Is this why athletic conferences are realigning?

This article in the WSJ  describes some of the effects of the increased prevalence of viewing recorded TV content. Since viewers can skip ads on recorded shows, the demand by advertisers for space on shows that tend to taped has fallen. However, the demand has increased for shows that are best seen "live", such as football games. The increase in demand by advertisers is fueling larger TV contracts and pushing conferences to realign to maximize their TV revenues.

Bar exam for teachers

This article from the WSJ describes a proposal to require teachers pass the "bar". A disadvantage of the proposal is that it would restrict the supply of teachers. An advantage is that it could reduce problems caused by asymmetric information; the cost to parents of identifying good teachers is high.

Collusion

http://online.wsj.com/article/SB10001424127887324640104578160771350104876.html describes what is apparently a successful and long-lived cartel. 

Natural Gas Regulation

This article describes the effects of LNG export permits on the liquid natural gas market.

Social Media

http://www.mckinseyquarterly.com/Demystifying_social_media_2958 is a nice article talking about how business can use social media.

Bargaining

http://www.nytimes.com/2012/12/09/business/getting-to-yes-offers-clues-to-fiscal-talks.html?ref=todayspaper&_r=0 is a good example of how switching costs affects bargaining outcomes.

What Economics Majors Earn

 Numerous studies show that students who major in economics tend to have above-average incomes.

http://economix.blogs.nytimes.com/2012/01/18/what-the-top-1-of-earners-majored-in/#more-141451

http://salary.com/8-college-degrees-that-will-earn-your-money-back/slide/6/

Film Clip for Auctions

http://www.youtube.com/watch?v=mp3LoPg7sYY&feature=youtu.be is a catchy example of an auction.

Ethanol and Food Prices

In this opinion the WSJ that describes the size and impact of the requirement by the Federal government for the US to use ethanol as a fuel. Summary: the program is diverting approximately 40% of corn crop to ethanol and increasing food prices.

Search for "A Mandate to Raise Food Prices" to find the entire opinion.

http://mruniversity.com/double-marginalization-problem is a nice lesson on monopoly welfare loss and double marginalization.

Network Effects

Business Insider has a nice article on network effects and why Apple should worry about Google and Android.

Cash v. In-Kind Transfers in India

Three articles in the recent issue of The Economist caught my eye.

One article reports about India giving money to poor people instead of food or in-kind transfers. Standard economic theory has taught for years that a cash transfer is equivalent to or  better than an in-kind transfer of the same value for the recipient. The article is also noteworthy for highlighting the use of technology in helping create a way for banks to identify people, making deposits to bank accounts possible. 

The second article reports a law suit against Standard and Poor's for its rating of constant proportion debt obligations issued by ABN AMRO. The article begins, "PROTESTING that only fools would rely on your product to make investment decisions may seem a dangerous argument to make. Yet it is one that has served credit-ratings agencies well over the years, allowing them to sell ratings to debt issuers while abjuring legal responsibility for the quality of their work." Economists have known for years that ratings tend to be biased. Two factors lead to bias. The issuer pays the rating agency and the ratings have the legal standing of an editorial - they are opinions. I find humor when reading that Standard and Poor's used the formula provided by the bank to determine the value of the asset. One mystery to me is why anyone pays much attention to ratings.

The third article discusses why people vote when voting is not compulsory. Economics teaches that the expected cost of voting typically exceeds the expected benefit. The chance that your vote matters is small. The only time it matters is if all other voters are tied and yours decides the election. The cost is real; you will spend at least 30 minutes going to a poll and waiting in line. We discussed the logic of voting in the first economics course I took. Thank you Dr. Hendley.

Gasoline Rationing

The quality of reporting on economic events is low. For example, I cannot learn easily what role, if any, restrictions on price increases play in creating gasoline lines in New York City and Long Island. CNN just posted an article discussing recent requirement there that drivers buy gasoline on odd or even days depending the last digit on their license plate. (Letters are considered to be odd.) 

A quick scan of the internet shows that most accounts blame the lines on the inability of many stations to obtain gasoline or to operate because power shortages; jobbers cannot pump gasoline out of storage tanks and retailers' pump do not operate. A reduction in the number of stations open would increase the lines at the stations that remain open. However, I suspect that something more is going on. I wonder why firms do not increase price in the face of such long lines. Price increases would reduce the quantity demanded and increase the quantity supplied, thereby reducing the lines. If price increased sufficiently, the gas lines would disappear.

I cannot confirm that restrictions on increasing price are in place in New York and Long Island. New Jersey does have restrictions: "... stations cannot raise their prices by more than 10 percent above pre-Sandy prices under state law due to the current state of emergency" (http://www.cnbc.com/id/49642174). The CNN article contains some evidence that similar restrictions are in place in the city and Long Island. It states that the rationing will "help gas stations stay open longer." I don't think stations close early if they have gas to sell and a line of waiting customers. I do think they close early if they run out of gas because the price is artificially low.

What can we learn from the responses to Hurricane Sandy?

I like much of what Nick Gillespie writes in Reason.com in a recent article about what NOT to say after Hurricane Sandy. First, don't say the damage will stimulate the economy. He references Frederic Bastiat's broken window fallacy. Second, don't say that a big problem requires intervention by the Federal government. I agree with the premise that local governments solve problems better than the Federal government when the problem is local. Finally, don't say that the storm proves anything about climate change. I like that he points that careful examination of data is a more reliable guide to trends than recollections.

How to reduce our carbon footprint?

The Wall Street Journal has a nice set of interviews with economists who discuss the advantages and disadvantages of taxing carbon emissions and a cap and trade market.  Read more if you are interested in my opinion.

I favor using an auction to allocate permits to emit carbon and then letting firms trade. Using the auction gives the government funds to use to compensate people hurt by carbon emissions. The cap and trade market gives a price that measures the marginal cost of reducing emissions. The government can easily relax or tighten the emission quota by selling or buying permits if analysts conclude that the optimal amount of emissions changes.

Supply and demand at work in CA

This article does a nice job explaining why gasoline prices are typically higher in CA than elsewhere and why they rose so much recently. The article also points out that regulation requiring a special blend of gasoline in CA plays two important roles. It contributes to the price increase. It also means that the price increase unlikely to spread to other states.

A good reason to work for 7 minutes

Here is an interesting way to measure the standard of living in a country. The article point out that the time spend working to acquire goods is a better measure of the standard of living than prices.

Do Futures Contracts Protect Against Price Volatility?

The Wall Street Journal published a article showing that futures contracts are imperfect protection against price volatility because the side with the bad price will often attempt to change the contract, find grounds to declare the contract void, or simply walk away from the contract. The article discusses what happened as the price of cotton increased and then collapsed between 2012 and 2012. The history points out that the cost of enforcing a contract is often a significant transactions cost.

Time to Flip?

L. RAFAEL REIF, the new President of MIT,  has an excellent editorial on how colleges can use online teaching for residential students. Here are some highlight quotations.

• "Higher education is at a crossroads not seen since the introduction of the printing press." 
• "The network of students that came together around it was so powerful that the course's instructor stopped his teaching assistants from answering questions in the online forum. The students had said they learned the material better when they helped each other out."
• "How can online education improve the residential experience? At MIT, we got a hint when we allowed a test set of MIT students to take the MITx version of Circuits and Electronics, supplemented by weekly contact with faculty, for credit. They liked the experience and demonstrated deep comprehension of the material.
  
  Some are calling this model the "flipped classroom."

A Better Search Model?

Economists use search theory and matching games to model what a job seeker experiences.
Bright.com aims to use big data to make the job-seeking process more efficient and effective. Read more.

Does this reporter make sense?

I suspect that the reporter has confused cause with effect in a curious account of the gasoline market in California. The first sentence states that retailers have stopped selling gasoline because of high prices. I have never heard of sellers not wanting to sell because the price is too high. I suspect the reduction in retailers offering gasoline for sale and high price of gasoline are both caused by a shortage of gasoline.

A second curiosity is the statement that "high costs meant profit margins were too low to stay open". Why don't the retailers simply raise price to cover the high costs? I am not aware of any price ceilings.

For an article that reflects a better understanding of supply and demand, read this. 

Some important differences between Obama and Romney

The Economist published a wonderful editorial discussing an important difference between President Obama and Governor Romney: what is the proper role of government intervention in the market? "Barack Obama and Mitt Romney have very different ideas about regulation, monetary policy, international trade and labour markets, although their rhetoric sometimes exaggerates the distance between their positions."