Preventing bush fires - are toxin free retardents merit goods?
As those living in Australia, Greece and California can testify through recent experience, protecting human life, buildings and foliage when bush and forest fires break out is often incredibly difficult and very expensive.
read more...»Q&A: Demerit Goods and Negative Production Externalities
Question: I was wondering what the difference between a demerit good and a good that has negative externalities in production was?
read more...»Economies of Scale for Wind Farms
The scale of the new farm project at Eaglesham Moor near Glasgow is stunning but projects of this type inevitably create a huge furore especially for those living in the area. My own personal view is that wind farms as a source of renewable energy are things of beauty - this BBC video provides an aerial view of the Glasgow project and might be a good one to use when teaching about the economics of renewable energy, cost benefit analysis and economies of scale.
The UK Government has a target of providing 15.4% of all electricity supply from renewable sources by 2015. Jim recently blogged about the London Array here
Recession provides boost to vitamin demand
A cyclical hat tip to Chris Freeman for spotting this excellent article in the New York Times which looks at the rising demand for vitamin pills and other health products as recession bites. “Sales of vitamins and nutritional supplements, which have grown consistently for years, have surged in recent months, rising as the stock market has fallen. People are clearly cutting back on many items, from bread and milk to designer jeans and flat-screen televisions, but they are stocking up on pills that they think can spare them expensive doctor visits.”
Lots of interesting economics here:
1/ The power of emotion in driving demand - are sales of fish oil tablets linked to how many times people read stories about the growing incidence of early dementia?
2/ Utility and price - is the utility that people say they get from nutritional tablets linked to the price they pay? Some behavioural economists have pointed to studies about the impact on perceived benefit that consumers report when they are told the price of a product - including placebos!
3/ Sales of vitamins are up but sales of pain-killers are down - what might this say about consumer preferences?
4/ Cross price elasticity of demand - the price of health care goes up - causing some consumers to look for supplements to reduce the risk of needing health treatments later on in life
The Law of Unintended Consequences at Staffordshire hospitals
Government intervention is carried out with the best of intentions, but can result in unintended consequences with resulting government failure (a deepening of the market failure or even worse a new failure which may arise). The case of the failures at the Staffordshire General Hospital reported yesterday gives a tragic example of this. A report by the Healthcare Commission, which is a regulator for the NHS, said there were deficiencies at “virtually every stage” of emergency care at the hospital, and up to 400 patients died as a result. This BBC report highlights a dreadful list of errors at the hospital’s Accident and Emergency department from the use of receptionists to carry out initial checks on patients to heart monitors being turned off on wards because nurses did not know how to use them. Various factors are identified as having led to this failure, the government’s target for patients to be seen within four hours at A&E which meant patients could be taken to “dumping grounds” to avoid breaching the target. The situation was only recognised after complaints from residents were backed up by statistics showing a high death rate.
read more...»Sky news focuses on the NHS
I usually have Sky news running in the background and this week their newsroom has been running a series of reports on the condition of the National Health Service and the financial pressures facing state health care in a world of ever-changing health needs and wants, the emergence of new treatments and the daily inevitability of health care rationing. Many of the features are ideal for those using health care as a case study in scarcity, resource allocation, cost benefit analysis, positive and normative economics and market demand and supply of health services. Here is the main link Among the articles and videos is an emotional one with the darts legend Andy Fordham, who is battling to have a liver operation.
Cross elasticity: Demand for allotments
From Wrexham to Eastbourne and in virtually every part of the country, the demand for allotment space is rising much faster than local councils can supply. The economics of having your own allotment land have changed significantly in the last few years. Allotments peaked in popularity in the immediate post-war years as people looked to grow their own food and drag themselves out of the restrictions of rationing. But gradually the number of allotments declined as the food availabilty improved, real prices fell and the number of supermarketsexpanded. By the 1980s using an allotment was widely regarded as the preserve of the ‘Good Life’ crowd and those in retirement wanting a way to pass the time.
But now the combined effect of rising food prices, growing concerns over the environmental effecs of food miles and demand for locally-grown organic produce has prompted a fresh wave of demand for scarce allotment space.
read more...»Red wine as a merit good
The red wine provided by Leith’s of London at the Business Studies conference yesterday went down very well at the end of a long week. And travelling home on the train I enjoyed reading this piece in the Economist on the health benefits of a couple of glasses of a decent red! Perhaps we should add red wine to the list of perceived merit goods! Part of the pleasure and benefit comes from anticipating the consumption of a good bottle. And behavioural economists would no doubt tell us that the private benefit is increased simply by thinking the red wine is expensive even if it isn’t! (The power of the placebo applied to wine lovers!).
The American Association of Wine Economists might have something interesting to say about this! And there is a series of articles on wine economics in the latest version of the Economics Journal.
Social viagra?
Could this be a possible new merit good?
“Scientists in the US found that oxytocin, a natural hormone that assists childbirth and helps mothers bond with newborn babies, helps reduce anxiety and calm phobias. There are also signs it may help people with autism.”
More here from the Telegraph and also from the Times
It would be nice to have a bottle of the stuff handy to spray over people at boring committee meetings and in classrooms where students are by default passive sponges despite our best efforts!
But she ain’t messin’ wit no broke…
This Wednesday the Law Commission announced that pre-nuptial agreements could become legally binding with a few years. This is a landmark decision that could change the face of British society as we know it. Currently, “prenups” have no legal standing in the United Kingdom while they are quite common in the United States and Canada. Today I am going to examine the prenup as a merit good, and offer a policy imperative which may be rather brow-raising.
“10 Grand” Design
If, like me, you dream of living in a modern home of the like seen in Grand Designs, this link from the BBC gives you hope - and perhaps offers a solution to the UK housing shortage.
read more...»Merit and De_Merit Goods
We had an interesting brainstorming session in our AS micro today! We wanted to discuss which examples of consumption and/or production deserved the sobriquet of merit or de-merit goods. The point was made very early on that what each of us regards as socially beneficial or socially damaging depends very much on our own value judgements. And the other aspect of merit and de-merit that we emphasised was the ever-present issue of information failure. Just today there was an article in the Telegraph about how “taking aspirin can cut breast cancer risk by 20%” and at the same time, we know the risks of addiction to painkillers and other treatments.
This was the list of merit and de-merit goods that my two groups came up with - fuelled it has to be said by a plentiful supply of mini doughnuts and chocolate cookies from Sainsburys! I used this as an example. We wanted to test doughnuts and consider their social benefits (!) but the plastic packaging and waste we created also has a social cost. I have linked to some relevant BBC news stories as well.
read more...»Mobile Shopping
mShopper is a new retail tool which allows consumers to make purchases via mobile phone.
Internet sales (’clicks’) are already challenging traditional retail (’bricks’) markets and the economics behind these changes is fascinating.
read more...»Reconsidering merit goods
What is a merit good? There has been an interesting exchange of views on the TES forum this week prompted by this post
“A merit good usually, but not always, yields postive externalities when consumed”
When would positive externalities NOT be yielded?
read more...»
