Eco-nomics: Bike Sales Up with Gas Prices

From the USA Today I learn that, unsurprisingly perhaps, bike and scooter sales have surged with gas prices:

Sales of new bikes rose 9% in the first quarter of this year, compared with the same period in 2010, and sales of road bikes — commonly used in commuting — jumped 29%, says Scott Jaeger, senior retail analyst with Leisure Trends Group, a Boulder, Colo.-based retail tracking firm.

Sales of gas-powered scooters are up even more: nearly 50% in the first quarter compared with a year ago, says the Motorcycle Industry Council, a trade group.

"We see spikes when fuel prices rise," says Ty van Hooydonk, the group's spokesman, noting many scooters average 60 to 80 miles per gallon.

But is is really due entirely to gas prices? I suspect that there has been a lot of investment in bike infrastructure in many cities, not just Portland and that this has a big impact as well on the bike sales portion. This is mentioned in the article as well:

"It's too early to say definitively that bike sales are up because of gas prices," says Tim Blumenthal, president of Peopleforbikes.org. He expects gas prices to escalate more and take bike sales along with them.

Also driving bike use is the boom in bike trails and bike-sharing programs, Blumenthal says, adding the federal government has made an "unprecedented" $2 billion investment in trails in the last two years.

Last year, Boston installed 20 miles of bike lanes and New York City added more than 50 miles, says the League of American Bicyclists, which designates 179 communities in 44 states as bike-friendly, up from 25 in 2003. It cites new bike-sharing programs in Denver, Washington, D.C., and Minneapolis.

But the idea that people respond to higher prices by changing their consumption patterns is an old one in economics (and one of the criticisms about the way we calculate inflation), and thus I say unsurprising when I see the statistics given the rise in gasoline prices. [HT: Joseph Rose]

The May Oregon Revenue Forecast

About what I expected: slightly better but no tidal wave of new revenue to save the state.  The new forecast predicts an additional $128 million for the next biennium.  Always nice to have more, but realistically, this is hardly enough to make a real difference. It is clear that this is going to be a long and slow recovery and it will take time to recover the lost revenues.  In the meantime public school districts are resorting to draconian measures to further diminish what already is an embarrassment of a public education system.

Anyway here are a couple of pictures from the presentation to the legislature this morning.

The first is the graph of Personal Income Tax Collections presented as a % change from one year ago (3 month moving sum):

The second is revenue growth relative to the March forecast - corporate is doing better than forecast but personal is doing worse:

In the mean time lawmakers will haver another $40 million plus hole to fill before the end of the current fiscal year.

Soccernomics: Does it Pay to be Professional? Timbers Salaries

Ever wonder what soccer players (not named Beckham and Henry) get for playing professionally in the MLS?  Well, here are the Timbers salaries this year (you can find all MLS salaries here).  I know that the order and formatting is terrible, but being a man of an advanced age, this is about as good as my technological abilities get.  Actually and more to the point: the opportunity cost of doing more than this quick clip is too high.

For me the best value-for-money by far is Kalif Alhassan who is my vote for MVP at this point in the season.  The worst is probably Kevin Goldthwaite who has not seen much action and doesn't look to see much more as well as Futty is playing.

The Timbers, by the way, have the lowest payroll in the league:

Mole-o-nomics Redux

Last fall I wrote about my great economics experiment with the moles who have decided to make my back yard their home.  Not wanting to harm the innocent little critters, I bought a 'sonic-stick' that buzzes and vibrates and is supposed to make life less comfortable for them.  (I also refrained from the mole-o-nomics bit, but I have less shame now)

From an economics perspective it made sense: increase slightly the marginal cost of inhabiting my yard and the moles will chose a more peaceful life in my neighbor's ground.  And any good economist starts with good theory...

Alas, it was too good to be true (as I suspected - a good economic naturalist knows that if this were such a winning technology there would not be all of the poisons and traps still available on the store shelf).  But the moles goes away in the winter and I thought that perhaps if the annoying buzzing wasn't enough to make them move away, perhaps it was enough to keep them from coming back.  

Alas, no.  Witness my yard yesterday (pictured above).  To add insult to injury this new mole volcano is about two feet from the stick itself (visible in the picture above just above the volcano) - it is not even keeping them at a distance!  The only conclusion is that they could care less about the buzzing.

In a way it is a relief, the buzzing might not be annoying to them but it sure is to me!  Now I can have a peaceful summer in my backyard undisturbed by intermittent buzzing.  Of course, I also have to move on to more draconian measures of mole control.

As an aside, when the Leverage crew moved in to film a scene in my back yard, the sound guy came up to me and said "I am picking up some kind of barely audible buzzing, do you know what that could be?"   The mole stick strikes again...

Picture of the Day: The Falling Dollar

Source: The Economist

This graphic from The Economist shows the fall of the Dollar (though note the recent fairly wide fluctuations).  I am glad my vacationing this summer is all in the US.  

By the way read the blog post linked to above about whether it is a matter of concern.  In my view it is not, it is part of the natural process of restoring equilibrium in world markets and the fact that this can happen to our national currency is a very good thing - it allows us to avoid the fate of Greece, for example, who would dearly love to have a declining currency right about now.

Economist's Notebook: Tenancy Rent Control

This map, created using 2010 census data, shows vacant housing units in the Bay Area

Source: The Bay Citizen (http://s.tt/12lM2) Credit: Eric Fischer

Via Greg Mankiw I find this fascinating article about the affect of tenancy rent control in San Francisco.  Tenancy rent control is a term Kaushik Basu and I coined to describe the type of rent control that is attached to a tenancy as opposed to the old-style price ceiling attached to a rental unit.  Tenancy rent controls (often found in the form of tenant's rights laws) are the far more common modern version of rent control and do not fit the classical textbook price ceiling model that we still teach our econ 101 students.  Which is why Kaushik and I wrote two papers that attempt to model the effects of these types of rent controls (you can find them here and here).

Here is an excerpt from the article in the Bay Citizen:

Koniuk, who himself lives in suburban Belmont, gave a half-interest in the building to his older son in 2007 so he could evict a tenant and move in himself. But under San Francisco’s extraordinarily pro-tenant housing laws, landlords can do this only once per building.

So while Koniuk desperately wants to move his younger son into the building’s other four-bedroom apartment, he cannot. He is exploring legal options. Robert Murphy, who has lived there for 30 years without a lease, remains, paying $525.82 a month.

Last spring, Koniuk offered Murphy $45,000 to move out. Murphy’s lawyer demanded $70,000, a sum Koniuk says he does not have. Meanwhile, the city’s Rent Board notified Koniuk that he was allowed to increase Murphy’s monthly rent this year by $2.63.

Murphy is afforded extra protections as a renter because he is more than 60 years old. Koniuk might still be able to evict Murphy and allow his younger son, Adam, to move in by invoking the Ellis Act, which would entitle Murphy to about $10,000 in compensation and give him a year to vacate. But doing so would impose permanent restrictions on the Divisadero building’s future use, seriously depressing its value. And should 24-year-old Adam decide to move elsewhere, the Koniuks would be legally required for a decade to offer Murphy his old apartment, at his old rent. Invoking the Ellis Act would also mean that any new tenant to the unit, should Murphy decline the chance to return, would also be entitled to Murphy's old rent amount for many years to come. So the Koniuks would likely opt to just leave it vacant.

Kaushik and I were neither condemning nor supporting such laws, rather we were simply trying to understand how they impact an economy.  What we found was that long stayers (those who were able to remain in an apartment for a long time) ended up paying less than they would in a free market and short-stayers paid more.  Landlords were no better or worse off on average.  So whether tenancy rent control is  a good thing depends on what type of tenant you are: older, less-mobile people probably benefit at the expense of younger more peripatetic people.

For example, this story could have been told from another POV that focused on the aging man who has lived in his little apartment for 30 years being saved from homelessness by the good laws of the city.

A research question left open, that I have never returned to, is what economic impact might such legislation have on a city's economy.  As it leads to a lager concentration of older tenants and keeps the younger ones out.

As far as market equilibrium, if there is a higher concentration of long-stayers, this increases the cost of renting an apartment and initial rents have to increase as a result.  In the end, at least in San Francisco, the result is a lot of vacancy.

Increasingly, small-time landlords like Koniuk are just giving up. One of his Divisadero Street neighbors has left two large apartments on the second and third floors of her building vacant for more than a decade, after a series of tenant difficulties. It’s just not worth the bother, or the risk, of being legally tied to a tenant for decades.

“Vacancy rates are going up because owners have decided to take their units off the market,” said Ross Mirkarimi, a progressive member of the Board of Supervisors. He attributes that response to “peaking frustrations in dealing with the range of laws that protect tenants in San Francisco that make it difficult for small property owners to thrive.”

Perversely, that is hurting the city’s renters as well, as a large percentage of the city’s housing stock is allowed to just sit vacant, driving up rents that newcomers pay for market-rate housing.

Sadly, though price ceilings are almost nonexistent as rent controls these days (at least in the US) it is still the general framework people use to think about all such rent control laws thanks to econ 101.

US Unemployment Rises to 9% in April but Job Growth Strong

The BLS has released the April employment numbers and the news is good again - 244,000 new jobs added, all from the private sector (which actually added 268,000 jobs).  The unemployment rate actually edged up to 9% as more job seekers returned to the job market.

This rate of job growth is healthy and strong, but not fantastic and at this rate, as I have mentioned previously, it will take a long time to get back to pre-recession levels of employment.

This graph from the New York Times' Economix Blog is a sobering reminder of this fact:

Source: Bureau of Labor Statistics. Chart by Amanda Cox.Horizontal axis shows months. Vertical axis shows the ratio of that month’s nonfarm payrolls to the nonfarm payrolls at the start of recession. Note: Because employment is a lagging indicator, the dates for these employment trends are not exactly synchronized with National Bureau of Economic Research’s official business cycle dates.

Think Out Loud

I'll be on OPB's Think Out Loud show in a half hour or so - no time to blog, so listen in! Its all about the economics of tattoos...

Not Just a US Phenomenon: Income Inequality Increasing Everywhere

This new article from the OECD about rising income inequality among member nations is getting a lot of attention in the economics blogs.  Here is the figure everyone is posting:

From the report:

What drives growing earnings and income disparities?

The rise of earnings and income inequality occurred in most countries during periods of sustained economic growth, which raises the question why not everybody benefited from growth in the same way. While it is difficult to assess fully the role of many potential driving forces, the following factors have often been identified as having the most important impacts on widening inequality in OECD countries:

• Globalisation, skill-biased technological progress and institutional and regulatory reforms haveall had an impact on the distribution of earnings;

• Changes in family formation and household structures have had an impact on household earnings and income inequality;

• Tax and benefit systems have changed in the ways they redistribute household incomes.

A forthcoming OECD study assesses the relative roles of these different factors. The study first examines how trends in globalisation, technological change and regulatory and institutional reforms have affected inequalities in wages and earnings. Then, it analyses the extent to which trends in labour earnings inequality have translated into changes in income inequality. Finally, the study examines possible reasons for changes in the redistributive effectiveness of tax/transfer systems over time.

The report then goes on to discuss policy responses:

Which lessons for policies?

Reforming tax and benefit policies is the most direct and powerful instrument to increase redistributive effects. Large and persistent losses of low-income groups following recessions underline the importance of well-targeted income-support policies. Government transfers – both in cash and in-kind – have an important role to play to guarantee that low-income households do not fall further back in the income distribution.

At the other end of the income spectrum, the relative stability of higher incomes – and their longer- term trends – is important to bear in mind in planning reforms of redistribution policies more broadly. It may be necessary to review whether existing tax provisions are still optimal in light of equity considerations and current revenue requirements. This is especially the case where the share of overall tax burdens borne by high-income groups has declined over recent years (e.g., because of non-compliance, cuts in marginal income taxes or because tax expenditures mainly benefit high-income groups).

However, redistribution strategies based on government transfers and taxes alone would be neither effective nor financially sustainable. A key challenge for policy is to facilitate and encourage access to employment for under-represented groups. This requires not only new jobs, but jobs that enable people to avoid and escape poverty. Recent trends towards higher rates of in-work poverty indicate that job quality has become a concern for a growing number of workers. Policy reforms that tackle inequalities in the labour market, such as those between standard and non-standard forms of employment, are needed to reduce income inequality.

Policies that invest in human capital of the workforce are needed. This requires better training and education for the low-skilled. The latter would serve to boost their productivity potential and future earnings. Over the past two decades, the trend to increased education attainment has been one of the most important elements in counteracting the underlying increase in wage inequality in the longer run. Policies that promote the up-skilling of the workforce are therefore key factors to reverse the trend to further growing inequality.

Indeed.

QPR to the EPL?

Note: Nursing a sick son today so time only for frivolity about soccer - for what you all turn to The Oregon Economics Blog, of course - where else?

Queens Park Rangers have won the Championship and will play in the English Premier League next season (pending a hearing on a potential violation with a player signing). My granddad, from Hammersmith and a QPR man, would be excited were he still around.  Of course, this hearing is serious and could jeopardize their promotion, so one can only wait and see.

In other football news, my Arsenal beat Manchester United Sunday which otherwise would be a glorious event but now serves only to rub salt into the wounds of us supporters following a spectacular late season collapse and no hardware to show for their efforts.   In fact, since I posted my rhapsodic recap of the first Champions Leg tie with Barcelona it has all been down hill.

Timbers in the meantime, look an entirely different side at home.  Clearly the home support matters a lot, but I also think the very small pitch at Jeld-Wen Field helps them with their defensive shape which was a disaster at the expansive Home Depot Center in LA.

Finally, the Barcelona - Real Madrid tie continues today after what can only be called a disgrace of a first leg, especially for Barça, a team I admire immensely but who spent much of the game play-acting to get RM players carded.  But Real Madrid were trying to play the pack it in defense game which was ugly and stultifying. For shame for both of them.  Fortunately football's little superman, Leo Messi, saved the day with a characteristic piece of individual brilliance.

Me and the sicko will watch the second leg, hopefully Real Madrid will actually try and win the game and bring their full-on attack which could be fun.

Eco-nomics: California's Carbon Market

California is in the process of creating perhaps the world's largest carbon market and, in so doing, putting economic theory to the test. Here is an excerpt from an article by Reuters' Rory Carroll:

"This is by far the most ambitious program to reduce greenhouse gas emissions in North America, and by some measures the world," said Franz Litz, a senior fellow at the World Resources Institute.

California regulators are convinced they have the data and intelligence necessary to improve upon the system running in the European Union, which has shown results but has also experienced theft and fraud.

California officials say the market is a key part of implementing a six-year-old law that requires it to slash its emissions back to 1990 levels by 2020.

California also has the advantage of being a very large state -- independent of the United States it would represent the world's eighth-largest economy.

It plans to launch its market in conjunction with the Canadian provinces of British Columbia and Quebec, and officials hope the market will one day draw in other U.S. states and perhaps even Europe.

So officials at the state's Air Resources Board (CARB) are confident it will have the liquidity necessary to reflect an accurate and predictable price.

Many businesses hoping to profit from the trading of carbon credits and major environmental groups agree with the state, saying the market will give power plants and factory operators the flexibility to decide how to reduce their output of the heat-trapping gases.

At the same time, they hope the market's incentives will ignite the ingenuity of the state's businesses, which will invent the clean energy technologies to be sold around the globe like so many Hollywood blockbusters.

Economists love cap-and-trade for a simple reason, it allows for the most efficient reduction of carbon emissions to achieve a target.  The ones that can do so at the lowest cost will and those that find it quite expensive will buy credits from the cheap reduction firms. Thus is the target met and the expense to the economy minimized.  But achieving such a market requires quite a lot of bureaucracy and (as the European experience has shown us) leaves a lot of room for fraud.

But if the California market is successful it will lower the fixed costs for other states who which to participate, for they only have to join in the California market rather than try and create their own from scratch.  There are still many legal and political challenges to the California market, however, so stay tuned.

Picture of the Day: Economic Growth and Height

Turns out I am slightly above average: I always thought that I, at 5'10", was exactly average, but no, I am a giant among men! [Graphic from article in New York Times]

The Royal Wedding and Me

By now I am sure you are asking yourself "how is he blogging, he must be off to London for the wedding?"  I have, of course, pledged my allegiance to the Queen and her heirs and only the chosen few get to do that, so I must be in one of the front rows of Canterbury...

Alas, sadly, my invitation must have been lost in the mail.  I know I must be on the list because I was given a front row seat to the Queen's Silver Jubilee in 1977 as evidenced by this instamatic photo of the Queen parading through London (yes, that is her - see how close us VIPs were allowed to get?)

I am sure William will be devastated by my absence, but being that he is British, I am equally sure he'll keep a stiff upper lip.  All those terribly British Saxe-Cobergs and Battenbergs will have to do without me.

By the way, anything and everything you want to know about the Royal family (well, okay, not everything - but all the scrubbed and polished stuff) can be found at The Official Website of the Royal Family. Yes, they have a Facebook page and even a Twitter feed! Who says the Royals are not modern?

Economist's Notebook: Missing Markets, Design and the CRC

Deck Truss CRC

The recent decision to proceed with the deck truss design for the Columbia River Crossing project rather than the more expensive but more aesthetically pleasing options (at least to some minds) brings up an interesting topic - how do we value design?

Cable Stayed CRC

In private architecture (by which I mean designing for a private client) the client decides how much aesthetics are worth to them and they pay to have a design whose marginal aesthetic value is equal to the marginal cost of said aesthetics.

And thus, for example, we get office buildings that are more than just square boxes:

Hearst Tower NYC

Apartment and condo towers also have this quality.  Part of the selling point to any apartment or condo is the aesthetics of the building itself:

Calatrava's Concept for Condo Tower in Manhattan

Even public buildings that are funded at least in part through private donations - the aesthetics are an important aspect to convince donors that they are helping realize something unique and inspiring:

Seattle Public Library

Milwaukee Art Museum

But public works projects are often lacking aesthetically and it is no wonder as there is no market for aesthetics in such projects.  In economics we call this a missing market.  It may be that residents of Oregon and Washington prefer a more aesthetically pleasing bridge and would even be willing to pay a little to have a bridge that inspires rather than stultifies but there is no method for them to do so.  Even if there was there is the remaining problem common to any public good - the free rider problem.  Few would actually give money for such an endeavor hoping that others will and they they can get the benefit for free.

Since there is no real market for aesthetics we cannot know what the optimal level of aesthetics for such a project is.  It is quite possible (perhaps likely?) that the simple deck truss is the right option for a bridge that is not in the middle of Portland.  If we had to remake the Marquam Bridge downtown I suspect there would be overwhelming sentiment for something beautiful in its place.

As for me I am not sure how much I would be willing to pay for a beautiful CRC - a little perhaps but not a lot.  The bridge is not in a place where I see it much and when I do it is for utilitarian reasons (I am driving over it).  But I would imagine that the city of Vancouver would have a much more interested population as it is going to be a permanent part of the scenery.  Which is probably why there was enough momentum to choose a reasonably beautiful design for the new Tri-Met bridge and a less than horrible design for the new Sellwood Bridge:

Modern bridges, it seems to me (knowing nothing about bridge building), require much less structure and so there are fewer opportunities for design elements to be incorporated.  I am thinking now of the Golden Gate Bridge which is beautiful in both structure and design, but the design elements are almost incidental to the structure itself.  By this I mean that you had to design the towers and the rest somehow so there were ample opportunities to add design elements and as such it was a minor part of the overall construction budget.  Without as much structure upon which to add design elements, the design of the structure itself is now pre-eminent:

Puente de Alamillo-Calatrava

Still, even when we do emphasize design we don't always get it right:

The publicly funded Portland Building

Actually, I have to admit, I still like the Portland Building - it is anything but boring and makes downtown just that much more fun and quirky.

Picture of the Day

Top headline of the day.  Sometimes I am simply astounded at the stuff on which we spend our energy and attention.

Now can we get on to the really important matters that confront us?:

Portland Home Values: Case-Shiller February Numbers

The Case-Shiller Home Price Index numbers are out for February and its more of the same as can be clearly seen from the graph above.  From the AP/Oregonian story:

The Standard &Poor's/Case-Shiller 20-city index shows price declines in 19 cities from January to February. The index fell for the seventh straight month. Prices fell at a faster rate in 11 markets in February compared with the previous month.

In the Portland metro area, prices fell 1.8 percent in February and were down 7 percent from February 2010. Only five other cities in the survey had sharper one-month declines. The Portland-area price index is now at a level not seen since the fall of 2004.

Average home prices in all 20 cities are now back to their summer 2003 levels.
High unemployment, stricter lending rules and fears that prices will fall further are among the reasons why few people are buying and selling homes. A record number of foreclosures are forcing down home prices in most metro areas, and prices are expected to keep falling through this year.

Which is pretty much how I'd describe it.  Particularly for the Oregon market, but true in general, continued high unemployment is really keeping housing prices from going anywhere but up down.  Though there has been a continued slow erosion of housing values in Portland, relative to the period of rapid decline, my previous prediction of a long period of trolling along the bottom is still reasonably true.  I'll be most curious to see how the April through July numbers turn out, this will be the first good indication of whether the market is starting to turn.

Eco-nomics: Importing Carbon

Randy L. Rasmussen, The Oregonian

Via the Roger Harrabin at the BBC, my attention is drawn to the Carbon Trust which points out that as high-income countries actively reduce their carbon emissions they are countervailing such efforts by simply importing such emissions.

Which is, in essence, what the pollution havens hypothesis is all about: as carbon-intensive economic activity becomes more expensive in countries that are actively curtailing carbon emissions, the comparative advantage switches to countries that are not and we should expect an increase in carbon emissions from those countries.

From the BBC article:

The extent of carbon dioxide (CO2) emissions "hidden" in imported goods is growing, according to two studies.

Official statistics do not include emissions created by making imported goods but researchers say they should.

It comes as the Proceedings of the National Academy of Sciences reports 26% of global emissions come from producing goods for trade.

***

Researchers want all nations to publish their data on embedded emissions.

Glen Peters of research group Cicero, lead authors of the PNAS report, told BBC News: "There is a degree of delusion about emissions cuts in developed nations. They are not really cuts at all if countries are simply buying in products they used to manufacture.

"We really need all countries to be developing and publishing the full extent of their emissions, whether they are produced domestically or outsourced through traded goods."

***

"It raises questions about consumption patterns, and whether countries should consider border taxes on imports from countries with no controls on CO2 emissions… though this is controversial and will be some way down the line."

A UK think tank, the Public Interest Research Centre (Pirc), has been discovering how uncomfortable this issue is proving for rich nations.

A succession of Freedom of Information requests reveals a degree of frustration among some British civil servants that the UK insists on basing its emissions calculations solely on domestic emissions.

One piece of government correspondence reveals: "While technological efficiency has improved the CO2 impacts of our products since 1992, the rise in UK consumption has outstripped the improvements achieved.

"The government needs to be cautious about over-claiming on its achievements in decoupling economic growth from environmental degradation."

Which is all to say that if you want to reduce carbon emissions world-wide than a global carbon tax is necessary. This is clearly impossible, so the major importing nations of the world will probably have to impose carbon tariffs.

Picture of the Day: Portland Retail

This little graph caught my eye from a nice article in Oregon Business about strip malls.

Combatting Corruption

Kaushik Basu, the chair of my dissertation committee in graduate school and now Chief Economic Advisor, Ministry of Finance, Government of India (coincidence? I don't think so...) which is essentially the same role as the Chair of the Council of Economic Advisors in the US has written an academic paper on combatting corruption.  what is interesting about it is this: here he is in a policy role and he is taking seriously the part economic theory, applied to real problems, can play in shaping and improving policy.

As a member of a nascent policy school, I think this is a greatly neglected endeavor.  The currency empirical study takes in policy is exaggerated at the cost of theory.  Without good theory there are no good empirics.

Anyway, here is Basu explaining in simple terms the very straightforward was policy can be altered to alter the incentives and combat corruption in India:

I recently wrote a paper suggesting a way to cut down corruption. This is of course a large problem and, while we must work against the whole gamut of it, waiting to solve the whole problem must not become an alibi for doing nothing. It was with this in mind that I proposed one way of reducing one class of bribery: “harassment bribes”, defined as bribes that ordinary people often have to pay to get what is rightfully theirs, such as when a person’s income tax refund or driving license is held back, with all formalities completed, till she agrees to grease palms. Such bribes are just a segment of the large problem of corruption, but they are by no means negligible. For ordinary citizens, these are often the most ubiquitous forms of harassment at the hands of officialdom. My suggestion was that, for such crimes, we must not treat the ordinary citizen, who is the victim of this practice, on par with the official who takes the bribe, as our current law does. In particular, we should not punish the bribe giver but should instead make the penalty stiffer for the bribe taker and also require him to return the bribe. My belief is that if we make this kind of an amendment to India’s Prevention of Corruption Act 1988, there will be a sharp decrease in bribery. This is because it will now be in the interest of the bribe giver to get the official who took the bribe caught. Knowing this, there will be much greater reluctance on the part of officials to take bribes.

Soon after the British in India declared sati a crime, they went on to declare witnessing sati also a crime. Is there any surprise that the courts seldom found any witnesses for sati?
In today’s India, where, at last, there is public stirring to bring these pernicious practices to an end by drafting new laws, I wanted to make a small contribution to the debate by drawing on my own expertise. And the reaction to my paper has been heartening beyond measure in the media, domestic and international. But what really pleases me is the hand-written letters I have got from ordinary people thanking me for suggesting that they be not treated as criminals on par with those who forced them to pay a bribe.

It is really a tribute to India that we can discuss and debate such touchy topics in public and with transparency. There are few places outside of a handful of industrialized nations where this is possible.

The reason I am summarizing my paper is that I am saddened by two or three vicious articles that appeared in the last few days turning my argument on its head and trying to silence the debate instead of participating in it. I do not know if this is done with some vested interest or simply from a failure to understand what I was saying. Hence, this second attempt. There are some responses to my article which, whether or not they agree with my main proposal, are well-argued, show respect for the Indian reader and join the discussion in the spirit in which I wrote in the first place (see Indian Express and Business World of April 23, for instance).

These require a more thought-through response but that will have to wait.
For now, let me just add what I have said before in public: one reason I refuse to partake in the debate about whether corruption enhances or thwarts growth is my view that corruption should be considered unacceptable in a civilized society no matter what it does to growth. In my life as an economic adviser nothing distresses me more than the news breaks on corruption that we get ever so often. Our citizens deserve better.

Kaushik Basu
24 April 2011

Here is the paper itself. Here is some political blowback.

Eco-nomics: Green Products are Luxury Goods

From The New York Times today, a fascinating article on the rise and recession-driven fall of green products:

When Clorox introduced Green Works, its environment-friendly cleaning line, in 2008, it secured an endorsement from the Sierra Club, a nationwide introduction at Wal-Mart, and it vowed that the products would “move natural cleaning into the mainstream.”

But America’s eco-consciousness, it turns out, is fickle. As recession gripped the country, the consumer’s love affair with green products, from recycled toilet paper to organic foods to hybrid cars, faded like a bad infatuation. While farmers’ markets and Prius sales are humming along now, household product makers like Clorox just can’t seem to persuade mainstream customers to buy green again.

Sales of Green Works have fallen to about $60 million a year, and those of other similar products from major brands like Arm & Hammer, Windex, Palmolive, Hefty and Scrubbing Bubbles are sputtering. “Every consumer says, ‘I want to help the environment, I’m looking for eco-friendly products,’ ” said David Donnan, a partner in the consumer products practice at the consulting firm A. T. Kearney. “But if it’s one or two pennies higher in price, they’re not going to buy it. There is a discrepancy between what people say and what they do.”

In economics a luxury good is an item that you buy in greater proportions to you income as your income increases - and vice-versa - you forego in greater proportion when your income declines. This is distinct from a normal good which is what we call any good that you buy more of when your income increases.

It sure sounds like, based on these anecdotes, that 'green' products are classic luxury items. And it makes sense, the Whole Foods business model has always been about mixing gourmet and natural foods and green products into one - very expensive - market. It is perhaps not surprising, then, that such products have the characteristics of luxury goods.

But it is a bit disappointing, I am a big fan of the Green Works line of products because I thought that these had the potential of being category busters, the first to really appeal to mainstream buyers.  But it seems like there is still a big distinction.

[Reader note: I now subscribe to the NY Times - their pay wall did its job on me by turning me into a paying reader.  I know that linking to NY Times articles now creates the potential for the pay wall to interfere.  But I also believe in the public good that is investigative reporting and I am happy to support it and encourage you to do so as well.]