The Black Market and College Furniture

College kids have used stolen milk crates for decades as building blocks of coffee tables and dorm room shelves. Now, people are cashing in by swiping thousands of the containers from loading docks and selling them to shady recyclers. The containers are chopped and shipped to China to be made into a variety of products. This represents an estimated $80 million in losses from the thefts. Dairies across the country are moving to stop the plastic pilfering. In California, companies are even hiring private detectives and staging sting operations.

"We saw them disappearing into this black hole," said Rachel Kaldor, executive director of the Dairy Institute, a trade group in Sacramento. "We just don't know who's stealing these crates off the loading docks."

In the past two years, the high-density plastic has joined a list of materials that are being stolen and sold via a thriving underground recycling network. Thieves target copper, aluminum bleachers, beer kegs, even cemetery vases and nameplates.

It took a while for dairies to determine what was happening to their crates.
"If it were just college kids taking them, the dormitories would be overflowing with milk cases," said Stephen Schaffer, general manager of Alta Dena Dairy near Los Angeles. The crates are made of petroleum-based plastic that has increased in value along with gasoline prices. The material now sells for 22 cents a pound, compared to 7 cents a pound in 2005, said Patty Moore, a recycling consultant in Sonoma, Calif. Consumers can spend as much as $10 for an "authentic" dairy crate at retailers such as the Container Store. Dairies pay about $4 when they buy in bulk.
Last year, the industry lost about 20 million crates to thieves. California, the nation's largest dairy state, has taken the lead in the fight against plastic poachers. Wood hopes the busts encourage college students and homeowners to voluntarily return any stolen milk crates they might be using. Alta Dena's has even set up a "milk crate abuse" hotline at (800) 457-6688 for people to surrender the containers, no questions asked. It shows that illegal undocumented black markets really do exist. There can be a market for anything. Most often, we just think of black markets as drug selling murder rings. Well, milk crates count also.

Airspace a private good

The tragic story of the two news helicopters colliding in Arizona during a high-speed police chase demonstrates how airspace can be viewed economically as a private good. Air traffic control acts as a supplier of the good. The good is excludable because air traffic control must clear crafts to fly in the area. The air is rival in consumption because only one aircraft can occupy a particular unit of air at one time or tragedy will ensue as did in this story. What is considered a unit of air can change what category the good would be considered. If the unit of air is the entire airspace that air traffic control allowed the aircrafts to occupy, then more than one person could use that unit at the same time making the airspace an artificially scarce good.

Live Earth: Harmful...or Beneficial?

Some of you may recall that there was a series of concerts that took place in early July to benefit the environment, even though it wouldn't surprise me if you are scratching your head saying...what concerts? Anyways, Al Gore and a bunch of celebrities/music artists decided that it would be a nice idea to hold a series of concerts in different places around the world to "spread awareness" about the environment/global warming. The article gives some more specifics on the events that took place. Anyways, I have been sitting on my opinion of these concerts for a long time. While I understand their intentions, I question whether or not the benefits outweighed the negative outcomes. Now, the negatives of all of these shows would be the amount of fuel the artists wasted with their tour buses and planes, the electricity the concert was fueled on, the security, the money spent on fancy bottled water and random foods demanded(have you ever seen what some of those artists demand in their dressing rooms?) the artists drink and eat, the fact that they are wagging their fingers at me for taking a ten minute shower even though they drive a Hummer or Escalade which causes a certain feeling of nausea in my stomach.....but Al Gore swears up and down, as do many other green thinkers, that the "awareness" that was spread will outweigh these costs. Now, correct me if I'm wrong, but just because you tell someone something, it doesn't necessarily mean they are going to act upon that information. I can tell you we have class at 10 AM on Monday, Wednesday, and Friday, and you are aware of it, but you decide that staying in your room playing video games is worth more than your class. Another claim was that the concert "wasn't meant to just make changes for the general public, but to inform the lawmakers and activate their awareness". I just feel like this whole save the environment campaign would have worked better with a small, grassroots movement style. Concerts with thousands of people are VERY impersonal. Plus, if it is your favorite band, singer, or actress, you don't give a blast what they are saying--you're into the music! Adrenaline is pumping, you're waving your hands in the air, jumping like a puppet on a string...you aren't REALLY listening with full concentration (it is nearly impossible to with all the other people screaming around you anyways). I think by traveling the country/world (by bike or something more environmentally sound-maybe three bands could have fit into a plush tour bus instead of one) playing acoustic shows, doing volunteer work with communities, or holding autograph sessions and speaking about the environment, would have suited this kind of message a lot better than these concerts.

What do you think of the Live Earth Concerts? Did the costs outweight the benefits, or vice versa?

The economy of luxury

The Emporium is getting ready to celebrate their 10th anniversary. The Emporium is a large department store which carries all of the latest designers and fashions.
The senior managing director in charge of the Emporium explains how nothing comes easy but by pushing your idea and finding a level playing field with your shareholders you can be very successful. He managed to get a store placed in Thailand which he said was very hard work considering that his partners didn't think that it would do good. But because he researched his plan he found that the area would be a success, and now that 10 years have gone by he was right.
Another move that he made was by personally going to the clients he wanted on board with him. while Louis Vuitton and other clients turned him down, Chanel got on board with him. That was all it took because right after they took it one, the others followed.
He explains that you must start in moderation and then grow. But to be efficient in any economy you cannot grow too rapidly or you will lose your footing and your idea will collapse.

Northwest Airlines Canceled Flights

http://money.cnn.com/2007/07/30/news/companies/northwest_canceled_flights/index.htm?cnn=yes

In the attached article concerning Northwest airlines, the author talks about the high percentage of canceled flights due to the number of pilots calling in sick. He goes on to explain that the reason pilots are calling in sick is because they are afraid they will hit the maximum number of flight hours allowed by the FAA too early in the month. This action by the pilots has caused an 8% cancellation rate of scheduled flights and a 6% decrease in Northwest stock. I wonder if the airline has considered its marginal cost and the cost of hiring more pilots verses the cost of bad business?

Hershey’s Profit Falls on Cost of Job Cuts

According to New York Times, the largest US candy producer, Hershey, its second-quarter profit fell 96 percent due to the elimination of jobs and higher dairy costs. The net income dropped 41 cents a share compared to a year earlier.

In the article, it says “the elimination of 1,500 workers and the transfer of some operations to Mexico cost $124.4 million before taxes in the quarter.” I do understand the transfer of equipment will cost a lot to the company, and I think moving the manufacture to Mexico just fits capital flows theory. Because in Mexico, the wage rate is lower than the US, capital flows can help reduce the labor costs. However, I am not sure why the elimination of workers will cost money too, and it seems this cost is not small.

Hershey is trying to make profits despite the temporary loss. “We understand the missteps over the past few quarters and we are aggressively addressing them,” Richard H. Lenny, the chief executive, said.

Gas Prices Down

As most of us have notice gas prices have been going down this summer. This can be contributed to the fact that American refineries have started to reopen and up the production levels. However, with companies out trying to make a penny over paying at the pumps will still occur, due to the fact that it is summer and people are going on vacations. As more and more people start travailing and companies are cashing off on this perhaps this is also another indicator the the economy is recovering. Over the summer so far gas prices, depending on where you live, have dropped by about 30 cents thanks to the fact that the America Midwest refineries are recovering and producing more.

Ranchers, farmers battle over corn

Discussing an ongoing battle, corn has spiked due to the Ethanol battle from $2.50 a bushel to over $4.00 earlier in the year. On Tuesday corn delivery was at $3.12. The higher corn prices are leading to higher feed costs for many farm animals. The prices are also leading to less grazing land and higher costs for land as it is being converted to acres to corn. Where is the feed going to come from and what is going to happen to our competitive position internationally? These are among many questions that are being asked by Jesse Sevcik of the American Meat Institute as she notes that the livestock sector is losing its position to ethanol as the main consumer of U.S. corn. According to the Renewable Fuels Association, more then 120 ethanol plants are now in operation and 76 more are being built or expanded.

Cattle producers can use a variety of feeds, but other things like soybean and hay have also risen as farmers are using more land for there corn. Several other prices are higher due to the corn increase. Milk prices are up 10% from January, beef and pork prices are up 5%, and poultry are up 6.5% according to the Labor Department’s consumer price index. For pork and poultry producers, “an increase to $4 from $2 in the price of a bushel of corn and a jump from $120 to $260 per metric ton of soybeans translates into roughly a 30% increase” says Michael Swanson, an agricultural economist at Wells Fargo. For consumers, meat, milk, poultry and eggs make up about 20% of a families food budget. Also Cereals and grains account for 8%.

A website sponsored by cattle, beef, dairy, poultry and egg producers focuses on the side effects of the booming ethanol market. I encourage everyone to look at the website and read the articles because it is very interesting.

balancedfoodandfuel.org

Minimum wage hike kicks in Tuesday

A minimum wage increase affected 20 states on Tuesday. This was the first in a series of wage increases. The wage increased from $5.15 to $5.85 on Tuesday and will increase on July 24, 2008 to $6.55 and then on July, 24 2009 it will raise to $7.25. The last wage increase was in 1996 and 1997 and was a two step increase. Because there are 30 states that have a minimum wage that is already above the federal wage only 20 states were affected by the increase. According to the Economic Policy Institute more then 70% of workers already worked in the states that were not infected by the increase.

The director of the labor law policy at the U.S. Chamber of Commerce, Marc Freedman says “the higher federal minimum wage could mean fewer hours, fewer pay increases for other employees, benefit reductions, job losses, and waning job creation”. “In particular, in the small-business sector where companies have restricted cash flow, any time you have arbitrarily increase labor costs, they have to cover the costs in some ways.” Freedman also says “They have to pay more and get nothing out of it.” So would you say that this is an external benefit?

Ohio minimum wage is $6.85

West Virginia minimum wage is $6.55

Pennsylvania minimum wage is $6.25

Back-to-school pricetag: $18.4B

Back to school price merchandise is estimated to rise to 18.4 billion dollars this summer from a 2006 price of 17.6 billion. A large contributor to the price increase lies largely in the new and advanced technologies. New computers, music players, and cell phones are contributing a lot to the increase. Families with student are expected to spend an increase of 6.9% more on school supplies and 13% more on new gadgets year than in 2006 according to the National Retail Federation’s back to school survey.

Not only is electronics expected to rise, but also shoes and clothing sales are expected to increase this year. Also, because of the up-rise in the price of gasoline many families are planning to finish there back to school shopping on the net. This number is up 15.2% from last year. Many families are planning to shop at discount store rather then specialty store or department stores.

Throughout time, electronics have turned from luxuries to necessities for everyone. Parents are also investing a lot of money into learning tools such as laptops, educational software, printers, and books to help support their children’s learning experiences. The one thing that this article does not talk about is the amount of money that it costs to go to school. It seems to me that they price keeps increasing, but is there a point that the price of college has become overwhelming that kids and there parents will not be able to afford it. The next time you are begging your parents for that new iPod or new cell phone take a second and think about if you really need new apple iPhone or the new 80 GB video iPod or if you could settle for something less.

More then half of teens forgo summer jobs

For the first time on record, most U.S. teenagers are not or have not been looking for summer jobs. Many teens are forgoing traditional work at camps, pools, and ice cream stands. The Labor Department stated that teens, 16 to 19, are not looking for jobs in June 2007 (48.8%) which is down from the number in June 2006 (51.6%). The reason for the increase is said to be that more teens are spending time studying. The number of students in June 2007 is up form June 2006. So are students realizing the fact that a good education is important for their future or are teens having to take classes over because they didn’t put forth enough effort? A statement from Daniel Sullivan, an economist at the Federal Reserve Bank of Chicago, says “The value of school is higher than it used to be.” Also, “Students are accurately seeing that a good education has become more important for their careers and future wages.”
Because of the strong stock market gains, household net worth has increased which has given parents the ability to save more money for their children’s education. Therefore, teens do not have to work as much to save money for college. Another reason for teens not looking for jobs is the competition with older worker and foreign immigrants. Some teens feel as if it is not worth it because they will not get a job, so they just give up. So the teens that want jobs are having trouble finding them.
Some economists say that the kids that stay in school will benefit themselves and the economy. They believe that the more educated they will be in the work force the more productive they will be in the end. A professor from the University of Minnesota says “working moderate amounts during high school helps teens not only learn skills such as how to work with others, but also helps develop self-esteem.
When I was in high school I chose to work where ever I could just to have some money to spend. I question the fact that more kids are studying during the summer then being lazy and not working, especially at the age of 16-19.

New Fuels Looks Hopefull

Throughout reading this article it reaches out to me being a Petroleum major that new fuels are the future. Petroleum will remain a huge part of the fuels around the world and that wont change, but on the other hand we will start having a increase in alternative fuels such as the biomass's that the article speaks of. This will help cut down on some of the prices of oil since the demand might decrease. I think we will always have industry in foreign lands simply because we have to go where the oil is and if its out of this country were going to go get it. I do think that the alternative fuel idea is in genius considering most of the major oil company's have already taken to it. I have worked for Chevron and Anadarko Petroleum corporations and I can clearly see that they are pushing for finding better ways to create alternative fuels that are more and more efficient to the economy and environment.

Market share and the " Big Three"

Before the 1970s, the United States basically dominated the automobile market. The big three include General Motors, Ford, and Daimler Chrysler. In 1962, half the cars sold in America were made by GM. Now its market share is roughly 25 percent. In 1999, the Big Three had a 71 percent market share. According to the Washington Post, their share is now 58 percent and falling. Twenty-three percent of those working for auto companies in North America now work for companies other than the Big Three. GM says its health care package, negotiated with the United Auto Workers, puts it at a $5 billion disadvantage against Toyota. Japan's government, not Japanese employers, provides all health care in Japan. This could lead much of corporate America to push the federal government to assume more health care costs. This would be done in the name of "leveling the playing field" to produce competitive"fairness." Every dollar GM spends on health care cannot be spent on developing cars, like hybrids. We know that any large market share and limited competition is not true competition. How would you define this "competitve fairness?" The Asian motor companies that are in the market are a part of these woes. They had easy entry into the market and are able to produce cars at lower total costs. GM and the other American companies are held down by the expensive packages the unions require. Should we save American automakers by raising taxes to fund universal health care, or is GM over its head? This problem sounds like a web of slippery slopes.

Thirsty? Bottled water industry booms....

In what would seemingly be a perfectly competitive market, some producers of bottled water have found ways to make their products more unique, individual, and attractive to the market--causing high prices along with high sales for bottled water. At the cafe featured in this news clip, the best selling bottle of water is 30.00 a bottle, and the most expensive bottle of water is 55.00! So what is the big deal about this bottled water? I can turn on my tap and easily get drinkable water. According to the taste test, apparently, 3 out of 4 preffered the "expensive" water over the tap water, though. As far as health is concerned, the benefits of bottled water vs. tap water are still under debate, so why do you think so many people are willing to spend so much money on a simple bottle of water?

Applied game theory useful in online marketplaces

In today's society companies are getting ahead by using a Game Theory. This game theory helps companies to see what strategy another company is using so they can play against it.
A company called DUBAI is an international organization that is expert in the application of game theory to e-market design and e-commerce.
Ebay is one of the largest participants in this theory. Bidders will wait until the last minute of an auction in order to place their bid. This is because they know they have a better chance in getting what they are bidding on, due to the fact that no one will be able to place another bid. However the bidder doing this has to think in the eyes of other bidders in order to out bid them at the last minute.
Now a days there are companies that will watch an item for someone so that they don't have to constantly stare at a computer screen. The companies to the last minute bidding for the client in order to assure their client gets the item they want. This kind of theory is known as Sniping.
If companies are going to start using this sniping method in order to get ahead in their business, they will undoubtedly get ahead, but the question is for how long. There is only a certain amount that a company can do without using another approach.

Can companies compete when marginal costs are zero?

In this section of the course you are learning about the profit-maximizing behavior of competitive firms. Chapter 8 introduced you to the different types of costs that firms face. One big distinction is between fixed costs and marginal costs. From Chapter 9 you learn that a profit-maximizing firm should produce its output up to the point where marginal revenue (MR) equals marginal cost (MC). The blog entry linked above compares two different industry settings, each with high fixed costs but very different marginal costs: the auto industry and the movie making industry.

Do you agree with the author's characterization of the marginal costs in each industry? Why or why not?

Do you agree with the author's contention that competition will occur to the same extent in each industry?

The High Cost of Smoking

In the article, The High Cost of Smoking by Hilary Smith, the author presented many actual costs and opportunity costs accumulated by smokers. While I agree that these costs are real, the author missed one important factor; enjoyment!

While I agree there are many costs associated with smoking, and often the burden is shared by society as a whole, the author did not answer the most important question. Why do people smoke? As with any choice in life or business, an individual weighs the cost verses the gain. While many people who don't smoke can't understand how the cost cannot be higher than what little enjoyment a person might derive from smoking, I am sure a smoker would tell you the opposite. Therefore, my question is this; how can you calculate the cost of smoking if you do not place a value on the pleasure a person gets from this habit? Another example would be the cost of an additional big mac to a morbidly obese individual or the cost of another drink to an alcoholic.

Economics....it's in the music

I've been toying with the idea of incorporating an assignment into my courses that requires students to locate a song whose lyrics could be interpreted from an economic point of view. For an example of such assignments, check out From Abba to Zeppelin, Led. Do you know of any songs that contain some sort of economic lesson that might be ripe for such an assignment?

Beer Prices Barrel Higher

As today is fourth of July many will be paying more for their beer this year than in 2006. The price for beer has risen 3% in May then last year. With the most vital reasoning being the booming ethanol market. The increase is due to the fact that more farmers are using less land to harvest the malting barley, which is one of the main ingredients in beer, and more land to harvest corn. Farmers are growing more corn because there is more demand right now for corn to produce a fuel alternative blended with gasoline, which is known as ethanol. Also, the potential profits for corn and soybeans are higher then the barley.

The increase in price is not only due to decrease in barley but also there has been an increase in glass, cardboard, other grains, energy, transportation, and also labor. The malt, which is made from the barley, has increased 9% in the past year. Barley is becoming more expensive due to the fact that more of the corn being produced is being sold for ethanol rather then to feed the livestock. Therefore, more grains are being grown to simply feed the farm animals. A statistic shows that corn plantings have increased 19% in the last year.

So how much barley is used in a barrels of beer? This question is dependent on the type of beer, weather it is a light beer or a German dark beer. From the department of plant pathology website it says that on average 24-25lbs of barley is used in one barrel of beer. Company's such as Coors say that "the higher prices are not fully covering their increased cost", but "the competition is too fierce to raise the price too much." A statistic shows that U.S. age 21 and older on an average drank 30 gallons of beer in 2006. Also the statistic, according to the Beer Institute, says that Americans drink more beer on July 4th than any other day in the year.

After reading this article i wonder if the price of the home brewing kits are going to start increasing and if they are going to be used more. Also, the question of if the brewers who use a excess amount of barley will cut back on the barley, or boost the price. These questions can only be answered in the future.