18 comments on “Timmy elsewhere

  1. This is, of course, exactly the same story as: ” Economic benefits to the hosts justifies bid for Games” was running in the same paper, couple years back.
    It’s the same with all these extravaganzas. Same as the London Olympics. The economic benefits will be captured by those best positioned to capture them. The cost paid for by those least able.

  2. The usual right wing extremist explanation of, say , why accommodation prices go up in the summer holidays is that they are charging the real economic price then to make up for all the rest of the year when they are running at a loss. So Glasgow hoteliers have been stoically taking losses for years in the hope of a big public-sector organised event pulling in the punters?
    There is a simpler explanation: Occam’s razor and all that.

  3. See the “Millions spent on empty hotel rooms by London Olympics organisers” story, from a couple weeks back.

  4. Thanks to the work of one Michael O’Leary, the European public are increasingly familiar (and happy) with the idea that prices rise when demand rises. Even France’s SNCF offer cheap fares on off-peak TGVs. If the French can grasp the idea, then there’s hope yet.

  5. @Tim,

    They obviously think “price of stuff I am long rising = good, price of stuff I am short rising = bad”. This is more economically rational than it first seems.

    @DBC, you don’t get this at all do you? Even those weekends sold off cheap bring in revenue that counts towards the bottom line. Hotels have a lot of fixed costs, rather lower marginal costs (putting someone in a room doesn’t much increase the cost over and above having the empty room available), and will sell an empty room for almost nothing if it means increased revenue. The only reason you don’t see hotel rooms for £10 is that it results in a lot of people who would have paid £100 gladly paying £10 instead – full booking is not always revenue-maximising.

  6. BIG

    DBC Reed has never run a business, let alone a service business with highly variable demand. (Or if he has, he is taking the p*ss).

    ‘Extremist right-wing explanation?’ It’s basic economics and inevitable (fortunately).

    Sell your car. Which offer do you take? The one from the person who offers £400 over your target price or the guy who offers £400 under and pleads poverty? There’s £800 on the table there. What do you do? eh?

    A hotel room has a variable price. Tough titty. Watch it on telly or pay up if you really want to be there.

    I have given away a €2.800 service recently because I had the resources which would be wasted (people on the staff) but not the customers. I use it as marketing to the customers I want to bring in. Does that mean I have to give it away always?

  7. ” they are charging the real economic price” – don’t think I’ve heard anyone claim that ever, right wing or not. I have heard lots of people say the explanation is “supply and demand” – even some left-wingers – but that’s to do with equilibrium position rather than the “real” price. I don’t think I’ve even heard right wingers using the notion of a “real” price. They talk about prices being influenced by S & D, bargaining power, market power, taxation and so on but I don’t think there’s a notion of any price being the “real” one. The usual thing that irritates left wingers usually is the way economists talk of the free market, no taxation, no market power price as the “undistorted” one, as if it is somehow more fundamental. (Which isn’t the price DBC is referring to.) But that language use just comes around from the way economists model the simple case first, then add things like tax and market power as distortions of the model. Which is surely logical.

  8. So supply and demand has become “the usual right wing extremist explanation’. We heard it here first.- and so we’re the first to split our sides laughing.

  9. I’m just waiting for the meltdown when games organisers start selling tickets this way. Ok, they already do a fair amount of product differentiation with sponsorship packages, etc, but the lotteries and allocations dilute the S&D nature of the enterprise. The profits, of course, are captured by scalpers.

    Wouldn’t an open auction for tickets be great? No need to crack down on scalpers, everyone has already paid the maximum they are willing to, and the profits would flow back to the organisers.

  10. ” they are charging the real economic price”

    Sounds awfully close to the labour theory of economic value to me. There is only one ‘real’ price – that which people are willing to pay. The cost of providing it is irrelevant, except in deciding whether to offer it.

  11. Of course if you are going to talk about economic theory, there is the relationship posited first ,I think, by Ricardo that any local increase in the money in people’s pockets, through economic growth, government spending or local private sector success eventually ends up benefiting the owners of the inelastic supply of land and property.
    Which would be what appears to be happening in Glasgow as of now and has been happening to the UK economy since the Piketty discontinuity circa 1980 when the national money supply was directed straight into the housing market instead of into production.

  12. Yes, it’s obviously lack of affordable housing that’s making the Marriott in Glasgow jack their prices up in anticipation of an influx of visitors. What?

  13. No but its the same economic mechanism that translates any increase in available money into profits for landowners rather than firms and workers producing things..This relationship has been known about for several hundred years.

  14. The theory’s certainly been around that length of time. Doesn’t seem to be true. The value of land as a portion of national wealth has fallen precipitately over the past century or so. Read Piketty on this.

  15. Can’t remember who said this, but I’ve been quoting it for years.

    Petrol prices are going up. It’s a disaster! House prices are going down. It’s a disaster! I’d be interested to know what a non-disaster looks like.

  16. DBC, I’ve got Amazon on the phone – they want to know where to buy some land.

    Land is like bonds/blue chips – produces steady returns year after year. Productivity enhancement is slow at best.

    Production (manufacturing or services, whatever) can sustain exponential growth. I’m finding it hard to believe the profits all go back to landowners.

  17. @TW
    Since you wrote on 24 April ,(with due acknowledgement to Matt Yglesias) “we can achieve very much the same effect, the one Piketty desires ,by instituting a proper land value tax” , I very much doubt your latest surmise that land values do not figure very much in the aggregation of wealth.
    (If it is Piketty’s idea then give page references; he is nothing if not repetitive but i can’t remember it.Anyway you repudiated Piketty in favour of LVT ,quite plausibly in my view. )
    As a (deep undercover) land taxer, you know full well that huge amounts of up-front flight money get to be invested in London real estate because it is relatively safe and shows a good investment return sans the requirement to actually be productive; the situation in Glasgow is infinitely less critical (land is very cheap) but those with certain locational advantages do get to make an unearned killing over the summer. So the principle holds, as does the view that the Brit economy is going down the tubes by investing too much in landed property rather than in the production of goods and services.

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