Thursday, December 27, 2007

Flying cars come to the Rose Parade at last

American Honda has a new float at the Rose Parade titled "Passport to the Future." It is a combination of a flying car and a transformer. It starts as a full sized pick up truck, then transforms into a rocket car. This is what happens when we don't tighten emissions standards.
I do wonder two things about this. First, is this the future for Honda? Flying cars is a really cool thing to aspire to, and there is a market for personal transportation between 100-500 miles, or about the ideal range of a flying car. Of course, this does not account for the energy or environmental issues, only mobility.
Second, won't the flames shooting out the back set the roses on fire?

Wednesday, December 12, 2007

The Coase theorem and climate change

The classic example of the Coase theorem (it is the classic example because Coase brought it up) is what happens when sparks from railroads set fire to farmers' crops. The efficient solution to this problem is either the railroads compensate the farmers for moving their crops away from the tracks or the farmers pay the railroads to put equipment on their trains that eliminates the sparks that cause the fires.

Climate change offers a better example. Today's LA Times had a story about the current conference in Bali that suggests that nations should be paid to be green. This is a perfect example of Coase in action (this is a Chuck Norris moment for economic theory). By paying countries to not pollute, green standards are met and everyone is better off. The resulting contracts ensure an efficient outcome where rich countries can continue to live as they wish, they simply have to pay for it. The poor countries are compensated for not being able to develop polluting (and likely low cost) industries. This is a better example of the Coase theorem, if only because it resonates with people more than railroads, than his original example.

Thursday, November 29, 2007

The Coase theorem and the NFL Network

As you are probably aware, there is a big time football game between the Green Bay Packers and the Dallas Cowboys being played tonight (Thursday), but most of the country can't see it because it is only on the NFL Network. The network is in a stalemate with the large cable companies about pricing. In short, the NFL Network charges a certain price ( about $.70 per subscriber) to the cable companies for the right to air the programming. The cable companies argue that this price is too high for a single network and want the NFL package as part of a sports tier with a premium price.

So here is where the Coase theorem comes into play. There should be a price at which the NFL Network is happy to be a part of the premium sports tier (perhaps $1.00 per subscriber). If this is the case, then an efficient solution is for the other channels on the premium tier (NBA TV, Fox Sports, etc) to make up the difference between the current asking price and the strike price. This is efficient as long as the NFL Network is as big of an attraction as the NFL says it is. The NFL argues that they are the biggest sports draw in the country. The other sports leagues and events would benefit from the additional subscribers that would accompany the NFL on the premium tier and this is worth compensation.
Yet these negotiations are not happening, nor will they. Can this be completely blamed on transaction costs? Maybe, but there are not that many other networks that need to be included in negotiations. Does the NFL Network's asking price lead to an inefficient solution? Probably, as most people don't get it and the other networks are not well served by a smaller subscription base. Perhaps there is no price at which the NFL Network is willing to be on a premium tier.

So what are the transaction costs here, and is there any other reason that this situation has not been resolved?

Monday, November 12, 2007

The subprime meltdown is bad for surfers

Apparently the waves have been particularly tasty in SoCal (I haven't paddled out in quite a while), but they are also packed all day, every day. Surfline, a surfing website, went to find out who all the surfers were in the line up on a recent weekday afternoon in Orange County. Not surprisingly, most people they talked to were in the surf business or worked evenings. But a few were out of work mortgage bankers and other self employed folks having bad years (realtors?)
So the subprime meltdown is bad for Americans, bad for Wall Street, and bad for surfing. Just when you think it couldn't get worse...