Plastic Bags and Externalities: How Cities Use Taxes to Address Pollution

        As the effects of pollution and climate change become increasingly visible, governments around the world are taking action. On January 1st of last year, the City of Charlottesville implemented a five-cent ($0.05) tax on disposable plastic bags provided to customers at checkout in grocery stores, convenience stores, and drugstores within City limits. Essentially, this tax aims to limit the negative pollution externalities by disincentivizing individuals from using single-use plastic bags and incentivizing individuals to use reusable alternatives. As said on the City of Charlottesville Government website, 

“While this does not eliminate the use of plastic bags altogether, it incentivizes the use of reusable materials like bags, boxes, and baskets to transport purchased items. An important provision of the ordinance requires that the revenue from the 5-cent tax be funneled into environmental education, pollution clean-up, and providing reusable bags for SNAP and WIC recipients.”

Therefore, through collective action allowing for government intervention, the negative pollution externalities of plastic bags can be internalized through a market-based solution. 
        As explained by Ronald Coase in “The Problem of Social Cost,” if property rights are well-defined and transaction costs are low, private parties can negotiate and reach efficient outcomes without the need for government intervention. However, in this case, property rights over the use of plastic bags (the right to pollute) are not well defined, and the transaction costs in negotiating compensation for this widespread pollution are high, making a private solution impractical. Therefore, government intervention is needed to manage this externality efficiently. Overall, a tax on plastic bags is an efficient solution, as it internalizes the external costs while creating an economic incentive for both producers and consumers to reduce their plastic bag consumption.

Law School Monopoly: Go Into Debt, Do Not Pass Bar

Over the past two months, I’ve been knee-deep in law school applications. Not only is my brain exhausted from crafting essay after essay, but my wallet has taken a hit too. The Law School Admission Council (LSAC) manages nearly every aspect of the law school admissions process, and its fees are staggering: $250 for the LSAT, $200 just to register for the application cycle, and $45 per school application sent through their system (not counting individual school fees). LSAC has effectively vertically integrated itself into this system, making it a one-stop shop for admissions—and a lucrative one at that.

Though LSAC operates as a nonprofit, it works hand-in-hand with American Bar Association (ABA)-accredited law schools. These schools—conveniently the only ones recognized in the legal profession—are bound by an ABA rule mandating that first-year JD applicants take a “valid and reliable admission test.” Unsurprisingly, the LSAT remains the test of choice, as the ABA discourages alternatives by threatening schools with the loss of accreditation. This creates a closed-loop system where LSAC and ABA-accredited schools maintain control over who gets through the gates of legal education.

If this monopoly on admissions feels frustrating, you’re not alone. Millions of students across the U.S. face the consequences of rent-seeking behavior in higher education. Through lobbying efforts, groups like the ABA extract benefits, like maintaining the LSAT’s dominance, while students bear the costs through increased tuition and fees. This creates a deadweight loss, with fewer resources available for improving education and more funneled into preserving the status quo. For example, the ABA maintains a governmental affairs office specifically for lobbying Congress on issues related to the legal profession. 

If any of you future economists are debating a mid-career switch to the legal profession, here's a sample LSAT question to get you started: 

Correct answer: E

Negative Breakfast Externality

 Earlier in the year we talked about externalities which are byproducts of an action and can be positive or negative. A negative externality occurs when I do something that negatively affects someone and I don't bear any of the costs. I was reminded of this when I was eating breakfast the other day. I like to sleep in so I don't eat breakfast most days but every Tuesday and Thursday I like to eat after class. I like to keep my breakfast simple and I don't like wasting time making a good meal. At the same time I recognize the importance of eating a healthy breakfast so I compromise by eating a mixture of tuna and peanut butter for breakfast with a glass of milk. It has a lot of protein and I'm sure a lot of other nutrients. Many of my housemates do not share my sentiments and often complain about the smell. The smell doesn't really bother me so I'll continue to eat this in the future. Perhaps a coasian solution could be reached if they payed me not it but they'd have to make it worth my while.

The Boot's on the Other Foot: How European Soccer Is Learning From American Socialism

Growing up, I never played soccer because I thought it was un-American. That is a very true story. However, in recent years I've seen the light and now am a proud and anguished supporter of Everton (with their beautiful manager Sean Dyche, pictured at the bottom) in England's Premier League. I love the setup of international football's promotion-relegation, free market approach, where seemingly any team has a chance to win; hypothetically, lowly Swindon Town in the fourth tier of English football could be less than five seasons away from winning the Champions League, Europe's highest title. However, this rarely occurs; in European football, just as in capitalism, the richest clubs win the day. 

The European system differs greatly from any American sports league, even our own Major League Soccer. Major American leagues are set up to ensure the security of their member clubs even through financial woes and poor on-field performances. Even the wealthiest clubs have caps on their spending to ensure a fair competitive distribution (unfortunately for my Minnesota Twins, Major League Baseball is an outlier here). This Wall Street Journal article I read highlights the irony of this: America's strong laissez-faire culture contrasts with the socialist nature of American sports leagues, while Europe's more socialist culture supports a very capitalist soccer system. However, Europe's system slowly appears to be shifting toward a more American approach. Europe's major clubs tinkered with a "Super League" consisted of the top clubs from each major European nation, a move that was nearly unanimously shot down but led to a revised Champions League format that placed more focus on European instead of domestic competition. Recently, the EU's top court ruled that Europe's player transfer rules don't give players enough freedom, opening the door for free agency of sorts. 

The article caught my eye for its relationship to Buchanan & Tullock's Calculus of Consent. Chapter 6 states, "Since no player can anticipate which specific rules might benefit him during a particular play of the game, he can, along with all the other players, attempt to devise a set of rules that will constitute the most interesting game for the average or representative player. It is to the self-interest of each player to do this." American sports have implemented said rules to create a more competitive league, giving every team a chance to compete or game the system. Europe appears to be following their lead. 

Late Night Election Watching: Am I...Irrational?

 I, like many other Americans, found myself up until nearly 4 am on Tuesday night watching the election results. If you asked me why, I would've told you that I felt it was a very important outcome and I wanted to know as soon as I could what was going to happen. I felt like this made sense, and as a result, I was one of the very first people to hear about the election results. The next morning I woke up, and saw many people saying they "woke up to the most ___ news of their life." I leave the blank because obviously, people felt different ways about the outcome, but for many the similarity was they felt the news was extremely important and they woke up to it. In my mind, I wondered why they did not stay up to see if it was so important to them. 

The obvious answer here is that most people are not college students, and most college students do not have their first class on Wednesday at noon (though they should try it sometime). For me, the opportunity cost of staying up was very low, while for them it meant showing up tired to work or class, which can have real consequences. But I was not alone in staying up, given this BBC article titled: Staying up? Here's all you need to know about election night. Many others, like myself, stayed up for the important news. 

I was also honestly bored watching the results come in. It is pretty slow, and they say the same things over and over again. I can not think of any utility that made it worth it to be low on sleep the next day, and miss a little bit of daylight. Was I acting irrationally? Was there more utility to be gained by going to bed early and checking my phone first thing in the morning? Did anyone else stay up late watching it and feel like they were right to do so? For now, I might just have to live with the fact that I may not be perfectly rational. 

The Rational Voter's Dilemma: Avoiding the Hassle

A few weeks ago in class, we posed the question: why do [rational] people vote? Because the expected return of one individual voting to elect one's desired candidate is so low, we concluded that there must be other motives which compel utility maximizing individuals to vote; expressive voting and fulfilling a sense of civic duty are such examples of this phenomenon.

In the midst of all else that was going on during this election cycle, I realized that there was another rational reason to vote, at least in my case. Walking up and down the corner and throughout grounds during the weeks leading up to November 5th, I was accosted on several occasions by random strangers asking me if I had registered to vote. The truth is, I hadn't registered to vote, and was planning to do same day registration (or considering not voting at all). Thus, every time this question was posed, a little bit of negative utility was eating away at me. I did not want to say "Nope" and be asked to fill out some survey or QR code contrivance, but at the same time, I would rather my conscience not be burdened by continuously lying to these campaigners - leaving no positive outcome for this situation. And so, an argument can be made that it would have been rational for me to have registered to vote some time ago, to avoid any hassle from these people. After doing so, I could simply reply "yep" and carry on with my day, not being pursued by the harassment group, and my guilt being assuaged by no longer lying to them. 

By-Product Theory and American Physical Society

 A couple of weeks ago, I had to head down to UNC Charlotte to present on the research I did this summer. Since it was my first time presenting at an APS meeting, I wanted to make sure I had everything in order before I got to Charlotte. So about a week prior I went about registering for the event. To my surprise, the cost of attendance for a non-APS member student was $60 while that for a member student was $15. Student Membership to APS costs $25 annually, so naturally I signed up as a member, and then proceeded to buy the discounted ticket, saving me $20 on cost of attendance. 

Almost every other student I spoke to also signed up on the APS member ticket, which I thought was a really cool example of Olson’s By-Product Theory that we spoke about in class last week. In this case, the primary good being the lower cost of attendance at a conference, and the by-product being APS membership.  

An Athletic Prisoners Dilemma

Over the past few weeks, leading up to our last couple of competitions in the fall season, my rowing boat got substantially faster very quickly. Ironically, over this time, everyone in the boat was both putting more power into their oar and, at the same time, felt like they were exerting themselves less overall. We hadn't done any sort of fitness training over that time, so it would seem odd that both could be true. As one of my teammates pointed out during a meeting after practice, it came down to a prisoner's dilemma. 

As we row, we look for something we call "swing". This refers to the feeling of the boat moving when rowers are in perfect harmony, both in their rhythm and in their exertion. If any rower changes either of these things, that feeling is lost, and the boat both moves slower and feels "heavier," requiring more effort from hardworking athletes to reach the same speed. This is where a prisoner's dilemma comes in. If any one rower starts working harder, things get substantially worse for that person, as it is both very hard to be the one person pulling harder than the others and very easy to be the one person not pulling in a boat of harder-working athletes. However, if everyone simultaneously starts working harder, we can find swing and move the boat faster with less overall effort. Everyone, though, has an incentive not to act, as an athlete previously putting in minimal effort and then making the change will make their expected workload in the boat greater, regardless of the actions of the others. Instead of a fast, light boat, we get a slow boat with no hardworking athletes in which everyone ends up putting in more effort than if they tried to work harder as one. 

This is where my job starts to matter. Although I don't hold an oar, I am the voice in each rower's head encouraging them to do something that, if just one of them chooses not to do, will be extremely difficult and unrewarding for everyone that does it. However, when I can convince everyone to act, we see a pareto-improvement, making the boat faster with no downside to anyone, when compared to a boat with nobody working hard at all. 

Samuel Gregg and minimum differentiation

Our class discussed how a location model can be used to analyze how parties position themselves to acquire a majority. A classic Hotelling finding that Downs analyzes is a minimum differentiation solution between two parties, but do we really see that today?

I'm reading economist Samuel Gregg's book "The Next American Economy." Despite current polarization, he claims both parties have systematically questioned the use of free markets. He thinks conservatives, who once championed free markets, now brand their government intervention as "populist" or "economic nationalist."

Gregg's description shows the two parties are closer to 0.5 in a Hotelling model than what we may think. But this is far from a "democracy works because of minimum polarization" finding: Gregg is concerned that Americans have lost sight of the previous century's free-market enthusiasm.