Businesses Destroyed in Haiti--not by the Earthquake but by Emergency Aid...HUH???

Global Aid Is No Relief for Small Haitian Businesses (WSJ)
The unintended effect of the massive aid to Haiti has been a negative impact on local businesses that have not been able to sell goods because the same goods they could provide are given away by aid agencies...

Business for Ilia Alsene, one of Haiti's ubiquitous "marchands"—or merchants—who sell food and beverages at curbside stalls here, is a lot worse since the country's devastating earthquake. But Ms. Alsene doesn't blame the quake so much as the international relief effort that followed. "I have fewer customers now because they are handing out free food down the street," says the 52-year-old, pointing to the nearby Champs de Mars plaza where aid organizations regularly hand out food to tens of thousands of people camped there in tents....After the Jan. 12 quake, which killed as many as 300,000 people, the world launched a massive relief effort to bring food, water, medicine and other supplies to needy Haitians. The U.S. alone has spent more than $665 million, official figures show. But only a tiny fraction of that money is being spent in Haiti, buying goods from local businesses. Worse, the aid is having the unintended consequence of making life harder for many businesses here, because of competition from free goods brought in by relief agencies. The damage to Haitian companies is making it harder for them to get back on their feet and create the jobs the country needs for a lasting recovery.

This has been a necessary evil, but can be rectified if purchasing of locally made goods picks up quickly, but historically this is not likely to happen:

In most disaster relief, only a tiny fraction of aid money goes through the local government. And as little as 5% of the budgets of humanitarian agencies is spent locally in the countries they help, according to Peace Dividend Trust, a Canadian nongovernmental organization.

Any rebuilding of Haiti is going to require reform of private property rights to encourage MORE people to be productive and retain the right to gain from their labor.  Encouraging entreprenuership and helping them market their goods will be the best thing we can do for them. Recovery will be much faster and sustainable...

This is what I imagine students do instead of studying Economics...

This is what I imagine students are doing instead of studying for my class (Cafe Hayek)..

Outsourced/"Off-Shored" Jobs Coming Back to the US----What a Concept!!

By way of Carpe Diem,,,,From Detroit News: Mich. firm turns tables on outsourcing:  Burroughs moves call center back to Plymouth from India

Companies that "outsource jobs"(the more accurate term is "Off-Shore", but most recognized the former term) have to be mindful of the wage-to-productivity relationship. Workers in low-wage, developing countries, may be less productive than higher wage employees in developed countries.  Depending on the industry, the explicit savings from paying low wages may be offset by the decreased output from these workers, which may or may not be explicit in the short run.  In the example of call centers, the output fall is due to customer dissatifaction from dealing with customer service agents who may not be fluent in english or be able to adequately answer questions.  Over time, businesses find that they lose customers, or at the minimun, customer satisfaction diminishes...

"...In fact, a part of Burroughs' call center used to be in Bangalore, India, until company officials began to examine the real cost benefit of outsourcing. Burroughs is not the only company starting to question whether the initial cost savings adds up, long term. A small number of businesses and several state government offices are looking to bring jobs back to the United States and to Michigan in particular...While Indian workers were paid less than Burroughs' American workers, other costs were rising when customer calls were routed offshore. The number of machines returned to Burroughs was growing, as was the number of times the company had to send an engineer into the field to fix a problem. CEO Alan Howard began to question whether the up-front cost savings of outsourcing held up over the long haul. So Burroughs, which recently split from Unisys Corp., returned its call center to Plymouth, staffing it with the workers who had actually built the machines...."Our cost savings is greater than 10 times the cost saving we would have achieved offshore," Howard said. Customer satisfaction spiked, according to the company's internal tracking, and fewer units are being returned for repairs. And engineers are less often sent to the field to fix problems. "Customers prefer to talk to people who know what they are talking about," Howard said.''

Olympic Motivational Speech like no other....

In preparation for todays Gold Medal game between the US and Canada you may want to watch this video....A mini-Herbs Brooks (coach of the 1980 Gold Medal team) gives a motivational talk to the team...

Nice source/resource if you need info on Cap and Trade...

Useful site that provides referenced links to the evolution of Cap and Trade from conception to today...This would be an excellent source if you have to research the topic

Capping It Off:  How a concept became an environmental policy catchphrase.

" "Cap and trade" began not as a catchphrase, but as a simple concept: that the market could help curb pollution. Its roots date to the 1960s, when U.S. government scientists came up with a scheme for regulating sulfur dioxide emissions through setting a cap and then trading the right to emit over the limit. By the 1970s, environmentalists -- and their politician allies -- embraced the concept, and it became standard in regulatory legislation. Now, as climate change makes the regulation of carbon emissions crucial, cap and trade may be more necessary than ever, if global wrangling doesn't do it in first. "

Drug Abuse in America---facts, figures, fright...

Click HERE for source

Google Inforgraphic--Some interesting detail about them....

Google amazes me in so many ways...A concise infographic HERE with interesting details about them...

Google has perhaps more than any other company become “The Internet Company.” It’s grown hand in hand with the internet and its entire business model has from the start been totally focused on the internet as a delivery platform.  And let’s face it, Google is a pretty interesting company. In fact, we think it’s so interesting that we put together this infographic with a ton of facts and figures about Google. We’ve been digging through Google’s SEC filings, news articles and the trusty old Wikipedia to get plenty of interesting data to include. We hope you like it!

A pop quiz: What’s the largest U.S.-based international relief and development organization?

Did not see this coming...NYTIMES: Nicolas Kristof: Learning From the Sin of Sodom...A MUST READ!!

It’s not Save the Children, and it’s not CARE — both terrific secular organizations. Rather, it’s World Vision, a Seattle-based Christian organization (with strong evangelical roots) whose budget has roughly tripled over the last decade. World Vision now has 40,000 staff members in nearly 100 countries. That’s more staff members than CARE, Save the Children and the worldwide operations of the United States Agency for International Development — combined.

For most of the last century, save-the-worlders were primarily Democrats and liberals. In contrast, many Republicans and religious conservatives denounced government aid programs, with Senator Jesse Helms calling them “money down a rat hole.” Over the last decade, however, that divide has dissolved, in ways that many Americans haven’t noticed or appreciated. Evangelicals have become the new internationalists, pushing successfully for new American programs against AIDS and malaria, and doing superb work on issues from human trafficking in India to mass rape in Congo.

Finally, recognition for the 10's of thousands (maybe 100's??) of missionaries who do great works for the world's poor and dont seek fame and fortune...There certainly are exceptions where bad things have happened as the result of missionary actions, but they are so small/miniscule relative to the good that is done ON A DAILY BASIS...Too bad the media in general and many/most  "progressives" cannot bring  themselves to acknowledge it. World would be a better place for it...

The Demand for Cigarettes is MORE elastic than we thought! (Yes, it is IMPORTANT!!)

D.C. Cigarette Tax Hike Fail:  In AP Microeconomics, we learn that if a community wants to eliminate a "Negative Externality" it should levy a per unit tax on a good or service to discourage the purchase and use of the offending good/service through higher prices.  The most prominent example teachers use is cigarettes.  Cigarettes create third party injury with secondhand smoke and other direct and indirect health  related problems.  Another reason the example is appropos is demand for cigarettes is generally relatively INELASTIC. When a good has inelastic demand it means that a change in price of the good will bring about a relatively small change in quantity demanded of the good, whether the price is increased or decreased.  If the price, with tax, increase by, say, 25% and it results in only a 10% reduction in quantity demanded then demand is said to be "inelastice". (The elasticity formula is %change in Quantity Demanded divided by the %change in Price--if result is less than one, demand is inelastic)...There is also a Total Revenue Test for Elasticity too.  If demand is inelastic, like cigarettes, then if %change in price increases MORE than the %change in quantity demanded than Total Revenues will INCREASE! However, it did not work out this way in D.C.

The projections are now that this year's estimated cigarette tax revenues will fall below the pre-hike FY2009 levels ($37.6 million)---in other words, the tax hike got the city less revenue, not more...instead of $45.4 million in revenue, Gandhi says the District will only bank $30 million.

Some predictable variables show up in this instance:

Because the increase, to $2.50, catapulted the District's rate over Maryland's $2-per-pack rate, Gandhi explains, many Maryland smokers who'd bought their tobacco in the District switched back to buying in Maryland. Add that to all the D.C. smokers who started buying cheap-as-dirt Virginia smokes, and you get the picture---

It appears that close proximity of a "substitute" LOCATION to buy cigarettes has made the demand curve for cigarettes in the Maryland/DC area MORE elastic! (The demand for a good becomes  MORE elastic with the increase in available substitutes)....If politicians and policy makers took an economics class now and again, they may become more aware of the consequences of their actions...

News Flash! China is experiencing wage inflation---MONTHLY minimun wage---$114!!

NYTimes: Defying Global Slump, China Has Labor Shortage...

"Just a year after laying off millions of factory workers, China is facing an increasingly acute labor shortage. As American workers struggle with near double-digit unemployment, unskilled factory workers here in China’s industrial heartland are being offered signing bonuses.  Factory wages have risen as much as 20 percent in recent months."

Welcome, China, to the Short Run Aggregate Supply Curve.  China is experiencing "normal" inflation due to increasing wages as a result of moving closer to what is called "Full-Employment" Real GDP.  Economists define Full-Employment Real GDP as the dollar value of an economy's "potential" production, regardless of the price level.  Notice on the graph full-employment Real GDP ("FE RGDP") is fixed. 

This fixed point of potential GDP comprises the Long Run Aggregate Supply (LRAS) and is vertical at FE RGDP.   Any RGDP to the LEFT of the LRAS represents "Actual RGDP" (Point "RGDP1"). It means the economy is producing a Real GDP that is less than its potential ability to do so. It is "under-employing resources" and the main resource we care about is people.  At FE RGDP the unemployment rate is relativel low, but NOT zero!  Economists consider 0% unemployment to be actually about 5%, or the "Natural Rate of Unemployment".  If an economy can get to 5% unemployment it should consider itself at  full-employment.  The lower the Actual RGDP is relative to FE GDP the higher the unemployment rate (we have the presence of "cyclical unemploymnet"). As an economy increases its actual RGDP it consumes more societal resouces, labor included.  As you move closer to FE GDP, more people are employed and fewer and fewer skilled and unskilled workers are available. If business are still expanding, then they will have to compete with each other for ever-more scarce workers.  They do this by increasing wages, to attract AND retain existing workers.  Labor is the resource, according to the article, that is becoming more scarce, hence increasing wage rates.  Increasing wage rates are EXPECTED as a normal course as production moves closer to Full-Employment Real GDP. The effect of rising wages start to take effect in the graph (below) as we pass Real GDP5. This will increase the cost of producing, hence the transition from the horizonal section of the Short Run Aggregate Supply (SRAS) curve to the upward-sloping intermediate section of SRAS, up to Real GDP8.

You can see that price level increases as production is increased.  Again, it is important to remember that this is EXPECTED inflation and is built into the existing SRAS curve.  The problems arise when inflation is UNEXPECTED (creates "Stagflation"--more on that another time) and SHIFTS the SRAS curve to the left....Bottom line: China is moving along its Short Run Aggregate Supply Curve and is a normal condition as it reaches full-employment GDP. Problems arise when they (1) experience UNEXPECTED inflation (resource price shock, for example) OR (2) move BEYOND there Full-Employment capacity and ACTUAL unemployment goes below the Natural Rate of Unemployment...

TV News Reporting Template---Who would have thought???

If you are a news junky like I am, but are HIGHLY annoyed by local TV newscasts and the "on the scene" reporting, this video takes a humorous look at the template that local reporters apparently use to film their segments. When I watch the local news I do notice a pattern...

I am objective! No, REALLY I am....

A VERY short political philosophy quiz to determine your leanings HERE (only take two minutes and the most)....The graph above is mine...I answered honestly...I am pretty much a Centrist with Libertarian leanings...Guess that means I am somewhat objective OR I can committ one way or the other...it is a fine line, I suppose..

Moving to China? Keep Fluffy at Home, PLEASE!!

From The Economist: "Off the menu: The right to eat cats and dogs is under threat"...I sometimes wonder about the country of China and some of the cultural norms...

AT THE National People’s Congress (see main story), the Communist Party decides what laws to draft and when they get passed. But public pressure is beginning to count, too. An attempt to persuade the Congress to ban the eating of dog- and cat-meat has captivated the Chinese press and caused an uproar....This creates conflict with ancient eating habits. Dogs are a popular dish in many parts of China, not least among ethnic Koreans in the north-east. Dog restaurants are also common in Beijing. Many believe that eating dog helps keep the human body warm in winter. Cats are popular in southern China. The sweet-tasting meat has been served to your correspondent, diced into small cubes reassembled in feline form with fur-stripped paws sticking in the air. The wretchedness of its foreshortened life was left to the imagination.

A Depreciated Dollar is NOT Appreciated by Oil Producing Countries---Should We Care???

Oil producing countries do not like a depreciating US Dollar.  As with most commodities (oil, wheat, corn, sugar, soybeans, gold, silver, on and on...) that are traded in world markets, the currency of record is the US Dollar.  In other words to buy or sell oil, countries need dollars to do so.  Today a barrel of oil (42 gallons in a barrel) sold for $78.17.  Lets use Canada as an example.  Canada is our number one source for foreign oil (surprised?).  Assume today Canada sells that barrel of oil and gets the $78.17.  More than likely they will exchange those dollars for Canadian currency (they dont have to, but lets assume so).  At todays exchange rate of $1.00 =  1.05CN the Canadians would recieve ($78.17 X 1.05) 82.08CN.  NOW, assume the dollar depreciates relative to the CN, or vice versa, the CN Appreciates relative to the dollar and the exchange rate is $1.00 = 1.00CN ($1.00 buys fewer CN than it did before).  Now the Canadians would only get ($78.17 X 1.00CN) 78.17CN---LESS than before!! In order for the Canadians to get AT LEAST what the got before the depreciaton of the dollar, they would NOW have to "get" $82.08 US dollars for a barrel of oil.  Every other country that sells oil, ceteris parabas, is going to be in the same situation.  The international market price for oil tends to increase.  There is a consistent inverse relationship between the price of oil and the value of the dollar (see graph...keep in mind there are other varibles at work too).  This works in reverse as well---an appreciating dollar tends to decrease the price of oil and other internationally traded commodities...

The Hummer Brand is Dead...I say good riddance....

WSJ: GM to Shut Hummer After Sale Dies

General Motors Co.'s beefy Hummers will join its Pontiac and Saturn in the scrap yard of failed brands after a $150 million deal to sell the line to a Chinese equipment maker collapsed. Sichuan Tengzhong Heavy Industrial Machinery Wednesday failed to win approval from Chinese regulators for its bid. GM said it would wind down Hummer operations after concluding Tengzhong wouldn't be able to finalize the deal.

I have said in class that the Hummer brand WAS bought by a Chinese company already, but I was wrong....The brand is dead, it seems, officially...Because I am  market-orientated in my outlook, I would never tell someone what kind of vehicle to buy.  I say let market forces do the work.  Well, market forces have spoken in regards to the Hummer. In this case, I believe the correct message was sent.  The vehilce always seemed excessive to me, not only in proportion, but in resouce use.  In a time of war, it symbolized what is/was wrong with our consumer culture AT THE AFFLUENT MARGIN. I heard people defend their purchase/use of this vehicle on the grounds of "freedom"(or some semblence of that arguement)...Yes, you are free to buy one of these, but SHOULD you is the question.   I would hope through  widespread "enlightened" study of economics and philosophy by "the folks", markets can be more efficient and more understood...Could happen...:)