Eco 200: parking garage safety

(group) Seattle has a municipal ordinance requiring that new multilevel parking garages have barriers at least 18 inches high to stop automobiles from going through the walls. The ordinance was not made retroactive. When a car broke through a fifth-floor wall in a parking garage that did not have the 18-inch barriers because it had been constructed prior to the ordinance, three people were killed. A local newspaper editorialized as follows:

It was a freak, as well as tragic, accident. The odds against a similar occurrence are high. Yet certainly it is possible. The City Council therefore must not hesitate in ordering that all multilevel garages in the city be brought into compliance with current safety standards.

1. What is the flaw in the editorial's argument?

   I see little flaw in the argument, given that the board feels that life is more valuable than the cost of retrofitting garages. It is possible the additional cost of retrofitting older parking garages will cause many garage owners to convert their garages to other, less safe uses, such as leaving boarded up property to the abuse of drug addicts and homeless people. However, I don't know the probability that will happen. Perhaps they will just tear the structures down and turn them into safe, for-profit parks. The cost might be high to do so, but if the city feels the value of human life is higher, it's a rational argument.

2. Why does it often make sense to apply more stringent safety standards only to new construction while exempting existing structures? Consider, for example, a proposal to make all housing "earthquake proof."

   Because the cost of retrofitting existing buildings to the new standards is higher for the same amount of safety than the cost of building in safety from the beginning. If the cost rises higher than the value one places on life and lack of injury, then it's a bad idea.

Eco 200: dire predictions

(group) Worldwatch Institute regularly predicts an increased scarcity of grain worldwide in the coming year and warns that the world is about to run out of food.

1. How could you use the commodity futures page in the newspaper to evaluate this prediction?

   If the commodity futures show any prices at all, then professionals expect there to be some food to be available. If the overall prices remain consistent with previous years' prices adjusted for inflation, then they expect about the same amount of food to be available.

2. If professional speculators disagree with the forecasts of the Worldwatch Institute, in whose forecasts would you have more confidence? Why?

   I would generally trust the forecasts of those who have a stake in the matter, provided they have a large enough stake.

3. Do you think that the people at Worldwatch Institute buy wheat futures at the time they issue their forecasts? Should they?

   I don't know if they do. Perhaps they have and issue dire forecasts to drive up prices so their futures become more valuable. If they intend to hold the contracts until the scarcity or abundance becomes apparent, then they probably should not, as they will likely lose money when their predictions turn out wrong. Or at least won't make as much money as their forecasts would predict.

House

I may do something with my house.

Eco 200: W.T.O.

(group) Given the trade portion of this unit's lecture, evaluate the following comment: Given this clear example of the gains from voluntary trade, it is difficult to understand those who question the function of international institutions created to facilitate trade, such as the W.T.O.

It is difficult to understand those who question those who question the W.T.O. and other international institutions. While trade in general is good, and every trade is by definition advantageous to the traders (absent fraud), numerous people who are not directly trading are affected. Individuals who trade can be rationally expected to look out for their own interests, but not that of others who are affected or the public in general. In the short term, opening trade may cause much pain to peripheral actors. For example: eliminatng H1-B visa limits will likely result in an increase in foreign nationals working in the U.S., and lower opportunity cost for existing workers. The companies who hire foreign nationals will gain. Ultimately so might the existing workers. But abrupt change often ought to be cushioned. It is the proper place of the government to regulate commerce. Presumably the government may do so in a manner which balances short term pain against long term gain.

If the W.T.O., a quasi-governmental organization, does not do this, people ought to protest. Obviously, many who did protest were looking out for their self-interest, especially in the short term. This is a rational response. Others may look at the W.T.O., World Bank, and I.M.F., and come to the conclusion that in their operations they favor one special interest over the good of all, and wish to modify how those organizations operate. These organizations have had some notable failures, and are not above criticism for causing pain in the lives of millions.

Eco 200: Friedman quote

(group) A Milton Friedman quote: The promotion of individual freedom should be the prime objective of social arrangements. Relate Friedman's objective of individual freedom to the role of information, middlemen and speculators in an economy. What is a social arrangement? Does this objective tend to conflict with other societal objectives? Explain.

Middlemen and speculators are primarily dealers in information. As are producers, but it is more clear in the role of middlemen and speculators. According to Friedman, the rules should be engineered so as to allow individuals the greatest amount of choice in their decisions. In Friedmans view, this is no conflict with other societal objectives, as the product of individuals' choices will result in the greatest good. I would disagree. I believe unregulated economic freedom will on occasion result in situations which do not benefit all. If overall wealth rises, but the entire rise goes to 1 person, that is hardly an optimal result.