Category: Economics

Economic Reasoning 101 from the New York Times

by philg

“Hailing a Car in Midtown Manhattan is Becoming More Expensive” (NYT, January 5, 2025):

Many of the vehicles that crowd the tolling zone are taxis and cars for ride-hailing services such as Uber and Lyft.

The new tolls will not fall on the drivers of those vehicles, who are often struggling to make ends meet. Instead, passengers will be charged an additional amount for each trip into, out of and within the zone. (Even before the new pricing began, passengers already paid congestion-related fees of up to $2.75.)

Riding in a taxi, green cab or black car will now cost passengers an extra 75 cents in the congestion zone, which runs from 60th Street south to the Battery. The surcharge for an Uber or Lyft will be $1.50 per trip.

I want to focus on “the new tolls will not fall on the drivers of those vehicles”. Let’s consider Eric Cheyfitz, the Cornell professor who teaches Gaza, Indigeneity, Resistance:

The first half of the course will be devoted to situating Indigenous peoples, of which there are 476,000,000 globally, in an international context, where we will examine the proposition that Indigenous people are involved historically in a global resistance against an ongoing colonialism. The second half will present a specific case of this war: settler colonialism in Palestine/Israel with a particular emphasis on the International Court of Justice (ICJ) finding “plausible” the South African assertion of “genocide” in Gaza.

(There are 476 million Indigenous people in the world, but fully half of the course will be devoted only to the 2 million who support Hamas, UNRWA, and Palestinian Islamic Jihad.)

Prof. Cheyfitz is visiting some pro-Hamas faculty at NYU and is considering taking an Uber for a 15-block trip to a restaurant. His/her/zir/their alternative is walking or taking the subway. Suppose that Prof. Cheyfitz is willing to pay no more than $20 for a car ride before he/she/ze/they will hoof it. If the city imposes an additional $1.50 fee (on top of existing congestion fees, car registration fees, taxes, etc.), doesn’t that reduce the maximum revenue that a driver can obtain for the trip? I don’t see how the money taken by the government can not come out of some combination of Uber’s pocket and the driver’s pocket. Consumers always have alternatives, not only walking and public transit but also deciding to stay put. (And, in fact, one express goal of the fee is to reduce the number of trips that Uber/Lyft customers will take. If successful, doesn’t that mean the tolls actually did “fall” on the drivers?)

As a thought experiment, suppose that the new fee were $1,000. Nearly all consumers would decide to stay put or use public transit or use a personal/family car. With the service priced only for billionaires, there wouldn’t be work for more than 10 Uber/Lyft/taxi drivers in the entire city. With no limit on who can apply for these 10 jobs there wouldn’t be any reason for the job to pay any better than it does now. The impact of a $1.50 fee is much smaller, of course, but I think the analysis works in the same way.

The Cornell class in case it is memory-holed:

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Value of not having to rub shoulders with a peasant (JetBlue Mint vs. cattle class)

by philg

I’m looking at going out to California after teaching FAA private pilot ground school (free and open to the public) at MIT. Here’s a guide to what an elite is willing to pay in order to avoid sitting with the peasants for 7 hours: $700/hr. Prices as of December 19, 2024:

Some “extra room” seats are still available on this flight:

So the alternative isn’t cramped torture.

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Does Kamala Harris propose “Socialism” or “Xboxism”?

by philg

My response to an X user who wrote “Usually it’s an exaggeration to claim that the other side is lunatic socialism. With Kamala 2024 that’s become a reality we face.”:

I don’t think that it is fair to call Democrats “socialists”. Under Socialism, e.g., in the Soviet Union, able-bodied citizens were required to work or be guilty of the crime of “Parasitism”. There were no undocumented immigrants. Certainly, a Soviet family couldn’t spend four generations living in public housing, getting free health care via Medicaid, shopping for food with EBT, and chatting on an Obamaphone. Kamala Harris and friends propose a system in which half of a country works/commutes 60 hours/week so that the other half can relax and play Xbox. That’s not a political system contemplated by Marx or Lenin. Maybe it should be called Xboxism?

Note that the above idea isn’t original. “Transferism, Not Socialism, Is the Drug Americans Are Hooked On” (Foundation for Economic Education):

Transferism is a system in which one group of people forces a second group to pay for things that the people believe they, or some third group, should have. Transferism isn’t about controlling the means of production. It is about the forced redistribution of what’s produced.

I think Xboxism is an easier term to understand, though, because it captures what government policy enables. And now that we have open borders we need a term that covers a migrant family that arrives to take up the Maskachusetts offer of guaranteed shelter forever even if nobody ever tries to work but instead enjoys a life of permanent leisure.

Related:

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Why you’re likely safer on a Panamanian- or Liberian-flagged ship than an American ship

by philg

A maritime safety lecture from Into the Storm: Two Ships, a Deadly Hurricane, and an Epic Battle for Survival by Tristram Korten…

SS El Faro’s hull, a towering wall of blue-painted steel, loomed over the wharf at the Port of Jacksonville’s Blount Island terminal as gantry cranes loaded her decks with cargo containers. She was a steamship (designated by the “SS” before her name), using two large boilers to power a single-propeller shaft. And she was old, built by the Sun Shipbuilding and Dry Dock Company in Chester, Pennsylvania, just south of Philadelphia, which rolled her into the Delaware River for service on January 1, 1975. That put her in the minority of big ships [in 2015]—less than 9 percent of the world’s merchant fleet is over twenty years old.

This doesn’t sound good for structural integrity:

Twenty years later, in the mid-1990s, she was hauled into a shipyard in Alabama, where her mid-body was lengthened to increase cargo capacity.

The 790-foot El Faro didn’t make it past her 40th birthday, sadly, but it turns out that she would almost certainly have been scrapped many years prior to the dramatic events of 2015 if not for U.S. laws to restrain maritime trade.

Sun Shipbuilding has since closed, a casualty of America’s decline in manufacturing, leaving a dwindling number of shipyards able to construct big cargo ships in the United States, which also means a dwindling number of shipyards capable of fulfilling the requirements of the Jones Act, a 1920 law requiring that any cargo transported from one U.S. port to another must travel on ships that are American built, American crewed, and American owned. (Puerto Rico, being a U.S. territory, counts as a U.S. port.) The law was designed to protect America’s supply routes during times of war. Today its primary effect is to protect the jobs of American sailors, preventing companies from hiring much cheaper crews from Third World countries. But there is a cost—and it is steep. To build a Jones Act ship costs $120 million to $140 million. To build the same ship in South Korea, which is a developed nation, would cost about $32 million, according to Court Smith, an industry analyst with Shipping Intelligence and Analytics. It’s even cheaper to build one in India or China. South Korea builds roughly two hundred commercial ships a year, according to Smith. America puts out maybe four. As a result, shipping companies pushed the life spans of their expensive American-made ships to the absolute limit. The average age of the U.S.-flagged cargo fleet is thirty-three years, compared to thirteen years for the global fleet, according to UN statistics, and most shipping experts say the average age a cargo ship is retired worldwide is around twenty years. El Faro was a product of this dynamic. Due to its age, it was allowed to remain outdated in certain areas. For example, a regulation requiring new ships to carry enclosed lifeboats was waived for older ones, for which compliance would require a costly retrofit. Grandfathered in, El Faro continued to carry two old-fashioned open-top lifeboats. Likewise, the ship’s emergency position-indicating radio beacon, or EPIRB, did not have to be encoded with GPS, which would give the ship’s position in a time of distress.

In addition to putting American sailors lives’ at risk, the Jones Act dramatically drives up costs for businesses and individuals in Puerto Rico, Alaska, and Hawaii. In addition to the obvious costs described above, there is the non-obvious cost that the closed market facilitates collusion:

For two decades, Sea Star had been one of several shipping companies that sailed supplies to Puerto Rico on a regular schedule. All that competition meant slender margins and low profits. But companies stayed with the route to Puerto Rico—travel between a U.S. state and a U.S. territory—because they had invested so much to comply with the Jones Act. There were no dodgy flags of convenience for El Faro; she flew the Stars and Stripes. That was a high barrier to entry for would-be competitors—they would need an American-built ship, crewed by U.S. sailors. Then, in 2002, one of those firms, Navieras, went bankrupt. Suddenly the companies still afloat—including Sea Star, Crowley, Trailer Bridge, and Horizon—started seeing increased business and profits for the first time in decades. Rather than risk losing their newfound earnings to any potential newcomers, the companies bought Navieras’s ships, and executives from at least three of the companies, Sea Star, Crowley, and Horizon, conspired to fix their prices. They created secret email accounts to communicate, and set up spreadsheets that kept track of their rates, which increased by as much as 30 percent—so that, as Forbes magazine wrote, “they could assure that nobody was cheating, while they were cheating.” They weren’t clever enough to fool the FBI, however, which got involved after learning of a meeting between executives from the competing firms.

Even a newly built South Korean ship would have had some trouble handling what the American captain and crew did with El Faro, but the new ship might not have sunk and, if it had, the modern lifeboats would have given the crew a chance to survive.

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The fraud in GDP growth statistics continues

by philg

New York Times, today:

The U.S. economy remained resilient early this year, with a strong job market fueling robust consumer spending. The trouble is that inflation was resilient, too.

Gross domestic product, adjusted for inflation, increased at a 1.6 percent annual rate in the first three months of the year, the Commerce Department said on Thursday. That was down sharply from the 3.4 percent growth rate at the end of 2023 and fell well short of forecasters’ expectations.

The word “population” doesn’t occur in the article, though it is critically important. If the population is growing at a 1.7 percent annual rate, for example, Americans are currently on track to become poorer on a per capita basis.

How much did the population grow? It’s almost impossible to say because our population growth is driven by undocumented migration and the error bars on estimates are huge (see “Yale Study Finds Twice as Many Undocumented Immigrants as Previous Estimates”).

Separately, the GDP of Harvard Square is growing. An “essential” marijuana retailer seems to have opened up on Church Street. Photos from this evening:

It’s also a great time to be a tent retailer. The “Free Palestine” encampment in Harvard Yard, view from outside Harvard’s police-guarded border wall:

Here are the stickers that supporters of Hamas/UNRWA/Palestinian Islamic Jihad have added to Harvard’s “the Yard is closed” signs:

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The Admin Fee at a restaurant

by philg

Happy Tax Day for those in the U.S. and also U.S. citizens who live abroad and get no services from the U.S. but still must pay taxes (consider the U.S. citizens held hostage by Gazans, for example).

How about a new 3 percent tax from a restaurant on the restaurant and kept by the restaurant, couched as an “Admin Fee” on the receipt?

One of my companions asked what it was for. The waiter responded, “It’s a fee that we incur to keep our prices competitive.”

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New Maskachusetts program to make income inequality look more extreme than it is

by philg

I’m not sure how anyone comes up with a Gini coefficient of income inequality in the U.S. given that we have so many means-tested taxpayer-funded “not welfare” welfare programs. A person with zero income making the U.S. look extremely unequal may yet have the spending power to occupy a $60,000/year apartment, consume $30,000/year in health insurance, buy groceries, own a smartphone with service, and enjoy high-speed Internet at home via the new “free broadband” program.

There’s a new challenge in Maskachusetts… “Making Transit More Affordable: MBTA Board Approves Low-Income Fare Program to Benefit Riders in 170+ Communities” (MBTA.com):

… the MBTA today announced that the MBTA Board of Directors has unanimously approved the MBTA’s plan to implement a reduced fares program for riders with low-income. This program, which has been a topic of research and planning by the MBTA and many partners for the last decade, is an exciting improvement for fare equity.

The new program will provide riders who are aged 26-64, non-disabled, and have low income with reduced fares of approximately 50% off on all MBTA modes. Program participants will demonstrate eligibility via existing enrollment in programs with a cutoff of 200% of the federal poverty level (or lower).

The MBTA estimates the cost of the program to be approximately $52-62 million (including administrative costs, operating costs to meet induced demand, and fare revenue loss).

Without this program, a resident of Lockdown Land with 201% of the federal poverty level in income would be considered better off than someone with 200%. But with this program, the higher income person actually will have less spending power, assuming that he/she/ze/they ever uses public transit.

On net, any program likes this makes the quoted numbers on income inequality in the U.S. misleadingly extreme, which is good news, I suppose, for any political party that thrives by stoking envy.

Apropos of transportation, a friend of a friend’s hangar here in South Florida, complete with C1 Corvette and Nissan Fairlady Z (“Datsun” for Americans at the time):

And a photo of an almost-finished house that I snapped after departing from this airport:

(Jupiter Island, not to be confused with Jupiter; Intracoastal Waterway in the foreground and Atlantic Ocean in the background.)

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Swedish heretics refuse to abandon their heresy

by philg

From a couple of economists in Sweden, proving that sometimes peer-reviewed research must be rejected, “The Covid-19 lesson from Sweden: Don’t lock down” (Economic Affairs):

… countries with more stringent lockdown measures did not experience a lower death rate, as might be expected a priori.

Sweden, with an average lockdown rate of 39 for 2020–21, shows a weak cumulative GDP growth of 3 per cent during the two years 2020–21. Compared with an average annual pre-pandemic growth rate of 2.6 per cent, the Swedish economy lost approximately one year of growth. Countries with a higher lockdown rate lost between one and three years of economic growth.

There is a clear correlation between the degree of lockdown and the budget deficit for 2020–21. It shows the same pattern that emerged in Figure 4 for the relationship between lockdowns and GDP growth: the more restrictions, the deeper was the downturn in the economy and, consequently, the larger was the budget deficit.

In Sweden, with a lockdown indicator rate of 39, the total fiscal cost measured in this way was less than 3 per cent of GDP. In other words, Sweden managed to meet the European Union’s Maastricht criteria of no more than a 3 per cent budget deficit even at the height of the crisis. The corresponding budget deficit figure for the UK, with a lockdown rate of 50, was 27 per cent; for Italy, with a lockdown rate of 60, it was 17 per cent; and for France, with a lockdown rate of 48, it was 16 per cent.

Countries with weak public finances before the crisis experienced a further deterioration during the pandemic. After the pandemic, France had a higher public debt-to-GDP ratio than Greece did in 2009 at the start of the European debt crisis. In Sweden, the debt-to-GDP ratio at the end of 2021 amounted to 36 per cent, just slightly above the 35 per cent ratio before the pandemic. By the end of 2022, the Swedish debt ratio had fallen to 34 per cent and it is expected to fall below 30 per cent in the coming years.

By being less restrictive than other countries, Sweden was able to combine low cumulative excess mortality with relatively small losses in economic growth and continued strong public finances.

Here’s an annotated version of one of the figures from the article:

In other words.. the Swedes still think that they’re right!

Where is the non-Nobel Nobel prize in economics for Anders Tegnell and his not-so-merry band of MD/PhDs who said, in February 2020, “you might as well get used to SARS-CoV-2”?

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Pinballnomics: How long did it take for the Limited Edition Jaws machine to sell out?

by philg

In October 2022, the James Bond 007 LE pinball machine from Stern sold out in about 45 seconds.

Let’s take the pulse of the economy by looking at Stern’s latest release: Jaws. Just after 1:00 pm on January 4, 2024:

By 1:05 pm:

It’s possible that it sold out prior to 1:05 because with the James Bond machine people reported adding it to their carts and being unable to check out.

The Jaws machine is actually cheaper than Bond was: $12,999 in 2022 dollars versus $12,999 in 2024 dollars. Bond might be considered a more desirable theme, but Jaws was designed by superstar Keith Elwin, the genius behind Godzilla (#1 on Pinside’s Top 100).

Sadly, we’re gonna need a bigger family room if we are ever to enjoy Jaws at home.

Related:

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Abortionomics in Maskachusetts

by philg

In a recent phone call regarding correct Christmas Card mailing addresses, a nurse friend in Boston told me that she’s moonlighting providing anesthesia at an abortion care clinic. Anesthesia is required starting at about 10 weeks of gestation and the clinic provides abortion care to pregnant people who are up to 24 weeks pregnant. She said that they are especially passionate about providing abortion care to pregnant people who’ve come from states where abortion care is illegal or unavailable in practice at the 24-week mark.

Who decides how long the pregnant person has been a pregnant person? “That’s done with a combination of ultrasound looking at bone sizes and also asking the patient about the date of the last period.” In other words, depending on what the ultrasound shows, the clinic might refuse to provide abortion care to a pregnant person who has been pregnant for only 23 weeks or, if the customer gives a later-than-reality last-period date, to a pregnant person who has been pregnant for more than 24 weeks, which is still perfectly legal in Maskachusetts:

(Note the “mental health” judgment item.)

What’s the revenue picture for the clinic? “Prices start at $600,” she replied. What about for abortion care at 23.99 weeks? “I think it is about $3,500.”

What’s her daughter up to? I learned about various biomedical internships for the college undergrad. “She wants to go to medical school and become an ob-gyn.” I told my nurse friend about our neighbor who does IVF and who tells people if their insurance won’t cover the astronomical cost to get a job at Starbucks where they’ll be immediate covered. “Oh, my daughter wants to work on the other side of O.B. She wants to work in an abortion clinic where women [hateful term quoted; her language, not mine] come from out of state if they can’t get abortions in their own state.”

Related:

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