Saturday, March 3, 2012

Short article on the role of "scarcity" in business (and government). If you are a business, finance or econ student this will be helpful to you...

Here is a link to a short article on the value of "scarcity" in business (and you can extend this to govt as well, in my opinion) and why we should embrace it.  As is learned  Day 1 in a basic economics course, scarcity is the over-arching theme in the study of economics---how we (individual, businesses, govts) go about allocating limited resources to satisfy unlimited wants. 

Below is an excerpt. I encourage you to read the whole thing...

The Silver Lining to Scarcity: It Drives Innovation

..."How does innovation manage to flourish under such time and budget constraints? For one thing, as these examples demonstrate, scarcity forces focus. Instead of exploring every avenue, consulting every possible collaborator, and blindly pursuing established "innovation processes" because they once worked for someone else, we make tough decisions about where to apply our efforts. This means leaving things out and taking risks—two actions we avoid in times of abundance. In times of scarcity, innovation is less risky than stagnation, especially when it's pursued with focus, clear expectations, and a creative problem-solving approach.

Scarcity also gives us an excuse to get on with it. With limitless time and resources, it's always easy to ask for more tests and get more data. "We'd like to get going on this concept," we find ourselves saying, "but maybe we should run it by one more review committee." Everyone has an opinion, and in times of plenty, everyone wants to be involved. But this is exactly where our tendency to design by committee takes over. Scarcity gives us the freedom to say "It'd be nice to go over it again, but we simply don't have the time/money."

Most important, scarcity forces us to be genuinely creative. The branded environment project described above didn't have the resources to do a "proper" sales office, so the team had to start from scratch. Given enough time and money, any competent organization can emulate something that succeeded in the past. But when limited resources take the tried-and-true off the table, the only option is to come up with something new....""

Thursday, March 1, 2012

"It's a Gas, It's a Gas, It's a Gas Gas Gas (Taxes)!"---Gas taxes and consumption from around the world...

Gas prices vary across countries and continents. Much of the difference is in the level of taxation.  The chart below (From The Conversable Economist) shows, in US dollars, the amount levied on a gallon of gas in various developed countries.

There are many reasons why you might want to put high taxes on gasoline.  Economic theory suggests if you tax something you get less of it or at least less consumption of it.  The chart below shows the relationship between the gallons consumed per person (vertical axis) and the retail price of gasoline, taxes included (horizontal axis).   The labels are flipped relative to the conventional Demand Curve. There seems to be a pretty tight relationship between price and quantity demanded!

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