Wednesday, February 21, 2018

Why mansions are artificially cheap

That is the title of an excellent blog post by Jaap Weel. In a nutshell, because zoning regulations prevent them from being converted into a a higher valued uses. He compares to this home on a one acre lot that sold for $6 million in Atherton

to 350 unit mixed use condo on a 1.6 acre lot 2 miles further up the peninsula in Redwood City that would fetch hundreds of millions.

If one could convert the mansion into condos, the value of the property could easily increase tenfold.
But the zoning code mandates single-unit buildings with a floor area ratio below 18% on lots of at least 1 acre, so $6m it is. Quite the bargain.

Zoning - keeping assets in low valued uses.

Friday, February 16, 2018

Trucking Costs

One little tidbit in this WSJ story on Tyson's earnings has to do with them passing on to customers the rising MC of trucking transport:
Short-term prices to secure some big rigs have jumped 20% as a result, and long-term shipping contract rates are projected to climb between 5% and 8% this year.

This provides an opportunity to test the relative competitiveness of various downstream industries. We know that the simple pricing rule is (P-MC)/P = 1/|e|. In a more competitive industry, firm's demand curves are more elastic. At one extreme 1/|e| = 1 for a monopolist and at the other, 1/|e| is zero for a perfectly competitive industry. For the former, P should rise with 0.5*MC and for the latter P should rise with 1.0*MC (the math is left as an exercise for the reader). So, for different industries and firms, is the "pass through rate" closer to 0.5 or 1.0?

Tuesday, February 6, 2018

7% gender pay gap for Uber drivers

The flexibility of the gig economy was supposed to eliminate the gender pay gap.  At Uber it didn't:
 ...the entire gender gap is caused by three factors: experience on the platform (learning-by-doing), preferences over where/when to work, and preferences for driving speed. This suggests that, as the gig economy grows and brings more flexibility in employment, women’s relatively high opportunity cost of non-paid-work time and gender-based preference differences can perpetuate a gender earnings gap even in the absence of discrimination.
HT:  Peter Klein