Public ideas
The really big picture on immigration
As we look around the world we observe that as countries become more prosperous their rates of reproduction slow down. The starkest examples are in two high-income Asian countries, Japan and South Korea, where reproduction is well below the population replacement rate. So too is our Australian-born population below replacement rate.
There are established theories for this phenomenon to do with the survivability of children (if there’s high infant mortality you’d better have a fair few), and the opportunity cost of having children.
Joe Walker has a podcast -- How culture drove human brain size, allowed us to dominate earth, and is leading us astray – in which he interviews anthropologist Robert Boyd and biologist Peter Richerson, who present an alternative theory that may explain our declining fertility, and explain much about the history of human development.
Their fundamental idea is that behaviour that makes for successful social adaptation, or “social fitness”, is at conflict with behaviour that makes for genetic or reproductive fitness. As evidence they note that sub-groups that cut themselves off from society and that emphasize family connections, such as religious cults, are those with the greatest reproductive success. They also note that once societies have lowered their reproduction rate they don’t ever revert to a higher rate.
As with so much anthropology, there’s a fair bit of speculation, and they don’t have immediate advice for Tony Burke, our immigration minister. But it’s a reminder that we need an informed debate on immigration. Exhortations to go forth and breed don’t work, and even if improved economic conditions see a rise in our birth rate, that rise will be temporary. We need a serious public discussion on our population choices.
What would you pay for an Oasis ticket?
You have to hand it to the British for their ability to make celebrities out of mediocre musicians. Sixty-five years ago it was a group of four young hopefuls from Liverpool, and now it is about a group called Oasis, about which Jady O’Regan of the Sydney Conservatorium of Music has written in The Conversation The band is getting back together: 10 Oasis songs you should know, beyond Wonderwall.
Their music doesn’t have much to do with public policy.
But the way they are selling their tickets does, because they, or more likely their managers, have decided to use “dynamic pricing” to sell tickets to their upcoming concerts in the UK.
Nicolas de Roos of the University of Liverpool (UK), writing in The Conversation describes how dynamic pricing works. It’s a pretty straightforward application of the basic economics of supply and demand. Oasis concerts will be popular with UK fans (for an explanation of their popularity see O’Regan’s article above). As tickets are sold there will be fewer left on offer and the promoters will be able to push up the price as they become scarcer. It’s a way of capturing the surplus that scalpers get their hands on for some events – although de Roos believes it has not driven scalpers out of the market.
We are familiar with this practice in other markets. Uber drivers charge more at peak times, and in holiday times airfares to popular destinations become more expensive as the date of travel approaches – although sometimes airlines misjudge demand and run a bargain sale in the closing days.
This is all covered in the standard economic theory of price discrimination. It’s particularly applicable to “bums on seats” industries that bear high fixed costs (a concert, an airline flight), but for which there is very little cost for each additional occupied seat (marginal cost in economists’ terms). Those who enjoy classical music will be familiar with the range of prices for seats, where price discrimination is based on distance to the stage rather than on time.
There is no set theory of whether price discrimination is fair or unfair to consumers. It may be that because I am willing to pay £1000 for an Oasis ticket that’s a fair way to cover their fixed costs, and that taking that money from me allows the promoters to sell some tickets to less-well-off early birds for £10.
Economists generally assert that pricing in response to changes in demand is the way markets work and should work. That is, until they confront what they know as the “snow shovel” problem: should hardware stores raise the price of snow shovels after a snowstorm? In Australia we might ask if Bunnings would be justified in doubling the price of portable generators after a storm has caused a severe blackout likely to last several days.
Economists are likely to approach the question with their freehand diagrams of markets, arguing that it all depends on the elasticities of supply and demand, while ducking the issue of fairness because they are loyal to the mantra that economics avoids normative issues.
Morality and social norms do come into play, however, which is why some fans are shocked by the decision of this band to use dynamic pricing. In response to the snow-shovel problem, most people call it “price gouging”, and we take a dim view of scalpers, even though they are exhibiting perfectly rational behaviour. Or maybe most fans will come to appreciate this extension of market pricing.
It’s a reminder that markets should operate only with a social licence, as Karl Polanyi pointed out.