Friday, December 25, 2009

The Feel Good Story of the Year!! Watch the baby squirrel scale a wall!!

Thanks Amanda Petty!!!!

Thank you very much for the extension of credit...

On Christmas Eve, Congress  increased the legal debt limit by $290 Billion.  In other words, they have reached the credit limit $12.1 Trillion) they set for themselves and have granted themselves an increase.  This will keep the Federal Government going through the end of January.  This means that every man, woman and child in the US (Pop. approx 310 million people) share of that increase (209 Billion/310 Million) is approx. $1,000 (a little interest factored in)...They thank you in advance for the loan...

Are Zombie Movies the NEXT "Bubble" To Bring Down the Economy???

I am out of my league in discussing Zombie movies,  but those of you who love them may be interested this information....I got this from this blog. The writer is suggesting there may be a "bubble" forming in the genre and it is reaching critical mass.
From the beginning of the zombie movie in 1932 through 2002, there were an average of 3.23 zombie movies per year. From 2003 through 2010, there were an average of 103.88 zombie movies per year. I think much of this growth was driven by the success of 2002's 28 Days Later, which grossed over $82 million, with a budget of only £5 million. Next, 2004 brought us a re-make of Dawn of the Dead, which grossed $102 million with a budget of $28 million. After that, the market was flush with zombie-dollars ready to fund the next 28 Days Later or Dawn of the Dead. Unfortunately, for every 28 Days Later, there were dozens more like Diary of the Dead (2008), which had a budget of $2 million and grossed $5 million, despite being directed by George Romero, who had 39 years of zombie movie experience.

I don't know much about this but I do like graphs and I am always interested in what they say about a particular time especially when there is a tremendous spike in one period of time like this one.

 I am STILL haunted by this movie I saw when I was about 8.

"I Love What You Do For Me...Toyota!" mean...HUGO!

Headline in Wall Street Journal: "Venezuela Threatens to Expropriate Toyota Plant"

Quote from Hugo Chavez, President of Venezuela:
"The left is back, and it's the only path we have to get out of the spot to which the right has sunken us. Socialism builds and capitalism destroys"--Hugo Chavez

Hmmm...I am just a dumb ol' high school teacher, but I believe Capitalism built that factory with profits from selling dependable cars that people want at prices they can afford to pay.  This is a real-life example of how Capitalism produces cars.

These are examples of cars produced by Socialist means:

I will let YOU decide and not decide FOR you...:)

The Gross State Product of Texas = Gross Domestic Product of Brazil!!!

This is an updated version of the map I show in class when we cover GDP.  To give you a perspective on how large our GDP is relative to the rest of the world, this graph compares EACH states Gross State Product (when you add all states GSP's together you get National GDP) to the closest GDP of  another country.  Texas used to be Canada, but now it is Brazil. There has been a shuffling of the deck, so to speak, as the nature of trade and "Creative Destruction" re-allocates resouces around the world.   HERE is a link to the list of nominal GDP's for all counrties. HERE is a link to the GDP's converted at Purchasing Power Parity (more on this later)...

(referenced from Carpe Diem)

Update:  On a related note, China is poised to pass Japan in terms of Gross Domestic Product to become the world's second largest economy (at PPP it already is)..The beat(down) goes on....

My Family Knew What I Wanted For Christmas!!!!

Thursday, December 24, 2009

Students are Lazier Than Ever...or are MORE Ambitous than ever??? Hmmmm....

This article contains observations from a college professor about the work habits of college students, domestic (read that "American") and foreign.  Her observations are certainly generalized and are not absolute, but admittedly as a teacher I can see some truth in them.  However, could we not say these things about every prior generation? Or is the difference that in previous generations even the idleness had some merit (physical play, deep (or even shallow thought) whereas today the idle mind is occupied by passive activities that do not engage the intellect actively? Or do I have "good old day" syndrome where every generation thinks they are superior to the current one? 

I have this conversation with students from time to time.  From my perspective as an AP Economics  teacher, students have access to more infomation AND they are expected to synthsize far more information than my generation (I am 49 yrs old) every was required to.  I, and daresay, my peers, never took a class in High School as difficult as AP Econ (I will let other AP teachers defend their disciplines).  This dovetails with what students seem to wholeheartedly agee on: "Kids Today" are less committed to doing things that they simply dont feel like doing or feel are necessary.  I like this charitable description because many social critics would say students today are lazy, shiftless, unmotivated, have a sense of entitlement, etc.  I, however, do not go THAT far.  I believe some of this can be put on the historic notion, starting after the advent of the industrial revolution, parents wanted their children to have it easier than they had it.  All the posturing by social critics for the past 100 years as to what this might wrought, well, this is what it has wrought.  Reading the cited article for me is like looking "Back to the Future".  She talks about how the Chinese, Brazilian, Indian, Thai,  students are hardworkers and taskmasters.  Seems this an apt description of what the educational elite in  the US, post-industrial revolution to the 1960's, looked like.  Or is that easy for her to say because the students from those mentioned countries are selected from an elite pool of students.  In other words, she has the privilidge of seeing only the best and brightest and not the "average student" from those countries.
Bottom line for me: Students (from top to bottom) are technically brighter and have more potential than previous generations BUT are not as quite as ambitious and hardworking (you might be the exception, I am looking at the rule)...Am I right, wrong, or I have no clue as to what I am talking about?

Wednesday, December 23, 2009

To Tax Tans or Not to Tax Tans, THAT is the Question!!

The issue of whether to tax elective cosmetic surgeries or tanning sessions raises the question of which one is more effective at (1) raising tax revenue, (2) inflicting the least amount of harm on the industry which ultimately may affect employment in that industry.  In Micoreconomics we look at something called elasticities. In this analysis we will examine the Elasticity of Demand for a good or service.  Elasticity in layman's terms is if a change in the price of a good/service changes quantity demanded of the good/service significantly then its demand is said to be relatively elastic. If the change is quantity demanded is less significant when the price changes then the demand is said to be relatively inelastic.  In other words, if quanitity demanded is very sensitive to changes in price then it is elastic. If quantity demanded is not very sensitive to changes in price then it is inelastic. GOT THAT?? I am going to intentionally avoid the math associated with this concept, for your sake.  Elasticities are actually very important when discussing tax policy.  I am going to use the Tan Tax as an example, but we can apply the same analysis if the tax was levied on the comestic surgery industry.

An economics lesson would not be complete unless you had a graph to go with it.  Below you will find a graph of the Market for Tans.  We have a market price of $20 and a market equilibrium of 100 Tans (I am using very simplified numbers, but the concept will bear out regardless of the numbers).  This indicates that the quantity demanded EQUALS quantity supplied in this market m.  We are in equilibrium.  Our market supply curve is vertical at 100 Tans. This suggests the market (in the short run) has the capacity to provide 100 Tans REGARDLESS of the price (just take this as a given right now).

Notice the Demand curve (D*) is downward sloping and relatively flat. This represents a demand curve that is relatively elastic--small changes in price lead to large changes in quantity demanded. At a price of $20 and a market quantity of 100 the Total Revenue in the industry is $2,000.  

The government now imposes a tax on Tans of 10%. Instead of costing $20 per tan it now costs $22. Lets see what this looks like on the graph.

At a price of $22 the Quantity Demanded is now 40 Tans ("B") and the quantity supplied is still 100 Tans ("C").  In the market we now have a SURPLUS of 60 Tans (unused tanning beds).  Our market is in disequilibrium.  The Total Revenue now is $880 ($22 X 40 Tans, but $80 of that is Tax Revenue). One of two things could happen.

The market supply curve could shift LEFT to 40 Tans.  There would be 60 less tans which means that the business would (1) reduce employees because of reduced demand, and/or (2) some will go out of business as the ripple effect would close some businesses "at the margin".  Either way, the employment in the industry going to DECREASE.  Tax revenue to the government would total $80 ($2 Tax X 40 Tans). 

Lets assume that instead of decreasing the market supply, the tanning salons collectively keep the price at $20 and the business absords the $2 tax.

The price the industry receives AFTER paying the tax is $18.  The total revenue is $1,800 ($18 X 100). This would maximixe the tax revenues for the government.  HOWEVER,  because each salon is now receiving $18 per tan instead of $20 then the question still becomes, how will the salons react to this lower revenue?  Some will have to layoff workers and some, again "at the margin" will go out of business and employment will DECREASE.  The market supply curve will shift to the left in the second scenario, but by how much? The bottom line in both scenarios we know the supply curve will shift left and that workers will lose jobs and entrepreneurs will lose financial capital.  The brightside (forgive the pun) of this is that there are now fewer artificial tans and statistically there will be fewer cases of skin problems or out right cancers. Essentially what the government has done is reduce what it has deemed a "negative externality" by imposing a tax to reduce the market quantity of a good/service that imposes costs on a third party--the healthcare system and insurance that the rest of us pay for.

Now lets look at this from a diferent perspective.  Lets assume the in the market for tans people are not so responsive to changes in price.  GOTTA have that glow!  If a change in price does not significantly change the the quantity demanded then demand is said to be INELASTIC.  If demand is inelastic the demand curve is going to have a steeper slope compared to the previous example.

Assume the same 10% tax on tans raises the price of tans to $22.

 At $22 the quantity demanded is 80 tans and the quantity supplied is 100 Tans. We now have a SURPLUS of 20 Tans.  The same scenario will play out as in the first example.  The supply curve could shift to the left by 20 Tans OR the industry could absorb the tax and recieve $18 instead of $20 per tan.  In either case, the market quantity shrinks.

In sum:  How does this compare to the surplus when demand was relatively MORE elastic ?(60 tans vs. 20 tans). The tax revenue now is now $160 ($2 X 80 Tans). How does this compare to the tax revenue when demand was relatively MORE elastic? ($80 vs. $160)  How does employment compare when demand was relatively MORE elastic? (Intuition tells me more people are unemployed in the first case as opposed to the second)

Bottom line: If government is going to tax an industry, it appears that in order to raise the most tax revenue AND minimize the employment losses to an industry they should tax the one that is the MOST inelastic compared to another....This begs:

Questions to ask:
(1) Is the demand for tans elastic or inelastic?
(2) Is the demand for elective cosmetic surgery elastic or inelastic?
(3) Comparing across the two industries, which industry's demand curve is MORE inelastic?
(4) After determining that, which industry would you tax, if you were going to impose a tax?
(5) And most important---Which industry has the most/best lobbyists? (somewhat facetious question, this is the non-economic aspect of politics)
Note:  You could assume there are some negative externalities with cosmetic surgery and that government could deem it undesirable---who is going to pay for it, botched surgeries and is it a social vanity that is bad for society---:)

Wake up!!! It is time to go to Hayward's 1st Period Class!!!

Kim Peek, The Real "Rainman" dies...Interesting video of him here...

Kim Peek (I did not know his name before) has died.  He is the person who Dustin Hoffman used as his role-model in "Rainman" with Tom Cruise...I never saw him before I saw this video. It is worth the time to view it. The mind is an interesting thing...

Tuesday, December 22, 2009

This chart (click to enlarge) has SO MUCH information I dont even know where to start in analyzing it.  The over-arching theme that emerges is the market capitalization of the Top 25 is less than it was 10 years ago, which suggests (1) the overall market capitalization (or value of all companies) for world industry collectively is LESS than it was 10 years ago relative to the whole "pie", because  mid-sized to smaller companies have a bigger share of capitalizaton (it has been a "zero-sum game") or (2) there is "devolution" going on in industry toward less concentration at the top and more dispersed capitalization ("demorcatization of capital?) across industry (the pie is not bigger, but more evenly shared), or (3) Economic growth is occuring overall so the pie is gettng bigger but the "top dogs" are getting less of it as a share. I dont know if this is overall a satisfactory answer...Also, the compostion and international nature of industry has changed as well.  Note the emergence of China, Brazil, Australia, The Netherland and India.  Creative Destruction has played a big part in shifting resources to alternative uses.  Some for the better (energy) and perhaps TOO MUCH to the detriment (finance/banking).. Note at the bottom the companies that have fallen out of the top.  Some have disappeard altoghter!! I am interested in any other comments/analysis of the plethora of information provided here.

How much do the items in "The Twelve Days of Christmas" cost?

If you have kids (or you are a "kid" yourself) they (you) will enjoy this two minute video on the prices and the change in prices of the items in the "Twelve Days of Christmas"...Don't forget to click on the links below the video screen, there is more info kids would enjoy...I know I did!! :)

I voted for it before I voted against it..

From the New York Times: A US Senator from California has put the kibosh on a large scale solar plant in the Mojave desert.
"Senator Dianne Feinstein introduced legislation in Congress on Monday to protect a million acres of the Mojave Desert in California by scuttling some 13 big solar plants and wind farms planned for the region."
This is symptomatic of the NIMBY syndrome---Not In My Back Yard.  How are we to take steps to energy independence and and reduce carbon emissions if we dont actually take a stand and physically do something about it.
"Her intervention in the Mojave means it will be more difficult for California utilities to achieve a goal, set by the state, of obtaining a third of their electricity from renewable sources by 2020; projects in the monument area could have supplied a substantial portion of that power. "
 Entreprenuers want to be a part of the solution, but when a single Senator can squash a project at the behest of a small interest group (relative to the whole who would benefit) then, well, that says something about our system of representation.
Developers of the projects have already postponed several proposals or abandoned them entirely.
An interesting aside is this comment by a Kennedy:
"This is arguably the best solar land in the world, and Senator Feinstein shouldn’t be allowed to take this land off the table without a proper and scientific environmental review,” said Robert F. Kennedy Jr., the environmentalist and a partner with a venture capital firm that invested in a solar developer called BrightSource Energy. In September, BrightSource canceled a large project in the monument area."
Please see this link for another lesson on NIMBY related to this statement by RFK Jr.

(Got idea for this post (and many others from Division of Labour...I have to get better at citing sources for entries)

Monday, December 21, 2009

Attention, English, teachers, commas, are, IMPORTANT...,

Here is a real-life story that will make English teachers smile.  A comma (yes, the punctuation mark) gave delegates at the Copenhagen summit fits.  I suppose it would be a great article to show classes the importance and power of simple punctuation...

Scrooge should had NOT listened to the 3 Ghosts!!! They were not engaging in the "Economic Way of Thinking"...

I just saw the Jim Carrey version of "A Christmas Carol" this week. Very dark and not really suitable for young children. The animation was quite incredible. However, I always felt Scrooge was getting a bad rap but could not place my finger on why. This column reminds me why...Worth a read if you like to see things from a differnt angle than most people.

Sunday, December 20, 2009

Taxes, Taxes, I dont need no stinkin' taxes...

A comparison of FEDERAL TAX RATES.  These  do not include other taxes we pay, as I mentioned in class, such as sales tax, school tax, county tax, city tax, Tarrant County Community College District, Tarrant County Hospital District, gas tax (State and Federal), tariffs embedded in products/food you buy, etc...You can easily see how these would get you up to the $40,000 to $50,000 range in taxes you pay on $100,000.  Keep in mind, some of these taxes you can deduct from your Federal Taxes  (property taxes) IF you itemize your deductions (gets complicated, doesnt it??)...In the US, your employer "contributes" (not optional) the same amount, dollar for dollar, you do in Social Security taxes AND Medicare taxes.  I am not sure this is included in the calculations for the graph.

World Hunger Drops Significantly Since 1970...Is this GOOD NEWS???

World hunger has dropped significantly since 1970.  From what I understand in reading comments from the Economist site I got this from, a significant portion of the drop came in India AND the data may actually support an increase in malnutrition rather than hunger.  I suppose that makes sense since it is ground zero for the "green revolution" in agriculture.  The dramatic increase starting in 2004-05 is a curiosity.  I believe there was a convergence of things that caused this.  The price of food increased dramatically during this period, not as a result in decreased supply (the usual suspect), but because of increased demand from emerging economies (China et al) for better quality food items, and the mandates for ethanol production from the Congress (and European countries too) to add to the nations fuel supply to make it cleaner.  I am open to other ideas as to why hunger/malnutrition decrease so dramatically during this period....:)

Gas Taxes High in the US? Relative to what/who?

A gallon of gasoline in Texas has State and Federal Gasoline Taxes already embedded in the price of gas at the pump.  The State tax is $.20 and the Federal tax is $.184 (read that as "18.4 cents").  The retailer of gas adds a half  cent so we get that funky ".9" for every gallon.  So the total tax burden is $.389 cents per gallon.  The accompanying chart shows the tax rates on gasoline (petrol, as they call it) in Europe.  They price it in Euro cents so let me do an example.  Look at France (it is almost on the 60 Euro Cents line).  There are 3.78 litres in a gallon so at a tax of 60 Euro Cents per litre, the tax in Euros is 2.27.  At todays (12/20/09) exchange rate that would be $3.25!!.  Remember, that is just the tax, not including the price of the gas.  They do not necessarily pay more for the wholesale price of gasoline that US retailers pay, but the retail price you might pay at the pump is going to be MUCH higher than you pay.  This is an example of using taxes as a way to change economic behavior.  The Europeans use this as a way to discourage gasoline consumption, hence as a way to reduce carbon consumption.  I referred to this tax as a Pigovian Tax in a previous post. A tax designed to reduce/eliminate a "negative externality" (a "bad" that is not desirable by society).  Do you think we should levy a large tax on gasoline at the pump in order to change our consumption behavior towards this carbon-based fuel?
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