Soren T. Anderson

Automobile Fuel Economy Standards: Impacts, Efficiency, and Alternatives

This article discusses automobile fuel economy standards in the United States and other countries. We first describe how these programs affect the automobile market, including impacts on fuel consumption and other dimensions of the vehicle fleet. We then review two different methodologies for assessing the costs of fuel economy programs—engineering and market-based approaches—and discuss what the results of these assessments imply for policy. Next we compare the welfare effects of fuel economy standards and fuel taxes and discuss whether these two types of policies can be complementary. Finally, we review arguments for transitioning away from fuel economy regulations and toward a “feebate” system, a policy approach that imposes fees on vehicles that are fuel inefficient and provides rebates to those that are fuel efficient.

Simplified marginal effects in discrete choice models

We show that after a simple normalization of explanatory variables so that they equal zero at some desired reference point, marginal effects for continuous variables in probit and logit models simplify dramatically, becoming a function of only the estimated constant term. We present similar simplifications for computation of the asymptotic variance of marginal effects, as well as for the effects of dummy variables on predicted probabilities. We provide a simple table, which in combination with raw probit or logit estimates, is all one needs to compute the desired effects.

Private Markets, Contracts, and Government Provision What Explains the Organization of Local Waste and Recycling Markets?

The authors study determinants of market organization of local public services by an examination of one of the most visible services, residentialwaste management. Using a multinomial logit model and data for 1,000 U.S. communities, the authors explore the effects of political influence, voter ideology, environmental constraints, production costs, and contracting transaction costs on a community’s choice of service delivery options. They find that costs are significant in explaining communities’ choices. In contrast, few of the political variables are statistically significant. These results hold for both waste and recycling, providing further evidence that local governments emphasize costs when choosing between private and public provision.

Diversify or focus? Spending to combat infectious diseases when budgets are tight

We consider a health authority seeking to allocate annual budgets optimally over time to minimize the discounted social cost of infection(s) evolving in a finite set of groups. This optimization problem is challenging since the standard SIS epidemiological model describing the spread of the disease contains a nonconvexity. Neither optimal control nor standard discrete-time dynamic programming can be used to identify the optimal policy. We modify the standard dynamic programming algorithm and show how familiar, elementary arguments can be used to reach conclusions about the optimal policy. We show that under certain conditions it is optimal to focus the entire annual budget on one group at a time rather than divide it among several groups, as is often done in practice. We also show that under certain conditions it remains optimal to focus on one group when faced with a wealth constraint instead of an annual budget.

The Intergenerational Transmission of Automobile Brand Preferences

We document a strong correlation in the brand of automobile chosen by parents and their adult children, using data from the Panel Study of Income Dynamics. This correlation could represent transmission of brand preferences across generations, or it could result from correlation in family characteristics that determine brand choice. We present a variety of empirical specifications that lend support to the former interpretation and to a mechanism that relies at least in part on state dependence. We then discuss implications of intergenerational brand preference transmission for automakers’ product‐line strategies and for the strategic pricing of vehicles to different age groups.

Restoring great lakes ecosystems: Worth the cost

The Great Lakes are among North Americas most important natural resources. These enormous bodies of water span some 94,000 square miles, accounting for 90 percent of Americas and 20 percent of the world’s surface fresh water. The lakes and surrounding watersheds sustain thousands of species of plants, fish, waterfowl, birds, and mammals. The Great Lakes basin is also home to more than 35 million people in the United States and Canada.Following last weeks discussion of health hazards from indoor air pollution, this weeks commentary focuses on another major cause of premature death in developing countries—tuberculosis. Ramanan Laxminarayan, Eili Klein, and Sarah Darley discuss the widespread prevalence of tuberculosis and their estimates of the highly favorable benefit to cost ratio for potential interventions to contain the disease.