Tuesday, February 27, 2007

Governor signs global warming pact

Governor Napolitano has signed on to a pact with four other western governors to reduce greenhouse gases.
Arizona and four other Western states pledged Monday to work together to reduce greenhouse-gas emissions to stave off the consequences of global warming.
More precisely, they've agreed to come to an agreement.
The Western Regional Climate Action Initiative agrees to set a regional greenhouse-gas reduction goal within six months. To reach that goal, the governors gave themselves 18 months to craft an approach, such as a cap-and-trade program, to reduce carbon dioxide emissions. Cap-and-trade programs usually involve setting a pollution ceiling, or cap, for each company or utility involved. Companies that produce less than their allotted emissions can then sell the credit to bigger polluters.
Cap and trade schemes are favored by economists since they reduce pollution more efficiently than command and control regulations. More later.


Efficiency wages at Costco

Over at Greg Mankiw's blog, he finds evidence of an efficiency wage being paid at Costco (as compared with say Sam's Club.)

Labels: ,

Monday, February 19, 2007

Selling HOV lane access in California

Think about this for a minute. Were consumers really buying a hybrid vehicle or a right to drive in the HOV lane (and save a bunch of commuting time.)

In 2006, the California legislature authorized the state Department of Motor Vehicles to distribute 85,000 stickers to the owners of gasoline-electric hybrid cars. The stickers allow drivers to travel without passengers in all of the state's high occupancy vehicle (HOV) lanes, which were formerly restricted to cars with two or more passengers. A report determined that California's HOV lanes were operating only at two-thirds of their capacity and not easing congestion as much as they could; the idea was to stimulate demand for hybrids and thus reduce the emissions of greenhouse pollutants.

The sticker distribution did exactly what it was supposed to do. People wanted to shave time off their commute, and the stickers drove up demand for hybrids for the Toyota Prius and Honda Civic hybrid (the only cars that qualified for stickers), so much so that the small Prius has been selling for over $30,000, and until recently had waiting lists. The Civic hybrid has carried a dealer "added premium" to the manufacturer's suggested list price of as much as $4,000 (with the hybrid Civic total price nearly $7,500 higher than the quoted price of a non-hybrid Civic).

It is also interesting to note that the right (sticker) stays with the vehicle. That significantly changes the value of the vehicle.

Now that there are no more stickers for distribution, what can be expected to happen in the California market for hybrids?

First, we should expect a drop in the demand for new hybrids at dealers, along with a drop in their negotiated sale prices. Buying a new hybrid Civic instead of a non-hybrid Civic has been difficult for even warm-hearted environmentalists to justify, since the hybrid would very likely have to be driven over 500,000 miles before the savings in gas (at current prices) could offset the added purchase price plus the cost of replacing the hybrid battery (most likely within 10 years), and the additional sales tax and interest cost on financed vehicles. However, those added car costs can be easily justified by a commuter who earns $40 an hour and who, with the stickers, can save an hour a day commuting to and from work. Such drivers can cover the added hybrid costs through lower commute costs within nine months.

Since the HOV-lane stickers stay with the hybrids, the demand for used hybrids can be expected to rise, along with their prices, perhaps dramatically, especially since Honda and Toyota can no longer accommodate the demand for reduced commute times with more cars.

My thought is that you determine how many stickers to issue each year and you auction them off. The right would be good for a year and as well as being transferable. I suspect it would be at least as good at reducing pollution as the California program, and it would raise revenue for the state rather than dealers.

To say it another way, didn’t California really just give a subsidy to auto dealers that sold it to the highest bidder?

Labels: ,

Saturday, February 17, 2007

Taxing tabacco

Governments like to tax things that are inelastic in demand. That tends to give them a stable tax base and a very predictable revenue stream. However, other public policies can get in the way of those revenue streams. Banning smoking in most places (Arizona's ban starts in mid-May) is one of those.

Because of quitters like Henkel, Minnesota's tobacco tax revenue is expected to go into a gradual slide later this year -- a drop that may grow even steeper with the expected passage of a statewide smoking ban...

Similarly, the federal cigarette tax has been bringing in less money each year since 2002. The amount dropped from $8.1 billion in 2002 to $7.7 billion in 2005...


Sunday, February 11, 2007

Recycling economics

Phoenix just started up it’s second recycling plant. The capital cost was $16.2 million and it will cost $5.5 million to operate for 3 years. $13.5 million in revenue is expected in that time. Looks to me like we’ll get $8 million net over 3 years and have an undiscounted payback period of about 6 years. Not bad for a public sector project.

The $16.3 million "materials recovery facility" with state-of-the-art machinery is part of the North Gateway Transfer Station, where household trash is brought by city garbage trucks for recycling or for transfer to a landfill in Buckeye…

The plant will handle 50,000 tons , or 100 million pounds, of materials annually for now. It was designed to handle more than 100,000 tons, said Terry Gellenbeck, solid waste administrative analyst for the city's public works department.

The plant costs almost $2 million a year to operate, or $5.5 million for a three-year contract with the Hudson Baylor Corp., which specializes in the work. The city expects to receive $13.5 million in revenue from the sale of recyclables during that time.

It also is expected to cut down on transportation costs and extend the life of the new landfill near Buckeye.


Saturday, February 10, 2007

Minimum wage law consequences

I’m not sure if this was an unintended consequence or not. In any event, intensions don’t matter.

A voter-approved state minimum wage law contains no exemption for disabled workers who employers used to be able to pay less, Arizona Attorney General Terry Goddard concluded Wednesday.

Wednesday’s new opinion ultimately could force the layoff of thousands of workers who until now have been paid less than the federal minimum wage under a provision of the Federal Labor Standards Act.

Apparently this wasn't unintended.

You thought it was an accident? An oversight? You thought the stories you read about centers that employ handicapped workers closing were about a big mistake by ballot-initiative writers who failed to dot all the i's? Well, you would be wrong. A coalition of six organizations, including the Governor's Council on Developmental Disabilities, proudly acknowledges that, hey, it was us! We did it!
1,500 to 3,000 people are heading out the door.

Labels: ,

Easier to find work

Next thing you know, they’ll start offering higher wages to retain workers.

High housing costs and congested freeways make it tougher for Scottsdale employers to recruit and retain workers, a panel of job experts told First Friday Airpark Breakfast last week.

Scottsdale long has been a net "importer" of workers, but recent trends are working against the city, said Rick Kidder, CEO of the Scottsdale Area Chamber of Commerce. Healthy employment rates mean people can find work closer to their homes, he said.

Labels: ,

Fully utilize the resource

This proposal probably isn’t going anywhere, but it should. From an environmental efficiency standpoint we ought to be making use of an underutilized resource. The real question should be how to do it. I’d suggest that the Department of Transportation determine each year how many additional vehicles should be allowed in the HOV lane without slowing it down significantly. Then auction off the permits to drive in the lane on ebay.

We’d fully utilize the resource and increase revenues at the same time.

A state lawmaker wants to turn the carpool lanes on Interstate 17 through Phoenix, and potentially other Arizona highways, into high-occupancy toll lanes that would allow drivers to pay to slash time from their morning and evening commutes.

The lanes would remain free to carpools, and the tolls would be collected electronically.

The proposal could change the philosophy of high-occupancy-vehicle lanes from exclusively encouraging carpooling to providing a faster way for solo drivers to get where they're going.

The concept is called HOT lanes, for high-occupancy toll, an idea that has gained ground in congested areas in California and is being promoted by the federal government.

Labels: ,

Minimum wage increase decreases teen employment

Apparently, the higher minimum wage in Arizona is reducing employment among the unskilled - especially teenagers.

Some Valley employers, especially those in the food industry, say payroll budgets have risen so much that they're cutting hours, instituting hiring freezes and laying off employees.

And teens are among the first workers to go. Companies maintain the new wage was raised to $6.75 per hour from $5.15 per hour to help the breadwinners in working-poor families. Teens typically have other means of support.

Mark Messner, owner of Pepi's Pizza in south Phoenix, estimates he has employed more than 2,000 high school students since 1990. But he plans to lay off three teenage workers and decrease hours worked by others. Of his 25-person workforce, roughly 75 percent are in high school.

It's not like this was unexpected.

Labels: ,

Thursday, February 08, 2007

Classic Oligopoly Behavior

Led by Delta, the US airlines are trying to raise fares:
DALLAS -- Delta Air Lines Inc. raised domestic air fares by $5 each way late Thursday, and American Airlines, the nation's largest carrier, matched the increase on Friday. No. 2 carrier United Airlines also matched Delta's increase, United spokesman Jeff Kovick said late Friday.
...It marked the third attempt at a broad-based fare increase so far in 2007. One of the previous two succeeded.
If everyone goes along by Sunday night, it will stick. If not, Monday morning fares are back to where they were.

Update: The price increases have been rolled back. United backed off first. They're 1 for 3 now.