In a further revelation about how entirely terrible the auto bailouts were, the Daily Caller has been doing some good investigative journalism and uncovered evidence that administration officials intentionally subverted contract law, pension agreements, and bankruptcy law in an effort to help union members and do harm to non-union employees.
This is directly related to economics because as the government expends efforts to determine winners and losers in the marketplace the co-ordinative ability of the market is severely compromised. People begin to make business and personal choices based not market support, but on the likelihood that government will support them. This leads to misallocation of resources - harmful because of the money spent, but much more harmful because those resources (money, people, etc...) are not being used to produce something people actually want to buy.
The several dozen failed fedgov investments in green energy projects come to mind here.
Showing posts with label Application of Economic Thinking. Show all posts
Showing posts with label Application of Economic Thinking. Show all posts
Wednesday, September 05, 2012
Tuesday, September 04, 2012
Unseen: Faucet Edition
I recently had to replace the aerator in our kitchen faucet. The new unit is a "water saver" that has a 25% reduced flow compared to the original unit. I looked for an original 2ga/minute aerator and couldn't find one to fit our faucet. The new unit works ok. Sure it takes longer to fill a pitcher. Sure it makes a little more noise. Sure, I find myself turning the handle on full more frequently than I used to. But I suppose it might be saving some water somewhere.
My wife though was just telling me how the "water saver" actually takes longer to rinse dishes. The new unit takes longer to rinse soap and creates more bubbles on the dishes while rinsing. So you have reduced flow, but longer faucet run-time.
Does it save any water? I kind of doubt it. Reminds me of those "water saving" toilets that frequently must be flushed repeatedly.
My wife though was just telling me how the "water saver" actually takes longer to rinse dishes. The new unit takes longer to rinse soap and creates more bubbles on the dishes while rinsing. So you have reduced flow, but longer faucet run-time.
Does it save any water? I kind of doubt it. Reminds me of those "water saving" toilets that frequently must be flushed repeatedly.
Tuesday, June 19, 2012
NSF Waste
The National Science Foundation has the "luxury" of not having to worry about the future worth/usefulness of the research it funds. After all they don't pay for it, the taxpayer does, nor are the grant-makers responsible to the taxpayers. So I'm not really surprised to see an article like this one, detailing some of the waste and fecklessness at the NSF.
Wednesday, May 09, 2012
Why do things always go wrong?!
So why do the economic policies and efforts of the political left just about always result in failure? This article has some good, accessible, insights.
Thursday, October 13, 2011
Cost of Regulation
Really, rather remarkable how so very often the very regulations intended to help the poor/middle income end up instead hurting them.
Pass a bill designed to limit how much banks can charge for debit transactions, and banks look to recoup their costs by decreasing services or increasing other fees.
Require that banks look into the identities of customers, in an attempt to make money laundering more difficult, and create a situation where banks have to charge more money to the poor than to the rich b/c it is typically more difficult to establish the financial identify of someone without a financial past.
More detail? Look here.
Pass a bill designed to limit how much banks can charge for debit transactions, and banks look to recoup their costs by decreasing services or increasing other fees.
Require that banks look into the identities of customers, in an attempt to make money laundering more difficult, and create a situation where banks have to charge more money to the poor than to the rich b/c it is typically more difficult to establish the financial identify of someone without a financial past.
More detail? Look here.
Tuesday, September 20, 2011
Research by Crowd (of gamers)
The "Wisdom of Crowds" is an economic idea that has been around for a while. Basically the idea that a large group of people will possess many little bits of information that, if properly assembled, can solve even very complex and difficult problems. The trick is getting the holders of the information to assemble it. You can have a contest (guess the weight of a steer at the fair), allow people to "invest" their knowledge (political betting markets), or you can CREATE A GAME.
Pretty cool. The potential of using the creative and problem solving skills of diverse people, especially if they don't know they are solving problems is fairly incredible.
What other problems could we solve?
Pretty cool. The potential of using the creative and problem solving skills of diverse people, especially if they don't know they are solving problems is fairly incredible.
What other problems could we solve?
Thursday, August 28, 2008
Rainy Day Sale
A rainy day here at PHC. While going to lunch I noticed that the bookstore was having a "rainy day sale" on umbrellas.
My economist sense tingled.
Hmmm....
You see where I'm going with this - a store interested in making money should not decrease the price of an item just as the demand increases (as for umbrellas when the sky leaks). The customers demand or desire for an item is at least partially influenced by perceived need. Your perceived need for an umbrella increases when liquid steam is falling from the sky. So, in general, customers will be more willing to purchase umbrellas and the store should increase prices.
But they didn't. They reduced prices.
Why?
I see two options. First - the PHC college bookstore exists not to make money, but to serve the students so they reduced umbrella prices in the students' day of (wet) need. Second - the bookstore does intend to make money, but umbrellas are a poor seller and the bookstore is taking advantage of the rain to get them to move off the shelves.
I'll have to ask the bookstore staff....
My economist sense tingled.
Hmmm....
You see where I'm going with this - a store interested in making money should not decrease the price of an item just as the demand increases (as for umbrellas when the sky leaks). The customers demand or desire for an item is at least partially influenced by perceived need. Your perceived need for an umbrella increases when liquid steam is falling from the sky. So, in general, customers will be more willing to purchase umbrellas and the store should increase prices.
But they didn't. They reduced prices.
Why?
I see two options. First - the PHC college bookstore exists not to make money, but to serve the students so they reduced umbrella prices in the students' day of (wet) need. Second - the bookstore does intend to make money, but umbrellas are a poor seller and the bookstore is taking advantage of the rain to get them to move off the shelves.
I'll have to ask the bookstore staff....
Wednesday, August 13, 2008
Labor and Capital
Tonight I visited a local fast food establishment to grab something on my way home from the college. In most respects this is a very typical establishment, but it normally stands out in one notable way. Rather than giving your drive-through order to a voice-box, you give your order to a live person standing by the menu board. And this is no temporary situation - there is almost always a person stationed outside by the menu.
Today the order-taker was, as usual, stationed outside. Additionally there was a second employee outside, running up and down the lane, taking money/credit cards, giving the payment to the teller inside, and returning change/cards to each vehicle. I'm not sure why the manager chose to do this (pay a second employee to collect payments), but let's take a brief look at the economics in play.
Any producer must make a wise choice between investing in capital (equipment, machines, etc...), labor (manpower), or some combination of the two. Both are usually necessary for the production of goods or services. At the local fast-food establishment, the manager made a choice between upgrading his order-processing equipment and paying additional people. The producer (the manager in this case) will typically make the choice based on a comparison of cost and productivity for each additional unit of labor or capital.
From what I observed today, I can only conclude that the local manager believes that it is better (leading to greater net profit) to hire two additional people beyond what similar establishments usually employ than to upgrade the capital. In this case "capital" may include capability of the person working the registrar (who usually handles orders and taking payment as well). Therefore, because most fast-food establishments choose the capital route, I must conclude that either the capital improvements are for some reason unavailable or that labor is particularly cheap for this particular manager.
Today the order-taker was, as usual, stationed outside. Additionally there was a second employee outside, running up and down the lane, taking money/credit cards, giving the payment to the teller inside, and returning change/cards to each vehicle. I'm not sure why the manager chose to do this (pay a second employee to collect payments), but let's take a brief look at the economics in play.
Any producer must make a wise choice between investing in capital (equipment, machines, etc...), labor (manpower), or some combination of the two. Both are usually necessary for the production of goods or services. At the local fast-food establishment, the manager made a choice between upgrading his order-processing equipment and paying additional people. The producer (the manager in this case) will typically make the choice based on a comparison of cost and productivity for each additional unit of labor or capital.
From what I observed today, I can only conclude that the local manager believes that it is better (leading to greater net profit) to hire two additional people beyond what similar establishments usually employ than to upgrade the capital. In this case "capital" may include capability of the person working the registrar (who usually handles orders and taking payment as well). Therefore, because most fast-food establishments choose the capital route, I must conclude that either the capital improvements are for some reason unavailable or that labor is particularly cheap for this particular manager.
Tuesday, August 12, 2008
"In a hurry, will pay"
One of the persistent dreams for future transportation is a road/vehicle/transportation network in which personal vehicles (cars) talk to each other. The hoped-for result is to create a smoother traffic flow with fewer (or no) traffic jams or accidents.
If cars are talking to each other, then it should be entirely possible for you to program your vehicle to offer to pay/bribe other vehicles (and their occupying passengers) to move our of your way. Emergency vehicles will already, I expect, have this power - - so why not create a system that allows your car to implement the same "get out of my way" program for a price?
But such a system might not be so simple. In many urban areas (especially DC) everyone will program their cars to scream "I AM IMPORTANT! MOVE!!!" And because everyone has programmed their vehicles to be important, no one will move, and no one will benefit.
To solve this impasse we turn to the economist's favorite tool - pricing. For most economists, the creation and function of prices is the equivalent of duct tape, a good knife, all-purpose oil/grease, and adjustable pliers all rolled into one. Prices hold things together, allowing people within a market to trade with each other and function as one unit. Prices remove and separate unwanted or unproductive portions of the economic structure, resulting in concentration of resources on productive uses. Prices speed and smooth interaction between the various elements of an economy, allowing greatly reduced friction (transaction cost) and less wasted energy. Prices continually adjust to best regulate the good or service being traded, adjusting much faster and more precisely than human-controlled mechanisms ever could.
But how do prices help us solve our priority-auto-driving problem? Well, the simplest way would be to have each driver program a price at which (s)he is willing to move out of the way for other drivers. In this case your vehicle would automatically accept a move request, and payment, from the vehicle of a driver who is willing to pay more than the minimum you have set. You could even allow drivers to change their prices on the fly. Say you have an important meeting to rush to. You set your "priority price" at $0.75 and set off. Many people move out of your way, but as traffic gets heavy and you are forced to slow, you look up from your laptop and instruct your car to offer $0.80. That doesn't free you, so you increase your "bid" to a full $1.00. That does the trick, and you are soon zooming on your way.
You, as the driver, may also opt to allow your car to automatically increase your bid to whatever level is necessary (or some maximum you pre-select) to buy speedy passage.
Both of these methods are, however, potentially subject to what economists call the "holdout problem."
Presumably, drivers of vehicles would be able to set not only their "priority price" - the price they will pay to pass others - but also their "move aside price", the price they expect to receive before they will reduce their own speed or change lanes for someone else.
A holdout would potentially occur if, for example, you are trying to hurry your way through heavy traffic and, instead of allowing you to pay them and move out of your way, the vehicle in front of you sees your hurry and simply increases its prices. Dramatically. Before you know it, you might be asked to pay $50 or more before the person in front of you will move out of the lane.
One potential way of solving this problem would be to program your vehicle to hold a brief, almost instantaneous, auction. By communicating with the vehicles in relevant positions around you, your car could determine whether it would be cheaper/faster to negotiate a path around the recalcitrant vehicle in front of you rather than buy him off. Though you may run into areas (especially around DC) where everyone expects a fair amount to cede right-of-way, peoples' self-interest should give them enough incentive to accept your offer before someone else does.
If cars are talking to each other, then it should be entirely possible for you to program your vehicle to offer to pay/bribe other vehicles (and their occupying passengers) to move our of your way. Emergency vehicles will already, I expect, have this power - - so why not create a system that allows your car to implement the same "get out of my way" program for a price?
But such a system might not be so simple. In many urban areas (especially DC) everyone will program their cars to scream "I AM IMPORTANT! MOVE!!!" And because everyone has programmed their vehicles to be important, no one will move, and no one will benefit.
To solve this impasse we turn to the economist's favorite tool - pricing. For most economists, the creation and function of prices is the equivalent of duct tape, a good knife, all-purpose oil/grease, and adjustable pliers all rolled into one. Prices hold things together, allowing people within a market to trade with each other and function as one unit. Prices remove and separate unwanted or unproductive portions of the economic structure, resulting in concentration of resources on productive uses. Prices speed and smooth interaction between the various elements of an economy, allowing greatly reduced friction (transaction cost) and less wasted energy. Prices continually adjust to best regulate the good or service being traded, adjusting much faster and more precisely than human-controlled mechanisms ever could.
But how do prices help us solve our priority-auto-driving problem? Well, the simplest way would be to have each driver program a price at which (s)he is willing to move out of the way for other drivers. In this case your vehicle would automatically accept a move request, and payment, from the vehicle of a driver who is willing to pay more than the minimum you have set. You could even allow drivers to change their prices on the fly. Say you have an important meeting to rush to. You set your "priority price" at $0.75 and set off. Many people move out of your way, but as traffic gets heavy and you are forced to slow, you look up from your laptop and instruct your car to offer $0.80. That doesn't free you, so you increase your "bid" to a full $1.00. That does the trick, and you are soon zooming on your way.
You, as the driver, may also opt to allow your car to automatically increase your bid to whatever level is necessary (or some maximum you pre-select) to buy speedy passage.
Both of these methods are, however, potentially subject to what economists call the "holdout problem."
Presumably, drivers of vehicles would be able to set not only their "priority price" - the price they will pay to pass others - but also their "move aside price", the price they expect to receive before they will reduce their own speed or change lanes for someone else.
A holdout would potentially occur if, for example, you are trying to hurry your way through heavy traffic and, instead of allowing you to pay them and move out of your way, the vehicle in front of you sees your hurry and simply increases its prices. Dramatically. Before you know it, you might be asked to pay $50 or more before the person in front of you will move out of the lane.
One potential way of solving this problem would be to program your vehicle to hold a brief, almost instantaneous, auction. By communicating with the vehicles in relevant positions around you, your car could determine whether it would be cheaper/faster to negotiate a path around the recalcitrant vehicle in front of you rather than buy him off. Though you may run into areas (especially around DC) where everyone expects a fair amount to cede right-of-way, peoples' self-interest should give them enough incentive to accept your offer before someone else does.
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