It’s quite surprising that the major consumers of the world’s oil have not been able to agree to an oil tax under the auspices of something like the Kyoto Protocol.  It’s surprising because if the major consumers of oil all increased taxes they would end up bearing very little of the burden. 

The result is a simple application of the theory of tax incidence.  The burden of a tax falls on those who can least afford to escape the tax.  The world’s demand for oil is inelastic but the supply is even more inelastic.  What is Saudi Arabia, for example, going to do with its oil except sell it?  The oil is already fetching a price well above cost so if there is a world tax on oil that’s like a tax on land – Saudi Arabian land to be precise – and a tax on land is born by land owners not by consumers.

Members of the Pigou Club should take note.  For the Pigou Club to work to alleviate global warming the Pigouvian tax must reduce the global consumption of oil (not just say US consumption) but with the supply of oil being very inelastic that’s not going to happen.  A tax could drive high-cost US producers out-of-business but the major world producers are going to keep selling even with a high tax. In other words, membership in the Pigou club has few privileges unless you can put the major producers under (does that advice sound familiar?)

If you want to tax Hugo Chavez, however, please do join the Ramsey Club.

It’s well known that people suffer from confirmatory bias, so after they buy a new car they eagerly read the advertisements for that car  – the ads, of course, confirm that their purchase was a good one.

Many people also have a predecisional bias, they interpret new information in a way that is biased towards the leading candidate – a confirmation bias in expectation.  In Choosing an Inferior Alternative (also here) Russo, Carlson and Meloy show that careful manipulation to take advantage of predecisional bias can actually cause people to choose inferior alternatives.

The authors ask people to rate restaurants, nominally named A,B,C etc., on a series of attributes (atmosphere, hours, parking, dishes and so forth) thus creating a ranking.   Two weeks later they ask the same people to rate the same (but renamed) restaurants in a series of pairs.  But this time they put the attribute that most favored the inferior restaurant first – thus the inferior restaurant would win the first comparision and further attributes would suffer from predecisional bias.  They also put the attribute that had the second strongest favorable rating for the inferior restaurant last to take advantage of any recency effect.  The least favored attributes were buried in the middle. 

Compared to a control group, twenty percent more of the treatment group chose an alternative that according to their own preferences was inferior.  In fact, in the treatment group a majority chose the inferior alternative.

I love it when Greg Mankiw gets nasty.

Robert
Reich says that, as a requirement for free trade deals, we should tell
developing countries to "set a minimum wage that’s half their median wage." The
proposal raises two questions in my mind:

1. Does Reich pay his nanny,
cleaning person, and gardener more than half the median wage of members of his
family?

2. If not, should I refuse to buy his books?

The big story in Niger is not uranium but trees.  According to an interesting article in the NYTimes:

Recent studies of vegetation patterns, based on detailed satellite
images and on-the-ground inventories of trees, have found that Niger, a
place of persistent hunger and deprivation, has recently added millions
of new trees and is now far greener than it was 30 years ago.

These
gains, moreover, have come at a time when the population of Niger has
exploded, confounding the conventional wisdom that population growth
leads to the loss of trees and accelerates land degradation, scientists
studying Niger say.

And the key to this growth?   Property rights.

Another change was the way trees were regarded by law. From colonial
times, all trees in Niger had been regarded as the property of the
state, which gave farmers little incentive to protect them. Trees were
chopped for firewood or construction without regard to the
environmental costs. Government foresters were supposed to make sure
the trees were properly managed, but there were not enough of them to
police a country nearly twice the size of Texas.

But over time,
farmers began to regard the trees in their fields as their property,
and in recent years the government has recognized the benefits of that
outlook by allowing individuals to own trees. Farmers make money from
the trees by selling branches, pods, fruit and bark. Because those
sales are more lucrative over time than simply chopping down the tree
for firewood, the farmers preserve them.

Just in case you forgot the Census Bureau wants to reminds you that this is  "Return Shopping Carts to the Supermarket Month."  Why?  Because "supermarkets play a big role in everyday life."

Thanks to Jeff Smith for the pointer.

A new study from Sony will provide some hard data on real world trading of virtual items.  The link goes to a press release the study should be out in a few days.

Thanks to David Zetland for the pointer.

Brad DeLong has an excellent post on the prisoner’s dilemma, the symmetry argument and Newcomb’s problem.  He hits the nail on the head with this:

I am a dominant-strategy guy. If you find the Symmetry Argument
convincing–well, Grasshopper, you have once again failed to snatch the pebble
from my hand. But I feel the force of the other side: If you find the Symmetry
Argument an obvious fallacy–well, Grasshopper, you have once again failed to
snatch the pebble from my hand.