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Lifeboat Economics

You're the purser of the Titanic and it has just hit an iceberg.

 You've escaped into a lifeboat with an 80 pound bag of gold, an 80 pound bag of silver, and an 80 pound bag of copper. The lifeboat starts to flounder* from being overloaded. You push Al Gore over the side, quieting and improving the lifeboat environment, but the lifeboat is still overloaded.

It is now clear that you will only be able to salvage one of the 80 pound bags if the lifeboat is to stay afloat.

You choose to save the gold bag, and toss the silver and copper bags into the Atlantic.

If this were an opportunity cost problem, then the opportunity cost would the second best choice, i.e. the 80 pound bag of silver. However, it is clear that the actual cost or sacrifice of saving the gold bag is the combination of both the silver and copper bags (and Al Gore, but he doesn't count).


If this is an opportunity cost problem, why is the opportunity cost not equal to the standard opportunity cost definition? (the silver bag alone)

If this is not an opportunity cost problem, why not, and what is it?

These are not known to be trick questions, but they are currently open questions with no known answers.


* = Usage Note: The verbs founder and flounder are often confused. Founder comes from a Latin word meaning "bottom" (as in foundation) and originally referred to knocking enemies down; it is now also used to mean "to fail utterly, collapse." Flounder means "to move clumsily, thrash about," and hence "to proceed in confusion." If John is foundering in Chemistry 1, he had better drop the course; if he is floundering, he may yet pull through.



Federal Criminals

Three American seafood dealers and one Honduran lobster-fleet owner are currently doing hard time for importing lobster tails that were the wrong size and that were packaged in clear plastic bags rather than in cardboard boxes. They ran afoul of the Lacey Act, a federal statute that makes it a crime to import fish or wildlife taken "in violation of any foreign law."

The U.S. government argued that they had broken Honduran law because some of the lobster tails—3 percent, to be exact—were less than five and a half inches long, and because a Honduran regulation required that the lobster tails be packed in boxes. Yet Honduran officials testified that no laws had been violated.

Nonetheless, Blandford, McNab (the Honduran national), and Schoenwetter, three small-business men with no previous criminal records, were sentenced in 2001 to eight-year terms. Their "partner in crime," Huang, got off easy: two years' incarceration for the mother of two young children.

Why the Standard of Living Cannot be Measured

You walk into a candy shop to buy a half dozen Hersey Kisses chocolate candies. They are available wrapped in either silver or gold colored foil, for the same price. You prefer, and purchase, the gold.

If we assume for simplicity that your preferences do not change, and that you are indifferent to whether the shop actually stocked any of the unpreferred silver colored foil units, then we can rank the standards of living that result from candy shops that carry only one choice as gold, then silver.

Since the prices are the same there is no way for an outside observer to distinguish, let alone measure, the standards of living that result from the consumption of gold vs silver foil wrapped candies.

While you may know that you prefer gold to silver, you have no way to quantify the difference, or the intensity of the preference, in the standards of living, at least without bring new subjectively valued goods into consideration.

In Retrospect, Do the Atlanta Braves Regret Taking Batting Practice From Curt Schilling?

A week ago Monday, the Atlanta Braves pounded Red Sox pitcher Curt Schilling's 85-89 mph batting practice fastball for 6 runs in 4 + innings, driving him to the Disabled List.

This apparently screwed up their swings completely, having scored only a single run in total in the following 5 games.

Spot a typo?

From a comment on Greg Mankiw's blog :

aristotle said...

I agree with anonymous above, the demand for colleges like Harvard, Yale, Princeton, etc etc is too big that any one university can take all the top students leaving harvard with mormons.


Energetic Senate Morons

Senate passes energy bill

The Senate passed an energy bill late Thursday that includes an increase in automobile fuel economy, new laws against energy price-gouging and a requirement for huge increases in the production of ethanol....

But the legislation provides a bonanza to farmers and the ethanol industry. It requires ethanol production to grow to at least 36 billion gallon a year by 2022, a sevenfold increase of the amount of ethanol processed last year....

The Petty Tyranny of the NCAA

See here

The violations involved 133 walk-on student-athletes in six athletic programs (two men’s and four women’s) who were inadvertently undercharged for training table meals in two ways. The first violations centered on walk-on student athletes who ate at training table even though their practice schedules did not preclude them from dining in residence halls.


Pigou Tax, Yes or No?

A small community sits on the outlet of a small river and uses the river water exclusively for unheated, unbuffered showers. The community has 50 homes, each with a single shower. The river flow is always sufficient to supply up to 60 showers in use simultaneously, so showers are not scarce goods, in terms of demand with respect to supply, and have no economic value.

After ten years of growth, the community now has 100 homes and showers, and it is no longer true that the unchanged river flow can supply all of the showers in use simultaneously.

Question :

In principle, would a supporter of a Pigou tax on road use to reduce traffic congestion support a tax on water use to reduce shower congestion? If not, why not?

New SF Book Alert

Rollback by Robert J. Sawyer

Life Extension, First Contact, Philosophy, Ethics, Robotics, Evolution, Sink-Kitchen

Economics, not even a two-bit science

Fundamentally, economics traces its foundation to a matter of choice, selection or comparison, or to an iterative ordinal ranking of alternatives. In each case, the result can be completely expressed as A or ~A, yes or no, higher or lower, 0 or 1.

In other words, economics is a one-bit science, with only a sign or direction bit needed, and no additional magnitude bits.

Destined to Legislate

House Antigouging Bill

"The legislation's sponsor, Rep. Bart Stupak, D-Mich,..."

Inequality of Income, Rhetorical Question

Why do discussions of the inequality of income never seem to get around to government workers, university professors, public pensions, public and private union members and officials?