Archive for December 24th, 2008

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Easy to rig BLS auction

December 24, 2008

Michael Giberson

The emerging field of economic systems design (or “market design”) has spawned a lot of fancy mathematics in the effort to better understand auctions and other economic systems and to apply that knowledge to make those systems better. Paul Klemperer, among others, has pointed out that “what really matters in auction design” is often just a matter of getting simple things right: encourage entry, discourage collusion and predatory practices.

Al Roth at Market Design provides current reminder of the importance of getting simple things right in the form of a news story on an economics student who disrupted a recent BLS auction of development rights to public land in a very simple way: he bid, but had no intention of paying.

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Organ donation as a club good rather than a public good

December 24, 2008

Michael Giberson

Al Roth, blogging at Market Design, discusses Lifesharers in a post “Lifesharers: organ donation as a club good rather than a public good“:

Deceased organ donation is a public good in the sense that everyone is better off in expectation if everyone else is willing to donate their organs when they die, but no one receives any direct benefit from donating his organs after death (and there must be perceived costs to donation, since not everyone is a donor).

Economists often worry about how to provide public goods …

In between public and private goods are “club goods,” like a park or country club that is funded by members, and is only open to members and their guests. The idea of LifeSharers is that organ donation can be a club good: members indicate that they are willing to donate their organs, giving first preference to other members.

That isn’t exactly the standard version of the economic term “public good,” but I guess we can make allowances for the remark being a blog post rather than an research article.

Roth frequently posts on organ donation and related topics. See his posts tagged kidney exchange and compensation for donors.

Previous posts on organ donation here at Knowledge Problem include “Life on the Kidney Queue in the Land of the Market” and “Markets for Kidney Transplants.”

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“10 big energy myths”

December 24, 2008

Lynne Kiesling

Here’s an interesting list of “energy myths” from Chris Goodall at The Guardian. What I find useful about his discussion is not the “myth debunking” per se, but rather his comments on why he considers them myths. The “wind is unreliable” myth, for example:

Actually, during some periods earlier this year the wind provided almost 40% of Spanish power. Parts of northern Germany generate more electricity from wind than they actually need. Northern Scotland, blessed with some of the best wind speeds in Europe, could easily generate 10% or even 15% of the UK’s electricity needs at a cost that would comfortably match today’s fossil fuel prices.

The intermittency of wind power does mean that we would need to run our electricity grids in a very different way. To provide the most reliable electricity, Europe needs to build better connections between regions and countries; those generating a surplus of wind energy should be able to export it easily to places where the air is still. The UK must invest in transmission cables, probably offshore, that bring Scottish wind-generated electricity to the power-hungry south-east and then continue on to Holland and France. The electricity distribution system must be Europe-wide if we are to get the maximum security of supply.

We will also need to invest in energy storage. At the moment we do this by pumping water uphill at times of surplus and letting it flow back down the mountain when power is scarce. Other countries are talking of developing “smart grids” that provide users with incentives to consume less electricity when wind speeds are low. Wind power is financially viable today in many countries, and it will become cheaper as turbines continue to grow in size, and manufacturers drive down costs. Some projections see more than 30% of the world’s electricity eventually coming from the wind. Turbine manufacture and installation are also set to become major sources of employment, with one trade body predicting that the sector will generate 2m jobs worldwide by 2020.

This is a more thoughtful discussion of these issues than one usually sees in non-industry-specific media.

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