The great Devine one opines:
This year, with the postal rate increase,
people pay 35 cents to get a 32-cent stamp.
The change shows up not as three one-cent
stamps, but as a three-cent stamp, which
currently is one of the most useful stamps
around, since it fills the gap between the
old 29-cent stamps and the new. But students
are still leaving their change in the machine
for others to are still leaving their change
in the machine for others to pick up! This
seems totally irrational.
Au contraire amigo! If students are leaving their stamps it is
only because the marginal cost of taking the $0.03 stamp does
not match the marginal benefit = $0.03. Surely, if the stamp
was of greater value, say $3.00, the affluent students would
not leave it behind. Hence, for some $0.03 < marginal cost <
$3.00 the students would gladly take their stamps. The job for
a neoclassical theorist -- all theorists who employ an
atomistic choice theoretic methodology -- is to specify the
nature of the costs (because pecuniary and psychological).
Clearly a costly activity. Indeed, this energy expenditure will
vary according to the height, size, diet, and weight of the
student. Moreover, as Becker's 1985 JPE article indicates, the
marginal price of effort is related to the individual's market
opportunities, time, and home work activities. All of which
will surely vary by race, class, and gender. Moreover, even
under the assumptions of identical utility functions, sub-
jective valuation will differ because of differences in para-
metric specifications.
Second, the handling and preservation costs of maintaining the
three cent stamp as well as the additional effort require to lick
and place two stamps ($0.29 and $0.03) instead of just one must
be weighed into the balance.
Third, some students will leave the $0.03 stamp as an act of
charity. Thereby, creating a pareto superior redistribution of
income.
Fourth, leaving the $0.03 stamp behind dramatically confirms
consumer surplus (at least for Loyola students).
The admininstration could alleviate this issue by increasing
the price of stamps to $0.35.
Sorry Jim, disaffirmation of rationality is dead.
Live long and prosper, patrick l mason
