The Opportunity Cost of an Email

There’s a midterm this week in my class of 550 students, and I have been deluged with emailed questions, many procedural, that are covered in the online daily class summary. (For example, is the test being given in class?)  In the old days, when students came to office hours to ask questions, I wouldn’t have gotten most of these queries.  Regrettably, a student’s opportunity cost of emailing is much less than the cost of an office visit.

Why don’t I raise the cost to students by refusing to answer these emails?  If I thought that would deter all such questions and visits, I would refuse. But even if 20 percent of the emails translate into student visits, I’m better off answering the emails, since each takes me at most 1/5 as long as dealing with the question face-to-face in my office.  This is annoying, but I believe I save time this way.

No Camping in Faculty Offices

A student appears to have enclosed the commons: for the last two weeks, he has camped in a small public area in the vestibule of a suite of faculty offices, making it unusable for other students to meet in groups (its use in all previous years).  Believing that this is a public area, and absent my colleagues saying anything, I asked the chap to vacate the place to allow others to use it.  This is a classic case of the difficulty of maintaining property rights in a public setting with no way of enforcing public ownership other than moral suasion. This may be more of a problem in universities than in businesses, given what I find as the self-selection into faculty jobs of people who want to avoid confrontation.

Dismantling the Social Safety Net

One of the major complaints of right-wing politicians against the Affordable Care Act (Obamacare) is its imposed mandates that individuals obtain health insurance and that larger businesses offer health insurance to employees.  The professed opposition is to the mandates, per se.  It ignores the mandates that both employers and workers pay taxes for Social Security coverage—old-age, disability, Medicare, and unemployment compensation.  Mandates are not new—nor is “government interference” in private choices about private insurance.

Opposition to the ACA mandates is really just a stalking horse for the eventual dismantling of the American social safety net. If the new mandates were to be dropped (unlikely, thank goodness), I would expect that their opponents would quickly move on to removing mandates for other programs that have been in effect for 70+ years.

Choosing Your Reward

Last spring, I blogged about the $5/day for in-house food purchases that many Sheraton hotels give guests who waive house-cleaning.  In some hotels, they offer a choice between the $5 and 500 frequent-guest points.  Which is better?  For infrequent guests like me, the $5 is better.  But in some of the best Sheraton hotels, it only takes 10,000 points to obtain a free night—i.e., 20 days of no house-cleaning.  If you are a frequent guest, that seems like a much better deal—the opportunity cost of one free night is $100, typically far below the price of a night.  The Sheraton’s offer creates a separation between infrequent and frequent guests, benefiting the latter (and giving people an incentive to become frequent guests). (HT: DJH)

Why Something Won't Sell, Even at Fire-Sale Prices

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?

The Wednesday Lecture Tradition

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)

Is It Biology?

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.

Rent at Public Markets

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.

Taxi Pricing: Hail or Call?

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?

Products for Charity

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?