Deadweight loss during the holidays

Great video on the economics of giving by Marginal Revolutions's Tyler Cowan and Alex Taborrok.

Pop quiz: Suppose you have $20 in your budget for a gift to Aunt Mabel.  How do you make sure that Mabel gets at least $20 worth of enjoyment?  Easy answer: give her $20 in cash or Amazon gift card.

But do we really want to spend the holidays trading $20 bills with each other?  The video brings up other motives for gift giving, but I am not sure making charitable contributions in Mabel's name is the answer.  She might rather have the $20.

Is the NFL leaving money on the table?

So argue two WP economic writers.   Their basic point is that the NFL could relocate some of its teams and create a stronger revenue stream and global brand presence for the league.

The recent move of the Rams from St. Louis to Los Angeles underscores the basic idea: some very large US markets are not being served.  So the article suggests that San Diego Chargers head to Orange County, the Buffalo Bills move to Brooklyn, the Cincinnati Bengals move to Vegas and the New Orleans Saints move to Austin-San Antonio.

But wait, there's more.  Why not move franchises to Jacksonville to London, Detroit to Toronto and Cleveland to Mexico City to create a true global presence?  Better do it quick before Clinton or Trump imposes a relocation tax!

My only pushback is whether relocation makes more sense than expansion.  And why not have games  on Tuesday and Wednesday night?

More than maybe you want to know on corporate income tax

Politicians from both parties are calling for big changes to the corporate income tax.  There are two major sets of issues on the table.  As shown in this NYT article, the tax is applied very inconsistently across different sectors of the economy.  Companies exploit a wide range of tax exemptions and deductions that vary by industry.  The net result is that companies in industries such a trucking and electric utilities pay close to the maximum rate of 35%, whereas biotech, pharma and IT pay 10% or less. Economically, this means we are unduly restricting output in the high-tax sectors and subsidizing the low-tax sectors.  Mucho deadweight loss could be eliminated by equalizing tax rates across all sectors.  Of course the politics of this are dicy; no one likes for their taxes to be raised especially while others are being lowered. 

The other major issue is whether the US relies too much on the corporate income tax to fund government activities.  Some Republicans want to eliminate the corporate income tax.  Of course, if the corporate tax were scaled down, some other tax would probably have to go up unless radical steps are taken to cut spending -- which is not too likely with split government in Washington.  My guess is that this talk will die down quickly.  "Cut deadweight loss by reforming the corporate income tax" is not likely to pave anyone's way to the presidency in 2012. 

Deadweight loss on Delta Airlines

I am sitting in the Delta Sky Club at JFK airport.  Made a business trip to Nice France this week to visit Skema Business School and was returning today with my colleague John McCreery.  Plane from Nice arrived early and as we cleared customs at 2:30 we saw there was a plane to Raleigh leaving at 3:10, well before the ticketed 7:02 departure on a later flight.  Immediately went to the Delta Sky Club where a very helpful person at the front desk told us we could book the earlier flight for $50 (all luggage was carryon, otherwise that would have been a deal killer).  But by then it was slightly less than 30 minutes before departure and she could not get into the system to book the flight.  She said to go to the gate and they would take care of the situation. 

The folks at the gate said we had to go to Customer Service, an obvious oxymoron for the Delta crew at JFK today.  There were at least eight people behind the counter but no one acknowledged our presence for at least a minute at which point we simply moved to the counter and asked for help.  The initial response, "We cannot do that."  In other words, just go away.  Then we explained the situation: plane does not leave for 25 minutes, we have no checked luggage, we are willing to pay $50 apiece to get home four hours earlier, and there are empty seats on the 3:10 plane (and who knows we could free up seats they could sell on the 7:02 plane).  Nope, "cannot do that." My take: these people did not want to be bothered to help anyone -- they seemed much more interested in visiting with each other. 

Finally asked to see a supervisor and she offered us a great deal: pay $250 apiece plus any difference in the ticket price that might be associated with a walkup fare.  (Delta management -- you might want to make sure your employees give consistent answers.)  At this point we were thoroughly disgusted and retreated to the Sky Club to watch football (Go Pack! Go Sparty!). 

This is a classic case of a deadweight loss, but it is not associated with government regulations or price ceilings.  We were ready to pay Delta for seats that were open but they would not sell them to us.  There really were no excuses other than Delta's thoroughly rotten employee/management culture at JFK.