15 Aug 11
Originally posted by Metal BrainBTW, the principle also holds in reverse: e.g., holding income effects constant, consumers will tend to use less electricity as prices go up. They economize.
So perhaps this crappy economy is good for reducing carbon emissions.
Lets hope the economy never recovers. LOL!
15 Aug 11
Originally posted by Metal BrainWhen buying new appliances, for example, people will be more interested in power use if electricity is more expensive.
It is true to an extent, but most people I know use the electricity they need and worry about the electric bill later.
If their electrical appliances become more efficient and the electric bill is lowered I doubt people will use more electricity just because they are using less than they were.
They are still using what they need, so why find ways to use more than they typically do?
15 Aug 11
1 edit
Originally posted by Metal BrainOne would expect the income-adjusted substitution effect to be the same for a price increase as for a price decrease of the same magnitude, just in opposite directions. Which is basically where telerion said that you seemed to be contradicting yourself.
That depends on their income. I'll bet most people would not economize at all.
I do agree that income has an effect: for one thing, the lower the income, the higher the portion of one’s budget is likely to be taken up by such utility bills. A price increase with the ensuing tighter budget constraint (income effect) means that the household will have to economize somewhere.
I suspect, though, that most households would decrease their electrical usage in such a case—especially households from lower to middle income classes. In any case, there is certain to be some empirical data on this out there…
EDIT: There are likely to be lags: for example, if one is billed for a past 30-day usage period (plus a lag from meter-reading to billing), one cannot consider changing one's usage until after one gets the bill. Demand is likely to be inelastic in the short-run.
15 Aug 11
Originally posted by KazetNagorraAnd that may affect the decision to shop for a new appliance; not the whole (or even the major) factor, but certainly one that can tip the decision. My personal experience is that, anyway.
When buying new appliances, for example, people will be more interested in power use if electricity is more expensive.
15 Aug 11
2 edits
Originally posted by vistesd
One would expect the income-adjusted substitution effect to be the same for a price increase as for a price decrease of the same magnitude, just in opposite directions. Which is basically where telerion said that you seemed to be contradicting yourself.
It could be even easier. Take a point on the demand curve for electricity. Without loss of generality, let that point be 100 units at $10/unit. Now Metalbrain asserts that if the price goes down people will consume more (this is reasonable). Let's take another point on the demand curve. Again WLOG, let it be 110 units at $9/unit.
Consumers want more electricity at $9/unit than at $10/unit. But then, that also says that consumers want less electricity at $10/unit than at $9/unit. Thus, if consumers demand more at a lower price, they must demand less at a higher price.
"Decreasing price increases demand" simply says that at least some region of the demand curve is downward sloping but not vertical. "Increasing price decreases demand" follows immediately then.
15 Aug 11
Originally posted by telerionYeah, but I have to fight through the cobwebs in the attic (my brain) to get to that. 🙂 It helps if I publish my cobwebby thoughts here, and then let you clean the webs away… Appreciated as always.
Originally posted by vistesd
[b]One would expect the income-adjusted substitution effect to be the same for a price increase as for a price decrease of the same magnitude, just in opposite directions. Which is basically where telerion said that you seemed to be contradicting yourself.
It could be even easier. Take a point on the demand cu ...[text shortened]... rd sloping but not vertical. "Increasing price decreases demand" follows immediately then.[/b]
15 Aug 11
Originally posted by KazetNagorraThat is true, but my whole point for having efficiency standards is to do it while NOT taxing them and let them keep their money and spend it on other things. Spending is important to economic growth to some extent.
When buying new appliances, for example, people will be more interested in power use if electricity is more expensive.
I don't think a carbon tax will happen during bad economic times and it might be a long time before we have a true recovery. My plan can happen now, before a recovery since it will allow people to spend more and therefore a little stimulus plan
15 Aug 11
Originally posted by telerion"quantity demanded"? 😉
Originally posted by vistesd
[b]One would expect the income-adjusted substitution effect to be the same for a price increase as for a price decrease of the same magnitude, just in opposite directions. Which is basically where telerion said that you seemed to be contradicting yourself.
It could be even easier. Take a point on the demand cu ...[text shortened]... rd sloping but not vertical. "Increasing price decreases demand" follows immediately then.[/b]
15 Aug 11
Originally posted by vistesdVery poor people will lower their electricity consumption to some extent but I stand by my statement that most people will not. I view carbon taxes as being inefficient at lowering consumption and bad for an economy with anemic growth at best and no growth at worst.
One would expect the income-adjusted substitution effect to be the same for a price increase as for a price decrease of the same magnitude, just in opposite directions. Which is basically where telerion said that you seemed to be contradicting yourself.
I do agree that income has an effect: for one thing, the lower the income, the higher the portion o ...[text shortened]... one's usage until after one gets the bill. Demand is likely to be inelastic in the short-run.
Higher efficiency standards are the way to go IMO.
15 Aug 11
Originally posted by Metal BrainHmmm. Well, I really can’t address the competing possibilities; I was really just dealing with the impact of one, in terms of price. Let me work it in my (cobweb-cluttered, economic) brain for a while.
Very poor people will lower their electricity consumption to some extent but I stand by my statement that most people will not. I view carbon taxes as being inefficient at lowering consumption and bad for an economy with anemic growth at best and no growth at worst.
Higher efficiency standards are the way to go IMO.
My knee-jerk microeconomic response is that I think taxes are “cleaner” (any pun intended), are likely to have a quicker impact, and are likely to lead to otherwise market-driven higher efficiency “standards”. But that’s all that is—a knee-jerk out of the cobwebs. 😉 I won’t let you hold me to it. 🙂
Good discussion.
15 Aug 11
Originally posted by telerionCap and trade was a scheme concocted by chaletons using fear of nonexistent global warming to rake the public worldwide for billions of $ without any benefit to the environment, even if the root scare was true.
Yep. Carbon tax or cap-and-trade. Either one makes sense.
15 Aug 11
Originally posted by telerionWhy not just let the market sort the problem out, if there is a problem? The wealthiest, most capitalistic countries have already made the most progress controlling industrial polution.
You could mandate that electrical devices be more efficient. Assuming that there are easy technological fixes that will make them sufficiently more efficient, it would still likely cause the price to rise so it's not going to be a free lunch.
Another issue with just making things more efficient is that it just reduces the private marginal cost of fuel c ...[text shortened]... buted in many ways (some proposals have built in credits to reduce the burden for the poor).
Nobody wants dirty air.
15 Aug 11
Originally posted by telerionYour presemption is entirely based on unproven speculation, and perhaps manufactured fiction.
Not at all. I'm acting under the presumption that some reduction in emissions is necessary, and then asking what is the best way to achieve that.
Carbon taxes and market-based cap-and-trade are both excellent ways to do this. So far the criticisms that I heard of it coming out of this forum haven't even been accurate characterizations of the policie ...[text shortened]... rnational coordination dilemma (I may be giving him more credit than he is due) not included.