Deuteronomy 28:68 states “ye shall sell yourselves unto your enemies for bondmen and for bondwomen, and no man shall buy you.” Oh dear, even at a price of zero, supply would exceed demand. (Josephus noted that there were so many slaves on the market when the Romans destroyed Jerusalem in 70 C.E. that many couldn’t be sold even at fire-sale prices.)
Why not buy a slave at no cost? The answer, presumably, is that potential buyers already owned so many low-priced slaves that they believed that another slave’s marginal product would fall short of his or her upkeep. The variable cost of maintaining the slave must have exceeded his/her output. Is there a contemporary analogy to teaching assistants?
I get invitations to guest lecture at English universities on Wednesdays, but almost never for Wednesdays in the U.S. I didn’t know why this difference exists, until one of the inviters mentioned that many English universities keep Wednesday afternoons free of regularly scheduled classes, historically so students can engage in inter-scholastic athletics. Universities thus have created a positive coordination externality.
We economics professors don’t engage in these athletic endeavors, but the athletic coordination creates a positive externality for economists: In scheduling seminars, we know that most faculty members at other universities are free to visit, and most of our colleagues should be available to attend the seminar. (HT: NT)
A very nice new paper (IZA Discussion Paper 7575) by Anne Gielen, Jessica Holmes and Caitlin Myers asks whether testosterone, which generates masculine traits, contribute to male-female differences in labor-market outcomes. The research innovation is to look at earnings differences between female twins, distinguishing those who had male twins (and thus were exposed to testosterone in utero) and those who had a twin sister (and thus were not exposed). There are no significant differences in earnings; if anything, the female twins exposed to testosterone earned slightly less than women with a female twin. Biology may matter; but this simple experiment should increase one’s belief that culture is more important.
At the Queen Victoria Market, an immense city-run collection of stalls and shops in Melbourne, Australia, a fishmonger at a prime corner is paying $5,500 per month to the City to operate there. Since other fishmongers pay less, much of this payment is economic rent — payment for the visibility/access at this corner. But is the City extracting all the rent, or is it giving the fishmonger a good deal?
This fishmonger has been in business at this location for a very long time. That fact suggests that at most the City is not overcharging him, and perhaps it isn’t even extracting all the rent. Whenever many public lessees in competitive businesses stay in business a long time, the public agency is probably granting them excess profits — at the public’s expense.
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.