often. Recognizing this, many stores offer customers “free” Wi-Fi. I’m sure the cost of the Wi-Fi is passed onto the customers as higher product prices, in what are typically competitive retail industries. But how to avoid people spending hours in the shop surfing the web free of charge, and perhaps causing congestion for other users?
The Whole Foods store on Kensington High Street in London has solved this problem by allowing each computer or smart-phone a two-hour log on period, after which the device is booted off the Wi-Fi. Two hours are enough to satisfy almost any customer, but short enough to prevent non-customers from making the store their Wi-Fi venue of choice. I expect this kind of limit will become more widespread shortly — it is much more effective than warning people not to stay logged on for very long.
The Week (and, earlier, the N.Y. Post) reports a new way for high-wage people to economize on time: when visiting Disney World, hire a “tour concierge” — a disabled person who uses his/her disability privileges to ignore waiting lines (and take the high-wage person and family with him/her ahead of the crowd). At $130 per hour, the time saving is easily justified economically (just think of the lines at Space Mountain, or at my personal favorite, Small World). It would be nice too if people would rent me their toddlers to board Southwest Airlines flights ahead of the mob. Clearly, there is room for beneficial exchange like this in many areas.
These are not, however, Pareto improvements: while the “concierge” and his/her customers gain, everybody else in line loses. It doesn’t seem fair to me, and perhaps not efficient, since the externalities of extra waiting time for the whole line can be substantial.