28 Jun 2008

Are Airline Loyalty Programs About to Die?
Delta (and others?) to start charging for award tickets

by Richard Belzer

in Regulatory Economics

Delta Airlines has announced new fees for redeeming frequent flyer miles into airline tickets -- $25 for domestic flights and $50 for international destinations. Other airlines are considering reciprocal actions.

What does economics teach about the likely consequences of this action? More...

1 Jun 2008

Breaking Even is Hard to Do:
The higher cost of hybrid vehicles

by Richard Belzer

in Regulatory Economics

New York Times reporter Bill Vlasic says "[c]onsumers have been slow to embrace" General Motors' new Yukon/Tahoe Hybrid despite the near 50% improvement in city driving fuel efficiency. It's easy to see why. More...

28 May 2008

Gas Tax Holidays, Part 4:
Pressure in favor mounts in Europe

by Richard Belzer

in Regulatory Economics, Legislation

Public discussion about a federal gas tax holiday has abated in the U.S., but according to the Washington Post it is heating up in Europe. More...

27 May 2008

More Evidence that Consumers Respond to Gas Prices
Increases observed in mass transit use

by Richard Belzer

in Regulatory Economics

During the short-lived debate about suspending the federal gas tax to ease prices, economists quoted in the news seemed to agree that consumer demand is highly inelastic -- that is, as price increases a lot, the quantity demanded changes very little.

The news increasingly contains stories suggesting that consumers respond more to changes in the price of gasoline than economists have assumed is the case. Example: rising use of mass transit. More...

24 May 2008

To Save Gas, Consumers Accept More Safety Risk and Emit More Air Pollution
Some costs of switching to motor scooters

by Richard Belzer

in Regulatory Economics

The Wall Street Journal reports that at the same time consumer demand for low-mileage SUVs and trucks has plummeted in response to high gasoline prices, consumer demand for high-mileage motor scooters has intensified. This tradeoff is entirely predictable. Scooters are ubiquitous commuter vehicles in European cites, where because of high taxes gasoline prices have for years been as high as they are now in the U.S.

Consumers are making two less obvious (but just as predictable) trades to get higher gas mileage: increased risk of injury and death from motor vehicle crashes and more air pollution. More...

2 May 2008

Gas Tax Holidays...
...and how they conflict with the candidates' energy policy proposals

by Richard Belzer

in Regulatory Economics

Recently, Sens. John McCain (R-AZ) and Hillary Clinton (D-NY) have proposed a "gas tax holiday" in which the federal government would suspend its collection of motor fuel taxes during the summer vacation travel season. Sen. Barack Obama (D-IL) has opposed it because it would provide minimal relief.

The proposed gas tax holiday is an odd idea to dominate an energy policy debate. All three candidates have promised to take action if elected that would dramatically and permanently increase gasoline prices. More...

23 Apr 2008

Proposed New Fuel Economy Standards:
A test for benefit-cost analysis

by Richard Belzer

in Regulatory Economics, Regulatory Policy

The Department of Transportation's National Highway Traffic Safety Administration proposed on April 22 to significantly increase the fleet average fuel economy standards motor vehicle manufacturers must meet beginning in the 2001 model year. More...

8 Mar 2008

Virginia's New "Voluntary Tax" on Its "Bad" Drivers, Part 4:
The backlash wins

by Richard Belzer

in Regulatory Economics, Regulatory Policy

Washington Post staff writer Tim Craig reports that the Virginia legislature is expected to repeal the law that authorized the voluntary tax on bad Virginia drivers. The action follows a Virgina Supreme Court decision issued on February 29 declaring unconstitutional the legislature's other 2006 transportation policy innovation -- the creation of unelected regional authorities with the power to levy taxes. More...

19 Sep 2007

OMB's Principles for Risk Analysis:
OMB's initial response to the National Academy of Sciences

by Richard Belzer

in Regulatory Science, Regulatory Policy

Today the Office of Management and Budget issued a memorandum to agency heads directing them to adhere to certain principles of risk analysis. The memorandum is OMB's initial response to the report of a National Research Council panel that OMB asked to review a 2006 proposed bulletin on risk assessment. That report called the proposed text "fundamentally flawed" and gave seven recommendations, one of which was that it be withdrawn.

A fair reading of the new memorandum is that OMB followed this specific recommendation. More...

13 Aug 2007

Benefit-cost Analysis and Real World Decision Making:
The case of homeland security equipment maintenance

by Richard Belzer

in Regulatory Economics

Critics say benefit-cost analysis is a bad tool for choosing whether to regulate. Supporters say it's a good tool because it mimics how people and institutions normally make rational decisions. Today's example is homeland security equipment purchased by the federal government but left unmaintained by local governments.
More...

27 Jul 2007

Who Pays the Cost of Regulation?
Insights from corporate income tax incidence

by Richard Belzer

in Regulatory Economics

Regulation is widely understood as a tax on the activity or person being regulated. Where these activities repair genuine market failures, benefits from regulation may result. If there are benefits from, say, automobile safety regulation, one would expect the beneficiaries to be persons who otherwise would have been killed or injured at the pre-regulatory safety level.

But what about the costs of regulation? Who bears them? More...

22 Jul 2007

TSA Relaxes Restrictions on Butane Lighters
Why risk-based security regulations can be hard to implement

by Richard Belzer

in Regulatory Economics

On August 4, the federal Transportation Security Administration will permit butane lighters in carry on baggage. Why is TSA allowing them now? Why were they banned in the first place?

More...

21 Jul 2007

Virginia's New "Voluntary Tax" on Its "Bad" Drivers, Part 3:
The backlash continues

by Richard Belzer

in Regulatory Economics, Regulatory Policy

We've posted here and here on Virginia's new "voluntary tax" on so-called abusive drivers, the funds from which are earmarked for highway improvements. The law continues to provoke controversy, we think in part because defenders of law persist in applying economic logic that even people untrained in economics understand is faulty. More...

5 Jul 2007

Getting Better Information About Air Travel Delays:
How benefit-cost analysis and information quality principles can solve the problem

by Richard Belzer

in Information Quality

In the wake of JetBlue's latest problems, air travel in general is getting more attention. Much of this is focused on various proposals for air travel "customers bills of rights."  We've shown that CBORs don't (and possibly can't) address every circumstance of interest. They also have the peculiar effect of taking service quality out of the domain in which airlines can compete. An alternative approach not only allows airlines to compete on service quality, but encourages them to do so.

One requirement for this to work is passengers have to have access to high-quality information that addresses the kind of service quality questions they care about. The Department of Transportation has issued regulations concerning air travel delays. There is mounting evidence that these rules have not yielded the kind of information passengers need.

4 Jul 2007

The Importance of Caring:
Will hybrids still sell after they become mainstream?

by Richard Belzer

in Regulatory Policy

Previously we've posted on automotive fuel efficiency, pointing out that other cars besides hybrids get the highest gas mileage. But hybrids have other advantages not available to conventional fuel-efficient vehicles, including access to high occupancy vehicle (HOV) carpool lanes,

Today's New York Times tells us that driving a hybrid shows you care about the environment, and showing you care may be more important than what you achieve. But this raises an intriguing question: One hybrids become mainstream, they won't be different. How will people be able to show they care? More...