ECON 439: Public Policy Analysis

In a sociology class the other day, we were asked why Oregonians like to recycle. Most people said because it’s good for the planet, or some form of pleasing remark. I however, said I recycle because the cost for me not recycling is numerous informal sanctions from people that watch me throw my can away in the garbage. Or the glare I get from someone when I put a piece of paper in the trash when a recycling bin is in the room. I would say I’m just lazy, but I think the reality is I just never really put thought into what sort of damage people do to our earth with waste. Because of all this, I’ve recently switched to a metal water bottle because I was wasting money buying plastic water bottles all the time, and it was starting to burn a hole in my wallet. Additionally, I did some research into where plastic bottles go when people casually throw them away or litter and was disgusted with what I found. It is known as the North Pacific Gyre, and its a massive floating island of plastic waste. We had been attempting to solve the problem as to how to dispose of this, until so many sea creatures inhabited it. Now it serves as refuge to some amount of organisms that deems it “protected”. Despite the minor benefit of being a home to few, this is the devastating that we would allow something like this to go on. While I may still forget to recycle from time to time, I believe the over all benefit in pollution reduction and harm to the planet is far greater than the cost of finding the right receptacle for disposing waste.

Recently I went to a walk up ATM, and found something funny. Like we had discussed in class, there was brail on the side buttons that read, “receipt” and “enter”. Previously we compared the cost benefit to having brail on the drive up ATMs and the walk up ones. It didn’t make sense to put it on the drive up ones, because logically not blind person would be driving. However, if thought about economically, we would conclude that the cost to make a separate machine that didn’t include brial was greater than the cost to have one machine that simply included brail on all machines. The issue I’m having with the recent ATM machine I saw is this. Umpqua bank has completely updated their machines in the last few months. Now you can deposit money and checks at any hour, which is definitely convenient and efficient. Strangely enough, brail is on the side of the machine for the two words “receipt” and “enter”. This may not seem odd to you, unless I said the rest of the machine is completely touch screen. By this, I find it hard to rationalize why Umpqua would go to the trouble and pay for part that is useless. While it would be nice if blind people knew where their receipt was and select enter. It would have been more useful to invest in audio technology, considering the updated touch screen.

E-cigarettes have become popular over the last year. The main difference between e-cigarettes and regular cigarettes is that the electronic ones do not produce much smoke or smell and they merely attempt to simulate most of the things about traditional cigarette smoking. Because of this, e-cigarettes could be very beneficial devices to our society because they could help a lot to reduce the amount of air pollution caused by smokers. However, some people think that e-cigarettes should be banned and not allowed for public use. But the main arguments I have heard for this are all arguments against smoking because of the stigma surrounding the activity. According to Forbes, an NYC council banned public vaping (e-cigarettes) just because it looked too much like regular smoking.

Many of my friends are talking about finding jobs recently. One of the most questions they talked about is that if their education background really matters when they apply the firm. I have a friend’s friend’s friend who has another friend, and then he had a girlfriend whose dad works as the CEO in the Industrial Bank. He ever told my friend that the education background really matters when you apply the firm. The firm cares about not only which university you graduate, but also what GPA you get. God, look at my GPA…… But why？Generally, you may think that you are the smartest person, and you could do anything if you would like to do. If the firm could give you the opportunity of training curriculums, you should be the person who could handle them faster and better. But why should the recruiters believe in you? If you have ever worked in other companies, then your working experience, your boss, and your reputation and credibility in the industry would prove it for you. But now you are only a college student. What you know about your ability may have some deviation from what the recruiters know about yours. Therefore, your education background will prove your study ability to some extent, and your GPA will prove your mental level, your learning attitude, and the aspects that the employers pay more attention to. Through the above analysis, you could understand now why the college graduates who don’t have or have only a little working experience need the education background and the GPA to prove them. Similarly, that’s why the firm would care about the college graduates’ education background as well as their GPA.

Recently a group of friends and myself went out to dinner and determined before hand to split the bill equally between the four of us. What became apparent was how to decide which menu item to select, bearing in mind that if i intended on eating the best meal possible it would be more expensive and my compatriots would be footing a larger bill. Assuming the more expensive the menu item the more enjoyment I would get out of the meal; however, my friends would suffer from my enjoyment by having to pay more than they were expecting to. The Prisoners’ dilemma takes hold of this same situation as everyone at the table has the same incentive to enjoy a more expensive meal yet everyone else will suffer. This dilemma will often lead to collusion as everyone’s decision is closely monitored by the others at the table, and disgruntled friends will always find a way to make the dishonoring individual feel their fault later on. Most likely buying the table a round of drinks as punishment.

Oregon and Washington are currently involved in a perfect example of the public good dilemma. The I-5 bridge crossing which connects Portland OR to Vancouver WA is argued by some to be too old and not really suitable for the amount of traffic trying to cross the Columbia River every day. A new crossing has been in the works for a number of years but the future of the project is in major jeopardy. Based on the articles I’ve been able to read, it appears the major hold up on building a new bridge connecting Oregon and Washington is coming up with a means to finance it. Oregon legislators wants to split a portion of the cost with Washington, but up to this point Washington has refused to pay for any part of the bridge construction. Part of the reason Washington is refusing to help with financing the crossing is that some legislators believe the cost is being inflated by a light rail transit system that will run along the bridge. Also, there’s uncertainty as to whether or not a new crossing is going to alleviate the congestion problems facing Vancouver and Portland.  If Oregon does decide to take up the entire cost of the project, a situation would exist where Washington residents would be free riding if they used the bridge. As a way to eliminate the free riding problem some proponents of the crossing have suggested placing a toll on the bridge in order to capture revenue from Washington residents. Some believe though that Washington residents will just use the I-205 bridge instead which would lead to more congestion over that crossing. Ironically, Washington officials from the Vancouver area had showed up at a committee hearing a little over a week ago encouraging Oregon to go forward with the project, despite their states refusal to help with funding. It will be interesting to see what the state of Oregon decides. It seems either way, build or no build, a lot of citizens are going to be unhappy.

Game theory is one of my favorite topics within economics because I enjoy thinking about the rational conclusions that each party can make in order to maximize utility. I recently watched a TED video about game theory. The speaker was Colin Camerer, who is a researcher that studied the ability of chimpanzees to play incentivized games and compared their results to humans. The results showed that chimps were much better competitors in the games because their results were much closer to the nash equilibrium. Camerer also studied the brains of humans when they played games and found that there were different parts of the brain that were stimulated when strategizing about the outcomes. He also found neurological differences and similarities between people who thought one, two and three “steps” ahead. If you would like to watch the video you can find it here: http://www.ted.com/talks/colin_camerer_neuroscience_game_theory_monkeys.html

One of the most important public goods is the access to air that is not completely contaminated with pollutants. When policy is drafted to help keep the air clean through restrictions and regulations, it often costs money and needs the support of the taxpayers. Since the government often pays for these things with tax money, this helps eliminate the “free rider” problem. It makes it so that everyone pays for their “share” of the environmental quality. If clean air had to be provided by the private sector then it would be under provided. That is why I think that air quality is a great example of the public sector providing a true non-rival, non-excludable public good that doesn’t have a free rider problem.

The UK game show titled Golden Balls is a perfect real world example of the prisoners dilemma.  During the final round of the game each player must choose either to split the money with the opposing player or steal the money for themselves.  If each player chooses to steal, both individuals go home with nothing.  If one individual chooses split and the other chooses steal, the person that picked steal takes 100% of the money for himself/herself.  If both players choose split, the amount of money is split 50, 50.  The payoff matrix in this game has three Nash Equilibrium points that are present where at least one person choose to steal.  This matrix makes the split option very questionable for players because they have nothing to gain as long as the other player is planning on stealing.

Overall really interesting game show.  Here is a clip that illustrates my explanation a little better.

Way back when, in the days of yore, Valentine’s cards were handed out willy-nilly. You received a card from many of your classmates and reciprocated as such. However, what happened when there was that special someone across the room that you really wanted to give a valentine to, but likely didn’t share this interest? What if this person failed to give you one back? This is where game theory comes into play.

Your moves:

Give the love interest a valentine

Don’t give the loves interest a valentine

Your Pseudo-lovers moves:

Give you a valentine

Don’t give you a valentine

The Outcomes:

You both give each other a valentine: A fleeting moment of bliss

You give her a card and she fails to reciprocate: A year of embarrassment and shame

You don’t give her a card and she gives you one: You feel guilty and like you made a mistake

Neither of you give each other cards: No guilt or embarrassment is felt

Obviously, the best outcome for you is to attain the moment of bliss by exchanging cards. However, as she likely doesn’t share these feelings, you know her best move is to not give you a card (saves paper). Based on her likelihood of playing this move, you know it is in your best interest to not give her a card and save yourself the embarrassment.