Stadium: A Public Cost for Private Gain

A big reason for the current fire sale of talent in the Florida Marlins is due to their demand for a new stadium.

http://www.ballparks.com/baseball/national/miabpk.htm

This link shows the proposed plans for a new stadium in Miami and of course the owner of the Marlins wants the city of Miami to pay for $198 million dollars, provided by the tax payers of the city. Now it is believed by some that having a sports team provides no new economic growth and that there is a fixed amount of money in an economy and people will spend it at other places within the city if the sports teams leave. Well then why can the owners expect the city to pay for such a large part of it when there is no significant economic boom after? I’m sure there are better things that the almost 200 million dollars could go to in the city of Miami. Also, new stadium or not Miami isn’t that great of a sports town. Attendance at a game this past season was under 1,000 people, more people came to Schaly Stadium for community day. Although the stadium would be nice to have is it really needed, or wanted?

A-Rod's Dollars Make Sense for Yankees

It is the largest deal in professional sports history, and both A-Rod and the Yankees stand to get significantly richer because of it. A-Rod is likely to generate $450 million of "value" for the Yanks. Assuming they will exceed the luxury-tax threshold in each 10 years and face the 40% tax, the total cost for Rodriguez will be $427 million. The true economic value of A-Rod is based on the Yankee's growth and his Marginal Revenue Product. The article talks about other places the Yankees could have spent their money, broadcast revenues, increased ticket prices and demand for games. All of these topics are because of Rodriguez. After our class discussions, what is everyone's opinions on one of the biggest sports contract to ever exist.

Tampa Bay to Get New Ballpark?

Despite money woes that have lawmakers scrambling to pay for state programs, Florida Govenor Charlie Crist said that he thinks the state should try to figure out a way to help the Tampa Bay Rays build a new waterfront ballpark in St. Petersburg. But how?
Earlier this month the Devil Rays announced plans for their $450 million open-air, waterfront, downtown stadium. Crist has stated that he will do whatever he can to help the process move along smoothly. He claims that the new stadium will result in economic growth for Florida and create "jobs, jobs, jobs for a lot of people." It seems that argument of new jobs is always used, but as we have learned, not as many jobs are created as people may think.
Currently, the Devil Rays play in Tropicana Field which does have a roof. However, they envision a 35,000 seat stadium on the current site of their spring training facility.
What do you think would be an appropriate way to fund the new stadium? Should they tax cruise-ship passengers and try to put the tax on out-of-town visitors (rental cars, etc) or should they simply just have the citizens pay for it? What about Crist's argument of the new stadium resulting in economic growth and jobs?

Teams bring more than money to a city...

Taking an Economics of Sports class and learning about the various financial effects of a sports team on the city they represent has got me to thinking. I know that a real Economist is only concerned with the bottom line, the final number, but I think that the effects of sports teams go beyond what can actually be measured by a calculation or number. Last night I attended the Pittsburgh Steelers vs. Baltimore Ravens game in Pittsburgh. I have attended many of the games at Heinz Field this season but each time have been more crucial of the economics side of the business (or team) that I was rooting for. Could they cut costs there? Should they make a bigger stadium? Why don’t they charge more for that? The list goes on. Last night however when I was standing in the parking lot 4 hours before the game drinking the legal beverage of my choice I realized that, at least in Pittsburgh, Steelers are about so much more than just a business. The effects of the team’s winning percentage are irrelevant to the atmosphere before the games, people from all walks of life come together to have a great time, to relieve the pressures of day to day life and the 64,546 people that packed Heinz Field last night experienced a type of emotion that is difficult to describe. Now last night’s game was an exceptional example considering the Ravens served the Steelers the win on a silver platter, but the effects are still the same. As I stopped at a rest area during my trip from Pittsburgh to Marietta at about one o’clock in the morning I realized that nearly every car in the Ohio rest stop were full of Steeler fans. Terrible towels, Steeler flags, logos, jerseys and more colored the rest area black and gold. I just think that to say that a few quick calculations could measure the true financial effects of a team on a city would be ignorant. Now of course, I am obviously a Steeler fan, and a Economics minor should I be able to separate emotion and passion for a team apart from the business side of the game? Maybe I should be able to, but I simple don’t think that it’s possible to do.

Baseball Stats Inspire Sports Economists

How do you become a sports economists? What 9 year old says I want to be a sports economists when I grow up? Most say I want to be a baseball player or football player, but not very many people get to make it professional. True sports fans have a numerical obsession that gages how well a player is hitting, throwing, or shooting. These stats are looked over and talked about every season, but unfortunately there aren’t too many careers that involve memorizing stats and analyzing. However there is an alternative career that involves numbers and sports and it is being a sports economist.

http://www.usatoday.com/money/2006-07-27-sports-econ-usat_x.htm

Former Former Federal Reserve chairman Alan Greenspan admits learning mathematics using baseball stats and current chairman Ben Bernake isn’t any different. The link above discusses more about why there is an increase in interest and the new audiences sports economics is grabbing the attention of.

Smaller Stadiums; are they good or bad for the viewers?

It is obvious that stadiums are getting smaller these days. In fact, in the past decade, the Seattle Mariners are the only team to have built a larger stadium than the one before it. At www.foxbusiness.com, they say that the reason for this is to be more like a nightclub. If the club is full, more people will come, even if it is full only because it is small. The owners want the stands to be full, because they don’t want the people at home watching the game to see the empty seats. The smaller stadiums are good to the fans, because they have larger seats that are closer to the field, wireless internet available, and more concessions available with smaller lines. All of these facts look good to the consumers, except for the fact that because of less seats, the price of seats will go up. Fans will also have the disadvantage if they like to decide to go to games the day before, or the day of, because tickets might be sold out. So, is it better for the fans to have smaller stadiums? I think it is better because if you plan ahead and pay a slight increase in ticket costs, the advantages of having smaller lines for food and larger seats will be worth it.

Teams pack up and leave (is that bad?)

It would be logical to think that a lockout by team would be bad for the local area around stadiums. With no games consumers would have less reason to visit the area. Also that a team leaving the city (for any reason, like lack of a new staduim) would have a heavy impact on the cities economy. However, its seems to be quite the opposite. During the strike of the NBA from 1998-1999 there was almost no impact at all. In fact a team leaving a city didn't even impact the economy the next year. This suggest that consumers will spend their dollars on something else, perhaps a different form of entertainment or maybe some other luxury. So does the threat of leaving if a city won't back the creation of a new stadium carry any weight, or is it the empty threat of desperate entity?

TBS Has Record-Low NLCS Ratings

After our discussion in class about broadcasting revenue, I thought this article was interesting. TBS, which is now carrying more than just Atlanta Braves games, isn't drawing a large crowd for the playoffs. The National League championship series had all the elements of a low-rated sporting event: a sweep involving two smaller-market, tradition-poor franchises. Why would anyone think that the ratings would be higher? The Rockies four-game sweep over the Diamondbacks drew a 3.3 rating for homes with TBS. The previous low average NLCS rating was a 6.2 for the Mets' five-game victory over the Cardinals in 2000. Why the big difference? Even though they are smaller teams, it's the playoffs. This is where teams are supposed to bring in extra money. However, Tuner Sports said network executives were "still very, very happy" with their seven-year deal with Major League Baseball despite the low NLCS ratings in their first year airing the playoffs. President David Levy is still optimistic. He said that broadcasting all the division series games on the same network helped attract viewers by eliminating confusion. Which could be very true. Were the ratings low because both contenders were small-market teams? Why wouldn't the playoffs draw more attention and demand?

Real Madrid the Yankee's of soccer

Baseball isn’t the only sport where teams attempt to buy a championship. Take a look at Real Madrid a Spanish soccer club. Real had over $200 dollars of revenue in the year 2002, and only made $10 in profit. Where’s it all going? You guessed it into the top notch players they buy from everywhere. Take a look at the roster. Ronaldo (world player of the year, current record holder for goals in a single world cup, world cup champion), Zinedine Zidane (2 time world player of the year, widely regarded as the best center midfielder to ever play period, was the highest paid player in sports prior to A-rod, world cup champion, Euro 2000 Cup champion), Luis Figo (2 time world player of the year), David Beckham (prior to move to the US, Beckham was the world player of the year and international icon). So what does it all mean can you buy a championship? Why yes you can…Real won the Spanish league in 2003, winning for the 29^th time and club history. That’s 3 more time than the Yankees, and they were founded just 1 year before. With all the power Real commands in Europe they sell jerseys for $65 a pop. That’s about $15 more than the Yankees. But does all this winning ruin the sport of soccer in Europe? Not quite. Real’s stadium holds 17,000 more people than Yankee stadium, it being one of the smaller stadiums in even in the country. Oh yeah its been sold out for the last 10 straight seasons (to every game)…

Forecasting the Winner of the Nobel Prize in Economics

The Bank of Sweden Prize in Economic Science in Memory of Alfred Nobel (aka the Nobel Prize in Economics) will be announced on Monday, October 15, 2007. Of the 58 men who have won the award outright or shared in it since the prize began in 1969 (no woman has yet to win it), 38 have been Americans. The leading university homes of the winners include the University of Chicago (9), followed by Columbia (4), Harvard (4), University of California-Berkeley (4), and Cambridge University, England (4).

Now, let's see how well you can forecast. I will award 2 bonus points to the first person who correctly forecasts the next winner of the Nobel Prize in Economics. Your educated guess must be posted as a comment to this post before the Nobel Prize announcement is made. In the event that more than one person submit identical guesses, the earlier timestamp of the comment will determine the winner. The bonus points will be added to the winner's next exam score following the Nobel announcement on October 15.

Enter your comment by clicking the comment button at the bottom of this post. If you are not a member of Blogger you must choose an Identity: choose "Other" and put in your real name. Click "Publish Your Comment" when done.

Will/should the NFL move to a 17 game regular season?

The NFL Commissioner, Roger Goodell, stated on April 26, 2007 that the NFL has been thinking about adding a 17th game to the regular season. He said that if this idea goes through, they would probably drop a pre-season game. This option sounds like a good idea, but is it from an economic viewpoint?
There are many factors that will determine if an additional game will be a good idea or not. For instance, an increase in regular season games might only increase games in foreign countries. If this happens it will add profit to the NFL, but not to the individual teams and fans. If the extra game is played in the states, the fans will benefit by being able to watch another game, the players will benefit by getting a much higher salary in a regular game compared to a pre-season game, and the franchises will benefit by making a better game-day profit. The only problem is if the players’ salary increase were to be higher than the game-day profit. If this would happen, everyone would still profit except for the franchises. This probably will not happen because the demand for football is so high, that only one more game will still have the same demand as having a 16 regular season schedule.
So, should there be an additional regular season game? I say yes, but make it be in the United States, so we all can benefit from it.

Tribe Competes for Best Record in A.L. with One of the Smallest Payrolls

This past weekend the Cleveland Indians clinched the central division title for the first time since 2001. Now they are playing for home field advantage in the playoffs, were the team stands to make more money on gate, merchandise, and concession revenue while still paying much less salary to their players compared to Boston, New York and Los Angeles. http://sports.espn.go.com/mlb/teams/salaries?team=cle ranks the teams in MLB by salary this year and the Indians are 23rd out of 30 teams. Only San Diego (24th) is contending for the playoffs with a lower payroll. However, it has been 5 years without a playoff appearance for the Indians while the teams with the highest payrolls such as the Yankees, Mets, Dodgers, and Red Sox seem to always be in the race for a Pennant. There even seems to be a correlation with playoff appearances by teams and their salary. Yankees pay almost 4 times more then small market teams like Cleveland and San Diego, but as a result make the playoffs four times as much? Can a small market team compete year in and year out, or do they need to rebuild after a good run of 5 years or so? I think it would be better for MLB if every team made the playoffs equally to create excitement in these smaller markets and to stop “evil empires” from monopolizing the playoffs.

The Fed Rate Cut vs. Inflation Fear

The Federal Reserve cut the target on a key short-term interest rate by half of a percentage point to 4.75% last Tuesday. On the same day, the Fed also cut its discount rate by another half of a point to 5.25% after the surprise cut on 8/17/07. It is clear that the Fed is willing to take any moves necessary to ensure that the US economy is not derailed by problems in the subprime mortgage market. The federal funds rate is an overnight lending rate that banks charge each other. The rate cut is a very important tool because this funds rate influences the amount of interest consumers must pay for various types of debt, such as credit cards, home equity lines of credit and auto loans. The Fed is “intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time.”

Stocks surge after the Fed announcement of rate cut. The risk of potential inflation starts to catch people’s attention. Inflation could come from the still-booming global economy and from the lower rates, which push more money into the economy, making it easier to raise prices. In the statement, the Fed indicated that more rate cuts could be on the way. Do you think the Fed might cut rates too much? Are we expecting inflation now? I remember that the Fed had to raise rates in 1999 after cutting them during the 1998 financial crisis and the economy ended up in a recession in 2001. Do you think the same thing is happening now?

GM Walkout: Union Fringe Advantage?

United Auto Workers (UAW) walked out across the US in the first strike at General Motors (GM) since 1998. The two major issued as the two sides negotiate a new national contract: whether the UAW, having made big concessions on health care, should get some kind of jobs guarantee from GM. The GM management and UAW leaders held several bargaining sessions, trying to come out with a deal that would set up a huge, union-led health-care trust to assume retiree medical benefits and address a slew of other economic issues. Apparently, the two sides did not come to an agreement.

As we notice, the union wage advantage is an estimated 13 percent over their nonunion counterparts. This advantage rises by 2 to 3 percentage points when fringe benefits are considered. Here comes the question: why do union workers enjoy a greater variety and higher overall level of fringe benefits than nonunion workers?

First, union fringes may be higher because the union is able to deprive management of its workforce and the employer is willing to pay both higher wages and larger fringe benefits to avoid the costs of a strike. Second, union workers, by virtue of their higher earnings, may simply choose to “buy” more fringes than lower-income nonunion workers. Third as a collective-voice institution, a union may formulate fringe benefit proposals, inform its constituents of the details of such proposals, and crystallize worker preference. Fourth, older workers are usually more active in the internal politics of a union and therefore more influential in determining union goals.

What do you think about unions? Do you think unions are a positive or a negative force insofar as economic efficiency and productivity are concerned?

Seattle Supersonics; An Attempt to Trump Local Government

Seattle officials filed a lawsuit against the SuperSonics to prevent them from leaving town this Monday. The franchise has claimed arbitrary losses since the 1990's, and the losses of the 2007 fiscal year will exceed seventeen million. However, the Sonics had previously agreed to a fifteen year lease to play the rest of their games at the KeyArena, the smallest venue in the league, which will be up in Sept. 2007.

The Sonics are trying to exploit their losses in revenue to the media, and use it to their advantage in an attempt to have a pricey new $500 million stadium built in Seattle. The franchise is claiming they have to pay unfair amounts of the revenue they are generating to the city. The team is trying to buy up the remainder of the lease in order to get out of their agreement and move out of the city. This would hurt the overall fan base for the Sonics, which is relatively small compared to other franchises because of the poor quality over numerous years in the league.

The franchise is trying to present an ultimatum to the city of Seattle. If they do not get a new stadium, they are threatening a move out of the city, causing a loss of revenue for the city as a whole. This would interfere with the markets of other regions in the country if a move was made. However, the local government is stepping up, and putting pressure on the franchise to remain loyal to their lease for the small amount of time they have left to fulfill it.

More Apply for Jobless Benefits

Recently, the labor department released the data of new applications for unemployment insurance. By August 4th, the application increases to 316,000, the highest point since late June. However, claims are still lower than one year ago, which is 319,000. The government also reported the nation’s unemployment rate of July. It was 4.6 percent in July, the highest in the recent six months, indicating new job creation is slowing down.
The unemployment insurance reminds me of the decline of unionism. Since 1960s, the percentage union members in the US are declining all the time. Besides the structural changes and managerial opposition, substitution effect is another important factor. Many of today’s public programs provided by the government were only available to workers through unionization, so employees of today do not have to join the unions to enjoy these benefits. Still, unions can bring some other benefits such as a higher wage, so to join or not to join the union is really a personal decision.

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.

The i-phone

The new apple iphone seems to be the stir up in New York City as it prepares to make its premiere debut. The new phone looks like its a big hit as any new technological device is when it first comes out. Question being is it to much for apple? I mean thinking about it, the phone has everything that would cause sales on ipods and other apple software and devices to decrease. The phone just might have to much stuff in it. Apple designed the phone to give the user everything they would ever need in the palm of there hand but I think it might cause ipod sales to decrease a little and maybe even cause the ipod price to drop overall. Since there is Mp3 capability on the phone people might feel like why buy an ipod when i can get a phone and have it built in to it. The iphone is surely a new break through in phone technology but is it to much in your hand?

The Demand for Fireworks

With the 4th of July just around the corner, fireworks are hitting their peak season. The Zambelli family leads the pack in firework displays. During this time of year they have to hire 2500 additional employees to cover the increase in demand for firework productions. How does Independence Day impact the market for fireworks? The average firework show costs $10,000, but the prices spike up to $450,000 during this time of year. The fourth of July also impacts other markets. Idahoans are still spending money to travel despite the mid-week holiday and high gas prices. Around the country though, gas prices remain high and travelers will remain low because of the way the holiday falls and the decrease in demand to travel.

An iPod Has Global Value.

This article focuses on the assembly of the iPod. It shows that trade does pay off, or none of us would be walking around with that box attached to some body part. Apple outsources the entire device piece by piece. There are about 451 parts that go into an iPod. Three researchers at the University of California followed the trail of all the parts and realized how complex the global economy is. The most expensive part of an iPod is the hard drive which is made by Toshiba for $75. The finally assembly in China only cost about $4 U.S. Even though Toshiba is a Japanese company, they outsource the creation of the hard drive to the Philippines and China. This happens with all the other parts. It can get very confusing. The parts that are outsourced have smaller parts that are further outsourced. The $73 Toshiba hard drive contains $54 in parts and labor. Toshiba added $19 in value to the hard drive plus its own direct labor costs. This $19 is attributed to Japan since Toshiba is a Japanese company. The largest share of the value added in the iPod goes to the United States because of the units sold. The researchers estimated that $163 of the iPod’s $299 retail value in the United States was captured by American companies and workers, breaking it down to $75 for distribution and retail costs, $80 to Apple, and $8 to various domestic component makers. Apple figured out how to combine 451 mostly generic parts into a valuable product. They may not make the iPod, but they created it. This article shows how just one small product can have a global presence. Since the United States is a service economy, our ideas and creativity are more valuable than our labor or assembly. What do you think?

Housing/Home sales continues to fall....

With mortgage rates rising and a surplus of unsold homes in the market, the housing market continues to slump. Many real estate agencies are looking at pricing cuts as the only way to clear the market of all of these unsold homes. In another MSNBC article I read, others are taking action by living with strangers, because the prices of housing are so high. Some analysts are forecasting that the housing market has yet to bottom out, and sales will continue to slow. What, if anything, can be done to help the housing market rebound?

Turbulent Times for Aircraft Manufactures

It is no secret to the U.S population that aircraft manufactures are having a rough time staying in the air let alone in business all together. It is reported that in May there was a 22.7% drop in aircraft manufacturing. However, aircraft manufactures are not the only ones feeling the pressure to sell products. Heavy manufactures and metal are all feeling the squeeze to sell their products. Looking at it from the aircraft manufactures if they can not sell plans to companies it is no wonder that metal and heavy manufactures are suffering as well, saying that aircraft constructions uses both of these business in order to produce their own product. The aircraft manufacturing industry is starting a ripple effect that is branching out to other industries. What could possible help save these companies? A higher demand in air plans, let alone want/need to travel by plane or something else?

Price Controls Are Short-Sighted

From time to time I am asked to sign a letter espousing a particular economic policy position. I recently signed a letter urging members of congress not to impose restrictions on trade between the US and China. I've also signed on board as opposing any form of price controls, whether it is for health care, prescription drugs, or gasoline.

What follows is a letter to the editor of the Marietta Times that I wrote following the Katrina disaster.

Recent events in the Gulf Coast have shocked our economy and have led to calls for re-examining our nation’s emergency response systems. Among the calls to action is the enactment of price gouging laws, particularly as applied to gasoline. Such laws would be unnecessary at best and counterproductive at worst.

Price gouging laws reflect a basic misunderstanding of the role of prices in a market economy. Prices serve as a signal of the relative scarcity of a product. When a product like gasoline is in short supply due to, say, the disruption of production and distribution channels, then basic economics suggests that the price of gasoline will (and, indeed, should) rise. The higher price sends a signal to consumers that they should economize on their use of gasoline. Thus, consumers are encouraged to eliminate unnecessary trips, form carpools, drive more fuel efficient vehicles, and other ingenious responses. By doing so, consumers are doing their part to help allocate gasoline to those who place a higher value on the available gasoline, e.g., those engaged in the reconstruction effort in the Gulf Coast. Furthermore, a rising price will send the necessary signal to producers to expand their production in order to help alleviate the short supply.

If price is not allowed to rise to levels that equate supply and demand in the face of such disasters, then prolonged shortages are sure to follow. Is it better to have a smaller amount of gasoline available at artificially low prices or to have more gasoline available, albeit at higher prices? If the price system is not allowed to freely operate, then some other means of rationing will likely occur. For example, one would certainly expect long lines at gasoline stations to develop—reminiscent of the 1970s failed price controls on oil. How much are we willing to pay by wasting our time in such lines?

It is often argued that gasoline stations that charge extraordinarily high prices after disasters are mere profiteers, looking to make an extra buck in an unfortunate situation. If a rogue gasoline station does charge such high prices, then we are always free to shop elsewhere. If enough people react similarly, then the offending station will receive the appropriate message. Furthermore, the offending station will have to consider the harm to their reputation for their opportunistic, short run, pricing behavior.

I do not presume to second-guess the wisdom of the market as some politicians and the editors of the Marietta Times have done by calling for the application of price gouging laws. No single person (particularly any politician) has any informational advantage over the dispersed knowledge of thousands of buyers and sellers as reflected in market prices. Anybody who thinks they can “beat the market” has succumbed to what F.A. Hayek has referred to as the “fatal conceit.”

Organic Milk vs. Conventional Milk

Based on our consumption experience, organic mild normally cost three or four times as much as conventional milk. Consumers are encouraged to buy organic milk because of the health issue and environmental benefits. However, this is not true anymore. The price difference between organic milk and the conventional milk is getting closer and closer. Conventional milk prices are getting pushed by several factors. For example, Australian drought, disappearing European subsidies, higher feed costs due to corn-based ethanol production and swelling global demand chief among them all increase the price of conventional milk. Meanwhile, the organic milk price has been dropping due to a one-year glut in production caused by farmers taking advantage of a regulatory grace period regarding feed requirements. According to the new regulation, starting next year, farms will have to go 100 percent organic. Farmers expect some cash inflow by competing with the conventional milk. The increase in supply decreases the price for organic milk. What do you think about the milk market? What do you think will happen after the 100 percent organic farm is built up?

High School Dropouts

What is the cost of quitting school? Most teenagers don't understand the long-term effects or opportunity costs associated with dropping out of high school. In an article by Christine MacDonald and Brad Heath of the Detroit News, the major opportunity costs not only to the student but also to the society are lower wages, costs of adult education, and higher taxes. MacDonald and Heath estimate that a high school dropout will earn $19,900, a high school graduate will earn $25,100, and a college graduate will earn $35,500 per year. Dropouts will have a 9% higher unemployment rate and 13% will live in poverty.

The cost of a high school dropout to Americans will be 38.2% of a greater chance they will be on public assistance. Is it beneficial to the government to spend more money now to keep students in school or let them drop out and continue providing some type of assistance; perhaps for their entire lives? Also, how do you convince taxpayers that spending the extra money now will save them in the long run?

Some Things Never Change

The article through Radio Economics which was published through The Japan Times tells about how Japan doesn't have an open market for foreign goods. Most citizens of Japan buy their good from their own country. Why is this? According to this article, it's due in part to America and Europe are too expensive. The article also states that Japan grows certain items, such as mangos and bananas in abundance. Americans purchase foreign automobiles everyday. The foreign markets make both right-hand and left-hand driving vehicles. Yet, Japan says that they can't get vehicles, at decent prices, from America or Europe. Also, American vehicles are too big and use too much gasoline. Therefore, they purchase vehicles from their own market. In my opinion, Japan is sucking the money up left and right from foreign countries -- yet, they don't give back by bringing the foreign goods into their market for Japanese citizens to purchase. This is extremely unfair. How do you feel about this strategy of Japan?

What causes gasoline prices to rise (and fall)?

Most prices fluctuate over time. Gasoline is no different as this chart indicates. The chart distinguishes between the nominal price of gasoline and the real (or, inflation adjusted) price. Our economic models are primarily designed to explain changes in real prices. From what you've read in Chapter 3 about supply and demand, what do you think are the main factors contributing to the rising real price of gasoline? Do you think the real price of gasoline is destined to rise forever?

Is it really better to give than recieve?

According to a study done by two Missouri-Columbia researchers, companies that have good reputations and give to charitable organizations see a positive return on business. On the other hand companies with bad reputations who give to charities see a negative return on business. I found this to be quite interesting. Attempts by companies to recover from a bad reputation, such as donating money, lose business. Corporate public relations managers who plan to give money to 'save face' after severe reputation damage should reconsider their giving because the public is diligent about interpreting the real motivation for why a company gives money to social causes states Jiyang Bae, one of the researchers. So what are your thoughts, do you think the American public is truly getting the picture when it comes to sympathy donations?

Fuel effeciency standards

I think the U.S. government require automobile manufacturers to meet fuel efficiency standards. I recently read an article about policies to increase vehicle fuel economy. This article was presented by the American Council for an Energy-Efficient Economy (ACEEE).

One policy proposes raising Corporate Average Fuel Economy (CAFE) standards by 5% annually until 2012 and by 2% thereafter. They believe this could save 1.5 million barrels of oil per day (MBD) by 2010, 4.7 MBD by 2020, and 67 billion barrels of oil over the next 40 years. The ACEEE also tells us that imports of crude oil and finished petroleum products are projected to rise 66% from 1999-2020. If CAFE standards are raised the energy savings would cut that increase to 19%.

Engineering analyses show that this level of fuel economy improvement is feasible and could be achieved using conventional (non-hybrid) technologies. Also the ACEEE believes that costs of fuel economy improvements of this magnitude would not be very high. These fuel-efficient cars would cost less than an average 2010 vehicle --with no efficiency improvement-- if current price trends continue.

Automakers: Still fighting...but change is coming

Today I came across an article that is very similar to the one that we read for the graded assignment due tonight. The article addresses the issue of legislation and automobiles, and the need to increase environmental standards/fuel standards. One of the bills speaks about changing the CAFE (currently 27.5 mpg average for cars and 22.2 mpg average for trucks) and combining them, so that all vehicles would have to meet 35 mpg by 2020.

The most interesting part of the article talked about the rising gas prices and the effects it has on fuel consumption. One point was presented by the Vice President of General Motors. He compared mileage standards to obesity, arguing that raising mileage standards to solve fuel problems is like telling clothing manufacturers to sell only small sized clothes in order to fight obesity.

Obviously the government needs to step in to regulate fuel in SOME way. Gas prices are high and the environment isn't benefitting at all. There are many steps the government can take; but the two this article specifically mentions are raising prices of gas even higher(so less people will drive) and raising mileage standards on vehicles. A third of course, would be alternative energy. What do you think legislators should do to make a difference?

Flat as a Pancake

The book The World Is Flat by Thomas L. Friedman covers how the spread of information technology is evening the playing field across the globe, hence, making the world flat. Areas such as Asia, India, and Africa are using recent education on info-tech to move their Production Possibility Frontier's outward. While this may seem bad because it provides higher competition to countries like ours, it is good because it shows economic growth around the world. This increases the amount of countries that can begin trading services and goods with us.
This article tells us that the new economies benefit from the trial-and-error that others have gone through in info-tech. They can now grow very quickly and become of greater value to the rest of the world in this area. Because a big part of economics is the interaction between economies, this is good news for everyone. Now time and employees will be used more efficiently in businesses of these emerging economies.

Cavs' 4th quarters

The Cleveland Cavaliers made their city proud when they beat the Detroit Pistons in the NBA playoffs to move on to the finals against the San Antonio Spurs. During the games against the Pistons, the Cavaliers became notorious for making a big 4th quarter push, which resulted in winning games 3, 4, 5, and 6. Now in the first two games of the finals against the Spurs, the Cavs are still making 4th quarter pushes, but the aggression and concentration is coming too late in the game to pull out a win.
I believe that this article demonstrates many economic practices that we have learned thus far. If the Cavs do move to playing harder in the first quarter, this will take away some of their limited resources of energy for the end of the game. On the other hand, waiting until the end of the game to make a push limits the time left to win the game.
Mike Brown says of Spurs' Genobili "That was a heck of a shot and a smart play on his part, very smart," when Genobili leaned into Gibson to force a foul. Basketball players must use marginal analysis to decide if they should make a shot or force a foul. They must also decide at the margin how many points they need to score in a shot (2 or 3) in order to benefit them best according to the current score. Now, I'll admit, I know very little about basketball, but I do find it interesting to realize that economics is all around us.

More on fuel standards (sorry, Adam, I edited your title)

I think the US government could try to enforce car manufacturers to meet standards but they have to u9understand that standards are hard to meet in the fuel category. Cars burn fuel that's why they go and plus if you really wanted to be an efficient person go out and by a hybrid. I know for a fact that there are 3 or more companies that are manufacturing hybrid cars and are very successful.

Corn vs. Tequila

This article focuses on resource scarcity and cost benefit analysis. Mexican farmers are setting fields of blue agave on fire. As many know, blue agave makes tequila. They are not leaving the land barren. They are now planting corn. This is in reaction to the booming ethanol industry in the United States.
"Those growers are going after what pays best now," said Ismael Vicente Ramirez, head of agriculture at Mexico's Tequila Regulatory Council.
There has been an over supply of the plant, and the prices are dropping. It is also suggested this new corn craze will now leave a 35% gap in agave production. It takes many years for an agave to grow to a size worth exploiting.
Land is scarce. This is a trade off the Mexicans are hoping brings greater wealth. They can either plant agave, or they can plant corn. One or the other. They are trying to cash in on a profitable market in the United States. This also relates to trade between nations and a possible comparative advantage. We may have more land, but the value of their time might be less.

Economics of New York City

I've just returned from a little vacation to New York City to visit my brother. If you've ever visited the city, you'll know that prices of most goods and services are a bit higher than what you'd pay in Marietta. You'd also be amazed at the variety of markets that cater to every possible consumer preference. While we have yet to develop a formal theory of prices (that's part II of the course), the notion of relative scarcity can go a long way to explain the high prices.

This article describes the economics of operating a variety of businesses in NYC. One industry that surpises a lot of people is the taxi cab market. You'd think it would be pretty easy to get into the business...after all, all you need is a car, right? Wrong. The number of taxi cabs is artificially limited by the city government to around 13,000. Each cab owner must possess a license (called a medallion) to operate the cab. Given the restriction on the number available, the market price of a medallion hovers around $240,000. How's that for an entry barrier?

By the way, why do you suppose the city government artificially limits the number of medallions? Why not simply open the city up to free and unfettered competition?

While in NYC, I also ate $4 hot dogs at Yankee Stadium, got propositioned by a hooker while looking for a cab with my wife and daughter, and stood three feet away from someone called Rihanna while she signed her latest CD for my daughter (pictured in the foreground looking to her right in the previous photo).

Unemploment Rate has Increased

A recent report has shown that the national unemployment rate has risen to nearly 4.5%. This comes as a slight shock since the report also states the job growth has grown by about 100,000 jobs. While the combination of these two items may not seem too great, the hourly wage rate has increased by .2%. What do you think could be the driving force behind the slowed economic growth during the past month?

The Effects of a Doctor Shortage

The number of doctors available to see patients is decreasing here in the United States. This is causing numerous problems for those people who need to get specific medical attention but cannot because there is no qualified specialist close to them. According to state medical societies, there may be a shortage of as many as 200,000 medical doctors in the United States by 2020. This expected shortage is partly due to the fact that roughly one third of the 750,000 doctors practicing now are over 55 years old and will be retiring soon. Making the shortage even worse is the fact that the baby boomers are getting old and need more medical attention. What do you think can be done about this shortage?

Mom's Day

Whats your mom worth to you? In light of Mother' Day I thought I would look for something that had to do with the subject. It tuns out that a study has been completed and if a stay at home mom were paid for her may services to her family such as, "housekeeper, day care center teacher, cook, computer operator, laundry machine operator, janitor, facilities manager, van driver, CEO and psychologist," she would be paid $138,095 a year. So in light of this new information you might reconsider that 97 cent card you broke the bank on and get something with a little more value behind it.

The Wal-Mart Effect

Wal-Mart the major retailer we all know and love has a strangle hold on the market for companies trying to sell their product. Wal-Mart is such a major power house in the retail business it is easy to see how they could be considered a monopoly. Business who have a product that Wal-Mart could sell have a difficult time selling it with out using the Wal-Mart channel to do so. For example in the industry of soft drinks you have the two "titans" Pepsi and Coca-Cola. These companies are not greatly affected by not selling their product through Wal-Mart however smaller companies such as COTT does not have the market strength that Coke or Pepsi do. The lack of this market strength forces COTT which produces company brand carbonated soft drinks has to turn to Wal-Mart for 38% of its sales. It is this high percentage of sales from one small company that causes people to raise an eye brow at Wal-Mart. Soft drinks are one the only area in which this type of thing is happening at Wal-Mart they have such a huge power of the market of producers that companies have to turn to them to create a profit, selling through another retailer is not an option. This causes me to wonder just how much power Wal-Mart really hold and if it should be allowed.

Spider-Man 3 will come to this summer

Spider-Man 3 will come to this summer. From the economic way, we can see the film is artificially scarce goods, because it is an excludable and nontrivial in consumption. This kind of goods is nature monopoly goods, because the marginal cost is zero and the marginal benefit always more than marginal cost. “The first two adventures of Peter Parker grossed $403.7 million and $373.6 million in the U.S. respectively, according to figures from tracking firm Box Office Mojo.” so if people like to watch the film, it will get great benefit.

Environment: an Overview

This article talks about the waste disposal system in Denmark. Gathering the whole population, building the domestic district-heating system to reduce energy consumption, Denmark has pitched in the solid waste reduction for more than thirty years, regardless of economic growth. Nowadays, Danish people have already set up a rooted concept of environmental protection. Danish companies are more active in the world due to an advantage of energy economization.

Shrinking costs leads to higher profits. In general, lower prices will arise from lower costs to attract more consumers, while companies are able to gain more benefits by the extra sales at the same time. In general, people believe that secondary industries can take the advantage of lower costs. However, there are some side effects created by the process of waste reduction.

The world does not always run straightforward. While a free market is usually controlled by economic factors, non-economic factors can potentially affect the market. Due to a negative connotation of the word “waste”, consumers often have a prejudice that the quality of virgin goods is much better than the quality of recycled substitutes despite that goods have the same functions. Furthermore, the vertical integration also supports virgin industries since a familiar work area avoids the process of “acclimation”. The manufacture is less willing to give up the advantage in their area (Franklin 20). Manufacturers would like to keep the control of raw materials rather than to get into recycled industries which might offer a higher profit.

By this notion, it is a paradox to the pollution problem. How can governments efficiently overcome the non-economic factors? Are governments able to find out the balance between environmental protection and development?

Flying Leaps

In this article they are talking about an airline, Skybus, that is turning air travel upside down. Its unique economical approach to travel is allowing the company to cut prices as low as $10 a ticket for ten seats. The highes prices are always going to be 50% lower then other airplanes. This sounds absolutely great, but is it a good move for society? By cutting prices it seems that Skybus is trying to quickly eliminate its competition. By doing this, it will have a monopolistic hold on the flight industry. So I guess my question is, will this company be successful, and if so, will it last considering anti-trust laws?

Edwards Plans to Lessen Pollution?

This article explains Senator Edwards’ call for new emissions limits that he delivered in Nevada at the end of March. He, like many, is concerned with global warming and pollution. In his plan, Edwards makes many suggestions about how to minimize these harmful emissions. One idea he has is to eliminate $3 billion in subsidies to oil companies. This doesn’t seem like a good idea. Subsidies are generally issued to companies so the companies comply with some terms. In this case, the oil companies are probably producing fewer emissions because of the subsidies they receive. If these are eliminated, the oil companies will have incentive to create more pollution. Another idea Edwards suggests is to create a fund to develop new energy sources with money accumulated from selling greenhouse pollution permits. Again, this step to help eliminate pollution seems to be in the wrong direction. His plan to help decrease emissions is to sell more permits allowing it? Our text book admits that the biggest problem with tradable permits is that the government usually ends up issuing too many. Had Senator Edwards used the Pigouvian approach, he might have suggested an emissions tax on the major polluters.

Two Classes of Wal-Mart

During the last decades, Wal-Mart has become quite the enterprise within the United States. With its high volume of goods at competitive low prices, it has made life easy for the low to middle class individual. Above all that, it has also became the largest employer in the United States. They are said to have people waiting in line for there jobs. For great benefits, salaries, 401k plans, etc. But is this really true, is Wal-Mart a great employer? I think not. In a recent study,"Wal-Mart said it gave $667 million to 815,629 hourly employees who participated in the company’s profit sharing and 401(k) retirement program — or, on average, $818 for each worker,it spent $51.4 million on 706,389 hourly employees who participated in its stock purchase plan — an average of $72.76 per worker and it offered $397 million in savings on merchandise to employees through a 10 percent discount — an average of $294 per worker." How much were the executives given? "Top executives stock options were valued between $1 million and $5 million, and an average 401(k) contribution of $8,400 per year." So my question is, is Wal-Mart there for the little man like it pitches, or there for the big whigs?

State of Colorado Turns "Green"

According to the Rocky Mountain News, the State of Colorado's Governor has recently signed onto more than 20 bills that have been approved in both the State House and Senate. The most important of the bills are: House Bill 1281, which doubled the state's renewable energy standard that had been approved under Amendment 37. Under the law, utilities in Colorado must now get 20 percent of their energy from renewable source, such as wind and solar, by 2020. House Bill 1341, which altered the makeup of the state's Oil and Gas Conservation Commission. Under the bill, the oil and gas industry is no longer guaranteed a majority of seats on the commission. House Bill 1298, which makes protecting wildlife part of the mission of the oil and gas commission and gives Colorado's Division of Wildlife more say in how to insulate wildlife from the impacts of the fast-growing industry. Senate Bill 100, which clears the way for utilities to build more transmission lines to carry electricity generated from renewable energy sources, such as wind farms on the eastern plains.
This is one giant leap forward for the Green Movement and general environmentalist alike, in Colorado. But by issuing such non-industrial--namely oil--friendly policy, there is a real fear that industries will not want to remain operational nor be enticed to establish themselves within the State of Colorado. From an economics stand-point, this is true; there are little, if any, reasons for an oil company to move into Colorado. But the focus of this legislation is to bring renewable energy corporations into the state, and it gives them incentives to expand research on finding sustainable renewable energy sources. Under SB 100, utilities are providing basic infrastructure for transmittance of electricity from their sources; which may cause the wind farms on the eastern plains to expand their production and build more wind generators, and possibly allow for the development of more productive and efficient wind generators.
As the oil industry is obviously under attack by the Colorado Legislature, should more states pass legislation requiring increased renewable energy sources? How will this affect the economy of the nation?

Closing the Workplace Gender Gap . . . By Cutting Taxes?

It has been a fact that in the American labor market there have been far fewer women who have sought work and have found employment than men. According to research, only 59 percent of women who could be in the labor force actually are in the United States, versus 73 percent of men. On the surface, there are a number of reasons why there is such a noticeable gap in the numbers of women actually working or looking for work at all. The well known gender wage gap that exists in the overall labor market tends to keep women on the sidelines, as they know they're not going to get paid as well as their male counterparts. This feedback effect for women in the labor market is a negative to both the women and the labor market itself, as this leads to women often not gaining a lot of human capital to arm themselves to be competitive.

But, an approach to pull some of these women out of the labor force back into the pool of employable workers seems to be an economically sound approach: reducing the tax rates for women as an incentive to gain employment. The theories that are at work behind this proposal tend to support the idea from an economic perspective. Consider the aforementioned wage gap - The proposed idea suggests that taxes for women should be no more than 80% of those for men, which correlates with the current wage gap in the American labor market of women generally making 80 cents per dollar earned by their male counterparts. This would create some sort of net earnings equality effect - women, though grossing less than their male counterparts, would be able to retain a larger percentage of their paychecks to be used for consumption. The working thought is that a larger tax base through more females entering into the labor force would more than compensate for the reduction in the amount charged to each individual female taxpayer.

There are some drawbacks to this proposal, including the possibility that it could backfire if the amount of labor force non-particpation due to pay differences is overestimated. In addition, some economists suggest that women who want to be part of the labor force already are, and the drop in taxes would shrink the tax base while not affecting the labor pool at all. Some others believe that a lower tax burden on working women could be counterproductive to real wages for women, as some employers may cut wages for females to compensate for the lower taxation, hoping to minimize labor costs at the expense of the working woman, further discouraging women in the labor force and those waiting in the wings to start looking for employment.

Wind Farms and Electricity Costs

This article concerns wind farms and how they will offer more power but with possible problems. The issues associated are the local impacts on ecology due to the large turbine-like blades that capture wind power to transfer into electricity.

For economic purposes I want to focus on the statistical information out of the article pertaining to wind farms and the increased building of them.

In 2006, U.S. wind powered turbines generated over 11,000 megawatts of electricity. While just shy of 1 percent of the national power supply, the article estimates that wind farms could generate up to 7 percent of the nation's electricity within 15 years and offset as much as 4.5 percent of greenhouse gas carbon dioxide from electricity production.

With this data, the question comes down to basic economic cost. Will the increase in supply of cleaner and renewable sources of electricity cause electricity bills to decline? Will the change be too minimal to make a marginal impact on customer costs?

As it turns out global warming isn't so great for gardening

Could it be that Ohio will not always be characterized by its state tree: the buckeye, the tree that gives Ohio its nickname as the “buckeye state.” Could it also be that within the next few summers poisonous plants such as poison ivy will move more northward, along with plants like kudzu and ragweed. If temperatures continue to rise, then yes it’s true. It is also true that poisonous plants such as poison ivy become more intense, more concentrated with their toxic poison as the weather warms. Sounds like warmer weather won’t be all good for farmers and gardeners… isn’t that who it is supposed to at least be good for?

What I’m realizing is this situation is starting to look a lot like what would happen if it was discovered that smoking really didn’t help to diminish the chances of getting Alzheimer’s: the smoker would be completely raped of their “why I smoke” defense… So what about global warming… isn’t the warmer weather that it will bring supposed to be a plus side (for those that don’t live too near the coasts)… well now organizations such as The National Wildlife Federation are releasing information that alludes to the opposite idea: it’s bad for farming and gardening. Even Martha Stewart is advocating earth friendly tactics such as, not to use gas powered lawn mowers, use organic fertilizers, etc.

In the New York Times it was reported that the demand for organic fertilizer had doubled in the past couple years. This is the buyer’s way of saying that it is important and they are willing to pay that higher price. If this trend lasts for long enough a strong market will open up and another will start to fade out. The buyer has to show the seller what they want, and then once the market has been developed perhaps the prices will go down a bit. The New York Times also reported that ¾ of the US population gardens, and from this $34 billion a year is spent. That is a pretty big market and it sounds like they have the ability to invoke change!

Ethanol more Deadly than Gasoline?

Will Ethanol actually create more pollution than gasoline? According to research by one scientist yes, it will. So my question to the readers is why sink more money into ethanol if it is just as bad for the atmosphere as gasoline? I say if ethanol is just as bad as gasoline why sink more money into ethanol research. I say consider what we have already sunk into ethanol a sunk cost and invest more money into improving gas mileage and emissions in cars. I beleive our health is more important than saving a dollar or two at the pump every time you fill up. At least to me implicit costs such as my health are more important than an explicit cost of one or two dollars. Although at the end of this article it states that ethanol does reduce green house gases, I think if money that is used for ethanol research is shifted to cleaner gasoline research green house gases from gasoline could also be reduced to numbers that resemble that of ethanol.

Housing Slump Related to Gross Domestic Product?

This author says no. I beleive the GDP has more to do with interest rates and deficit. Interest rates havent been lowered since the end of summer last year. This makes it harder for people to borrow money. That in turn leads to less homes being bought, because no one has 100,000 dollars laying around to go buy a house and that leads to the housing slump. Also with high interest rates people are not investing into real estate, because that takes alot of money which is hard to borrow right now with the high interest rates. Also our increasing deficit has an effect on our GDP. According to this article the deficit shaved half a percent on our GDP. It may not sound like much, but with a war in Iraq and the world not in a state of stability our deficit could jus continue to go up like it has, and then it will contiue to shave percents off of our GDP.

Managers Voice Concern Over WorkChoices Legislation

In Australia there has been some debate over WorkChoices legislation. It is this legislation that has been one of the biggest changes to industrial relations for almost a century. While it has much support from the Business Council of Australia as well as the Australian Chamber of Commerce and Industry, it has met opposition from labor groups and unions. One of the changes that have gone into effect since the legislation has been passed involves employees losing their protection of unfair dismissal laws. This is just one of the many changes that have been made to the Federal System. The result of this legislation is lower worker morale because the employees feel that their basic work conditions are under attack and they should be protected by the law. There has even been speculation that many jobs will relocate to offshore locations. Will this new legislation hurt Australia’s economy, or will this just be a temporary set back?

Motherhood Worth Money?

What this article explains that if mothers could make money for being a mother than they would be worth 138,000. She would get this much money because of the fact that she is a housekeeper, psychologist, and cook. The also mention that she would make another 83,000 if she worked outside of the house. After reading this article my question is, can you really put a price on motherhood? and if you could do you agree?

Diesel Cars May Be Coming Back!

Diesel cars and SUVs are looking to come back after a brief appearance many years ago due to the rise in gas prices. In the 1980's, 80 percent of the cars sold in the U.S. were diesel powered. The reason the precentage was so high was to adjust to inflation of gasoline prices which was about $3.15 a gallon and people were looking for a more cheaper and fuel efficient way to drive. In Europe half the cars sold are diesels; the U.S. cars sold was only about 3.5 percent. Dieseal development is continuing in Europe to make diesel cars more quiet and not put out such stinky pollution. Diesel fuel has more energy than regular gasoline, therefore can last longer. With current gas prices rising to $2.99 a gallon do you think that there will be an increase in the demand for diesel fuel due to the purchase of diesel cars and SUVs?

Canada Rail Strike Disrupts Supply Chain

A rail strike is currently taking place in Canada. The strike has started to affect productions in industries such as mining, lumber, auto industries, and could affect the U.S. economy if it continues. The strike includes 2,800 conductors and yard workers for Canadian National Railway Co., one of the two major railways in Canada.

“A much broader economic toll will be felt if the strike continues, says Robert Hogue, a senior economist at BMO Capital Markets, the investment- and corporate-banking arm of the Bank of Montreal.” According to Mr. Hogue “producers facing shortages of supplies may also be facing cost increases as well as a higher risk of losing sales opportunities.”

The strike hasn’t crossed the border into the U.S. where Canadian National rail lines operate , but freight shipments that the railroad hauls between the U.S. and Canada have begun to be affected. In the U.S. we have the Railway Labor Act of 1926 which mandates collective bargaining in railroads and airlines. The Canadian Labor Minister Jean-Pierre Blackburn said “legislation to end the strike would be offered if no agreement was reached.”

The workers are seeking better pay and better working conditions. The last contract the employees were under expired towards the end of December. According to Machalaba, “The strike in Canada represents what some analysts believe is an almost inevitable conflict between an increasingly aggressive rail union and a tough, efficiency-minded railroad.”

Union workers are trying to improve two of the most sought after benefits in a new contract, higher wages and better working conditions. Right now the strike is in its beginning stages where employer concessions are low and union resistance is high. Eventually, after a specific amount of time, concessions will rise and resistance will fall causing the new wage to be offered somewhere in the middle. If there was perfect information between unions and firms and union leadership and membership, would there be strikes? Would the union and firm come to an agreement almost immediately?

Labor Unions to Address Possible Chrysler Sale

The labor unions for DaimlerChrysler met to discuss the possible sale of the company to a possible investor. According to Chon, “United Auto Workers union President Ron Gettelfinger, IG Metall leader Erich Klemm and Jerry Dias, assistant to Canadian Auto Workers union President Buzz Hargrove, are among the labor representatives who will attend.” These representatives are meeting with the Chief Executive Mr. Zetsche. Mr. Zetsche claims that “DaimlerChrysler is talking to potential partners about a possible sale of Chrysler and all options are on the table.”

Labor will play a huge process in the role of the sale of the company. Mr. Gettelfinger and nine other representatives hold half the seats on the 20-member supervisory board. The supervisory board is the American equivalent of the board of directors. The goal of Mr. Gettelfinger is to “lobby to keep Chrysler within the German company and he would argue his case at the next supervisory board meeting.” Germany is a strongly unionized country.

Labor plays a big role in this decision on the future of Chrysler. Mainly this is because the company is dealing with how to address enormous health-care costs and more than $15 billion in unfunded/unpaid pension and health care liabilities. Bidders have been trying to reach out and woo the unions for support. They know that they play such a big role in this decision that they are trying to persuade their hand. Potential buyers such as Cerberus Capital Management LP, Centerbridge Capital Partners LP, and Canadian auto-parts supplier Magna International Inc. have been reaching out to the labor union.

According to Chon, “Mr. Gettelfinger, along with other labor representatives, have expressed opposition to a private-equity takeover of Chrysler.”

As is evident in this case labor unions can play a big role in a companies future decision making processes. They often cause problems and can hinder the process. Do you think labor unions are a good thing? Do they help or hurt a company?