Wednesday, June 28, 2006

The Right Kind of Conservation

The San Jose Mercury News reports that in an effort to reduce damage to sea life by commercial fishers, two environmental groups have "purchased six federal bottom trawling permits and four commercial trawling boats from fishermen based in Monterey and Morro Bay..." This is the first time that a private conservation group has purchased permits in Pacific waters.

Rod Fujita, a marine ecologist with Environmental Defense in Oakland, puts it plainly: There are too many boats chasing too few fish. People respond to economic incentives. The solution is not to blame or punish them but to provide incentives for stewardship, not exploitation.'' It's a delightful surprise to hear this from an environmental activist.

As Coase has written in the past, when property rights are defined and transaction costs are permissibly low, the efficient outcome will prevail. In this case, the environmentalists now have a healthier ocean and the fishing company is free of a low-profit area.

Dobbsian commentary: Nasty, brutish, and wrong

Admittedly, I don't know a whole lot about Lou Dobbs, except that he seems to draw the ire of quite a few viewers. Maybe it's his interviewing tactics that upset people, because his columns are terrifically comical. I believe they come out every Wednesday.

Here are his thoughts on raising the federal minimum wage. Here's my favorite line:

"The myth that raising the minimum wage will lead to job cuts is just that: a myth. In fact, research suggests just the opposite."

Raising the minimum wage leads to more jobs? Isn't the obvious answer to then keep raising the minimum wage? If we create a minimum wage of $20 per hour, imagine the job growth! Just think of $30 per hour! Or $40!

He cites a study that shows areas with higher minimum wages have shown stronger job growth since 1998. It's a problem of direction; it's not the higher minimum wages cause more job growth, it's that higher job growth allows for minimum wage legislation to be passed with minimal negative effects on the economy. It doesn't prove that demand curves don't slope downwards; it shows well-timed decision making by political players.

There are plenty of situations that can show how an increase in the minimum wage will have little or no effect on the economy. I would like, however, to peruse the reams of research that show increases in minimum wage cause increases in job growth.

Dobbs' most recent column is on public schooling. It's no more correct in its reasoning than the minimum wage piece ("And we're not talking only about money...That's why it's so difficult to solve this systemic problem [with our public schools]."), though he does at least recognize that performace-based pay for teachers can yield better results. For an accurate piece on the state of our public schools, see John Stossel's "Stupid in America."

Wednesday, June 14, 2006

File this under: It was only a matter of time...

Who'd have guessed that FEMA's funds would have been spent in a shady manner after Hurricanes Katrina and Rita? Oh, that's right...anyone with a mindset towards political economy and incentives. Russell Sobel looked at the issue well before the Katrina disaster, and I think everyone has been forced to admit to some degree that FEMA simply can not work as an emergency relief organization.

My favorite items? A sex change operation, Girls Gone Wild videos and Dom Perignon.

An article is here. Here's another.

Tuesday, June 13, 2006

Roethlisberger and the law

I'm having trouble getting a sense for how big of a national deal that the Ben Roethlisberger crash is, because here in Morgantown there are radio updates every time that they do the news (if not more frequently). What's more, my satellite is linked up to receive all of the Pittsburgh local channels, so you can imagine what that's like. Nonetheless, there seems to be a couple of interesting law issues that have arisen-- I know there are law school types that read this, so I'm curious to hear your take on it.

Every NFL player, in the least, has a clause in his contract that prohibits risky behavior; the article above has it quoted as "significant risk of personal injury." Some players known for risky behavior have more specific provisions; Kellen Winslow is well-known for getting in a motorcycle wreck himself (though while performing stunts in a closed parking lot, as opposed to Roethlisberger getting hit by an alleged red-light runner) despite an explicit clause in his contract that forbade him from riding his bike. Due to this aspect of his contract, the Browns (Winslow's club) were able to reclaim a portion of the signing bonus they awarded Winslow when he inked on with the team.

The $64,000 question-- or several million dollar question, perhaps-- is whether the Roethlisberger's club, the Pittsburgh Steelers, will be able to reclaim any portion of the bonus money paid to their star quarterback. Personally, I don't think they are going to be able to get any of the money back. It comes down to defining Roethlisberger's behavior as "risky," or subjecting him to a "significant risk of personal injury." I'm not sure that driving a motor vehicle on a public roadway can be construed as risky in and of itself. Granted, a motorcycle is more risky than a car, but motorcycles are still legal vehicles. If it is found that he was speeding or broke a law, and this was the cause of the accident, then that may be some margin that the Steelers can work on. I just don't see simply riding a motorcycle as being defined as inherently risky in court.

Further, current Pennsylvania state law makes wearing a helmet optional. Roethlisberger is on record as saying he doesn't like wearing a helmet when he rides. That does make riding a motorcycle more risky...but driving a car without a helmet is more risky too. Walking without a helmet is more risky than walking with one. People are making a large deal of the fact that he wasn't wearing a helmet-- usually for the issue of safety, not breach of contract-- but I don't see how the fact he wasn't wearing a helmet, especially considering it wasn't illegal, can play any role in court either.

Ultimately, it seems like Roethlisberger should be back with the team by opening day-- evidently the most serious injury was a broken jaw, which takes approximately seven weeks to heal. The NFL season typically starts around the first of September.

UPDATE: KDKA-TV in Pittsburgh is reporting this morning that Roethlisberger does not have a valid motorcycle license, and that his temporary motorcycle license expired in March. This changes the situation completely; while there's no inherent increase in risk by driving a motorcycle with or without a license (considering it has been previously earned), a court definitely sees driving without a license as a risky activity. I'd say that if this turns out to be true, Pittsburgh has a more than fair chance of reclaiming of their QB's signing bonus.

Thursday, June 08, 2006

A legislative balk

A district court judge in Massachusetts ruled yesterday that a disgruntled fan can sue a ticket reseller for charging too much for a Red Sox-Yankees ticket. The fan didn't actually buy the ticket, but if things like this are going to be allowed, why have any logic at any point of the process at all? Couldn't anyone in the general Boston area pursue a lawsuit like this?

Well, the fan that didn't buy the ticket isn't the one actually going to trial-- that's the role of consumer activist Coleman Herman (Socialist - Dorchester). Herman comes across with the typical price gouging argument-- by golly, $500 is just too much for a baseball game! What's worse is the following quote from Herman himself: "It allows me to go to trial and do discovery to find out where Admit One gets its tickets." Nothing like using the system to reach your goals. I think we can file this one under "not a wealth producing activity."

The whole issue stems from a law that has been on the books but is just now starting to be enforced. The letter of the law reads that no one can resell a ticket for more than $2 above face value, plus service charges.

The most frustrating part is the judge's take on the matter:

"The plaintiff had a protected right to purchase a ticket at a price established by law that balances the economic interests of the defendant and the consumer's interests in the event to which the ticket would admit. The plaintiff made an effort to secure a ticket reflective of this balance and was denied the opportunity"
If we are truly balancing the defendant and the plaintiff-- or the buyer and the seller-- then why can't we let them determine a price for the ticket independent of regulation? Wouldn't that balance the economic interests of both parties? The mere fact that the would-be buyer observed the price and decided not to buy the ticket proves that he had exactly the opportunity to secure a balance between his desires to see the game and his opportunity cost for $500.

In theory, a supply and demand curve intersect to create a market clearing price. But there's a whole section of a demand curve below the equilibrium point-- these are people who don't want to trade. Why do we need laws to serve them? It was their choice not to consume. In the same example, there's a whole section of a supply curve that doesn't get to trade either-- the prices they desire are simply too high. Don't they then deserve the right to sue the people that didn't buy their tickets? Something tells me that we're not going to see lawsuits on their behalf since consumers won't buy their goods that are priced too high.

Fortunately, if you find yourself in a state that does things like this, there's an easy way to get around it. Bundling your sought-after ticket with another good for one market-determined price is usually good enough to keep you away from the law. So the next time you want to sell your baseball tickets, bundle them with a baseball, and let everyone become better off with the trade.

Monday, June 05, 2006

Someone stop the price gouging yellow shirt dealers!

Yes, apocalyptic price gouging has now reached Thailand, where now-popular yellow shirts are all the rage.

From the article: "Suppliers say they're running out of shirts, and buyers complain they are being gouged by sellers."

As expected, when people want something but they have to pay too much for it, they cry foul and petition the government for action. Heeding their fellow citizens' pleas for yellow shirts, Thailand's Deputy Commerce Minister Preecha Lohaphongchana lays it on thick: "If we find traders selling shirts for an excessive profit, they will face legal charges with punishment of up to a seven-year jail term or a 140,000 baht ($3,675; euro2,834) fine." Take that, economic freedom ranking!

This, of course, is nothing more than an increase in demand for yellow shirts. Break out the Econ 101-- prices and quantity will go up. It's going to take a bit for the market to respond with more shirts; of course, with the prices forced lower and the profit incentive reduced, it's going to take a little bit longer.

The real question: Aside from the supply vs. demand shock, is this really any different than the gas situation here in the United States?