A True Redistribution of Wealth

 I recently have been second guessing my decision to work as a server at Bizou. While the food is very good, and I enjoy waitressing (to an extent), my problem recently has been the tips. While any server knows that a decent payout is not guaranteed at the end of the night, I have become really frustrated recently with my paychecks. I think I know the problem: at Bizou we pool tips. 

When I first applied for Bizou, I had no restaurant experience and no idea if I would be any good at serving. Under a true Rawlsian veil of ignorance, I thought tip pooling was the right move. What if my section just wasn't busy that night? What if I didn't get any big tables? What if I got a real mean group of Virginia Tech fans who would refuse to tip me? Tip pooling was a wonderful solution of perfect redistribution. Until it wasn't. As I got more experience, I realized I was consistently making less money than I pulled for the group. This perfect redistribution ignores that my marginal utility per dollar seems more than some of my coworkers. Where I would happily take a big table for a better tip, I know that some of them would derive just as much utility taking a stress free two top. So if anyone knows a restaurant that doesn't pool tips, text me. I'll be their star server. 

Grappling Game

While training Brazilian-Jiu-Jitsu tonight, I noticed something interesting about how I fight and its pertinence to economics. For those who don't know, BJJ is a grappling art that has a strong emphasis on submissions. To lead up to a submission, one has to make a series of moves, which all have a certain probability of working depending on who you are going up against. Better fighters will have more counters to high-percentage moves, decreasing their expected utility, and worse fighters won't. In this sense, BJJ is a game of expected utility maximization.

For example, tonight I was trying to escape from a rather disadvantageous position, and during the match, I was trying to use one of my best escapes. My opponent believed that this was the only thing that I was thinking of, so prepared themselves to defend against this. However, since I knew my opponent and was maximizing expected utility over the entire game, I had prepared a counter that could then deal with how they were going to defend. As a result of this planning and understanding of the probabilities that each move would work, I was able to win the match.

Sunsets on Skyline

     Skyline Drive and the greater Charlottesville area in general can have some beautiful sunsets. Last weekend, my roommates and I drove along that road with the idea to stop and have a sunset picnic dinner. Sunsets can be categorized as a public good as they are non-rivalrous and non-excludable, in theory. Many people who want to view a sunset can (and should!) without bothering or lowering anyone else's utility in consumption. Further, we stopped in a small parking lot with just a few spots-- one of which we were lucky enough to snag. Like many roads or parking lots, it seems as though there was some degree of rivalry present in our situation through a risk of overcrowding and having one's view inhibited as well as a lack of availability to stop in that parking lot.

    As a notable market failure, there was allocative inefficiency present in this sunset scenario because there's no way to appropriately charge consumers when a good is non-excludable. Q* does not equal QAE. A potential solution for this issue may be to utilize the gate (entry point) that is present along the road to "close the door" or to enforce Shenandoah National Park's entrance fee to create excludability to re-allocate resources efficiently. So, is it the government's role to step in and solve this economic issue?

"All the Debts I Owe"

As an enjoyer of live music and a fan of the band Caamp, I was thrilled to hear they would be playing at the Ting Pavilion in Charlottesville. However, a quick survey of my bank account discouraged me from attending the event. The night of the concert left me disappointed to miss the chance to see them. I had heard rumors that there was a spot near the venue where you could sit outside, and hear the concert, so I grabbed a friend and we found this spot. Atop cement blocks and rebar, we enjoyed a full Caamp concert, with a great view. The best part of this view was that I paid nothing for it. 

Sitting on my cement block and listening to the chorus of “By and By” I began thinking about the economics behind this situation. It became clear to me that this music was a positive externality in production, and I was free-riding by enjoying it without buying a ticket. Since Ting Pavilion is an outdoor venue, it is much more difficult for them to exclude than say JPJ. The non-excludability of this event allowed me to free-ride and enjoy a concert that others paid hundreds of dollars for. This relates to the externalities and the free-rider problem that Gruberch discusses in Chapter 5. Caamp produced the music for the patrons in the venue who paid for it but could not prevent me and others from enjoying the public good that they were providing.

Penny is a freeloader

In "The Big Bang Theory," (tv show) Penny, an aspiring actress who supports herself by waitressing, takes advantage of the kindness and resources of her neighbors, Leonard and Sheldon. Leonard and Sheldon are roommates who also work at the same university. Both, Leonard in particular, are benevolent to Penny, so she enjoys free Wi-Fi, meals, or help with various tasks. In this case, Penny benefits from the goodwill of her neighbors, without having to pay them back.

Now, this pattern of behavior mirrors the classic case of the "free-rider problem". The free-rider problem arises when there is a reluctance to contribute to the cost of goods that bestow group benefits. If a public good or service is being provided, some might benefit without contributing to its production. In this context, we can highlight the Wi-Fi conundrum. Now, I know what you're probably thinking: "Wi-Fi is excludable, so this example is rendered moot!" And yes, you would typically be correct. HOWEVER, you see, we haven't considered Leonard's kindness toward Penny, rendering him incapable from excluding her usage of Wi-Fi. And hence, we have the free-rider problem.

Negative Externalities of Music Consumption

 I have a friend, Andrew, who lives on the first floor of an apartment building on JPA. One thing about Andrew is that he loves his music. He really likes to feel like he's at trin at all times of the day. It doesn't matter if it's Tuesday at 1pm or Sunday at 2am, He's blasting his music. As you can imagine, Andrew consumption of music has a significant negative externality for neighboring apartment and significant. So much so that Andrew received a message from his landlord on Monday that his neighbors had the right to file a police report if he kept it up. 

While most people would have simply turned down their music, Andrew took a different approach. He research the Charlottesville City noice ordinance to determine the exact decible limit at various times of the day. He then purchased a tool to measure the decibels of his speaker at max volume. AS it turns out, his music plays 5 decibels below the legal limit. Much like the farm with the smelly hogs, Andrew's not liable for the negative externalities he's causing. So clearly, Andrew wont be turning his music down anytime soon. So, I suppose the real question now is: How much do his neighbors value their peace and quiet? And are they willing to compensate him to lower his consumption to the level of the social marginal benefit?

UVA parking is annoying

 My friend Bill and I had a long discussion this weekend about parking here at UVA. Bill claimed that parking was “for the people” and that he should be able to park wherever he wants. I explained to him, using Buchanan’s “An Economic Theory of Clubs”, that parking is not a public good but a private good given that it is reasonably excludable and rivalrous in consumption.

I live on Wertland Street and Bill lives at Bond. He comes over to do homework all the time and I always warn him not to park on the street because the parking patrol here is fierce and he doesn’t have a parking permit. Bill comes from a small town in Champagne, Illinois where parking is in abundance and it seems that anyone can park wherever they want with no consequences because Champagne police are not concerned with parking infractions.

I explained that parking is reasonably excludable because there is often limited space in population dense areas such as UVA. I also explained that parking is obviously rivalrous because there are more drivers than parking spots available on Wertland Street requiring some people to park elsewhere. He still wasn’t convinced that parking should be this restrictive– given his upbringing in parking abundant Champagne– so I explained further. While I agreed with him that parking has degrees of publicness especially in less-densely populated areas, parking on Wertland should not be considered a public good because the people authorized to park there have to pay every month for a spot. His decision to take an available space on Wertland Street is robbing another resident. This can also be seen as a negative consumption externality because the consumption of a parking spot by Bill reduces the well-being of Wertland residents who now have to spend time and fuel driving around to find a place to park.

Is Anyone On Board an Economist?

Recently I was on flight in which a passenger had a medical emergency - not a terribly unusual occurrence. The crew called for a doctor and a medical student revealed himself. The passenger - now patient - settled at the front of the plane and the med student treated him until the pilot made an emergency landing. Then the passenger was whisked off in a stretcher while the rest of us wondered what was wrong with him.

What does this have to do with economics? The situation is best conceived as production-side externality. In the course of generating a doctor, a hospital has been shuffling that med student from paying customer to paying customer. Yet my plane's passenger was able to take advantage of the process and gain medical care for free! If we want the allocatively-efficient number of medical students on planes, it may be time for hospitals to deploy them with pocket credit card scanners.

Air Externality

Given that I have moved myself about as far as possible from home for my college career, I spend a fair amount of time on planes. My most recent trip back to Charlottesville included a 17.5 hour flight, one in which I decided to enter the seating lottery (read: forgot to select a seat at all) and lost spectacularly with an assigned middle seat. I hoped that my seat neighbors would follow "middle seat etiquette", but as we settled in for the journey it was clear that they were both set on commandeering the armrests.

Their use of the armrests imposed a negative externality on me, one that was not accounted for in the price of their tickets (since this airline doesn't charge for selecting a seat). Before I had even learned of Ronald Coase's approach to these kinds of social costs, my intuition told me to engage in private bargaining. However, I faced an assignment problem in determining property rights to the armrest – the airline never made any official decree on the matter, and while I feel very strongly about middle seat etiquette I recognized that using it as an argument in this negotiation would be flimsy at best. I also had to consider the transaction costs of added tension between us and the potential of them cutting off my access to the bathroom in retaliation, a particularly dire prospect for a flight this long. So I decided to cut my losses, take a Panadol, put my headphones in, and watch as many movies as I could.

UNO(s) Organ Donation Network

         A few nights ago, one of my roommates made a comment about how her mother is finally taking a hard-earned vacation from her stressful job. My roommate’s mother is the CEO of the United Network for Organ Sharing (UNOS), and she began to talk more about the things she has been dealing with at work. Her mother has been traveling back and forth to Washington, D.C. for months, and meeting with many Senators’ staff. When I asked why she’s been so involved in politics lately, she explained that UNOS has recently been under fire from Congress due to the fact that there is no competition in the organ donation market. They have long been the only nonprofit organization to hold a federal contract for organ sharing, making them a publicly-regulated, private monopoly that holds 100% of the industry.

I asked, if the monopoly is so detrimental to health care and patients across the country, why has it taken so long for legislators to try to break up the UNOS monopoly? My roommate explained that the other options that have been considered in the past were not feasible. Organ donation needs to be national because organs are a scarce resource, and it is difficult for another company to compete against UNOS. It takes so much time to become reputable in a field as important as organ sharing, and at this point, UNOS’s long-run average cost is declining, and a new competitor would likely face very steep costs in starting up. She, and her mother, both have acknowledged that the current system is not optimal, as there is a need for organs that is not being met. Friedman, on the other hand, might argue that all the government needs to do is get out of the way, and allow UNOS to be a fully private monopoly until the market allows a new competitor. Either way, serving as CEO in the midst of a Senate overhaul of UNOS is a job that is well-deserving of a vacation.