Extra Credit Question 1The New York Times August 17, 2012M.docx

Extra Credit Question 1
The New York Times August 17, 2012
Merchants and Shoppers Sour on Daily Deal Sites
By STEPHANIE CLIFFORD and CLAIRE CAIN MILLER
As their e-mail in-boxes filled with daily deal offers from Web
sites like Groupon, Lea Pische and Edwin Hermawan, a pizzeria
waitress and a former lawyer living on the Lower East Side,
finally decided to buy one: a discounted Skillshare class on how
to start a business.
Their business plan? It was a service that would unsubscribe
people from all those daily deal e-mails.
Three months after its introduction, UnsubscribeDeals.com has
7,800 unsubscribers, a number that nearly doubled in the last
month. Ms. Pische and Mr. Hermawan tapped into deal fatigue,
a malady that has been afflicting the small businesses that offer
daily deals and is now hitting consumers too.
Daily deal services — like Groupon, LivingSocial and Google
Offers — took off because they seemed to offer something for
everyone: small businesses got a novel way to bring new
customers in the door, shoppers got a discount and the deal
providers got a large cut of every sale.
But signs of deal fatigue are everywhere, raising questions
about whether Groupon and its competitors can continue their
hyper-growth.
In the last six months of 2011, 798 daily deal sites shut down,
according to Daily Deal Media, which researches the industry.

When Groupon reported its second-quarter results this week, it
said that active customers — defined as people who purchased a
Groupon deal in the last year — grew just 3 percent, a
significant slowdown from previous quarter-to-quarter customer
growth rates. While traffic to Groupon was higher at the
beginning of 2012 than last year, it was down almost 10 percent
in May and June from the same months in 2011, according to
comScore.
Shares of Groupon have fallen 82 percent since it went public in
November, and the company is now worth just $3 billion, half
of what Google offered to buy it for in 2010.
Gilt City, a daily deal service owned by Gilt Groupe, laid off
employees and closed offices in six cities earlier this year.
Google Offers, whose membership has plateaued in some cities,
has had to team with 35 other deal providers to supplement its
own selection and help other companies reach customers.
Facebook and Yelp were quick to jump on the fad, but backed
off last year. Groupon is searching for alternative ways to make
money, like buying movie tickets, watches and other goods and
selling them to shoppers.
“Many of the other competitors have retreated or scaled down
ambitions,” said Jordan Rohan, an analyst with Stifel Nicolaus.
“There are no real barriers to entry, but there are fairly
significant barriers to success.”
One of those barriers is keeping merchants happy. Though small
businesses were excited at first about a new way to attract
customers in a post-Yellow Pages world, many soon soured on
the daily deals. Customers who bought deals overwhelmed the
businesses, spent the bare minimum and never returned.
The scene on a three-block stretch of Mississippi Avenue in

Portland, Ore., is a snapshot of what is happening nationally, as
merchants grow increasingly wary of daily deal services even as
more daily deal salespeople try to court them.
Muddy’s Coffeehouse, which serves coffee and granola in a
purple-trimmed Victorian home, offered $24 of food and coffee
for $12. It paid Groupon half of that. Muddy’s succeeded in
drawing crowds — but ended up losing money.
“I pretty much had to take a loan out to cover the loss, or we
would have probably had to close,” the owner, Dyer Price, said.
“They don’t warn you that you’re going to get hit really hard
and that you have to be prepared. We will never, ever do it
again.”
A few doors down, Mississippi Studios & Bar Bar, a former
Baptist church that became a live music club and burger and
cocktail restaurant, offered a Groupon deal but said it slowed
down the bartender, who had to complete paperwork for each
coupon, and brought in customers who did not return.
“It was a huge boondoggle for us, and we were counting down
the days until it was over,” said Kevin Cradock, co-owner of
Mississippi Studios. He said he had a better solution for local
advertising. “We still do the old-school thing,” he said. “We
print these posters and hire kids on bikes to put the posters up.”
He also tried Google Offers, whose deal was easier to process
because Google sent an Android phone to scan coupons, but it
did not attract repeat customers, either.
The story was the same elsewhere. Kevin Stecko, founder of
80sTees.com, offered a Groupon deal for $20 off a $40 order, of
which $10 would go to Groupon. Initially, the results looked
good: 971 coupons were sold, and almost all of the customers
were new.

But Mr. Stecko said he lost $2.96 per order on average, and
only nine of the customers who used the Groupon deal had
bought something else from the site since then. (He made some
money, though, he said, because 14 percent of people who
bought coupons did not redeem them.)
“It devalues your product,” said Rafi Mohammed, a pricing
consultant. “You get people who come in who are very price-
sensitive, who aren’t going to come back and pay full price.”
Groupon has added tools to help merchants with some of their
most common complaints, like a scheduler so they can avoid an
overwhelming rush of customers. The company said that in the
last two quarters, half of its offers were from businesses that
had previously used Groupon.
But that might not matter if shoppers continue to tire on daily
deals.
Tamara Koedoot, 47, a real estate agent in Portland, has spent
about $100 on four deals a month for several years. But lately,
it has been testing her patience, partly because she said
businesses discriminated against her for using coupons.
“As soon as they find out you have a Groupon, they don’t even
want to work with you any longer, so that’s a turnoff,” she said.
Ms. Koedoot has cut back on buying deals because she has lost
money when coupons she bought, like one for a Spanish
language course, expired, or when she could not get restaurant
reservations before the expiration date.
“My thoughts have definitely changed, and I think my friends
are kind of feeling the same way,” she said. “We’ve got to quit
buying so many of them because it’s like, ‘We’ve got this

Groupon, we have to go now.’ ”
UnsubscribeDeals.com has become a support group for shoppers
who are fed up with deals.
Some commenters take issue with the frequency of the e-mails,
while others complain about the quality of the offers. “I once
got a Groupon for teeth whitening,” one person wrote. “I went
to the office and the receptionist gave me some bleach and told
me to do it at home. She said it would be extra if I wanted the
dentist to do it.”
This article has been revised to reflect the following correction:
What happened to the economic fortunes of coupon sites like
Groupon? Explain. How does the following quote explain the
problem with the business model of the coupon sites? “There
are no real barriers to entry, but there are fairly significant
barriers to success.” What are the problems for businesses using
these sites? In your answer explain the problems encountered by
Muddy’s Coffeehouse, Mississippi Studios & Bar, and
80sTees.Com. What are the complaints of shoppers on these
sites? Explain the complaints of Tamara Keodoot.
The New York Times August 17, 2012
When the Network Effect Goes Into Reverse
By JAMES B. STEWART
With battered Facebook shares closing Friday at just over half
their offering price in May, no one’s talking anymore about a
social media “bubble.”
Just a year ago, social media seemed the next big thing. With

dizzying user growth at Twitter, Zynga and especially
Facebook, investors were euphoric about Internet sites that
connected people with shared interests and experiences,
seemingly the perfect media for targeted advertising.
The professional networking and job search site LinkedIn was
first to test the public’s appetite when it went public in May
2011. Its shares more than doubled to close at $94.25 after
trading as high as $122.70 that first day.
Early investors were understandably giddy, but others, like the
former Treasury secretary Lawrence H. Summers, sounded a
cautionary note. “Who could have imagined that the concern
with respect to any American financial asset, just two years
after the crisis, would be a bubble?” Mr. Summers asked at the
time. Over the last year, Internet companies like Groupon,
Zynga and Yelp made their public debuts. Facebook followed in
May at $38 a share, instantly giving the newly minted public
company a valuation of nearly $105 billion. Since then,
euphoria has given way to mounting anxiety.
Facebook hasn’t closed above $38 since. The initial offering
was widely deemed a debacle both for trading glitches and for
the need for underwriters to prop up the stock.
The shares’ subsequent decline accelerated after the company’s
first earnings report as a public company late last month dashed
investors’ hopes for torrid growth.
This week was the end of the lockup period, which barred
insiders from immediately selling their shares, and Facebook
shares hit a new low, slumping to $19.05.
Other Internet companies have fared even worse.
Like Facebook, the Internet discount coupon site Groupon

increased its offering price and number of shares just before its
public debut last November. After rejecting a $6 billion
takeover bid from Google in December 2010, Groupon shares
closed at $26.11 on its first day of trading, up from its $20
offering price, giving it a market value of $13 billion.
It has been pretty much downhill ever since. On Friday,
Groupon shares fell to $4.75, a decline of more than 75 percent
from its offering price, giving it a market capitalization of just
over $3 billion, barely half what Google offered.
Zynga, a company that makes online social games, went public
in December at $10 and dropped 5 percent its first day.
Although it traded above $14 a share as recently as March, it
ended the week at $3, down 70 percent.
Shares of even the best-performing social media sites have
stagnated. Yelp’s shares, which jumped 64 percent on their first
day of trading in March to close at $23, were below $22 this
week. And LinkedIn, considered by many to be the gold
standard for social media concerns, never again hit its opening
peak, and ended the week below $102.
Twitter and LivingSocial have put the brakes on going public;
the companies have recently said they’re in no rush. That’s
hardly surprising.
What went wrong?
Every company has its own story, but the euphoria over social
media companies as a group was rooted in what economists call
the network effect. The more users a site attracts, the more
others will want to use it, which creates a natural monopoly and
a magnet for advertisers.
Facebook has been a classic example. If your friends,

colleagues or classmates are all on it, you’re all but compelled
to join. But evidence that the network effect is working requires
rapid growth in users and revenue, especially during the early
stages of a company’s public life. So far, social media has
failed to deliver the kind of growth that would bolster investor
optimism, let alone euphoria.
The network effect is a double-edged sword, Ken Sena, a
consumer Internet analyst at Evercore, told me this week.
“The network effect allowed these companies to grow so fast,
but the decline can be just as ferocious,” Mr. Sena said. “If any
of them misstep with users, they can leave, and the network
effect goes into reverse.” The textbook case is Myspace, once
the most visited social networking site, that is now a shadow of
its former self.
This week’s Groupon earnings illustrated the problem for social
media companies. In theory, Groupon should benefit from the
network effect. The more users it attracts, the more merchants
will want to offer coupons through Groupon, and vice versa.
And on the face of it, the earnings report looked good. Groupon
earned a profit of $28.4 million for the quarter, above analysts’
expectations, reversing a loss a year ago. Groupon’s boyish-
looking chief executive, Andrew Mason, called it a “solid
quarter.”
But growth, not profit, is what matters at the early stage in the
life of a networked Internet company. Groupon said revenue
grew 45 percent over the same quarter last year. But it counts
payments that it passes on to merchants as part of its revenue.
When that part of revenue was excluded, revenue grew just 30
percent. And compared with the previous quarter, revenue grew
just 1.6 percent.
Growth in its core coupon business dropped 7 percent from a

year earlier, according to Mr. Sena. (Other revenue came from
Groupon’s Goods business, a lower-margin operation that
competes with Amazon.) Groupon projected that revenue growth
in the next quarter would be just 2.9 percent higher.
Such slow growth was a jolt for investors, and Wall Street’s
judgment was swift, with Groupon shares down 27 percent on
Tuesday, the day after the earnings were announced.
A positive network effect is also supposed to exclude
competitors, but Groupon has long suffered from the perception
that it’s vulnerable to competition.
The online auction market is dominated by eBay, for example,
but many merchants offer coupons. Amazon bought a 29 percent
interest in a rival coupon site, LivingSocial, and Google
introduced its own offerings after being rebuffed by Groupon.
There are now so many that sites have sprung up to help
consumers sort them out. One of these, localdealsites.com,
listed 167 sites when I consulted it this week, though many are
much smaller in scope than Groupon.
LivingSocial has run into its own concerns. Although the
company is still private, Amazon has to release some financial
details because of its large ownership stake. Last month,
Amazon said that it was writing off $28 million in
LivingSocial’s book value and that LivingSocial lost $93
million in the quarter that ended June 30, even though revenue
more than doubled.
Facebook faced a similar problem rooted in high expectations.
In its first earnings report, it reported revenue growth of 32
percent over a year earlier and nearly one billion users
worldwide. But even though 32 percent topped analysts’
estimates, it was not the triple-digit growth many investors were

hoping for.
And although the number of monthly active users hit 955
million, that was just 29 percent higher than a year before.
Some analysts used the dreaded word mature to describe
Facebook’s penetration in North America, and others noted that
user growth was slowing.
A major challenge, as well as an opportunity, for Facebook is
the migration of users from personal computers to mobile
devices. Facebook said 543 million users looked at the site on
mobile devices during the last quarter, and its chief executive
and founder, Mark Zuckerberg, acknowledged that the shift “is
incredibly important.” But Facebook hasn’t mastered how to
convert customer use into mobile ad revenue.
“Migration to mobile is a big problem,” Mr. Sena said. If ads
become obtrusive and alienate users, Facebook could suffer the
reverse network effect.
That hasn’t happened yet. New companies, especially in nascent
industries like social media, are hard to value. Some may thrive
even as others fail. They may yet find ways to turn millions of
users into huge profits, as network television did in its heyday.
And although many social media investors have been burned in
the short term, it’s not as if they’ve given up hope.
Social media companies still trade at lofty valuations: Even
after recent declines, LinkedIn’s price-to-earnings ratio is a
stratospheric 852; Facebook’s is a much lower but still lofty 69.
By comparison, the market average for companies in the
Standard & Poor’s 500-stock index is about 16.
Since they haven’t earned a full year’s profit, Groupon and
Zynga don’t even have price-to-earnings ratios.

“The valuations are still high,” Mr. Sena said. “There are few
positive catalysts likely near term, and a lot of people think
you’ll be able to buy these stocks cheaper.”
What happened to the stock market values of social media
companies? Explain using Facebook, Groupon, and Zynga as
examples. What went wrong for these companies? In your
answer explain the possible role of a bubble, network (and
reverse network) effect, a “half” network effect (the case of
Groupon), and migration problems.
The New York Times June 25, 2011
Even for Cashiers, College Pays Off
By DAVID LEONHARDT
ALMOST a century ago, the United States decided to make high
school nearly universal. Around the same time, much of Europe
decided that universal high school was a waste. Not everybody,
European intellectuals argued, should go to high school.
It’s clear who made the right decision. The educated American
masses helped create the American century, as the economists
Claudia Goldin and Lawrence Katz have written. The new ranks
of high school graduates made factories more efficient and new
industries possible.
Today, we are having an updated version of the same debate.
Television, newspapers and blogs are filled with the case
against college for the masses: It saddles students with debt; it
does not guarantee a good job; it isn’t necessary for many jobs.

Not everybody, the skeptics say, should go to college.
The argument has the lure of counter intuition and does have
grains of truth. Too many teenagers aren’t ready to do college-
level work. Ultimately, though, the case against mass education
is no better than it was a century ago.
The evidence is overwhelming that college is a better
investment for most graduates than in the past. A new study
even shows that a bachelor’s degree pays off for jobs that don’t
require one: secretaries, plumbers and cashiers. And, beyond
money, education seems to make people happier and healthier.
“Sending more young Americans to college is not a panacea,”
says David Autor, an M.I.T. economist who studies the labor
market. “Not sending them to college would be a disaster.”
The most unfortunate part of the case against college is that it
encourages children, parents and schools to aim low. For those
families on the fence — often deciding whether a student will
be the first to attend — the skepticism becomes one more reason
to stop at high school. Only about 33 percent of young adults
get a four-year degree today, while another 10 percent receive
a two-year degree.
So it’s important to dissect the anti-college argument, piece by
piece. It obviously starts with money. Tuition numbers can be
eye-popping, and student debt has increased significantly. But
there are two main reasons college costs aren’t usually a
problem for those who graduate.
First, many colleges are not very expensive, once financial aid
is taken into account. Average net tuition and fees at public
four-year colleges this past year were only about $2,000
(though Congress may soon cut federal financial aid).

Second, the returns from a degree have soared. Three decades
ago, full-time workers with a bachelor’s degree made 40 percent
more than those with only a high-school diploma. Last year, the
gap reached 83 percent. College graduates, though hardly
immune from the downturn, are also far less likely to be
unemployed than non-graduates.
Skeptics like to point out that the income gap isn’t rising as fast
as it once was, especially for college graduates who don’t get an
advanced degree. But the gap remains enormous — and bigger
than ever. Skipping college because the pace of gains has
slowed is akin to skipping your heart medications because the
pace of medical improvement isn’t what it used to be.
The Hamilton Project, a research group in Washington, has just
finished a comparison of college with other investments. It
found that college tuition in recent decades has delivered an
inflation-adjusted annual return of more than 15 percent. For
stocks, the historical return is 7 percent. For real estate, it’s less
than 1 percent.
Another study being released this weekend — by Anthony
Carnevale and Stephen J. Rose of Georgetown — breaks down
the college premium by occupations and shows that college has
big benefits even in many fields where a degree is not crucial.
Construction workers, police officers, plumbers, retail
salespeople and secretaries, among others, make significantly
more with a degree than without one. Why? Education helps
people do higher-skilled work, get jobs with better-paying
companies or open their own businesses.
This follows the pattern of the early 20th century, when blue-
and white-collar workers alike benefited from having a high-
school diploma.

When confronted with such data, skeptics sometimes reply that
colleges are mostly a way station for smart people. But that’s
not right either. Various natural experiments — like teenagers’
proximity to a campus, which affects whether they enroll —
have shown that people do acquire skills in college.
Even a much-quoted recent study casting doubt on college
education, by an N.Y.U. sociologist and two other researchers,
was not so simple. It found that only 55 percent of freshmen and
sophomores made statistically significant progress on an
academic test. But the margin of error was large enough that
many more may have made progress. Either way, the general
skills that colleges teach, like discipline and persistence, may
be more important than academics anyway.
None of this means colleges are perfect. Many have abysmal
graduation rates. Yet the answer is to improve colleges, not
abandon them. Given how much the economy changes, why
would a high-school diploma forever satisfy most citizens’
educational needs?
Or think about it this way: People tend to be clear-eyed about
this debate in their own lives. For instance, when researchers
asked low-income teenagers how much more college graduates
made than non-graduates, the teenagers made excellent
estimates. And in a national survey, 94 percent of parents said
they expected their child to go to college.
Then there are the skeptics themselves, the professors,
journalists and others who say college is overrated. They, of
course, have degrees and often spend tens of thousands of
dollars sending their children to expensive colleges.
I don’t doubt that the skeptics are well meaning. But, in the
end, their case against college is an elitist one — for me and not
for thee. And that’s rarely good advice.

David Leonhardt is a columnist for the business section of The
New York Times.
What decision did we make in the United States over a hundred
years ago that set the stage for our rise to economic
prominence? What is the case today against universal college
education? What does David Autor of MIT say about the
investment in college education? Why are the critics incorrect?
Explain in detail. How does the return on college education
compare to the returns on stock and real estate investments? In
what fields do college graduates benefit from their degrees?
Explain. Do you believe that college education should be
universal? Defend your answer.
December 27, 2012
Carbon Taxes Make Ireland Even Greener
By ELISABETH ROSENTHAL
DUBLIN — Over the last three years, with its economy in
tatters, Ireland embraced a novel strategy to help reduce its
staggering deficit: charging households and businesses for the
environmental damage they cause.
The government imposed taxes on most of the fossil fuels used
by homes, offices, vehicles and farms, based on each fuel’s
carbon dioxide emissions, a move that immediately drove up
prices for oil, natural gas and kerosene. Household trash is
weighed at the curb, and residents are billed for anything that is
not being recycled.
The Irish now pay purchase taxes on new cars and yearly

registration fees that rise steeply in proportion to the vehicle’s
emissions.
Environmentally and economically, the new taxes have
delivered results. Long one of Europe’s highest per-capita
producers of greenhouse gases, with levels nearing those of the
United States, Ireland has seen its emissions drop more than 15
percent since 2008.
Although much of that decline can be attributed to a recession,
changes in behavior also played a major role, experts say,
noting that the country’s emissions dropped 6.7 percent in 2011
even as the economy grew slightly.
“We are not saints like those Scandinavians — we were lapping
up fossil fuels, buying bigger cars and homes, very American,”
said Eamon Ryan, who was Ireland’s energy minister from 2007
to 2011. “We just set up a price signal that raised significant
revenue and changed behavior. Now, we’re smashing through
the environmental targets we set for ourselves.”
By contrast, carbon taxes are viewed as politically toxic in the
United States. Republican leaders in Congress have pledged to
block any proposal for such a tax, and President Obama has not
advocated one, although the idea has drawn support from
economists of varying ideologies.
Yet when the Irish were faced with new environmental taxes,
they quickly shifted to greener fuels and cars and began
recycling with fervor. Automakers like Mercedes found ways to
make powerful cars with an emissions rating as low as tinier
Nissans. With less trash, landfills closed. And as fossil fuels
became more costly, renewable energy sources became more
competitive, allowing Ireland’s wind power industry to thrive.
Even more significantly, revenue from environmental taxes has

played a crucial role in helping Ireland reduce a daunting deficit
by several billion euros each year.
The three-year-old carbon tax has raised nearly one billion
euros ($1.3 billion) over all, including 400 million euros in
2012. That provided the Irish government with 25 percent of the
1.6 billion euros in new tax revenue it needed to narrow its
budget gap this year and avert a rise in income tax rates.
The International Monetary Fund, which oversees the rescue
plan, recently suggested that Ireland should “expand the well-
designed carbon tax” and its automobile taxes to generate even
more money.
Although first proposed by the Green Party, the environmental
taxes enjoy the support of all major political parties “because it
puts a lot of money on the table,” said Frank Convery, an
economist at University College Dublin. The bailout plan for
2013 requires Ireland to embrace a mix of new tax revenues and
spending cuts.
Not everyone is happy. The prices of basic commodities like
gasoline and heating oilhave risen 5 to 10 percent. This is
particularly hard on the poor, although the government has
provided subsidies for low-income families to better insulate
homes, for example. And industries complain that the higher
prices have made it harder for them to compete outside Ireland.
“Prices just keep going up, and a lot of people think it’s a
scam,” said Imelda Lyons, 45, as she filled her car at a gas
station here. “You call it a carbon tax, but what good is being
done with it to help the environment?”
The coalition government that enacted the taxes was voted out
of office last year. “Just imagine President Obama saying in the
debate, ‘I’ve got this great idea, but it’s going to increase your

gasoline price,’ ” said Mr. Ryan, who lost his seat in the last
election and now leads the Green Party. “People didn’t exactly
cheer us on.”
A recent report estimated that a modest carbon tax in the United
States that increased incrementally over time could generate
about $1.25 trillion in revenue from 2012 to 2022, reducing the
10-year deficit by 50 percent, based on projections from the
Congressional Budget Office.
“I think most economists — on the right and the left — think a
carbon tax is a good idea,” said Aparna Mathur, a resident
scholar at the American Enterprise Institute, a conservative
research group that held a daylong seminar on carbon taxes in
November. Some economists estimate that a carbon tax could
raise $400 billion annually in the United States, she said. But
the issue remains a nonstarter in the American political arena.
even though Gilbert Metcalf, the Obama administration’s deputy
assistant Treasury secretary for environment and energy, long
promoted carbon taxes as a Tufts University economist.
The Competitive Enterprise Institute, a conservative advocacy
group, has even filed a Freedom of Information suit seeking the
release of Treasury Department e-mails containing the word
“carbon” to make sure that nothing is in the works. Like many
other economists, Dr. Metcalf has argued that carbon taxation is
preferable to government regulation or cap-and-trade systems
because it sets a straightforward price on greenhouse gas
emissions and is relatively hard to evade.
Although carbon taxes in some ways disproportionately affect
the poor — who are less able to buy new, more efficient cars,
for example — such taxes do heavily penalize the wealthy, who
consume far more. As with “sin taxes” on cigarettes, the taxes
also alleviate some of the societal costs of pollution.

For several years, the European Commission has encouraged
debt-ridden members of the European Union to embrace
environmental taxes, saying that its economists have concluded
they have “a less detrimental macroeconomic impact” than new
income taxes or corporate taxes.
“Europeans don’t like taxes either,” said Connie Hedegaard, the
European commissioner for climate action. “But this is good for
the environment, and also good for our competitiveness.”
Some of Europe’s strongest economies, like Sweden, Denmark
and the Netherlands, have taxed carbon dioxide emissions since
the early 1990s, and Japan and Australia have introduced them
more recently.
Ireland took the plunge after its economy collapsed in 2008 as a
result of loose credit policies that created a real estate bubble;
in one year, tax revenues fell 25 percent. With a huge bailout in
2010 by the European Union and the International Monetary
Fund, Ireland’s deficit soared to 11.9 percent of its gross
domestic product, or over 30 percent with all loans factored in.
The environmental taxes work in concert with austerity
measures like reduced welfare payments and higher fees for
health care that are expected to save 2.2 billion euros this year.
The carbon tax is levied on fossil fuels when they enter the
country and is then passed on to consumers at the point of
purchase. The automobile sales tax, which ranges from 14 to 36
percent of a car’s market price depending on its emissions, is
simply folded into the sticker price.
That sent manufacturers racing to reduce emissions. Automakers
like Mercedes and Volvo began making cars with high-
efficiency diesel engines that shut off rather than idle when they
stop, for example. “For manufacturers it’s all, ‘How low you
can get?’ ” said Donal Duggan, a brand manager at an MSL

showroom near central Dublin.
Other emissions taxes on cars, including the annual car
registration fee, or road tax, are billed directly to customers,
potentially adding thousands to annual operating costs. Ninety
percent of new car sales last year were in the two lowest-
emission tiers.
The taxes on garbage had an immediate impact. In Dun
Laoghaire Rathdown County in southeastern Dublin, each
home’s “black bin” for garbage headed to the landfill is
weighed at pickup to calculate quarterly charges. Green bins for
recyclables are emptied free of charge.
“There was a big furor initially, but now everything I throw out,
I think, ‘How could I recycle this?’ ” said Tara Brown, a mother
of three.
Of course, new environmental taxes bring new pain. Gas,
always expensive in Europe, sells here for about $8 a gallon,
around 20 percent more than in 2009 because of tightening
market supplies and the new tax.
Still, Dr. Convery, the economist, is encouraging the
government to raise carbon tax rates for 2013, declaring, “You
don’t want to waste a good crisis to do what we should be doing
anyway.”
Why did Ireland start introducing pollution taxes in 2009?
Explain. What does it tax? Explain. Have the taxes worked to
stem pollution? Explain. How are pollution taxes viewed in the
U.S.? How has the Irish people and economy reacted to the
taxes? Explain. How did pollution taxes become part of
Ireland's political landscape? How does the government protect

the poor against the burden of the taxes? How much revenue
might carbon taxes raise in the U.S.? What has been the reaction
of conservative groups to the prospect of pollution taxes in the
U.S.?

Extra Credit Question 1The New York Times August 17, 2012M.docx

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Extra Credit Question 1The New York Times August 17, 2012M.docx