Tag: Incentives Matter

Train in Vain

If there is a story about incentives that is more awesome than this one, I’d be interested to hear it.

A cargo train filled with biofuels crossed the border between the US and Canada 24 times between the 15th of June and the 28th of June 2010; not once did it unload its cargo, yet it still earned millions of dollars…

Each time the loaded train crossed the border the cargo earned its owner a certain amount of Renewable Identification Numbers (RINs), which were awarded by the US EPA to “promote and track production and importation of renewable fuels such as ethanol and biodiesel.”  The RINs were supposed to be retired each time the shipment passed the border, but due to a glitch not all of them were. This enabled Bioversal to accumulate over 12 million RINs from the 24 trips, worth between 50 cents and $1 each, which they can then sell on to oil companies that haven’t met the EPA’s renewable fuel requirements.

It’s like a children’s joke: why did the train cross the border? As the man says, if you pay people to do something, you’ll get more of that something.

I wonder if this type of thing goes into the life-cycle analysis of biofuels?

The Chicken Dance is a Grim Trigger

The Sheboygan Press reports on a recent showdown at the Sheboygan North High School Homecoming dance.  It seems the jubilant student dancers broke out some moves that strayed a bit too far to the salacious side, prompting Principal Jason “Takes No” Bull to issue this dictum:

[Bull announced] that if inappropriate behavior were to continue, the lights would stay on, the chicken dance song would be played for the rest of the night, and/or the dance would be canceled.

The grim trigger is a strategy in a non-cooperative game, where one party threatens to end cooperation forever if the other party fails to cooperate.  Evidently, it was a credible threat.

Perhaps this helps to explain why.

LU Symphony Responds to Incentives

Our resident (American) football fan, Professor Galambos, has alerted me to this important change in the demand schedule for Sunday’s orchestral performance:

Players Exchange Views of the Rossini Selection

To accommodate both music lovers and Packer Backers, (Lawrence University Symphony Orchestra Director, David Becker), has moved up the time of the Sunday, Jan. 23 Lawrence Symphony Orchestra concert to 12:30 p.m. in the Lawrence Memorial Chapel.  The concert was originally scheduled for 3 p.m.  The Green Bay Packers play the Chicago Bears in the NFC championship game at 2 p.m. on Sunday.

In keeping with the spirit of the day, people attending the concert are encouraged to wear their green and gold Packers gear.

Click the image for a taste of symphonic goodness.

Jimmy John Responds to Incentives

The founder and big pickle behind the Jimmy John’s enterprise is threatening to take his fixins and go elsewhere, this according to the Champaign News-Gazette. Mr. Jimmy John (Jimmy John Liautaud) is upset about the steep tax hikes enacted this past week by the Illinois state legislature — raising the personal income tax from 3 to 5 percent (67% increase) and corporate taxes from 7.3 to 9.5 percent (30% increase).

“My family and I are out of here.”

This story has some personal interest to me, as I was in Champaign when he opened up one of his first shops back in the late 1980s.  I still recall one of my (more obnoxious) friends — impressed by the deliciousness of the Jimmy John’s sandwich — on the phone trying to bribe providing cash incentives for the workers to bring him an order outside of their regular delivery area.  Not too many years later, Jimmy John’s has gone from a couple of sandwich shops in east central Illinois to a big corporate supporter of everything from NASCAR to University of Illinois athletics.

Friend, that’s a lot of sandwiches.

If he indeed packs up corporate shop and heads elsewhere, it will certainly impact the local economy in some fashion.

Here’s his take:

Some people may not realize how many travel to Champaign-Urbana as a result of Jimmy John’s being here – many of them for training.

(Jimmy John) said his business accounts for “350 motel nights a week in Champaign, 1,400 motel nights a month.”

“They eat at Cheddars,” get automotive service at Sullivan-Parkhill and “drink at Carlos (Nieto’s) bars.”

Jimmy John’s offices occupy 23,000 square feet on Fox Drive, and Liautaud said he had considered buying a 20,000-square-foot building just north of those offices. Those plans went out the window with the tax increase, he said.

As far as the national economy goes, it probably doesn’t matter where Jimmy John sets up shop, if Champaign doesn’t enjoy the benefits, someone else will.  But, I wonder what sort of elasticity the legislative analysis used to estimate business leaving the state when they put these tax increases together?

Motivating Econ 101

Alex Tabarrok talks to NPR about the story he uses to motivate his 101 class at George Mason.  It is a tale of the English shipping their prisoners off to Australia, with the sorry result that many of the prisoners perished during the sea voyage.  Yikes.  How could they have prevented this sorry fate? Oh, I just wonder.

Cowen and Tabarrok are authors of an introductory textbook that I am willing to endorse, at least on the micro side.   They also blog at Marginal Revolution.

The Price is Right? UPDATED, TWICE!

The Summer marches on, and that means it’s time for some more summer reading. My recommendation this week is from George Mason economist and Marginal Revolution blogger extraordinaire, Tyler Cowen.  His latest book is The Age of the Infovore.

So, I was poised to pick up a copy for my wife at Amazon for what seemed to be a bargain price of $10.88, but then noticed that the hardcover version, Create Your Own Economy, was selling for only $4.64.   It’s the same book, but the title changed when the paperback edition was released.

But then I thought, maybe she’d want the Kindle version instead.  But the Kindle edition of Create Your Own Economy is $12.99, whereas the Kindle for The Age of the Inforvore is $9.99.  Huh. So I’m paying a premium for a Kindle version of a hardcover version of the book, but I enjoy a steep discount if I actually purchase the hardcover.

Then I thought, well, maybe I’ll get her some perfume.

I think Yoram Bauman is right – choices are bad.

UPDATE: I sent this pricing info to Professor Cowen and he sent me a copy of his book with the inscription, “How is $0.00 for a price?”  Thanks!

UPDATE 2: While trolling the EconTalk archives, I came across an episode of Roberts and Cowen talking about the book.