A loyal MR reader asks:

This is related to a recent post and something I’ve been thinking about a lot as I pack up my house to move: Why do we buy books and videos?  Doesn’t it make much more sense to outsource their storage to libraries and video stores or services like Netflix?

I have an intrinsic desire to collect and flood my house with nuggets of joy (not Natasha’s phrase), but that doesn’t explain everyone.  Often people own books and DVDs for reasons of identity and self-expression; that is why iTunes outcompeted Rhapsody, even though the latter in some ways offered a better deal.  Ownership, especially of the non-digital kind, also allows you to lend out, to send to friends, and to show off.  The ownership puzzle is related to the "why do we buy mostly new music" puzzle.

It makes the most sense to own songs and CDs, if only because the desire to hear them is more spontaneous, and renting them is harder.  The costs of renting are falling, but the costs of personal storage are falling too, as houses become larger.  The mail isn’t getting much quicker, but the demand for immediacy is growing.  Ownership remains robust.

#3 in a series of 50.

Maybe-Megan-McArdle writes:

When you donate money to build a new windfarm, you don’t take any of
the old, polluting power offline; you increase the supply of power,
reducing the price until others are encouraged to buy more
carbon-emitting power.

In other words, these carbon offsets shift back the demand curve for dirty power but they also shift out the supply curve for power as a whole.  (The persnickety might argue the demand curve doesn’t even shift back, but if you have to buy all those offsets you will think twice about your next plane trip.)  Competition from wind power forces down the price of the monopolistic dirty power company (electricity?), which means that other people buy more of it.  The quantity of dirty power consumed might well go up rather than down.

A better approach for carbon offsets might involve buying up a power plant and taking it off the market, thereby raising price and discouraging consumption.

Or it might be better if that "wind farm" is a failure and a fraud.

Furthermore if you simply buy less of a non-storable good such as electricity,
price to other demanders will go back down and social quantity consumed will
not change.  The boycott matters only if general
capacity shrinks over time, and that of course requires a large boycott.

If the dirty power source is from a broadly competitive sector (is there one? gasoline? cars?), the carbon offset is more likely to work.  If a non-dirty competitor comes on-line, the dirty power source has no option of lowering price and expanding quantity sold; the price of the dirty power source can’t fall below marginal cost.  Instead the supply of the dirty power source falls and the offset works.   

The bottom line: Unless you can put them under, don’t try to compete on price with your local power company.

That’s a request from the comments, sometimes the customer is king after all.

The point of price discrimination is to sell more goods and services while taking in more profit; the low demanders can pay a lower price, yet the company still sells for a higher price to the high demanders.  If output goes up, social welfare usually does too. 

So ideally we might levy higher taxes on those people who especially enjoy working, or people who especially enjoy living in the country.  Current tax rates are conditioned mostly on income plus a blizzard of confusing factors listed in the tax code, such as depreciation allowances and legislated tax breaks.  Why not — either directly or indirectly — condition tax payments on proxies for enjoying one’s job and country?  After all, those are the people least likely to leave or least likely to stop working.

Tax flags, guns, churches, and other correlates with patriotism.

Tax fun jobs.  Like being a professor.

Next idea?

More generally, I’m not always keen on taxing inelastic factors, if only because it leads to excess revenue collection, a’la Brennan and Buchanan.

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.

Other chairs here.