Saturday, February 18, 2012

Look at your phone then look at this advertisement for a cell phone from 1989...My how things have changed!

Shop Online and Save a Barrel of Oil...E-Commerce helps solve Climate Change--The Unseen (positive) effects of Creative Destruction...

Shopping on the internet is still in its infant stages but it appears it has a disproportionate negative effect on some business/industries compared to others.  A nice example of elasticities across industies and how they change over time.

As shown in the graph below, e-commerce has enjoyed high growth in a short period of time (Green line).  Not to suggest correlation is causation, but if you look at the other two lines representing the other two categories of goods (Orange and Less Orange(?) line), and look at your own changing buying habits, I think the relationship is quite clear---online shopping is slowly destroying the "brick and mortar" (real physical stores) in some industries.
Source: Wall Street Journal
It also has a positive impact on the environment too:
"But there are still some brick-and-mortar retailers who have little to fear from the Internet. In the fourth quarter of 2011, gas stations represented 11% of all retail sales, up from 10% during the recession and 7% in 1999. Part of that is due to rising prices at the pump, but gas also is something you still have to go out to purchase.Of course, the more people can do from home the less use they will have for their cars. So maybe gas stations aren’t totally immune after all."" (source: WSJ)

Nice, short video of David Lee Roth (Van Halen) explaining why the band demanded M&M's for each concert but the brown ones had to be taken out. Selfish rock star or brilliant businessman? Hmmm....

A couple of things of interest here (besides how he is dressed).

David Lee Roth, former front man for Van Halen, explains why in their live concert contracts they demanded the band be provided with M&M's but there were to be NO brown ones in the bowls. 

Spoiled, demanding rock stars OR a smart business strategy? The video is only 5 minutes long but informative.  Now when I read other musicians/actors who have crazy requests that appear to be selfish in nature, I will think more closely as to why they are asking for them.

Brown M&Ms from Van Halen on Vimeo.

Profiles of 11 Long Term Unemployed People---How do we solve this problem?

We JUST talked about this in class yesterday. The ranks of those classified as Long Term Unemployed are growing.   How do we begin solving the problems of the long-term unemployed in the SHORT TERM?  I believe this question is not as easy to answer as it is made out to be.  Read the stories (very short) at the link below and tell me what you think.
The Truth About Long-Term Unemployment In America
Here is a graph showing illustrating the long term unemployment issue (Presence of "Discouraged Workers"):

Source of graph and paragraph below
This graph shows the number of workers unemployed for 27 weeks or more.
According to the BLS, there are 5.518 million workers who have been unemployed for more than 26 weeks and still want a job. This was down from 5.588 million in November. This is very high, but this is the lowest number since September 2009. Long term unemployment remains a serious problem.

Tuesday, February 14, 2012

Why does a Salad cost more than a Big Mac? I am glad you asked---the answer within...

Here is an excellent example of how subsidies can distort markets. Subsidies tend to (1) lower the cost of production, hence more supply of  a good and/or (2) lowers the price of the good for the consumer, hence more demand for a good. More supply, more demand, more market quantity.  Notice I have not said anything about the societal value of the good in question.

 Below is the US Dept of Agriculture's "Food Plate" replacement of the traditonal  "food pyramid" many of us old-timers grew up learning.  It is simply suggested serving sizes/portions of various foods that promote good health in the long run.

Below that is the proportion of subsidy money (read that tax money) that is provided mainly to suppliers of various agricultural products.  Notice an imbalance? Fruits and Vegtables occupy approx half of the plate but receive a fraction of the subsidy money--Meat and Dairy occupy less than half but receive well over half the subsidy money.  Grains are just about right (however, I wonder if that includes corn for ethanol subsidies)...

Source: PCRM
Remember, it is the SAME agency, The Dept of Agriculture that is responsible for BOTH of these programs! 

"Show me the Spending!" Nice interactive illustrating the requested spending in the Presidents latest budget proposal

(HT: David Mayer for the link)

The NYTIMES has a terrific interactive breakdown of the spending side of  Presidents budget proposal for Fiscal Year 2013.  I encourage you to go HERE and look at all four graphics. If you click on a "bubble" you will see the category or spending, how much is proposed, and if it is increasing or decreasing.

Source: NYTIMES interactives
This graphic above shows Mandatory (on left) vs Discretionary (on right) spending.  You can't see it here, but if you go to the website and click on the LARGEST circles on the left you will see they represent Social Security, Medicare, Medicaid, and Interest Paid on the National Debt.  Those three things pale in comparison to any other part of mandatory spending.

National Defense is considered discretionary spending and is represented by the THREE largest  bubbles on the right.

All these programs are the "third rail" of politics---don't touch or you will die (politically).

So, you can easily see the mandatory programs are the "elephants in the budget room".  Instead of addressing the elephants, the political class of both parties seem to just fighting over who is going to (and not going to) run between the legs of the elephants to save the tiny budget mice. 

Wouldn't it be better to get the elephant under control and not wreak so much havoc on the poor little "budget mice" to give them a break?...Just sayin'....

Note: I add one more of the graphs below showing the breakdown of spending by major category.  The issues are obvious. How much conversation do you hear about this?

Monday, February 13, 2012

If you buy roses to give tomorrow don't talk to them. They won't understand a word you say anyway...See here why...

If you receive roses for Valentines Day and believe talking to them will extend their shelf life then you will have to learn Spanish.

Ninety percent (yes 90%) of the roses sold by Tuesday are imported and approx 82% of those imports come from Columbia primarily and Ecuador secondarily.  Why so many imports? California normally supplies a perponderance ofdomestically grown roses, but it is out of season for roses now.  February is simply the wrong time of year for domestic producers to significantly benefit from the "holiday".  

Need a graphic for a Valentines Day sentiment for that person who just LOVES economics? Check out these graphs---Love is in the air (and in equilibrium too!)

Nice graph showing the historical relationship between wages and productivity and 3 reasons why wages are/may be stagnating

Historically, worker wages have been closely tied to worker productivity--the more you (on average) produce, the more you earn (on average).  This direct relationship is represented in the graph below.
Source: Tim Taylor at The Conversable Economist
However, the tight relationship starts to sever around 1980 and productivity begins to increase faster than wages .  Professor Taylor at The Conversable Economist narrows the culprits down to 3 factors (he reverses the order from a source he cites at the link above):

1.  Technological change connected with improvements in information and communication technologies, which has raised the marginal productivity and return to capital relative to labor.
2. Increased globalization and trade openness, with the resulting migration of relatively more labor-intensive sectors from advanced economies to emerging economies. As a consequence, the sectors remaining in the advanced economies are relatively less labor-intensive, and the average share of labor income is lower.
3. Decrease in the bargaining power of labor, due to changing labor market policies and a decline of the more unionized sectors.
Numbers 2 and 3 have lots of politics mixed in with them.  If you think about the news you watch or read these ARE the major focus in some form and are easily exploited by politicians.

Number 1 not so much, if any, politics. 

Output is derived from a combination of Labor and Capital (machines, tools, processes, infrastructure, etc)--People using the latest available technology to make "stuff".  The value of that output over time is increasingly coming from the Captial side of the equation and is eroding the overall contribution that Labor adds to the good/service. 

Three things seem to result from this:

1. Workers at the margin are squeezed out of an industry altogether because they are adding little to overall productivity that the employment of capital and technology creates.  Not saying this is right or wrong, just the way it is...

2.  A subset of semi-skilled/low(er) educated workers that are still employed in the industry are not seeing wage gains, perhaps because they are more remote from the gains created through the use of capital/technology.

3.  A subset of skilled/high(er) educated workers who are directly involved in the gains created through the use of capital/technology are going to benefit the most from the gains in productivity.

Not a perfect list but I think it is a good outline...Any comments?

Nice Infographic an how promotions in corporations are REALLY earned. Cognitive Dissonance rules the day...

These are the results of a survey of executives who inevitably make promotion decisions within a corporation.  While favoritism does not necessarily trump competency (or does it?), I think they go hand in hand. Complements as opposed to substitutes, to put an economics spin on it.

I am fascinated by the section below "What Role Does Favoritism Play?"...A vast majority conceded favoritism in promotions exists all around them BUTat the same time they deny it is a  factor in their own promotion decisions.  Curious...

Source: Business Insider
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