Why Shale Drillers Are Pumping Out Dividends Instead of More Oil and Gas

"Compensation plans that once paid executives to boost output without regard to energy prices now foster cost cuts and shareholder returns" (WSJ, May 2022). Perhaps the new plan does a better job aligning the interests of executives and owners. "After years of losses, investors demanded changes to how bonuses are formulated, pushing for more emphasis on profitability. Now, executives who were paid to pump are rewarded more for keeping costs down and returning cash to shareholders, securities filings show."

How Not to Build Affordable Housing

"The nonprofit Up for Growth concluded that 'rather than increasing the number of affordable units,' the zoning scheme 'appears to be diminishing the supply of housing at nearly all income levels.'" (WSJ, May 2022)

Biden Establishes a Ministry of Truth

"People respond to incentives. Therefore experts respond to incentives."

"Put yourself in his shoes. If you predict doom and nothing much happens, it was because of your wise warning. If you don’t predict doom and reality is worse than you predicted, you will be blamed and shamed. The incentives are clear. Truth experts at the DGB will proclaim grave threats around every turn even when any “threats” are minor to nonexistent.

"By creating the DGB, the U.S. government is creating a crisis monitor with the dial permanently set to “existential threat.” No one inside the board will have the incentive—or the courage—to dial it down."

Roger Koppl and 

Abigail Devereaux, WSJ, May 2022

A Wide‐​Ranging Book for Non‐​Economists and Economists

David R. Henderson (Regulation, March 2022) reviews Steven Rhoads, The Economist’s View of the World, revised 2021. The review applauds the chapters on:

1. Opportunity Cost
2. Marginalism
3. Incentives
4. Government vs. Free Markets and
5. Safety Information.

Do we want to discourage marriage and work?

Casey Mulligan shows that the current version of the current version of the Spending Bill = Build Back Better Bill = Social Spending Bill = Reconciliation Bill imposes substantial taxes on couple who marry and increases the effective marginal tax rate on low-income earners (Mulligan, WSJ, Nov. 2021)
.

Amazon Go

Using AI, cameras, and sensors - Amazon is eliminating the human capital in stores and making checkout as smooth as swiping your phone and charging your account at the end. Imagine what Amazon can do when robots can fill orders and drones can deliver products to my doorstep. You could take a VR tour of a store and "buy" an item by blinking on it, the robot fills your cart, and the drone delivers the cart to your house. Your children's world will be different from mine.

Increases in the minimum wage are not going to slow the replacement of people with machines.

New York Trashes Landlords Again

This WSJ editorial raises questions about the security of landlord's property rights (WSJ, Sept. 2021). What exactly does the landlord purchase when the government can later forbid evictions or increases in rent? The restrictions decrease the income the landlord expected to earn. Does the inability to use the property as desired and decrease in income constitute "government seizure of private property for public use without just compensation"?

Do restrictions on evictions and increases in rent increase the incentive to become a landlord or decrease the incentive? How would the change affect the future availability of rental housing?

Copper Boom Has BHP, Freeport Picking Through Waste

Companies are extracting copper from what was formerly waste because the price has increased. (WSJ, June 2021) The increase in price => extraction => increase in quantity supplied.

Criminals in Minneapolis and San Francisco appear to respond to incentives

Click here for some discussion. on Minneapolis.

Clear here for some discussion on San Francisco.

Unintended Consequences of Hero Pay

Stores employ fewer heroes (Reason, March 2020).

The role of incentives in the CA fires

Here are three reasons that CA is experiencing horrendous fires. I presume that similar reasons operate in WA and OR. I also recognize that global warming makes fires more likely. In my opinion, global warming increases the importance of using controlled burns to reduce the chances of horrendous fires.

1. Burn bosses don't suffer when they don't order controlled burns, but do suffer when a controlled burn gets out of hand.
2. Public ownership of public lands means that no individual has a strong incentive to maintain the land.
3. Command and control regulations often have unintended consequences and thwart attempts to perform controlled burns. 

Bill Gates says most tests for coronavirus are "garbage"

 

"But people aren’t getting their tests back quickly enough.

"Well, that’s just stupidity. The majority of all US tests are completely garbage, wasted. If you don’t care how late the date is and you reimburse at the same level, of course they’re going to take every customer. Because they are making ridiculous money, and it’s mostly rich people that are getting access to that. You have to have the reimbursement system pay a little bit extra for 24 hours, pay the normal fee for 48 hours, and pay nothing [if it isn’t done by then]. And they will fix it overnight.

"Why don’t we just do that?

"Because the federal government sets that reimbursement system."

Here is the full interview.

What happens when coronavirus makes a plant an unsafe place to work?

The coronavirus pandemic hit meat-packing plants hard. The owners of the plant have responded many ways (WSJ, July 2020).

1. The demand for PPE increased. What do you think happened to prices for PPE?
2. The supply of labor decreased; people don't want to work where the probability of getting sick is high. What happened to the price of labor?
3. Owners are substituting machines for people to pack meat. Would they substitute more and faster when the price of labor is low or when it is high?

Are the responses by owners what a benevolent social planner would order?

How firms avoid paying tariffs

Firms are using a variety of tricks to avoid paying tariffs Trump imposed on China (WSJ, Feb. 2020). Here are some questions.

1. What determines whether the US firm moves operations to the US, continues to import from China and pay the tariff, or use a trick to sidestep the tariff?
2. Is sidestepping the tariff consistent with the goal of moving operations to the US?
3. Are the tariffs increasing the general standard of living in the US?

Incentives in Organ Transplants

This essay describes an unintended consequence in organ transplants. 

"Transplant programs are not evaluated by regulatory agencies to determine how well they use the organ donors available to them. Instead, they are judged primarily on how many of the patients they transplant are alive one year after surgery—an important but limited metric. The emphasis on one-year survival makes transplant programs overly cautious, letting viable organs go unused instead of using organs that they fear might harm their report card."

The essay includes an example. A surgery team turned down lungs that were good but not great matches for Patient A because another Patient B who had received a transplant had recently died. Patient A subsequently died while waiting for a match.

The emphasis on survival rates also reduces the propensity of doctors to transplant organs into patients who are likely to die within a year; e.g., patients who are old and weak and patients who suffer from other life-threatening diseases. 

Even crows respond to incentives

This post describes how someone trained crows to bring back money.