Privatizing fish supplies? In the Ocean? The Economist explains how it is being done.

The Alaskan halibut and king crab fisheries illustrate how ITQs can change behaviour. Fishing in these waters had turned into a race so intense that the season had shrunk to just two to three frantic days. Overfishing was common. And when the catch was landed, prices plummeted because the market was flooded. Serious injury and death became so frequent in the king crab fishery that it turned into one of America's most dangerous professions (and spawned its own television series, "The Deadliest Catch").

After a decade of using ITQs in the halibut fishery, the average fishing season now lasts for eight months. The number of search-and-rescue missions that are launched is down by more than 70% and deaths by 15%. And fish can be sold at the most lucrative time of year--and fresh, so that they fetch a better price.

In a report on this fishery, Dan Flavey, a fisherman himself, says some of his colleagues have even pushed for the quota to be reduced by 40%. "Most fishermen will now support cuts in quota because they feel guaranteed that in the future, when the stocks recover, they would be the ones to benefit," he says.

Although governing authorities are important in setting up ITQs, so is policing of the system by the fishermen themselves. In the Atlantic lobster fishery a property-based system has arisen spontaneously, says Dr Worm. Families claim ownership over parcels of sea and keep others out. Anyone trying to muscle in on the action risks being threatened; their gear may be cut loose or their boat could vanish.

Verbally and graphically explain labor and loanable funds markets. What happens to interest rates when savers decide to save more? Show graphically.

Economist Roy Cordato notes the relationship between resource markets and product markets to make the economic case against recycling, in this 1995 article.

What are price controls? How are they maintained? Explain, verbally and graphically, price ceilings and price floors.

Define tax incidence. What is the difference between economic incidence and legal incidence?

What must happen for shortages and surpluses to persist?

What socially beneficial results occur when relative prices rise? I.e., what is their effect on consumers and producers? How is this related to Smith's "invisible hand"?

Here is an old news story about someone trying to sell a kidney on eBay.

How is the tax incidence likely to be different for gasoline and Oreo cookies?

What is meant by the incidence of a tax? What conditions would cause sellers to bear the full burden? Explain.

"We should a 20 percent luxury tax on expensive automobiles (those with sales prices of $50,000 or more) in order to collect more revenue from the wealthy." Will the burden fall primarily on the wealthy? Why or why not?

One of the benefits of having me for Micro is that you'll probably feel confortable emailing me in a few years with questions for some zero-priced consulting. Here's an email I received today from a former student.

I took one of your economics courses a few years ago I consider you to be a high authority on all things economics-related. So, I wanted your opinion on a recent discussion I had with a co-worker. It was about the deregulation of the oil industry. He maintains that this deregulation sparked the upward movement of oil prices leading, obviously, to rising gas prices. I know very little about deregulation of anything so I didn't argue with him, I just listened. I His definition of deregulation was the introduction of barrels of oil to the stock market. My very small economic background led me to believe that deregulation was good for lowering prices because the government was lessening its intrusion on whatever industry. What is an accurate definition of deregulation? Has this participated in the rising prices of oil (which have actually been falling)? What kind of deregulation occurred in the oil industry and when? I sent this email to Dr. Walter E. Williams and he directed me to an article which stated that the prices of oil dropped during the years leading up to the end of the 90s. Why did oil go up so quickly during and after 2005? Is it all related to supply or just the fear by speculators that supply was low? Thanks for your time.

How would you respond? The essence of the question deals with what's affecting supply in oil markets, and is deregulation a major factor.

My response was that we have not seen deregulation in the oil markets and that, if anything, regulations have increased, with laws requiring (say) corn-based fuels and new grades requirements for gas, to say nothing of regulations that have allowed exactly zero new oil refineries to be built in the United State since the 1970s (although I have been told that one is now being built). Lobbyists haven't exactly been losing their jobs (if only!), and environmental regulations are often embraced by large firms because they hinder competition from competitors who cannot pay regulatory costs. Less competitive, and more monopolistic, markets result. Speculators are hardly a factor here. If they were such a force in these markets, then why have prices fallen so precipitously over the last few months?

What's more, it is important to think critically about such issues. It is intellectually weak to decide that when markets swing, then it must always result from deregulation. In truth, there is real deregulation (good) and re-regulation that goes under the name of deregulation (bad).

Which brings to mind another question to think about. Why are rising prices bad when we are talking about oil and gas markets, but good when we are talking about housing and stock prices? Is this inconsistent? Email me your thoughts, and we'll discuss these issues in class.

Define: surplus, shortage, excess supply, excess demand.

What is the economic case for the practice of what many term "price gouging"?

What signals do price changes send to producers and consumers?

What's wrong with this way of thinking? "Economists claim that when the price of something goes up, producers increase the quantity supplied to the market. But last year, the price of oranges was really high and the supply of them was really low. The economists are wrong!"

How will a substantial increase in the demand for housing affect the wages and employment of carpenters, plumbers, and electricians? OR, for that matter, how will a substantial decrease in the demand for housing affect these wages? (Here is an article dealing with this issue from Sunday's Birmingham News.)

What's wrong with this way of thinking? "Economists argue that lower prices will result in fewer units being supplied. However, there are exceptions to this rule. For example, in 1972, a very simple ten-digit electronic calculator sold for $120. By 2000, the price of the same type of calculator had declined to less than $5. Yet business firms produced and sold many such calculators in 2000 than they did in 1972. Lower prices did not result in less production or in a decline in the number of calculators supplied."

This weekend, Alabama plays the University of Arkansas (the"Razorbacks") in beautiful Fayetteville, Arkansas. Assume that at one hour before the game, it appears that many people want to go to the game but cannot find tickets for sale at the their face value. Verbally and graphically describe this market. Can you graph it? What role are scalpers playing?

Today's Birmingham News reports that there are fewer shortages in gasoline in Alabama, relative to other states, in the aftermath of Hurricane Ike. What does this tell us about relative price flexibility in Alabama compared to those other states? Explain graphically.

Which of the following is a positive economic statement?
a. An increase in the minimum wage will reduce employment.
b. The minimum wage should be increased to reduce poverty.
c. Social conscience demands that we increase the minimum wage.
d. Thoughtful people oppose an increase in the minimum wage.

Which of the following do you think would lead to an increase in the current demand for beef?
a. higher pork prices
b. higher consumer income
c. higher prices of feed grains used to feed cattle
d. widespread outbreak of mad cow or foot-and-mouth disease
e. an increase in the price of beef

Try this exercise (for fun).

Previous test question:

Talladega Superspeedway, which holds almost 200,000 spectators, is in the tiny town of Talladega, Alabama.

(3 points) On the weekend of the big race, hotel rooms in Talladega rent for $300 per night. On non-race weekends, they rent for $50 per night. Why?
(4 points) What happens if the Talladega City Council imposes an ?anti-gouging? ordinance that caps the price of rooms at $50 per night?

What must happen for shortages and surpluses to persist?

What socially beneficial results occur when relative prices rise? I.e., what is their effect on consumers and producers? How is this related to Smith's "invisible hand"?

I, Pencil in Newsweek:

Improbable as it might seem, perhaps the most important fact for a voter or politician to know is: No one can make a pencil. That truth is the essence of a novella that is, remarkably, both didactic and romantic. Even more remarkable, its author is an economist. If you read Russell Roberts's "The Price of Everything: A Parable of Possibility and Prosperity" you will see the world afresh—unless you already understand Friedrich Hayek's idea of spontaneous order.

Read the whole piece here.