Legal and Economic Incidence 12/7

1. Cost of taxes includes the deadweight loss and the cost of collecting, in terms of time and money: also includes cost of time spent preparing taxes and cost of hiring others to do it, again in terms of time and money

2. Whichever side of the market is more inelastic will always take the brunt of the tax, despite who the tax is aimed at -> RELATIVE ELASTICITY is the key to analyzing tax revenues and determining who takes the burden of taxation

3. Legal incidence and economic incidence are orthogonal

4. "Incidence" - Who really pays

Supply-Demand Changes 12/5

1. Illegality of drugs encourages:

• Less moral people to enter the market
• Stronger drugs
• Need for enforcement, which takes time and money

2. Taxes are neither a cost nor a benefit, since they only shift money around; however they prevent potential transactions, called the dead weight loss. This is where they hurt the economy.

3. Placing a tax on sellers is essentially taxing buyers; can't just isolate one side of the market for taxation without affecting other side

Golf at Bethpage Grey

This article dealt with the overwhelming demand for tee times at a newly renovated golf course in NYC, one of the most population dense areas in the world, and the legal black market which developed as a way to get people tee times. In the end, the demand created a sort of lottery system: the second tee times were open to buy, people would desperately call in, and the lucky few who got through would purchase a chance to play on the US Open quality golf course, while the others would just get the beeping of a busy signal and be forced to try again. The author detailed his own experience with the system and those of others who have also had difficulty in getting a reservation. Though overseers have attempted to regulate the NY Golf Shuttle company, which constitutes the black market, they have largely failed. Each attempt at shackling it only causes more issues, often to the detriment of unintended customers. How can this situation be fixed, or at the very least improved?

I have one response, which is that the golf course should raise its prices. This is the best way to remove the scalping issue. Though people will cry foul and say that this is biased towards the more wealthy citizens, which it is, it is a logical solution. The scalping business is an example of a de facto "black market" caused by the excess of demand relative to supply, and the forced inability of the market to equilibrate by raising prices. Despite well-intentioned attempts at regulation and keeping the price of the golf course the same, the black market seems to defy all attempts to regulate it. Though the price for a tee time is $120, it seems the only way to actually get a tee time is to use this booking and shuttle service, which for the author of the piece cost $850 and was inconsistent with times. Raising the price would solve this problem, decreasing quantity demanded and letting people realistically plan with the golf course, rather than using a middle-man service that blitzes the phone system and scalps tee times. As Rizzo said, there is money left on the table here for people to earn by exploiting the disequilibrium of the market, and the NY Golf Shuttle is certainly taking advantage.

Saving the Last of my Declining

This week I finally got around to purchasing a clamshell. I don't know why I didn't earlier. Honestly, it is one of the best investments anyone with an unlimited plan can make. For $5, you can buy access to clamshells for the entirety of the school year. Then, you can take as much food as you would like from either of the unlimited dining centers, which are a sunk cost, and bring it back to the dorm to save for times when you get hungry. Instead of going to the Pit or Hillside, you can just take the food you stored from Danforth or Douglass. Over time, the money saved adds up. Maybe I wouldn't have so little declining if I had just invested in the clamshell earlier.

Now, here's the interesting thing. I was baffled that the price of the clamshell was so low! Honestly, $5 for the entire year? Given the fact that you only have to purchase the clamshell once each year, the demand should be relatively inelastic, and the price elasticity should be very low. I would pay much more than $5 for access to the clamshell. Even a $20 price would seem low given how much it would save me. And again, I only have to buy it once? I truly would buy it a a lot more than $5. So why is the price so low? Well, I figured it had something to do with the price of tupperware, and the price of other potential containers, which act as substitutes for the clamshell. However, I don't believe people will turn quickly to tupperware. The clamshell is too convenient, and people often don't care to invest the time to utilize the alternative options. For me, it was a relatively spontaneous decision, made when I was in a rush but wanted to eat more. Buying one had been in the back of my mind for some time, but I had denied that I needed one. Guess having $15 left in declining changed that mentality...

Class Notes 12/2

1. Price controls create need for security which creates opportunity costs of what enforcers could be doing. Security is a cost.
2. Housing vouchers would be much better than price ceiling
3. Increase in price decreases quantity demanded, not demand
4. Minimum wage does not help the poor, but admittedly it doesn't hurt too much either; a better system would use an Earned Income Tax Credit (EITC)

Price Controls 11/30

Outcomes of Price Ceilings
1. Reduced availability of good; harder to get! -> Shortages
2. Lower quality goods
3. Development of Black markets
4. Misallocations
5. Other neighborhoods face higher demand and higher prices
6. Lack of fairness
7. Discrimination since there is a lower cost of being discriminatory
8. Costs of enforcement

Market Equilibrium 11/28

1. Prices economize and give information to solve economic problems, without comprehensive knowledge on either side of the market -> personality traits, lifestyles, etc... Despite this, prices force consumers to take into account how much other people value goods

2. Markets have trial and error advantage over politics and central planning

3. Planned economies suffer from a knowledge problem and leave room for side deals and other hidden transactions, despite attempts to prevent this.