Focus Topic: Is it cost effective to recycle?

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The final chapter of Landsburg’s “The Armchair Economist” provided me with some food for thought. He discusses if there is a need to protect the environment and if this will bring economic benefits.

Economics is the study of scarce resources and how people respond to incentives. The person with the greatest incentive in general is willing to pay the higher price to gain that resource. That’s why in a perfectly competitive (open market where everyone knows everything that is happening), the allocation of property rights is seen as inefficient/unnecessary. If an individual is given a property right say for example, to pollute but has no need to pollute that individual would rather sell that right to another individual who does pollute and who is willing to pay the price to obtain that right. Therefore, regardless of initial allocation of rights, whether split equally between the two individuals or not, the final outcome will always be the same.

The same can be said of recycling. Taken from a purely economic standpoint, due consideration must be made of both sides (to recycle and not to recycle) without factoring ANY moral judgements.  The side that will come out victorious is that with the greatest merits.

Here I reproduce in part, Landsburg’s argument:

“Economics is the science of competing preferences. Environmentalism goes beyond science when it elevates matters of preference to matters of morality. A proposal to pave a wilderness and put up a parking lot is an occasion for conflict between those who prefer wilderness and those who prefer convenient parking. In the ensuing struggle, each side attempts to impose its preferences by manipulating the political and economic systems. Because one side must win and one side must lose, the battle is hard-fought and sometimes bitter.” (pg 224)

A common argument for protecting the environment is for the benefit of future generations. However, Landsburg argues that “… do we have any reason to think that future generations will prefer inheriting the wilderness to inheriting the profits …?”

We must remember that in a market, there are buyers and sellers. If we stop buying something, the producer will soon go out of business which will lead to all sorts of problems including unemployment and in the case of recycling, possibly a reduction in the amount of forests as the number of trees planted goes down.

Of course we do not live in a perfect market. Among other things the deterioration of the environment could have implications for the potential of future profits .

So what do you think? Should we be recycling more? 

Priced out by the Olympics

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We are quite lucky to be living where we are: Zone 2, on the central line with easy access to National rail, Tube, Dlr or Buses to take us either into central or Essex. East London does definitely have its perks. I’ve only been here for 7 months, and it has grown on me. The people are different here, younger, full of energy, more “cosmopolitan”. That said however, there is a veritable mix of economic status. Take our small gated community for instance. Right on the door step of the Regent’s Canal but with pound and bargin shops just around the corner. Residents range from highly paid professionals to key workers and council tenants. On the other side of the canal you have the very successful professionals… well that’s my assumption because I was informed of the prices of those properties and knew there would be no way the likes of me could afford that.

Anyway, with my rambling over, the purpose of this post is to discuss the rise in the number of tenants that have been pushed out of their rented properties due to price hikes. Landlords are looking to cash in on the Olympics coming to town and increasing rents by up to 4 times. Those that are most vulnerable are those with limited rights and probably no access to council properties. As reported in the Guardian, young professionals are also feeling the push as they have restricted disposable income. I guess owner occupiers on the other side of the canal will be able to benefit if they decide to take extended holidays. With some estate agents offering £1,500 a week for a one bed, I’m wishing that I had bought a flat when I had the chance.

Read the full article on The Guardian website. 

Focus Topic: Migration

Migration into the UK has become a hot topic of the moment mainly because of the low employment rates among UK nationals. Recent data shows that unemployment now stands at 2.6 million, the highest level since 1994 (Source: BBC). Unemployment seems to be particularly troublesome between the ages of 18 and 24. Mayor Boris Johnson has added to the debate by claiming that the youth find themselves in this predicament because they lack the energy, drive and determination that so many of the migrants have. But is it really that simple? Is it just a case of cultural differences and expectations that prevent UK nationals seeking employment?

I must admit that to a certain degree there is a case to be heard here. The different characteristics of migrants and UK nationals do play a role in how they respond to current job opportunities.  Several studies have confirmed this. Migrants have been noted to be more flexible and entrepreneurial, factors which can go a long way in locking down a job. More importantly however, studies also highlight that migrants tend to have a higher level of education, which would explain why migrants have higher paying jobs than UK nationals in some sectors.

In general, most research has shown that migration into the UK has little effect overall on UK resident’s wages. Although if separate industries are put under analysis, individuals in the higher paid jobs tend to benefit whilst those at the lower end of the pay spectrum loose out. I guess this is the main reason why there is much concern about “migrants taking jobs away”. In this instance, where competition is stronger, an increase in the labour supply will depress wages for everyone. If this has the effect of reducing the wages below a point where UK nationals are willing to work, then it could increase unemployment. However, there is also evidence that shows this effect is very minimal.

So what does this all mean for UK nationals? Should we all try and find a new lease of life, become more self-confident and flexible? Even if that was the case, there are still no guarantees that we would get the job. A recent article published in the Evening Standard (23/01/2012) entitled “Why can’t a Brit get a Job at Pret?” (available here)  describes how a  British brand only has 19% of its staff as British. The Evening Standard follows the application of 4 British young workers as they try and get a job within the chain. But they all fall at the first hurdle and none are invited for interview. Joshi Hermann, the writer of the article, gets the opportunity to work in one of the stores and explains quite interestingly that an applicant’s final fate rests in the hands of the current staff. Pret calls this a democratic process. Now, if the majority of staff members are from one region, wouldn’t they tend to side with someone that they have some type of cultural affinity with? Even if it is unspoken.

Without concrete figures, this is all speculation.

For further information see articles by Glover et. al, Dustmann and the UK Border Agency. 

The First African Designed I-Pad Rival goes on sale!

Technology is moving leaps and bounds in the African continent. Over the last decade, Internet has become widely available to the masses, mainly through mobiles. And these portable devices are being used for much more than just making calls or checking emails. Across the continent, individuals now have access to banks through their mobile devices, farmers can check crop prices and health/community workers have access to patients reports (source). 

So I guess it is not much of a surprise that a rival to the I-Pad has been designed in Africa too. Personally, I think that it is just a shame that we haven't yet reached the stage that they can be produced there too. Read the full article here.

Does a tree really fall if no one hears it?

Everyday millions of people are suffering around the world. But we remain oblivious to their daily strives and struggles as we sit comfortably in our homes with little worry about food and our future. I understand that in current times, purses and budgets are being stretched and things are definitely changing, but in comparison to the likes of natural disasters and famines, we have little to worry about.

Unless we see or read media reports about these activities we are none-the-wiser. Increasingly, more and more of NGO’s and other international organisations budgets are consecrated to the development of their media and communications services. There is now a general consensus that to gain funding, such organisations must secure television and newspaper coverage. As the title of the this article states, if you are not around when something happens, how can you be sure that it is taking place? If no one knows what is happening, how can they be inspired to do anything about it?

This is a damning conclusion because by default it puts a price on the situation and individual suffering. Resources can only stretch so far, therefore the terrible decision must be made as to which famine is greater than another. A recent paper by Glenda Cooper published in the 2011 fourth quarter version of Global magazine succinctly summarises the challenges that agencies face, the disparities between funding received and the potential consequences that they may have. 

To put some figures to this, Glenda Cooper reports that following the 2004 Indian Ocean tsunami, the Red Cross received an estimated $1,241 per survivor. In the three days following the 2010 Chilean earthquake Oxfam America raised just $3,499 compared to $2.9 million received for the earthquake in Haiti.

The full article is available from here 

Ref: Global – “Profit and Loss: Holding Extractiveindustries to account”, fourth quarter 2011

Will confidence get us better jobs?

One of the biggest problems that organisations have is finding the right people to do the job. With so many applicants claiming that they have the skills and experience necessary to successfully undertake a given role, how does the organisation know who is telling the truth?

One method that is used, besides the rigorous application processes and assessments now in place, is that of payment based incentives, quite common in the financial sector. Such payment structures tend to link salaries to performance. The theory behind this states that a person is only likely to take on risk to the level at which they perceive it will pay off. That is to say, if you are confident in your abilities, you will have less aversion to taking a salary that is heavily dependent on your performance. By opting for such a salary structure, organisations get information about the candidate and their ability, i.e. that they are more or less likely to achieve results.

In recent times, this approach has met with quite strong opposition because it is believed to be one of the main causes of the financial crisis. Nevertheless, maybe if we showed a bit more confidence in our abilities and are willing to take on non-conventional salaries, we may have a better chance of getting a job.  

In a podcast by Professor Ian Ayres, he refers to Zappos.com where the CEO offers recent recruits $2,000 if they want to leave the organisation.

For further information read The Armchair Economics,Landsburg. 

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