Cardiff Businessmen Ask for Congestion Pricing

Businessmen in the Welsh City of Cardiff are asking for congestion charging to be introduced in the in order to reduce congestion and ensure the refurbishment of the infrastructure to stimulate that economy. This blogger has made psost here applauding the success of the road pricing in London and commented on news of its impending adoption in New York too. What is there to say when the chambers of commerce front-load the idea to city authorities? Either they are good economists or they are well-advised.

An Excess of Medical Exams

This article reviews a study that suggests that the full value of the annual medical exams that US citizens undergo is not established yet. Not surprising is the finding that the insured are more likely to be subjected to such tests and the reason is primarily because payment for the same is guaranteed. The cost of those exams and the fact that up to 20% of all adult citizens of the US take them suggests to this blogger that people are often less likely to questions medical procedures for the reason that the fear of infirmity is exaggerated.

The total cost of the unnecessary procedures that are undertaken show that physicians use the opportunity to extract rents from their patients. As stated in the piece, some medics are unsure whether personal health would be worse without the exams but that uncertainty leads to its provision in excess and for those for whom its adds little value. Perhaps they ought to be confined for the strict areas where the benfits are demonstrated already.

Champagne is Success Itself

The very few readers of this blog must forgive me for the apparent obsession with food for this week. American Magazine's current issue has this pithy but fantastic analysis about the small problem faced by the manufacturers of champagne. There's panic out there among the connoisseurs that there is insufficient champagne to meet growing demand from the world's increasing number of the affluent and status conscious. Whereas the rest see a crisis, I see a successfully marketed product.

A thirty fold increase in demand in China merely shows that the product is becoming rarer and that prices will rise to match that demand. Real markets are at work here. There's no guarantee that the prices will remain high but any substitution that occurs will help to moderate prices and the possibility of exercising market power. Only a successful product should denote success. champagne succeeds today.

Food Debate Starts in Wales

Government intervention into people's lives is reaching a level where it is being tied to objectives that are altogether incompatible. This story on the BBC news site reports that the Welsh government assembly has started a consultation process that intends to address the fact that 56% of Welsh nationals are reportedly obese. The Welsh Food Debate, as it is referred to in the piece seems to be not only misinformed but a real waste of public funds.

Admittedly, an understanding of the so-called obesity epidemic could be sufficiently raised by conducting a nutritional survey and subsequent eductaion to encourage consumption of fruit and other wholesome food. However, I think that the introduction of emotive words such as the "obesity time-bomb" and the rest, is evidence that certain bureaucrats are obsessed with determining choices for Welsh nationals. Getting people to understand where food comes from is not a socially useful objective any more than people understand the components that make up their automobiles or the IPod. The Food Debate is ultimately stretched to a protectionist argument for purchase of local products as if that is really related to the health problem that is used to justify the Food Debate.

My advise: Save the money intended for the road shows and reduce taxation on wholesome food and a place carbon tax to save the environment. The solution ought not to be more complex than the problem.

How About a Carbon Tax?

In addition to having established the Pigou Club, Gregory Mankiw presents in this NYT article the most complete and concise argument for approaching the small matter of global warming. This blogger has mentioned this in a number of posts but nothing beats Prof. Mankiw's command of the applicable principles of economics on the one hand while identifying the trade offs and political mobilization that would be required on the other.

The world is obsessed with half developed and fantastic ideas such as bio-fuels, cap and trade arrangements and fuel economy standards. he exhausts the pros and cons and states that a carbon tax is the most efficient way to approach it. the difficult part is to convince governments to negotiate an international carbon tax regime. petroleum exporters and consumers obsessed with keeping nominal fuel taxes low would be difficult to win over. That though is not the work of the policy wonk and he leaves the rest to the lobby professionals and the politicians to cut the deal.

Drumming Taxes Out of Defaulters

Any person visiting India is most likely to be struck by the size of the country on its own in addition to the stark contrasts among its people, lifestyles and cities. For instance, one often reads about the rising giant's high-tech centers in Bangalore and the huge middle class that amounts to nearly 200 million people living close to an even larger indigent population. In that respect, if the middle class population on its own were to be sliced away, India would qualify as a middle-income country.

An article in the Hindustan Times today illustrates another part of that contrast that is India. It reports the story of the Guntur Municipal Corporation which has chosen to hire drum beaters to shame property tax defaulters. Arriving at the addresses of the defaulters, the sound of drums serve to alert neighbors of the failure of the individuals who appear to pay to avoid both the shame and nuisance that is definitely caused. Who would argue with the approach when the officials claim that it has proved successful?

To my mind, this approach is further illustrative of the fascinating things about India. One is that the creativity applied in private and public affairs is very visible and the second being that labor is pretty cheap because it is still cost-effective to hire drummers and pay them off the cost of the recovered sums. Just amazing!

India Enters into Semiconductor Manufacturing

It is not to be debated that India's economic growth figures have been impressive in recent years. Most therefore assume that absent a major hiccup, this nation is destined to maintain its growth and become an even greater economy. Growth and success are indeed important but they often brew hubris and bad thinking by governments. An example of this is found in this news piece reporting that India's government is about to publish a semi-conductor policy as part of industrial policy.

It is a shame that government's just do not learn about the limits of directed or central planning and the success in one industry such as software and Business Process Outsourcing (BPO) is generating hubris among bureaucrats in India. They appear to be ignoring enormous amounts of literature on the one side and empirical evidence that weighs against designing industrial policy around subsidies under the guise of tax incentives to attract semiconductor manufacturing into India.

Based on my reading of this book by William Lewis, I would bet against the success of most of these firms that intend to start investments in the industry merely to ride on those subsidies. Careful reading of this book would show that the semiconductor industry is not only very highly competitive but that it exhibits the characteristics of common commodities. Further investments in producing semiconductors through subsidies or protection would only transfer public resources to those investors without generating much new value. If the guidelines remain as suggested in the piece, then this would simply be about putting corporations on welfare. the unintended consequence would probably be a glut in chips in the world market. India's Industrial policy planners would be well advised to review the chapter on South Korea.

Quoting Paul Krugman

" Economic analysis is not, or at any rate is not supposed to be, a set of rules to be followed on all occasions; rather, it is supposed to be a way of thinking, something that allows you to craft responses to an ever-changing world". Paul Krugman in The Return of Depression Economics p. 167

State Regulation of Phone Use by Children

An article here states that the State Government of Karnataka in India has announced a ban on the use of mobile phones by children under the age of 16 years. The reason given is that some information has been made available which suggests that such use has adversely affected cognitive abilities of students.

Now, I am deeply skeptical of this populist policy announcement for two main reasons. To start with, a 16 year old in India is unlikely to have sufficient income to acquire a mobile phone without the contribution and approval of ownership by a parent or guardian. Unless guardians are willing to police the youngsters, the enforcement of these regulations will be nigh impossible. The regulation of the use of that gadget should rest entirely with that guardian and all that may be required of public authorities is to ask schools to limit its use during lessons.

Secondly, the supposed studies upon which the prohibition is based make very bold assertions that are most likely exaggerated. Mobile phone use has been examined for the effects claimed and there has never been any reason to justify such draconian rules.

That the purported ban has not been accompanied by real sanctions yet is probably a good thing for there ought to be no sanctions from the state regarding this matter. This story merely illustrates the tendency for regulators to desire to control and regulate matters out of scaring the public with risks that are neither real nor established. So what happens when one gets to 17 years?

Quote of the Day

"The business people whose insights I value mostly think that business is complex, that there are few universal recipes for success, and explain that much of their time is spent gently coaxing the best from people". John Kay