Friday, September 3, 2010

Happy Capital Day!! Opps, I mean Labor Day...or do I?

On Labor Day we celebrate the contribution of the worker to the production of goods and services.  Good enough and well deserved.  However, why don't we have a day for what really allows workers to be more productive AND work less with their physical bodies and more with higher level thinking skills?...(HT: Division of Labour)
""Any good economist will tell you that as complementary factors of production, labor and capital are not only indispensable but hugely dependent upon each other as well.
Capital without labor means machines with no operators, or financial resources without the manpower to invest in. Labor without capital looks like Haiti or North Korea: plenty of people working but doing it with sticks instead of bulldozers, or starting a small enterprise with pocket change instead of a bank loan.
There may be no place in the world where there’s a shortage of labor but every inch of the planet is short of capital. There is no worker who couldn’t become more productive and better himself and society in the process if he had a more powerful labor-saving machine or a little more venture capital behind him. Capital can refer to either the tools of production or the funds that finance them. It ought to be abundantly clear that the vast improvement in standards of living over the past century is not explained by physical labor (we actually do less of that), but rather to the application of capital.
This is not class warfare. I’m not “taking sides” between labor and capital. I don’t see them as natural antagonists in spite of some people’s attempts to make them so. Don’t think of capital as something possessed and deployed only by bankers, the college-educated, the rich, or the elite. We workers of all income levels are “capital-ists” too—every time we save and invest, buy a share of stock, fix a machine, or start a business.
And yet, we have a “Labor Day” in America but not a “Capital Day.”
Like most Americans, I’ve traditionally celebrated labor on Labor Day weekend—not organized labor or compulsory labor unions, mind you, but the noble act of physical labor to produce the things we want and need. Nothing at all wrong about that! But I’m starting a new tradition this year that may never catch on and it doesn’t matter to me if it doesn’t. I’m doing it anyway: In odd-numbered years, I will celebrate Labor Day on the first Monday of September. In even-numbered years, I will celebrate what I’ll call Capital Day. This makes Monday, September 6, 2010 my first official Capital Day.
This weekend, I’ll be thinking about the remarkable achievements of inventors of labor-saving devices, the risk-taking venture capitalists who put their own money (not your tax money) on the line and the fact that nobody in America has to dig a ditch with a spoon or cut his lawn with a knife.
Happy Capital Day, America!""

Do the carpets in Vegas Casinos camoflage stains OR poker chips? I got to know!!

Apparently there is money to be made in carpets in Las Vegas...Are the carpets in casinos for covering up stains OR for camoflaging chips that have fallen from the possession of the gamblers? OR perhaps it is both!

HT: Marginal Revolution

Thursday, September 2, 2010

Economics underpins ALL conflict---Food Inflation causes rioting--is this just the beginning?

    The subject of the article below is something we discussed in class today.  Increasing food prices, while a nuisance, are easily absorbed by rich countries but disproportionately effect poor people in poor countries in a negative way.  It emphasizes the point of my lecture:  If you look at the history of conflict/revolution/war and strip away all the rhetoric, you will find an economic problem as the root cause.  In this case, it is rising wheat prices.  Wheat is a vital input into making many basic food staples.  While rising food prices may not be an ultimate reason for over-throwing a government, it may certainly be the catalyst.
Seven die in Mozambique food rioting
""The first food riots since the 2007-08 crisis have left seven people dead and at least 280 injured in Maputo, the Mozambican government said on Thursday. The unrest in the country’s capital followed the government’s decision to raise bread prices by 30 per cent.  The riots have prompted concerns that food protests could spread across poor African countries that rely heavily on agricultural commodities imports. Discontent about rising prices for staples has already emerged in countries from Egypt to South Africa.
Further violence in Maputo was possible, he added""
Another graph showing world meat prices relative to food prices world-wide:

Wednesday, September 1, 2010

"Priming the Pump"---this ain't plumbing but we are trying to unclog the stagnant economy---see multipliers enclosed.

  A nice graphic  below showing the multiplier effects of various fiscal policies Congress could implement to move the economy forward.  In a recession, Congress would want to decrease taxes and/or increase direct government spending.  The goal is to increase the demand for goods and services so businesses will produce more goods and services. In turn businesses would need to hire additional workers to produce these goods and services (or at the minimum, not layoff people or close it doors).  This would serve to stabilize the economy until private demand returns and government could back off.   In theory and in practice (I say that with reservations), each dollar spent by the government yields MORE in terms of  goods/services purchased than a decrease in taxes because in the very first round of spending the government does not save a portion of the dollar and people tend to save a portion of the tax cut.  This is the foundation of John Maynard Keynes "Multiplier Effect" of a dollar spent by government versus by "people".  According to this theory, if you want to jump-start an economy, or as Keynes said "prime the pump", then government spending a dollar trumps people spending that same dollar.  The extent of the multiplier effect is STILL up for much debate in economics, but depending on the policy, it seems to bear out.  Judge for yourself...
Tax Cuts That Make a Difference

""...But the most effective tax cut for putting people back to work quickly is one that businesses and households get only if they spend money. Last year’s cash-for-clunkers program was an example. So was a recent bipartisan tax credit for businesses that hired workers who had been unemployed for months. Perhaps the broadest example is a temporary cut in the payroll tax for businesses, which reduces the cost of employing people.
Any of these steps would increase the budget deficit, obviously. But relative to the multitrillion-dollar, Medicare-driven, long-term deficit, a temporary tax cut costing a couple of hundred billion dollars isn’t significant. The more pressing problem today, by far, is the weak economy...""


Keep your externalities Positive---"Metering Out" benefits...

It is usually easier to find examples of negative externalities than positive ones.  Positive externalities are benefits accrued by society from a use of a good BUT the market does not provide enough of this good.  Government can play a role in promoting the production of this good by offering a subsidy to either produce it or for the consumer to purchase more of it (increase the quantity demanded and the quantity supplied will increase--it still induces production):
""More than 100,000 central Ohio households are on the leading edge of energy technology, having received high-tech electricity meters with the help of federal aid, a project an Obama administration official praised yesterday.As soon as October, the customers will be able to use an AEP website to track their electricity usage the previous day. Future versions of the meters might allow for real-time tracking.  Electric utilities eventually might use the technology to offer different prices for power, depending on the time of day, which would encourage customers to use less power during times of high demand. This kind of change to pricing would require approval by state regulators.  As Chu sees it, the meters' main asset is the way they provide information that can be used to cut power bills.  "First and foremost, it's about saving money," he said."" (Source: Environmental Economics)

Tuesday, August 31, 2010

How many versions of an IPOD do we need?? The market says more...listen to the market...

Creative Destruction at work---within the same company.  A miracle of market activity that can only take place where people toil in economic freedom and have profit as a motive. Why else would anyone do it?? The IPOD is successful, why the need to continue to go above and beyond?  Is the answer "Because Steve Jobs can?" Incremental improvements lead to better products now, and we never know what those improvements might morph into someday. Innovate or die.  Sounds harsh, but would we really want it any other way?  Look at your IPOD or I-Phone or Laptop or ???? before you answer.

The iPod's Amazing Evolution
""Wednesday, Apple will likely unveil new iPods at an event in San Francisco.
The latest rumored features: An iPod touch with two cameras for "FaceTime" video chats, and a tiny new iPod nano with touchscreen controls. (And maybe even 3G Internet access for the iPod touch.)
Yes, the iPod has come a long way since its launch in October, 2001. That's when Steve Jobs showed off a device that promised "1,000 songs in your pocket" for $400.
This week's new iPod touch could promise "an HD camcorder and 250,000 apps in your pocket" -- for half the price.
The iPod could arguably be the most important product in Apple's entire history. Over the last 9 years, Apple has made the iPod one of the biggest consumer electronics hits of all time, pushing out more than a dozen new models and selling hundreds of millions of units.""
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