Wednesday, April 30, 2008
The Enclosures have been reenacted in the Third World by latifundistas and other feudal landed oligarchs, in collusion with Western agribusiness.
The main cause of starvation, as you say, isn't underproduction. But it isn't too little "trade," either. It's mainly the lack of purchasing power. Land that was formerly was formerly used by peasant subsistence farmers to feed themselves is now used to grow cash crops for the export market, while those evicted peasants sit in shantytowns or hold begging bowls in the streets.
A free market libertarianism that takes the distribution of "factors" as given, without regard to issues of justice in acquisition, really isn't libertarian at all.
Tuesday, April 29, 2008
Monday, April 28, 2008
Sunday, April 27, 2008
Saturday, April 26, 2008
In my opinion, as consumers voted for a choice of more biofuel, they have inflicted an unintended cost of starvation around the world. In the short-run, consumers must now make lifestyle changes in how they allocate their choices. In the long-run, technology might increase crop yields and shift the PPC outward. Monsanto produces genetically altered food that would immediately increase the food supply, but there is considerable resistance from the European Community. For 50 reasons why GMF are bad, click here.
In the short-run, the supply of food is inelastic given the growing season for food. So is the supply of tillable land. GMF are not the answer for everyone, but provide a starting block for more innovation especially as the long term effects of GMF on health and the environment are uncovered. To suggest that GMF is the only alternative is to suggest a false dilemma. But it is an alternative.
Another alternative is to eliminate the inefficiencies of the market like subsidies. The government should remove the crop reduction program which artificially restricts supply and let the market equate a the socially optimal equilibrium. All tariffs and quotas should be removed and money that is spent on Ethanol subsidies should be reallocated toward crop yield innovation. Liberalizing the market will allow consumers who vote with their dollars to choose the consumption bundle on the PPC that reflects their values. Government intervention with price controls has distorted the market.
Friday, April 25, 2008
Tuesday, April 22, 2008
Sunday, April 20, 2008
David Ricardo argued that the direction of reasoning was faulty. Grain prices were high because there was a high demand for grain which caused the price of land to increase. This same argument is what I hear today when I hear people complain about high fuel prices.
These people argue that the oil companies raise the price of oil which in turn rises the price of fuel. They argue that lower oil prices would lead to lower prices at the pump. They have it wrong. Demand is, pardon the pun, fueling the prices.
George Santayana gave his portend warning that "those who cannot remember the past are doomed to repeat it." Although I don't agree with the statement, I would like to change it to "Those who don't know economics are doomed to repeat their ingnorance over and over in front of large crowds who will use it against them in the future."
Saturday, April 19, 2008
The following picture along with an implicit thought that this will be our transportation if crude oil prices continue to climb. On several levels this is interesting. Suppose that someone in 1890 saw the prices of homes increasing. Would this man think that homes would be unaffordable in the future? Using this reasoning, how can people afford to the homes today? I also believe that if the price of oil gets too high, then alternate sources of fuel will become profitable for businesses and alternate forms like fuel cell, solar, hydrogen and others will then be substituted for light, sweet crude. If this isn't so, then why are we living in beautiful homes and not mud huts?
A choice like the one Erika has to make happen to all of us every day. Do you watch Family Guy or CSI? What do you want to eat for lunch, pizza or sub? I think everyone considers what they give up when they make decisions and cling to bad choices because they are afraid that making a leap or taking a risk might yield less satisfaction. Thus, people make decisions on what economists call “sunk costs.”
A sunk cost is a cost that cannot be recovered. As an example, suppose you rent the movie, No Country for Old Men. After 30 minutes of watching this movie, you get the feeling that this isn’t exactly your kind of movie. Do you finish watching it or shut it off and watch another movie? Most people would reason that they’ve already invested $5 and 30 minutes into the movie so they might as well finish it. This is irrational decision making since you’re letting the 30 minutes you’ve sunk into the movie dictate the next hour and a half of your time. If Erika sticks to her original Econ major, it is like watching the rest of a movie that she doesn’t like. Erika should change her major and forget about the time she has sunk into her education.
Here’s another example of sunk cost decision making. Let’s say that Amber meets a boy that she’s intensely attracted to. Should she stay with him the rest of her life or should she keep her options open?
There are many happily married couples who were high school sweethearts, but is this rational? Suppose there are 100 eligible boys that Amber could date. If she clings to the first boy she dates, then the probability is 1/100 that this is the right one for her. If Amber dates 99 boys and rejects them, then there’s a 1% as well that the last boy is the man of her dreams. She should date more than one but less than 99. Probability theory predicts that Amber should date 37% of the boys then choose the next best boy that is better than all of the ones she has dated and marry that lucky one. Now, don’t you wish your mother would have given you advice like that?
Erika should try all three majors in college then select the one that is the best of the three alternatives. Making a decision in this way will eliminate sunk cost decision making and maximize her happiness.
Monday, April 14, 2008
Sunday, April 13, 2008
Saturday, April 12, 2008
After reading the book, a colleague of mine became upset that judges could be bought. Was the book a work of fiction or fact? In a Q&A section for the book's promotion Amazon asks "The Appeal overtly suggests that elected judges can be bought. If the novel is meant as a cautionary tale, what's next--the Presidential primaries?" Grisham answers "Why not? Over one billion dollars will be spent next year in the Presidential primaries and general election. With that kind of money floating around, anything can be bought."
In the book Judge and Jury by Eric Helland and Alex Tabarrok, they conclude in a chapter entitled The Effect of Judicial Elections on Tort Awards, "Partisan-elected judges must cater to their constituents, and they must raise campaign funds to get elected."
The Appeal is fiction. If truth is stranger than fiction, then The Appeal might just become truth.
Friday, April 11, 2008
Thursday, April 10, 2008
Wednesday, April 09, 2008
Intellectual property rights must be enforced to induce musicians and artists to continue to create more music. Think about how much work you would supply if you had to give it away. Today, copying a song from Lime Wire or Kaaza is as easy as a couple of clicks of the mouse.
When a musician writes a song, all of the cost in incurred in making the original. The next 10,000 copies can be produced with little or no cost. This presents pricing problems for the music producer since consumers equate the price of a product with the cost to make it. When music buyers see the $1 price of a download on iTunes, they believe the price is too high so they share files on a P2P network. This is interesting too me as these same buyers would not take a nickel from the coffee fund but think nothing about taking intellectual property.
Tuesday, April 08, 2008
Monday, April 07, 2008
Sunday, April 06, 2008
Saturday, April 05, 2008
A negative externality occurs when the social costs of consumption are greater than the private costs. Say students are leaving school at the end of the day. Each student acts in their own self-interest trying to get out of the parking lot as fast as possible. Each student acts without regard to the "costs" that they are imposing on others and society. For example, while waiting in line, cars pollute and block emergency vehicles. As the graph to the right shows (click to enlarge), the optimal equilibrium should be less than Q* when all costs are included. Given this clinical analysis, why does Muscatine Schools insist on two exits from the school?
The average wait to exit the school after the 3:15 bell is 30 minutes. Our school should buy the property from the city cemetery and make an exit to alleviate traffic congestion. I believe that the cost of the investment would be less than having students and staff waiting in line to exit the school. Most students do not drive straight home. Some go to work or run errands or even go out to eat.
Other ideas include making Cedar Street and Mulberry a one-way when school is being released, staggaring out times, making students take a right turn to exit, using a traffic policeman to have students exit in a safe and speedy way, and making students pay to leave right after school.
Friday, April 04, 2008
When regulating the shoe industry, the government should allow the free market to distribute goods and services. With the hundreds of shoe supplies, you can bet that shoes are being bought and sold in a competitive market.
Thursday, April 03, 2008
her hardest hue to hold
Her early leaf is a flower,
but only for an hour.
Then leaf subsides to leaf,
So Eden sank to grief.
So dawn goes down to day.
Nothing gold can stay. Robert Frost
On a cold October day, I asked Don if I could marry his daughter. On that day, he gave me Cinderella. In stark contrast, today, we interned Don. As I write this, it's a cold rainy day in April. Heraclitus wrote that you never step into the same river twice. Just like there are no two rivers the same, no two people are the same. Don fought in WWII and was married over 60 years. Even in his last days, he lived with humor. With this may you fly away and find peace and love. Nothing gold can stay.