401 Midterm Readings Flashcards
What does Alejandro Henao’s analysis of Uber and Lyft’s rideshare optimal quantities suggest?
Technology has made it easier to find optimal rideshare quantities, though the answer varies by context. Historically, cities limited taxi licenses to an optimal estimate, but services like Uber and Lyft now face temporary caps. The central question becomes: What is the optimal number of trips? Balancing city wellbeing (e.g., traffic congestion) with minimal wait times is essential. In Austin, the sweet spot is around 3.4 trips per hour. There is a severe trade-off for yellow taxi cab drivers, as the value of their medallions has plummeted. The supporting graph resembles a rounded ‘L,’ with miles spent searching on the y-axis and trip requests per hour on the x-axis.
What does the NYT article argue about stakeholder capitalism, citing Marc Benioff and other sources?
The article argues that companies are failing to follow through on their social promises, especially under the lens of stakeholder capitalism, which was tested by COVID-19 and George Floyd’s death. Marc Benioff, the CEO of Salesforce, advocates that companies must prioritize doing good, but research reveals skepticism about whether corporations genuinely care beyond profits. A study of 800 companies examined their actions during June and July 2020, showing mixed responses. For example, Wells Fargo faced scrutiny for its decisions, and Amazon fired an employee for protesting. The Business Roundtable, a group of CEOs committed to prioritizing social health alongside profits, had varying performance, with BlackRock being praised for emergency services and Salesforce balancing positive actions with mass layoffs. A major reason for the failure of stakeholder capitalism is the short-term costs to shareholders, which often deter companies from prioritizing social good.
What makes Costco so successful and loved, according to the reading?
Costco stands out by keeping the price of its hot dog steady at $1.50, while McDonald’s has tripled similar prices over time. Costco has outperformed the market in recent years, with its share price increasing 430 times compared to 25x growth in the S&P. Despite operating at a lower margin (12% vs. Walmart’s 24%), Costco makes up the difference through membership fees, which generated $4.6 billion—more than half of its profit. The membership model is a key part of Costco’s success. Competitors carry 7,000 items, but Costco focuses on only 3,800, allowing it to turn over warehouses twice as fast. Costco also has exceptional employee retention, with just over 8% turnover compared to the retail industry average of 60%. Additionally, one-third of Costco employees have been with the company for over ten years, and Costco prefers to promote leaders from within. The company employs second-degree price discrimination by encouraging bulk purchases and charging membership fees, creating a distinct consumer class.
What is the Dunkin’ ADA debate about regarding non-dairy milk charges?
The debate revolves around Dunkin’ charging extra for non-dairy milk, which customers with lactose intolerance or dairy allergies argue is unfair. This practice resembles third-degree price discrimination, where different customer groups (e.g., lactose-intolerant individuals or vegans) pay more for essentially the same product based on their inelastic demand. Dunkin’ has been sued under the ADA for refusing to provide lactose-free milk, with the argument that lactose intolerance qualifies as a disability. However, the cost discrepancy also stems from plant-based milk being 87% more expensive per gallon than conventional milk.
What does the meta-analysis on income elasticity and alcohol prices reveal?
The meta-analysis reviews many studies on alcohol price elasticity and consumption, pulling from sources like JSTOR, Google, and EBSCOhost, and expanding beyond academic research. It critiques funnel graphs used for publication analysis, noting that they can overlook social factors—like people finding alternative ways to consume alcohol—leading to flawed conclusions. The research highlights that tax policies on alcohol may be more costly than previously estimated, and rising real incomes could further complicate the issue. ‘Demand heterogeneity’ is found to exist across both alcoholic beverages and consumer types. From a policy perspective, the government uses ‘sin taxes’ to increase revenue while discouraging consumption of harmful goods. However, this strategy becomes ineffective if alcohol demand is inelastic, meaning consumption wouldn’t significantly decrease despite higher prices.
What does the analysis of EV subsidies for low- and middle-income adoption reveal?
Electrifying the vehicle fleet is critical, with California planning to phase out gas vehicle sales by 2035. Subsidies for electric vehicles (EVs) were reinstated federally as part of stimulus efforts. Initially, high-income individuals primarily benefited from subsidies, rather than the intended low- and middle-income consumers. Programs like the Enhanced Fleet Modernization Program (EFMP) and California’s CVRP aim to address this. EFMP offers two subsidy tiers: a base subsidy and a higher subsidy for those under 225% of the federal poverty level, residing in disadvantaged ZIP codes. The analysis utilizes two datasets—rebate data and transaction data—to study battery electric vehicles and plug-in hybrids. Demand elasticity for alternative fuel vehicles is around -2.1, showing that low- and middle-income buyers benefit somewhat from subsidies, though not fully. The study uses difference-in-differences (DiD) models, refining them with triple-difference specifications to control for unobserved shocks. Findings show 73-84% of subsidies reach consumers, but results highlight the importance of broader adoption programs and better targeting to disadvantaged communities.
What are the main points from the article ‘Can the Rich World Escape its Baby Crisis?
The article discusses the dramatic drop in birth rates over the past 40 years, especially in East Asia, leading to a shortage of children. China now encourages larger families, but many countries face challenges in increasing fertility. Providing direct cash to families shows some success, though it’s expensive. The old assumption that easing time or work requirements would increase birth rates overlooks factors like career aspirations and culture. Israel stands out as a Western country with high fertility. Fertility rates below the replacement rate of 2.1 mean fewer people are contributing to the economy, which is unsustainable long-term. Governments are exploring expensive solutions, including matchmaking subsidies, but the effectiveness of these levers remains unclear. Economist Gary Becker suggests framing fertility choices as a consumer optimization problem, with parents making trade-offs between child quality and quantity under budget constraints. Policies like healthcare subsidies can change the price of ‘quality goods’ (e.g., child health), influencing parental behavior. This framework helps model how fertility might respond to fiscal and social policy changes.
What are the key points from the article ‘When Amazon Raises Its Minimum Wage, Local Companies Follow Suit’?
Research from UCB and Brandeis shows that when Amazon raises its minimum wage, smaller companies follow, raising wages without significant job losses. Amazon advocates for a $15 minimum wage nationwide, mirroring its own policy. The findings challenge traditional economic models, as wage increases did not lead to major job reductions—with only a 1.4% job loss and a 0.4% loss in low-wage sectors following a 10% wage increase. Frictions in the labor market often benefit employers, but political pressure could push wages up. Historically, major corporations like Walmart have driven wages down by squeezing out smaller, unionized businesses. While Amazon claims a social benefit framing, critics suggest its moves also serve its own financial interests. Amazon has engaged in union-busting, which complicates its PR efforts. However, actions like these challenge the idea that wage conditions in certain regions, such as the US South, are unchangeable.
What are the key points from the article on California fast food workers now earning $20 an hour?
“It’s too early to tell if rising wages will lead to layoffs, but some employees have already been cut while others receive raises. “
“Many restaurant operators are panicking, reducing overtime, cutting hours, and raising prices to cope with rising labor costs. “
“While employees enjoy higher wages—like a worker moving from 6 to 5 days but still earning more—these changes put pressure on both large and small businesses. “
“Governor Newsom frames the wage increase in social terms, but fewer workers mean increased workloads for those remaining. Big firms tend to cut labor heavily, and small firms struggle to compete. “
“There’s debate on whether minimum wage increases help or hurt employment. While some studies, like those on the Seattle and Pennsylvania-New Jersey borders, show mixed results, “
“examples from California indicate job cuts and reduced hours. However, the broader research suggests the theory that higher wages always reduce jobs doesn’t fully hold. “
“Exceptions also exist: fast food workers benefit from wage boosts, but others, like Starbucks or deli workers, do not. Economists generally remain skeptical of minimum wage laws.”
What are the key points from the article ‘Economists Pin More Blame on Tech for Rising Inequality’?
Economist Daron Acemoglu warns against excessive automation, arguing that the economy-wide benefits of investing in machines and software remain elusive. “
“Automation has contributed to half of the wage gap growth over the last 40 years, while globalization has weakened the role of unions. Acemoglu criticizes the mindset that markets alone dictate outcomes, calling this view incorrect. “
“He describes the ‘Turing trap,’ where technology is used to replace workers rather than enhance their performance. This trend has drawn attention from policymakers, with Acemoglu testifying before Congress about automation’s impact on workers. “
“Historically, technology before the 1980s improved productivity and employment, but recent ‘so-so’ technologies—like self-checkout stations—replace labor without boosting productivity. “
“Acemoglu advocates for directing technological development in a ‘human-friendly’ direction, similar to government-led renewable energy initiatives. He emphasizes the importance of training for future jobs. “
“The production process is described using concepts like isoquant curves, marginal product (MPL), and the marginal rate of technical substitution (MRTS). ‘So-so’ automation, he argues, reduces labor without meaningful economic gains.”
What are the key points from the article ‘The Market for Driverless Cars Will Head Towards Monopoly’?
The race for electric and autonomous vehicles is crowded, with all major carmakers competing. While this intense competition has both benefits and costs, it is expected to be short-lived. “
“So far, there have been no fatalities except for Tesla-related incidents, and AI driving is expected to improve over time. As driverless technology advances, the incentive to drive oneself may diminish, especially if waiting times are reduced to near zero. “
“The introduction of congestion tolling is unpopular, but the incentive to manage traffic could shift to firms themselves as they control autonomous fleets. “
“The article hints at the market trending towards monopoly, though it does not fully explain why. It suggests that as companies scale and optimize their networks, natural monopolies may emerge in the driverless car space.”
Question”: “What are the key points from the article ‘The Amazon-Walmart Showdown that Explains the Modern Economy’?
Amazon and Walmart have been in competition for years, with Amazon acquiring Whole Foods to gain physical retail expertise and Walmart acquiring Bonobos for online retail knowledge. “
“This battle raises concerns for both jobs and consumers. The likely equilibrium for these mega-retailers is a hybrid of online and in-person stores. “
“Positive returns to scale in physical retail could tilt the market towards monopolies. Apparel, with its high fixed costs and returns to scale, is a key battleground. “
“In 12 of 13 industry sectors, the share of revenue earned by the largest 50 firms has grown, making superstar firms a significant factor in the shrinking share of economic gains for small businesses. “
“Companies unable to compete on price and technology risk being driven out of the market—’it could cost them the shirt off their backs.’”
Question”: “What are the key points from the article ‘The Amazon-Walmart Showdown that Explains the Modern Economy’?
Amazon and Walmart have been in competition for years, with Amazon acquiring Whole Foods to gain physical retail expertise and Walmart acquiring Bonobos for online retail knowledge. “
“This battle raises concerns for both jobs and consumers. The likely equilibrium for these mega-retailers is a hybrid of online and in-person stores. “
“Positive returns to scale in physical retail could tilt the market towards monopolies. Apparel, with its high fixed costs and returns to scale, is a key battleground. “
“In 12 of 13 industry sectors, the share of revenue earned by the largest 50 firms has grown, making superstar firms a significant factor in the shrinking share of economic gains for small businesses. “
“Companies unable to compete on price and technology risk being driven out of the market—’it could cost them the shirt off their backs.’”
