New Economist seems to be having a migration special, its impact on rural China, migration and innovation, and why people emigrate.

The full discussion is here; my final post is here, about climate change. Here’s the guts of it:

Standard economics has a solution: a carbon tax, or a tradable permit scheme, to raise the cost of emitting carbon. We’d all have an incentive to cut down by driving less and turning down the heating or air conditioning, and also by insulating our homes and finding more efficient cars and fridges. Businesses would also cut back, and would have an incentive to develop new technologies.

Behavioral economics draws attention to different considerations. For example, we’re not as smart as conventional economics assumes, which means that we might fail to notice ways to reduce our energy bills. We might also need to be reminded about what our neighbors are doing: psychologist Robert Cialdini showed that we’re more likely to recycle if we think everyone’s doing it. That may hold true for carbon-saving too. And although we’re reminded of high gas prices every time we fill up, we really need to be reminded of them when we’re buying a new car or a new fridge.

So which approach is right? That’s a strange question. They can both be right, and I think that they both are.

Of course, the economic incentives will work. I don’t think there’s any serious doubt that raising the price of carbon would persuade us to pollute less. The Logic of Life showed that we are sensitive to these simple incentives in the most unexpected situations. For instance, raising the risk of unprotected sex persuaded American teens to have more oral sex instead; and two Australian economists, Joshua Gans and Andrew Leigh, have found that tax incentives can persuade pregnant women to delay labor, and even deter people from dying too quickly. (It’s really true: the death rate in Australia dropped in the week before inheritance tax was due to be abolished, and then sharply rose the week immediately after. A lot of people were clinging on to life to avoid their estates being taxed.) If people will change their date of death or the day they have a baby in response to a tax incentive, I am quite sure that they will be more environmentally friendly, too.

But I am also sure the behavioral insights will produce results. Cass Sunstein and Richard Thaler report one dramatic success: people cut back dramatically if the electricity company gives them an “Ambient Orb” that glows red when they’re using a lot of power. There’s no standard economic theory that explains why that should be; and that is just one example.

Group hug in the end - sorry.

The Bastiat prize for journalism, 2008, is open to entrants:

IPN’s Bastiat Prize for Journalism was inspired by the 19th-century French philosopher and journalist Frédéric Bastiat.

The prize was developed to encourage and reward writers whose published works promote the institutions of a free society: limited government, rule of law brokered by an independent judiciary, protection of private property, free markets, free speech, and sound science.

The prize fund (a total of US$15,000) will be divided between First, Second and Third placed authors. Entries for 2008 will be accepted from 1 April 2008 with a deadline of 30 June 2008.

More detail here; I was fortunate enough to share the prize with Jamie Whyte in 2006.

Today’s “More or Less” looks at the mathematics of The Simpsons, whether Whitehall II was wrong to say that if you have little control over your working life, that may cause you to have heart trouble, and the promise and perils of “sentiment surveys”. And, of course, more about which town has the most pubs in Britain.

4.30pm BST, Radio 4 - or thereafter streaming from the website.

I was recently invited to appear on radio to give an economist’s perspective on the costs and benefits of local exchange trading schemes (LETS), which are alternative currencies that circulate around a small community. This made me scratch my head a bit. I could not think of any real benefits, but then I couldn’t really think of any serious costs, either.

Advocates of community currencies argue that they have social, economic and environmental advantages. BerkShares, which organises a local currency in Massachusetts, claims that the currency helps businesses to connect with their customers, and strengthens the regional economy by favouring locals. In the UK, “transition towns”, which are seeking to use less oil, are exploring the environmental benefits of local currencies.

The common-sense economic case for these currencies was summed up for me by John Walker, acting treasurer of Brixton LETS in London: “They’re more appropriate for local communities, because the money doesn’t drain out of the local community.”

The remainder of this column can be read here. Please post comments below.

Dear Economist,
I am 22 years old with a younger sister. My parents were pretty strict, so I made sure I was a sensible teenager. I didn’t sleep around, didn’t take drugs, never seriously smoked and went on to a good graduate job. But now my 17-year-old sister is getting away with murder: my parents know she smokes, let her boyfriends stay overnight and turn a blind eye to other misdemeanours. It’s just not fair. Did I make a mistake in being such a square as a teenager?
Georgie H, Hertfordshire

Dear Georgie,

The latest Economic Journal presents a simple game-theory model of the problem. All teenagers wish to misbehave but fear parental sanctions. Parents wish to threaten punishment for transgressions, but only some parents are strict enough to do so. Your younger sister’s mere existence skewed the game to your disadvantage. Your parents are evidently soft-hearted, but had a clear incentive to pretend to be strict because every time they punished you, they knew they were also deterring your sister.

Now that you have flown the nest, the gains from “acting strict” are much smaller and discipline has slipped. Your sister pushed and discovered that they did not push back; you would not have found it so easy. But sunk costs are sunk costs, so be content with your graduate job. And if you really want to take drugs and sleep around, I can assure you it is not too late.

Questions to economist@ft.com

The technology is here, HT Seamus:

TimeMachiner is a new mini-app that lets you email people in the future. Use it to remind yourself to do something that you’ll more than likely forget, keep your future self on the straight and narrow, even wish your friends happy birthday…

Useful for reminding yourself of last year’s resolutions, but beyond that, what economically-interesting applications can y’all suggest?

Update: A loyal reader comments:

I can suggest one interesting experiment. Put up a website which provides this as a service. On the front page, put an easy-to-use form. Make the service free and open. Then have no privacy policy at all, so you can do what you like with all the email addresses you harvest. Then all the helpful bloggers will do your marketing for you. (Step 3: Profit!)

Good point…

Via Economic Principals:

Myth: Given the growing retirement income challenge, people will have to work forever. Reality: If individuals worked full time until at least 66, they could enjoy a long and financially secure retirement, with incomes one-third higher than if they retired at 62.

Myth: Older workers will choose to work longer on their own. Reality: Most people retire as soon as benefits are available at age 62.

Myth: As baby boomers approach retirement, employers will embrace older workers. Reality: Many employers are lukewarm toward retaining older workers due to concerns that they cost too much, lack current skills, and don’t plan to stick around long.

Myth: Employers will quickly change their tune in response to labor shortage. Reality: Many employers with a high proportion of older workers are in declining industries. Others can tap global labor markets.

The original source is Working Longer: The Solution to the Retirement Income Challenge, by Alicia Munnell and Steven Sass. Update: Link fixed, thanks to a reader for pointing that out.

That was one of one of the messages I tried to put over to audiences of the top US radio show, “Morning Edition”. Apparently you can listen to it here.

This morning I am in Amsterdam, promoting the Dutch version of “The Logic of Life“. The most disturbing thing about this is that my publishers are claiming that I am “the Jeremy Clarkson of economics”. I don’t know what’s worse: being compared to Clarkson or the knowledge that he’s a star in the Netherlands.

Nevertheless, nice to be here. Sadly I will not get time to visit the Aalsmeer Flower Auction, written up brilliantly in John McMillan’s “Reinventing the Bazaar“, one of my favourite economics books.