Rationing access to beaches, in a time of physical distancing

Last week, my ECONS102 class covered common resources and the Tragedy of the Commons. Common resources are rival (one person's consumption reduces the amount of the good available for everyone else), and non-excludable (if the good is available to anyone, it is available to everyone, and you can't easily prevent people from having access to it). The problem with common resources is that, because they are non-excludable (and therefore open access), they are over-consumed relative to the socially efficient quantity. Essentially, there is a difference between the private incentives (to consume as much of the good as you want to), and the social incentives (to ensure that the good is shared in some fair and equitable way).

Now consider public parks and beaches. In normal times, parks and beaches are non-rival (and non-excludable), because there is plenty of space available for everyone. However, in peak season they are clearly rival, and because they are non-excludable as well, they are common resources and so they are subject to the common resource problem outlined above. Everyone wants to be at the beach (the private incentive), but by everyone being at the beach, the beach becomes overcrowded and everyone's experience is all the worse for it. Fortunately, this is only a problem at times of peak demand.

However, what constitutes peak demand at beaches is redefined when physical distancing is important, as Time reported back in May:

Last weekend, images and reports of glutted beaches and parks have spurred several governors to roll back access to parks and shorelines for fear of a surge in new COVID-19 infections. At a certain point, it becomes physically impossible to pack so many people into six-foot intervals.

As summer approaches, and demand for outdoor recreation skyrockets even further, public space stands to become what economists call a “common resource” — something that belongs to no one, like fish in a lake, but can be depleted without a form of rationing. Already, New York City Mayor Bill de Blasio said Thursday that the virus-stricken city may limit entry to some parks.

“Space is now a resource that, in the foreseeable future, we’re going to have to ration in a way we’ve never had to ration before,” says Clemson University economist Michael D. Makowsky. “The outdoors used to be an inexhaustible resource. Human beings now require a lot more volume than they used to.”

The solution to a common resource problem is to make the good excludable, rather than non-excludable - essentially, to move from a resources that is open access, to one that is closed access (or where access is restricted). In the case of parks or beaches, the government can achieve this by rationing access to the resource. In the case of parks and beaches, the Time article notes three potential options:

The first and simplest approach would be to limit access to public places, like parks and beaches, based on some form of lottery. On Mondays, for example, Yosemite National Park might be closed to families in which the head of household had a driver’s license number ending in a 1 or a 2. On Tuesdays, on 3 or 4, and so forth — effectively reducing the potential crowd by 20%...

A second strategy could involve issuing permits for controlled spaces with discrete access points that can be sold or exchanged. It’s another idea that has already been tested in environmental policy — specifically, the “cap and trade” system, which created a marketplace for companies to buy and sell emissions permits while attempting to incentivize emissions reductions.

In the case of space rationing, an analogous policy would aspire less to incentivize isolation than to fairly distribute the limited resource of open areas. Under such a framework, cities would issue free permits to all residents to be used for access to the most popular parks, beaches and other coveted public areas. A person could choose to sell unwanted permits, or trade them for a different kind of permit (to a different park, or for a different day, and so forth.)...

A third option would be to impose new taxes on certain privileges that are currently shut down in many parts of the country, like dining in at a restaurant. “If ever there was a time for a dine-in tax, it’s now,” Makowsky says. Such a tax could be proportional to demand, with higher levies on weekends and other peak times, he says.

The first option is clearly open to abuse, since households with multiple vehicles (with difference licence plates) could skirt around the restriction quite easily. The third option doesn't regulate the number of people going to the beach directly, but simply makes it more expensive to do so (in essence, this potential solution isn't about making the good excludable, but about making it non-rival). Unless the tax varies based on beach-going demand, the tax would be too high on bad weather days, discouraging beach-going on days when people don't want to go to the beach, while simultaneously being too low on good weather days, where people would be more willing to pay the tax and still go to the beach. It likely wouldn't solve the common property problem at all.

The second option seems most feasible from an economic standpoint, and is quite similar to the tradeable quotas that are used to manage fisheries (another common resource). It encodes a property right for everyone (the right to go to the beach on a particular day), and then lets people trade between themselves to determine who actually takes up the right. The number of permits can easily be limited to ensure the 'right' number are available to ensure physical distancing can be maintained each day.

To be efficient (welfare-maximising), a property rights system needs to have four features:

1. Universal - In this case, everyone who wants to go to the beach must have a permit;
2. Exclusive - Only permit-holders are allowed to go to the beach, and all the costs and benefits of beach-going must accrue to the permit-holder;
3. Transferable - Permits must be able to be transferred in a voluntary exchange; and
4. Enforceable - There must be penalties in place that are sufficient to deter people without permits from attempting to go to the beach.

If those four features are in place, then the permit-based system is an efficient solution to the common property problem of how to make the beach (or park) closed access. The big problem then becomes, how do you allocate the permits in the first place? And of course, how do you administer the system? Those problems would first need to be solved in order for this system to be workable.

[HT: Marginal Revolution]

Coronavirus and the market for oranges

Last week, the New Zealand Herald reported:

Kiwis desperate to stay healthy in the midst of the Covid 19 pandemic have been buying up vitamin C in whatever form they can get it.

Since the virus hit our shores in early March, sales of oranges, kiwifruit and vitamin C supplements have surged.

Citrus New Zealand domestic market lead James Williams said sales of New Zealand navel oranges were 10-20 per cent higher than in previous years meaning Kiwis gobbled between 800,000 and 1.6 million kilograms of extra oranges.

He said pre-packed bags of the fruit had proved especially popular during the peak of the outbreak in New Zealand because there was less human interaction involved...

The popularity of the fruit this season meant consumers would have seen the price of the fruit go up in the last seven-10 days as the supply of the fruit dwindled, Williams said.

Consumer tastes and preferences are one of the factors underlying the demand curve. As consumers' preferences shift towards oranges, they demand more of them at each and every price. As shown in the diagram below, the market for oranges was initially in equilibrium where demand (D0) met supply (S0), at a price of P0, and Q0 oranges were traded. The increase in demand to D1 increases the quantity of oranges traded to Q1, and increases the price to P1.

The same effect is happening in other markets mentioned in the article, including kiwifruit (also increased demand because of high Vitamin C content) and avocados (because people have more time for cooking their own meals, they seem to be demanding more avocados).

Transition to Daylight Saving Time and student academic performance

The transition to Daylight Saving Time (DST) caught me out this weekend. Fortunately, I don't feel like I lost sleep as I was already exhausted from teaching this trimester. Putting aside teacher performance, the idea that losing an hour's sleep, or disruptions to the body's natural circadian rhythm, affects students' academic performance is a common working hypothesis in education circles. So, I was interested a couple of weeks ago to read this 2017 article by Stefanie Herber, Johanna Sophie Quis, and Guido Heineck (all University of Bamburg, in Germany), published in the journal Economics of Education Review (ungated earlier version here).

They used data from 22,000 European fourth-grade students from six countries, drawn from the 2011 waves of the Trends in International Mathematics and Science Study (TIMSS) and Progress in International Reading Literacy Study (PIRLS) studies (see here for more on those studies). The interesting thing about the 2011 waves is that, in the countries that Herber et al. look at, they know on what date the students were assessed, and they can identify some students who were assessed just before a change into DST, and other students who were assessed just after the change into DST. Since schools were effectively randomly assigned to when their students were assessed, this provides a useful quasi-experiment of the effect of DST on student academic performance.

Herber et al. looked at how maths, reading, and science performance differed by DST status for these students, and found that:

...students scored about 4 points lower in both math and science when tested during the week after the clock change. Given a standard deviation of about 72 and 70 points, respectively, test scores in the week after the clock change drop by roughly 6% of a standard deviation. These effects are not substantial in terms of either statistical significance or magnitude.

That quote doesn't make it particularly clear, but the effects were both tiny and statistically insignificant. In other words, DST made no difference to how well students performed on these low-stakes tests in maths, reading, or science. Herber et al. also looked at the effects on performance for eighth-graders, and again found effects that weren't consistently statistically significant and were small in magnitude (albeit on a smaller sample of countries). They conclude that:

This might be due to the fact that one hour of sleep loss is not enough to unbalance circadian clocks to the degree that performance within the following week measurably declines...

Based on our research, it is fair to say that neither parents, nor children, nor competence testing agencies (or even policy makers) have reason to worry about the alleged harmful effects of the clock change on low-stakes test performance.

So, we should probably stop worrying (if we ever were) about the effect of Daylight Saving Time on student academic performance.

Is there an acne premium as well as a beauty premium in labour markets?

I've written a number of times about the beauty premium in the labour market (see here and here, as well as here for my review of Daniel Hamermesh's excellent book Beauty Pays). More attractive people earn more. Hamermesh notes a number of potential mechanisms that might underlie the beauty premium.

However, in an interesting twist, a 2019 article by Hugo Mialon of Emory University (whose previous work includes the economics of faking orgasms) and Erik Nesson (Ball State University) looks at whether there is a premium associated with having acne in high school. They use data from over 43,000 adolescents in the Add Health survey, and find that:

...having acne in high school is positively associated with overall grade point average (GPA), mathematics GPA, and science GPA in high school; positively associated with earning an A in high school math, science, history/social studies, and English; and positively associated with completing a bachelor’s degree. The associations are generally stronger for women than for men... We also find some weak evidence that acne is associated with higher future personal labor market earnings for women.

Mialon and Nesson try to argue that acne is exogenous, meaning not related to any variable that in turn is related to student academic outcomes or later earnings. They show that having acne is:

...not related to measures of socioeconomic status, including parental education levels or most measures of family structure.

I don't find those particular results convincing. Parental education is likely to be measured with error (particularly since the data are drawn from the adolescents, not from the parents), and Mialon and Nesson include "don't know" and "missing" as categories in their education variable, which isn't a particularly robust way of handling it. So, I don't think we can interpret these results as necessarily causal, even though Mialon and Nesson provide some evidence of a plausible mechanism:

In theory, having acne may reduce feelings of being socially accepted, thereby reducing time spent socializing and increasing time spent studying, which may be conducive to educational attainment.We find strong evidence that having acne is associated with feeling less socially accepted and less attractive. Interestingly, we also find that acne is associated with reduced participation in sports clubs and increased participation in nonsports clubs, suggesting a possible shift from physical to intellectual pursuits.

Perhaps that explanation is true. Or perhaps adolescents whose parents had acne, and whose parents also achieved better in school, spend more time on academic pursuits. Is the causality occurring in this generation, or the previous generation? Or the one before that? It's an interesting question, but this should be far from the last word on this topic.

[HT: Marginal Revolution, last year]

Read more:

• Blonds have more fun (or rather, they get paid more)
• The beauty premium in undergraduate study is small, and more attractive women major in economics
• The beauty premium in the LPGA
• The beauty and height premiums in the labour market