June 16th, 2005



So I've never gotten a piercing or body mod in any way shape or form until now. But I have the design for a tattoo, and in large enough form (all I had was a small icon before) that someone can do something with it. Now, I need to decide where to go.

Who's good and who should I avoid? Money's not an object, but hassle factor is. I'm not gonna schedule this 3 months in advance or deal with someone who cancels appointments.


Eco 200: canals

(individual) The Army Corps of Engineers estimates that a canal between Tussle and Big Stone would save shippers $500,000 per year. The canal would cost $200,000 per year to maintain.

  1. Is it correct to say that the canal is a good investment in the long run because it will save society a net of $300,000 per year and eventually that will sum to more than the $20 million construction cost?

    No. Because the present value of a $300,000 annuity may not reach $20 million if the life of the canal isn't long enough. Essentially, it'd only be a good deal if the going interest rate is somewhere around 1% and the life of the canal is 111 years or longer. At interest rates of even 2%, it will take hundred and hundreds of years to make that a worthwhile investment. No one will be shipping via canal by then.

  2. About how low would the interest rate have to be to make the canal a profitable investment? (The canal would not be profitable if the interest payments plus maintenance costs ate up the saving to shippers.)

    Well less than 1%.

  3. The advantage of having the government build the canal is that government can do things that are in the public interest whereas private enterprise is constrained by narrow considerations of profitability. Evaluate that argument.

    Nothing should be done if the benefit does not exceed the cost. When something is of uncertain cost or benefit or the benefit is sure but the method of monetizing it is unclear, then government may be better because it is not concerned with monetary benefits or costs to the same degree. However, in the case of the canal, unless there are some huge hidden benefits beyond the savings to shippers, I don't see how this is worthwhile for anyone to build.


Eco 200: present value

(individual) What is the present value of each of the following when discounted at interest rates of 4 and 15 percent?

  1. A $10,000 prize in a limerick-writing contest, to be received one year from now.
  2. A $10,000 cash legacy from your Aunt Mehitabel, to be received when you reach your 25th birthday. (If you have already passed it, choose some other birthday).
  3. $10,000 per year for each of the next ten years, beginning one year from now, as first prize for telling in 25 words or less why you like a detergent.
  4. Ownership of an office building from which you expect to receive an annual net income of $10,000 per year for each of the next 30 years, at the end of which time you expect to sell the building and land for $100,000. Assume the annual income amounts are all received at the end of each year.
40th birthday
5 years

Eco 200: social responsibility

(individual) Should the managers of business corporations, in their official capacities, accept social responsibilities beyond the responsibility to increase the net revenue of the corporations which they run?

  1. Do they have a moral obligation to go beyond what the law requires in order to advance such cases as race and gender equality, a clean environment, better public transportation, good government, and so on? Why or why not?

    They do have a moral obligation. The classic example is slavery. Corporations could easily employ slaves today in jurisdictions like Sudan which allow it. It's repugnant.

  2. Who will pay the costs if corporation managers shoulder such responsibilities? Who will review their decisions to be sure that the decisions they make really are in the public interest?

    Beyond what their shareholders want, the government requires, and what the public will pay for, no one will review their decisions to make sure they really are in the public interest. No one except god upon their death.

  3. Why might the president of a large corporation want to contribute one million dollars of corporate funds to a hospital-building program in the city where the corporation is headquartered? What personal benefits and personal costs accrue to the president from such a gift?

    The corporation benefits from publicity and greater access to health care for its employees who then miss fewer days of work. Personally, he will likely be put on the hospital board where he gets to hobnob and make connections. He'll also suffer the wrath of shareholders who feel it depresses the stock price.


Eco 200: lawnmower

(individual) Each of the ten families on a suburban block is likely to have its own power lawn mower. Why don't families more often share a single lawn mower? Try to enumerate the principal transaction costs that stand in the way of such a cooperative arrangement.

Arranging plans for scheduling who uses the mower, who gases it up, and who repairs it. Finding who has it now when it's not where it's scheduled to be. Collecting money for gasline and repair costs if not handled by the person who does the work. Deciding the allocation of costs to coop members.


Eco 200: insulation

(individual) Should we have laws that require homeowners to insulate in order to save energy?

  1. How will homeowners benefit from improved insulation? Should homeowners insulate if the cost to themselves of doing so exceeds the benefits to themselves?

    They will pay less in heating costs. And generally homeowners should not insulate if the cost to themselves exceeds the benefits.

  2. How do others in a community benefit from the decision of some to insulate and thereby reduce their consumption of energy? Do these spillover benefits justify a subsidy to encourage homeowners to insulate? Who would lobby for such a subsidy?

    Three possible benefits I can think of quickly. One is preventing blackouts when overall use reaches certain thresholds, increasing the cost to all consumers by exorbitant amounts. Another is preventing the use of emergency services due to extreme heat and cold, costs of which or more often born by local governments (and thus, the taxpayers of the community). Reducing overall energy use can also decrease fossil fuel emissions by power generators, reducing pollution. These spillover benefits might justify some subsidy. It depends on how much those benefits actually are worth.


Eco 200: integration

(individual) If all Americans preferred living in racially integrated neighborhoods, would residential neighborhoods in the United States becomme integrated? They probably would if that were the only preference Americans held. But if the preference for racially integrated neighborhoods is only ne part of their preferences, we may have a Prisoners' Dilemma.

  1. Visualize a city whose population is 50 percent black and 50 percent white. Suppose further that no one objects to living next door to someone of the opposite color, but that they all object to having neighbors of the opposite color on both sides and will move if they find themselves in that position. Will a segregated or integrated housing pattern emerge under a system of voluntary exchange? Why? If integrated housing is considered a good thing, how could it be achieved under these circumstances?

    Because randomly, people will find themselves in WBW or BWB orderings. So the middle person will move. The only replacement who will move in will make it WWW or BBB. Gradually, such clusters will become larger.

  2. It isn't as obvious but it's almost as inevitable that a severely segregated housing pattern will eventually evolve if the citizens of this city wait to move until their neighbors on four sides are of the opposite color. How could such a community give effect to the desire of each citizen to live in a racially integrated community?

    The same mechanism would happen. A community could enact rules to prevent clusters before they take shape. They could also set up a community organization that buys up houses on the market and sells them in patterns that maintain integration.

  3. Do or should residents of an area have the right to encourage or discourage purchasers in order to achieve or maintain a racially integrated neighborhood? Do they thereby violate the rights of would-be sellers and purchasers who are prevented from arranging a mutually beneficial exchange because the purchaser is the wrong color?

    Depends on how such encouragement or discouragement happens. Some methods put minimal burdens on buyers and sellers. For instance, while it does restrict free exchange, granting people the right to beat a price in order to maintain integration doesn't impose a huge burden on freedom. And in some circumstances I could support more coercive tactics.

  4. The private developer who built Starrett City in Brooklyn wanted it to be a racially integrated neighborhood. To achieve that goal, Starrett City adoped racial quotas, reflecting the percentages of different racial groups living in the area. In 1988 the Supreme Court declined to review an appellate court decision holding that the quotas violate the Fair Housing Act of 1968, which prohibits racial discrimination in housing. Should racial discrimination by private parties that aims at achieving residential integration be illegal?

    Generally speaking, I think it should be legal.


Eco 200: more Sowell B.S.

(individual) Access, read, and comment on the reading located at: http://seattlecentral.org/faculty/jhubert/sowelltradeoffs.html

Most people realize there are trade-offs to these actions. Sowell is just bitching because people don't agree with how he judges them. And he presents some things as trade-offs which aren't. For instance, it's not a choice between caribou tranquility in Alaska and miners' lives in Pennsylvania. In fact, making oil more expensive will increase the demand for coal, allowing prices to rise and for the coal companies to afford more safety equipment. If demand dropped, there'd be more incentive to cut costs so as to profit from the coal. Safety is one way the costs could be cut.


Eco 200: give and take

(individual) Evaluate the following quotation: What the government gives it must first take away! — John S. Coleman

While not everything has a legal property right, everything is effectively owned by someone, even if just the first person who can get to the property to use it. If the government grants a right to someone, either they already have it, or someone else does (or someone else will be prevented from acquiring it first). So granting it to one entity takes it away from other entities.


Class done

Took my final this morning. Finished off the last assignment just now. You'll all be happy to not read the incessant postings of assignments I'm sure.