At least three times this morning we’ve heard a television weather expert explain that in New York City it costs about $1 million per inch to clean up snow falls. With perhaps 10 inches or more of snow to fall today, that quickly adds up.
But can $1 million per inch be right? Everything we know about economics implies that it can’t be. Surely the first inch of snow fall costs more than the last inch. You have to get all those plow drivers in, organise the clean-up, salt the roads, pay for plowed gas. At least some of those costs, however, have to diminish as we add more units of snow. After all, it doesn’t take that much longer to plow through 2 inches of snow instead of one, which means the hourly costs–wages, gasoline, etc–of plowing 2 inches of snow shouldn’t be much greater than plowing just 1 inch.
Are we missing something? Are the costs of additional snow really fixed rather than marginal? It’s an economic mystery.