Monthly Archives: January 2006

Are students leaving the politics out of economics?

The NY Times argues that they are. According to a poll of 230 of graduate economics students of University of Chicago, Columbia, Harvard, Princeton, Yale, Stanford and the Massachusetts Institute of Technology, students are leaving the politics out of economics. Graduate students are interested in empirical analyses but they do not want to advocate specific policies on the bases of their research results: they do not want to “take the next step, from research to advocacy” .
The NY Times article Students Are Leaving the Politics Out of Economics was pointed out in the January 27th post of Marginal Revolution.

Individual carbon "credit cards"?

Neasa MacErlean in the Guardian reports that 18 months ago Labour MP Colin Challen presented a proposal to the Parliament for the introduction of individual carbon cards. According to the proposal, each UK citizen would be given an equal amount of carbon credits per year. Every time a person would purchase a good or service, he would be charged an amount of carbon credits related to greenhouse gases associated to that good or service. If all the credits were used up before the end of the year, no purchase of, let’s say, fuels or plane tickets would be possible unless the needed carbon credits are bought from other carbon credits holders.
In short a system quite similar in principle to emission trading. In fact, I wonder would such a system be needed if and when emission trading of greenhouse gases is extended to those sectors not yet included. In other words do we need to regulate both the demand and the supply side? Another question related to administrative and monitoring costs such a system would imply. I suppose they would be huge. Finally, which purchases of goods and services would be included? Greenhouse gases emissions are linked to the production to all services and goods in various degrees. Thus implementation of the system would require a huge amount of data if extended to all goods and services. If not, it may lead to substitution effects, whose possible impact should be evaluated.

Fair-trade products: buy or not buy?

Fair-trade products such as coffee, tea, chocolate, honey, sugar, bananas etc. are commonly found on the shelves of supermarkets here in Finland. For those unacquainted with fair-trade, let me explain that fair-trade products cost more than their “conventional” counterpart. This higher price or price premium is paid by the consumer in exchange of the promise by the producer to pay a higher, “fair” price to the local producers and/or to pay a higher, “fair” wage to its workers (for more see ).
Standing is the aisle of the supermarket I ponder :should I buy fair-trade tee or the “conventional” one? What impact may an increased demand of fair-trade products have? For an interesting discussion see the Tyler Cowen’s post on Marginal Revolution

Here is an extract:

To make the best possible case for fair trade, I will assume the promise of good treatment is credible. Let’s say the supermarket has some market power and would have liked to price discriminate on coffee sales. Now you can buy either normal coffee or fair trade coffee, and the richer, more conscientious people are willing to pay more for the latter. Some people can be charged lower prices, while others pay higher prices. Fair trade will likely increase coffee output, relative to a world with no fair trade. Profits will go up. But what happens to input prices? Will wages of Rwandan coffee producers rise? It depends on the alternative to market segregation. It is possible that if only a single kind of coffee can be sold, the market would opt for the more expensive coffee, involving better treatment of all workers. Even if you don’t expect this today, it might happen in a few years’ time. If McDonald’s can improve the treatment of all the chickens it buys, maybe Starbucks or some other force will force the coffee sector to clean up its act. So development optimists should be suspicious of fair trade. It could diminish long-run general progress by giving the conscientious an outlet for their charity. By splitting up the market, we are institutionalizing especially poor treatment for one class of workers. Furthermore the high profits from price discrimination imply that producers will be keen to continue such segregation rather than end it.

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Munich Summer Institute on Economics and Psychology May 29 – June 6, 2006

It is now possible to apply to the Munich Summer Institute on Economics and Psychology, which will be held May 29 – June 6, 2006. Applications must be received by March 3, 2006. The teaching faculty includes: George Akerlof (Berkeley): Bruno Biais (Toulouse), Stefano DellaVigna (Berkeley),Ernst Fehr (Zürich): David Laibson (Harvard), Ulrike Malmendier (Stanford), Barbara Mellers (Berkeley),Sendhil Mullainathan (Harvard), Drazen Prelec (MIT), Antonio Rangel (Stanford) and Klaus Schmidt (Munich).

Forests, methane emissions and carbon sequestration

A study published in the 12 January 2006 Issue of Nature by Keppler et al., showed that living plants emit significant amounts of methane, an important greenhouse gas. However, even taking into account this methane emissions, it appears that forests remain a net carbon sink. In a later released clarification Keppler et al. write:

Furthermore, our discovery led to intense speculation that methane emissions by plants could diminish or even outweigh the carbon storage effect of reforestation programs with important implications for the Kyoto protocol, where such programs are to be used in national carbon dioxide (CO2) reduction strategies. We first stress that our findings are preliminary with regard to the methane emission strength. Emissions most certainly depend on plant type and environmental conditions and more experiments are certainly necessary to quantify the process under natural conditions. As a first rough estimate of the order of magnitude we have taken the global average methane emissions as representative to provide a rough estimate of its potential effect on climate. These estimates (for details, see below) show that methane emissions by plants may slightly diminish the effect of reforestation programs. However, the climatic benefits gained through carbon sequestration by reforestation far exceed the relatively small negative effect, which may reduce the carbon uptake effect by up to 4 per cent. Thus, the potential for reduction of global warming by planting trees is most definitely positive. The fundamental problem still remaining is the global large-scale anthropogenic burning of fossil fuels.