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."