Daily Archives: 02/20/2013

Turning Japanese

via Limericks Économiques by Dr. Goose on 2/15/13


Said Krugman: “It boggles me how
Any long-term concerns may allow
Our political corps
To mostly ignore
The depression we’re living in now.”

Ev’ryone calls for a plan
On inflation, which isn’t at han’.
If we tighten too soon,
We won’t be immune
To a Lost Decade à la Japan.”

Appearing on the Bloomberg Surveillance program with Tom Keene and Sara Eisen this morning, Princeton University economics professor Paul Krugman repeated his tireless message that the US is no longer in a debt crisis, but a jobs crisis. As he explains in his most recent book, End This Depression Now, Prof. Krugman emphasized that, in a depression, short-term considerations take precedence over the long term, and the usual rules don’t apply. It’s not that the long term isn’t important, it’s just that you have to get there first. As John Maynard Keynes famously said, “In the long run we’re all dead.”

So what should we do now? We should use the government’s fiscal powers to rebuild our infrastructure, thereby providing the basis for jobs today and growth in the future, which will make the longer-run deficit problems easier to resolve. What we should not do is implement fiscal austerity while expecting the Federal Reserve, which already maintains zero interest rates, to stimulate jobs through monetary measures. Prof. Krugman has only bewilderment for his Stanford rival John Taylor, who is correct in his concerns regarding excessive long-term unemployment, but, says Krugman, resists the policies that would ease the problem. The inflation fears of so many, and the related worries over the risk of tightening a moment too late, are reminiscent of the “lost decade” of Japan, in which nascent recoveries were repeated cut off by the central bank’s premature rate hikes.

The Absurdity of U.S. Air Travel: Baggage Fees Revisited

Catching up on President’s day weekend.

This appeared earlier without comment.  My bad.  I had intended to comment on it a bit.  I don’t quite buy the logic in the piece.

He suggests that lack free accommodation of bags imposes costs on flyer and makes money for the airline.  Price theory 101 would suggest no.

If indeed for example:  ‘ To double the airlines’ profits, the social benefit of which is highly unclear…We spend time and effort schlepping luggage through the airport’; then does a new entrant stand to profit?  If the costs enumerated to passengers are less than the cost to the airline of providing bag service, then why doesn’t an airline offer the bag service at a lower fee more approaching the costs of providing it and below the cost to passengers of avoiding it?  Passengers would flood to this offer wouldn’t they?  The new service would be profitable.

Gains from exchange would be realized.

There are some property rights issue that might complicate this picture I think.  Another consequence of bag fees is:  ‘ we jostle for the few spots in packed overhead bins.’  The overhead bins are still un-priced!  This would suggest that they are not allocated to those who value them most, they may be overused as well (think stuff falling on your head, or things broken due to the bins being overfilled.

Perhaps the problem isn’t the pricing of checked bags, but the lack of pricing for space for unchecked bags!  That might encourage more parsimony in choosing what to take on trips to the benefit of all.

In the end though, maybe I’m not the one to comment as I don’t like flying.

The Absurdity of U.S. Air Travel: Baggage Fees
Sanjoy Mahajan
Wed, 09 Jan 2013 14:34:27 GMT