Friday, April 16

NHL draft rules create perverse incentives

It's one of the most basic principles of economics: people respond to incentives. And when it comes to incentives, the National Hockey League creates some pretty perverse ones.

If we want teams to try to win, we should reward winning and punish losing. But the NHL offers a hefty reward for losing. The worse teams do, the more likely they are to get a high draft pick the following summer. A top draft pick can land you a franchise player that can bring success to your team for years to come — a Sidney Crosby or an Alex Ovechkin. It gives teams who don't think they can compete for the Stanley Cup an incentive to tank at the end of the year. Sure, there's a lottery that creates some uncertainty around what team gets which draft pick, but it depends on a rigid formula that ensures teams that lose are still rewarded with high picks.

Wednesday, April 14

Dalai Lama blames inequality for suffering

His Holiness the Dalai Lama tweeted a thought-provoking sentence on Twitter yesterday: "Economic inequality, especially that between developed and developing nations, remains the greatest source of suffering on this planet."

It's a loaded statement for 140 characters or less, and I was left pondering whether the Dalai Lama is correct. Certainly it's easy to accept that poverty — a lack of being able to afford basic necessities — can cause suffering. But it's not clear to me that economic inequality — a big variance in individual incomes — also causes suffering. I decided to try and test the Dalai Lama's theory.

Monday, April 12

First Nations, property rights and mortgages

Andrew Findlay has an excellent article in March's BCBusiness magazine about Canada's First Nations peoples and property rights. It seems like First Nations issues are often shoved under the rug because of their contentiousness, so it's nice to see one of my favourite magazines take this on.

The standard of living for First Nations people in Canada is, on average, far worse than the standard of living for Canadians as a whole. Governments and First Nations leaders have tried numerous strategies to try to narrow the gap, but one strategy that doesn't get much attention is individual property rights. First Nations people in Canada aren't on an equal playing field with other Canadians when it comes to home ownership.

Friday, April 9

Economic concepts through country music

After 23 years of living in the dark, I recently stumbled upon the joys of country music. Though many country tunes appear to be about the joys of beer, corn, trucks, rain, farms, Southern women, being a redneck and country music itself, one of the things I've noticed is that economic concepts are at the heart of many country tunes.

Here's a look at some basic economic concepts through the eyes of country songs:

Wednesday, April 7

Une bonne idée pour la santé

The Quebec government is mulling over an excellent idea that could improve public health care: deductibles.

In Canada, medical care is free, in that you don't have to pay when you go to the doctor. Some provinces (including Quebec, starting on July 1) charge a mandatory tax specifically for health care, but it's either a flat tax or dependent on income. The difference with Quebec's proposal is that it would be based on how much an individual uses medical services.

Monday, April 5

Illegality of unpaid internships

The New York Times ran a very interesting article on Friday about how state governments are starting to crack down on employers who use unpaid internships as a source of free labour (hat tip to William Wolfe-Wylie). It seems with the recession, businesses are using interns as free labour, which violates minimum wage laws.

I know some companies in Canada offer unpaid internships — they're particularly common in the media industry, where many outlets are struggling financially and there is an overabundance of qualified graduates looking to get their foot in the door somewhere. I wonder if these internships violate minimum wage laws here too.

Friday, April 2

Thanks, Ontario government, for increasing the cost of pizza

Proponents of increasing corporate taxes and minimum wages often argue that businesses pay for the increases. The logic is that tax and wage increases can't be bad if big, evil, profit-seeking corporations pay instead of workers and consumers. Unfortunately, that's a fallacy.

On Wednesday, Ontario raised its minimum wage by 75 cents, to $10.25 an hour. It now has the highest minimum wage of any jurisdiction in Canada or the United States. So when I visited my local Little Caesars' yesterday evening to pick up a pizza, I wasn't surprised to see a notice saying they have raised the price of their Hot-and-Ready medium pizzas (other than pepperoni) by 50 cents. Coincidence? I think not. Little Caesars' is facing higher costs with the minimum wage increase, so it's passing most of those costs on to the consumer.