The Economist | Deep trouble

The Economist | Deep trouble

The deep sea is a frequently used example of common access resources that is over-exploited  – a case of ‘The Tragedy of the Commons’ originally coined by ecologist, Garrett Hardin. It stems from a simple idea that the benefits of over-fishing (increased revenues) are private while the costs are shared. Unfortunately, such an approach is unsustainable as a result of over-consumption and subsequent market failure. Technology is both a cause of the problem and a solution too. Larger trawlers increase catch size reducing the number left to breed. However, new technology can help to monitor, collect information and enforce regulation. One extreme proposal is to ban fishing in set zones, this has been effective in some trials allowing fish to ‘restock’ and improve sustainability. Clearly, an international agreement is required, but this is hard, especially given the current rise in nationalism and self-interest. The WTO are working on something, but have been doing so for several years.

Tory plans mean no one will be left to build homes | Michael Thirkettle | Housing Network | The Guardian

Theresa May’s migration target will intensify the UK constructions skills crisis and scupper her plans for affordable homes

Source: Tory plans mean no one will be left to build homes | Michael Thirkettle | Housing Network | The Guardian

Nearly 12% of construction workers are migrants, increasing to 45% in London. The Conservatives, at the time of writing, have pledged to reduce migration to the tens of thousands in order to appeal to the popular vote. However, with the number of workers leaving the construction industry outstripping the number of apprentices (future workers), construction firms will face severe shortages. Expect wages to rise (due to supply constraints) and some pretty intense lobbying by construction firms to loosen visa restrictions for certain trades.

The significant differences between the proportion of migrant workers in London relative to the rest of the UK is a good example of geographical immobilities. Migrant workers are more ‘footloose’ and willing to move to where the work is.

I suspect other industries, such as health care and hospitality, will follow, making the setting of migration targets rather pointless.

The mystery of the missing young US workers and the supply curve for labour

In the USA over the last 15 years, there has been a steady fall in the number of young people in the labour force in America. Before 2000 and 2015, the employment rate for male workers without a degree dropped from 82% to 72% and a fifth of this group had not worked for a year. This took place at a time when the unemployment rate nationally dropped to 5% and almost 3 million jobs were created in the economy.

As the time spent in work decreased, time spent on leisure activities increased, with the main leisure activity being on-line gaming. Economists have struggled to explain this fall in employment among this group. One view relates to the trade-off between work and leisure whereby the more one works, the less time one has to enjoy the benefits of one’s increased income. Therefore, by implication, this cohort is satisfied with a low income and more leisure because the additional leisure time allows them to engage in their favoured pastime. Linked to this is the idea of “leisure luxuries” which are the leisure activities one spends more time on as one has more leisure time. They correspond to the idea of luxury goods which are income elastic.  For example, as one’s income rises, one might spend proportionately more on restaurant meals since they are a luxury item. Similarly, according to this view, put forward by Hurst, Aguair, Bils and Charles last year, as one has more leisure time one does not spend more time washing dishes or eating breakfast, one spends significantly more on one’s preferred hobbies. For these people, the marginal utility of an extra hour of leisure which they can spend on their preferred activity exceeds that from the income provided by an extra hour working. The authors are clear that not everyone behaves like this since some will prefer to work longer in order to be able to afford better goods and services, e.g. the two-week holiday remains at two weeks but is spent in more exotic destinations, paid for by the higher income from work.

Given that the longer one is unemployed, the more difficult it is to get a job, the implication of this trend is that this group of missing workers, mainly but not entirely male, will find it difficult in the future to get a job and pay for the non-leisure activities people need such as housing, furniture, food and a car.

Nimble entrepreneurs seek solutions to air quality crisis | The Guardian

With 55% of Chinese consumers looking to reduce pollution exposure and a London mayor focused on clean air policies, the market is growing

Source: Nimble entrepreneurs seek solutions to air quality crisis | Guardian Small Business Network | The Guardian

A standard market failure essay question would ask you to consider whether government intervention is required to correct a market failure or would it be best left to market forces. This article explores the role of the latter in the context of air pollution and the growth in the number of firms producing goods to both monitor and reduce the impact of air pollution.

Brexit: weak pound threatens craft beer revolution, say brewers | Business | The Guardian

Drinkers may have to accept price rises after the slump in sterling sends cost of imported ingredients and equipment soaring.

Source: Brexit: weak pound threatens craft beer revolution, say brewers | Business | The Guardian

When the price of USD in GBP terms increases so does anything we buy in USD. Imported hops, a key ingredient of craft beer, is now more expensive and, as a result, the costs of production for brewers is rising. Consider the impact on the price mechanism? An inward shift in supply = higher prices = reduced consumer surplus. In addition, a weaker pound means it is more expensive to import the necessary capital to help expand production to meet the craft beer craze that has swept the country over the past year or so. On a positive note, this could mean a rise in demand for UK hop farmers as brewers switch to the, now cheaper, domestic substitute. However, brewers don’t really like UK hops, the climate isn’t quite right for certain varieties, and when your product is priced at a premium based on its superior taste, that is a problem. All in all, expect the price of your favourite APA (American Pale Ale) to rise.