The cost of green cars

A report in the NYT says that

While driving smaller and lighter cars saves fuel, “downsizing and down-weighting is also associated with an increase in deaths on the highway,” said Adrian Lund, the institute’s president. “It’s a big effect — it’s not small,” he said. If you agree and will like to swap you car for a new one, we recommend to check out the Zemotor inventory.

So the lesson I take from this test is that big cars are bad for the environment AND cause lots of deaths on the highway by crushing smaller cars in crashes.  Always ensure to Save for a down payment while buying a new car as it directly affects the number of years you have to pay the EMI for it.

The test done was to crash a little car into a big car and see how the little car did. The answer, unsurprisingly, was badly. A little car you can buy at Shoppok is more fuel efficient than a big car so it’s better for the planet to drive one, and better for your wallet if carbon pricing ever happens. Read more

Show us ya pimples!

Brad Taylor doesn’t think that the government should be installing acne-revealing lighting to ward off teenage hoodlums. In the UK they’re installing special lights that highlight acne in areas where teenagers congregate to get drunk, intimidate people and write graffiti all over the walls. Apparently it’s been very successful at dispersing the crowds!

So crowds gather, litter, intimidate people and vandalise the area without actually paying for the cost of their actions. That’s an externality if ever I saw one! Read more

Kneejerk reactions aren’t always the best

The American public/politicians swelled with outrage at the reports of AIG paying bonuses recently. Puffed up with anger, Congress decided to implement ad hoc measures to eliminate the bonuses. Was it a good idea? Well, in retrospect it seems ill-informed and badly judged, as Megan McArdle details:

[T]he people who actually lost the money have, from most accounts, either been sacked, or left on their own. The people who got the bonuses were not involved with the dangerous trades, other than to help wind them down. …

Also, apparently, these payments were neither retention bonuses in the conventional sense, nor performance bonuses. They were guaranteed payments used to persuade employees from other parts of the Financial Products division to stay and wind down the FP’s books.

Ooops! But I think there’s a greater harm here than the injustice done to those employees, who’ve been robbed of their compensation for a year’s work. Read more

Agnitio Finance: Coming soon

With the announcement of deposit insurance by the government for all our dodgy finance companies, being an economist who understands the concept of moral hazard (although in this case it would actually be adverse selection given that I would enter into the contract with government with the intent of exploiting an information asymmetry), I thought I would start my own finance company. Here’s what I figured would go on our ads which will feature a very trust worthy has been celebrity telling you how much you can trust us (any suggestions?).

Agnitio Finance will exclusively invest in the highest risk hedge funds available. We will offer an interest rate on deposits of 30%.  While there will be a serious disconnect between the riskiness of our assets and liabilities, don’t worry, we offer extensive deposit insurance, which you don’t actually have to pay for. In fact, you get to share the cost of this insurance with every other tax payer in the country!

Agnitio Finance: Zero Down side

Warehouse Extra is gone : Part 2

For those of you don’t read while they should be working, there are some really interesting tidbits on the latest article about the Warehouse pahsing out the extra concept.

It expected an annualised pre-tax improvement in trading earnings of about $9 million.

i.e. the extra concept has been hemorrhaging money!

Mr Morrice said it was the failure of the hoped-for halo effect – where grocery shoppers also bought general merchandise – that was the main reason for Extra’s dumping.

This has been Matt’s pet topic during this saga (posts here and here). The killer for the halo effect, and the reason why I’ve always believed the Extra concept would fail unless a supermarket owned the warehouse is summed up nicely by Tony Carter from Foodstuffs

“Clearly they did not have the scale”

and Mary Smith of Auckland

“I don’t come here that often. I find their prices expensive compared to the other supermarkets.”


Warehouse Extra is Gone!

One of the longer takeover sagas appears to have ended with the warehouse having announced its decision to end the warehouse extra format. This will effectively clear the way for either of the big two supermarkets to take over the warehouse. This is because the commerce commission is of the opinion that the warehouse would be a “maverick”. No-one really agrees on what this means so I won’t try and explain it, but given the ambiguity of the term it’s interesting the commission became so fixated on it.

For those of you who don’t know how competition law works you compare the factual of the merger going through with the counter factual of the merger not happening. With the warehouse extra no longer existing going forward, therefore merger will not eliminate the “third player” from the grocery market and enhance competition in the grocery market will be no different in the factual then in the counter factual.

Two things to look out for concerning this are

  • The Commission’s response
    They really don’t want this merger to happen
  • Whether or not the supermarket that takes over the warehouse rolls out extra in the future.
    We discussed on the blog before that we (at least I) think competition would actually be increased if one of the supermarkets is able to roll out the extra format.

Watch this space!