Lesson in Tax Incidence

Apparently FAA taxes are temporarily suspended since congress has failed to act on renewing them. And it appears airlines are charging rates as if they were still collecting the tax. Any student of economics will recognize this as an issue of tax incidence. The fact that the price to the consumer remains unchanged, suggests that the incidence of the tax fell entirely on the airlines (suppliers). Rather than being angry this is something to be happy about. It means that consumers weren't harmed by the FAA taxes in the first place, and it also means demand for flying is highly elastic. The quote at the end of the block below suggests this might be true:

Several aviation taxes expired after midnight Friday when Congress failed to reauthorize the Federal Aviation Administration, which collects the revenue. The suspended taxes could save passengers 10% to 15% on their ticket prices, but most U.S. carriers have boosted fares to the levels ticket prices would have been with the taxes still in place, allowing the airlines to take in roughly an extra $25 million a day, says Rick Seaney of FareCompare.com.

As of Tuesday, only Spirit and Alaska seemed to be bucking the trend, Seaney says.

Frequent fliers have noticed.

"While I respect any business' right to set prices as they see fit, this is another example of the airline 'gotcha game,'" says Steven Gordon, a sales manager who lives in Virginia Beach. "It is getting to the point that I feel better about buying a used car than an airline ticket."

Changing Memory

The internet is changing us:

A more telling experiment provided a stream of facts to participants, with half told to file them away in a number of "folders" on a computer, and half told that the facts would be erased.

When asked to remember the facts, those who knew the information would not be available later performed significantly better than those who filed the information away.

But those who expected the information would be available were remarkably good at remembering in which folder they had stored the information.

"This suggests that for the things we can find online, we tend keep it online as far as memory is concerned - we keep it externally stored," Dr Sparrow said.

So what? I think in the end it makes us better. Rather than remembering things, we merely have to remember where we put them, thus freeing up our minds to remember more. As the article points out:

I don't think Google is making us stupid - we're just changing the way that we're remembering things... If you can find stuff online even while you're walking down the street these days, then the skill to have, the thing to remember, is where to go to find the information. It's just like it would be with people - the skill to have is to remember who to go see about [particular topics]."

Now I just need to figure out how to remember those things I forgot, but don't remember that I forgot them. There are things we know, things we don't know, and things we don't know that we don't know.

Another DataViz Site

Visual.ly

Brilliant

Conan O'Brien delivers an excellent graduation lecture at Dartmouth. The first 16 minutes are wonderful humor and fluff. At minute 16, he continues to be funny, but deeply introspective. 



HT to Presentation Zen, who list three must see graduation presentations. And don't forget Conan's other tasteful piece. The "People of Earth" letter to NBC.

Narcissism

Oh the narcissism. Maybe not everyone should make the baseball team?

Sex and Violence

Our relationship and defense of the first amendment is often peculiar. An excellent piece in the NYT discusses this quoting Justice Breyer.

But what sense does it make to forbid selling to a 13-year-old boy a magazine with an image of a nude woman, while protecting a sale to that 13-year-old of an interactive video game in which he actively but virtually binds and gags the woman, then tortures and kills her?

Maybe this is one of the reasons we have the one of the highest teen pregnancy rates in the developed world, along with one of the highest rates of violent crime.

Nudge

Order matters. Whether it is the order on a ballot. The order of choices in a survey, or the order of options on a menu.

“Very small but cumulated decreases in food intake may be sufficient to have significant effects, even erasing obesity over a period of years” (Rozin et al., 2011). In two studies, one a lab study and the other a real-world study, we examine the effect of manipulating the position of different foods on a restaurant menu. Items placed at the beginning or the end of the list of their category options were up to twice as popular as when they were placed in the center of the list. Given this effect, placing healthier menu items at the top or bottom of item lists and less healthy ones in their center (e.g., sugared drinks vs. calorie-free drinks) should result in some increase in favor of healthier food choices. [Judgment and Decision Making, Vol. 6, No. 4, June 2011, pp. 333–342]

In the case of voting:

And so it is with voting. Candidates listed first on the ballot get about two percentage points more votes on average than they would have if they had been listed later (flipping a 49 to 51 defeat into a 51 to 49 victory). In fact, in about half the races I have studied, the advantage of first place is even bigger — certainly big enough to win some elections these days.

Order bias in surveys can stem from the order of the questions in the survey or the order of the answer choice within a question. For example early questions can prejudice the answers to later questions through a priming effect. In the context of categorical answers provided, if they are inherently unordered, their order might affect respondents choice over them.

Modern software allows you to randomize both if you anticipate a large problem.


There is also an order bias when it comes to evaluating people, be it for a job or a contest. I imagine this will be tested with American Idol data at some point. But it is better to be first or last, not in the middle.

The Incidence of Mandates

The general public has a sense of tax incidence. They know that sometimes they bear the cost of sales tax, or at other times you hear them say: "corporations just pass that on to consumers", when referring to the corporate tax. We know payroll taxes are generally born by the employee, not the employer. But many people do not understand the difference between legal and economic incidence. Lawmakers for example, seem to have issues with that.  Anyhow, here is a recent study that has an interesting conclusion:

A key issue surrounding employer benefit mandates is the incidence on workers through wages and employment. In this paper, we address this question using a pay-or-play policy implemented in San Francisco in 2008 that requires employers to either provide health benefits or contribute to a public option health plan. We estimate the impact on employment and earnings for the private sector overall, as well as for high impact sectors: retail and accommodation and food services. We develop a novel approach for individual case studies by combining both spatial discontinuity in policies and permutation-type inference using other MSAs. We find that, compared to control counties, employment and earnings patterns in San Francisco did not change appreciably following the policy. This was true for industries most affected by the mandate, as well as for overall private sector employment. The results are generally robust to inclusion of different control groups, county-specific time trends, and varying pre-periods. In contrast to the small effects on the labor market, we do find that about 25% of surveyed restaurants imposed customer surcharges, with the median surcharge being 4% of the bill. These results indicate that while little of the burden of the mandate fell on San Francisco workers, approximately half of the incidence of the mandate fell on consumers.

Nicknames

This is how they get started. I am now "the TJ".