The basic economics of an import tax

We have had many surprises in the political arena, but perhaps none are more surprising than to see Republicans rallying around a tax increase.  Import taxes are politically convenient.  Gullible voters think that such taxes will be paid by foreign entities and will encourage producers to shift production to the US to avoid such taxes.

This is wrong on both counts.  Consumers in the US end up paying for the tax via higher prices.  As they cut back spending this means fewer domestic jobs in retail.  Producers have developed complex global supply chains to take advantage of productivity and cost differences across different countries. A 20% import tax is not going to be enough to offset a 500% labor cost difference.  

This applies to all industries, including the luxury industry.  See a quote from this expert in Luxury Daily!

Can pet economics tell us something about human health economics?

A recent HBR piece by Liran Einav of Stanford and Amy Finkelstein of MIT compares recent trends. for spending on veterinary care to spending on health care for humans.  They find that total spending on both items has risen more than spending overall, meaning more and more of our budgets are going to veterinary services as well as health care for people.  Spending by income brackets shows the same pattern, with much larger spends for high income than low income households.  Also spending for veterinary care tends to be concentrated in the last months of life, just like human health care.

These similarities are striking in some way because there is no employer-provided veterinary care insurance and there is no Medicare- or Medicaid-like program for pets.  So the trends for pet health spending closely mirror those for human health spending even though the role of government and insurance is quite different in the two markets.

The careful reader will note that Einav and Finkelstein do not address the question of price inflation for veterinary and human health care.  We all know that human health care inflation is much higher than overall inflation.  The picture for veterinary inflation is more mixed.  A research team from Purdue looked at the inflation measure published by the Bureau of Labor Statistics and then developed their own price index based on pet insurance claims submitted to Nationwide.  The BLS veterinary care price index increased by 25%, well above the 12% inflation rare for 2009-2015.  The price index based on the Nationwide index showed no veterinary inflation over this period.  

One last question: if we are spending more and more on our pets' health, are they getting healthier?  Are they living longer?  Are they leading more active lives?  Are they getting more tummy rubs?  Clearly this calls for more research.

NC State online MBA stays in US News top 20

More great rankings news!  For the third year in a row the NC State online MBA has placed in the US News and World Report top 20.  The program placed 18th, tied with Mississippi State and South Florida.

The US News rankings are based on faculty credentials and training, student services and technology, student engagement, peer evaluations, and admissions selectivity.  I am especially proud of how well we scored on the student engagement dimension.

I was fortunate enough this fall to have my first opportunity to teach the online core economics course.  It was one of the best teaching experiences I have ever had.  More people come to your office hours online than they do in day or evening instruction.  Accessibility matters, a lot!