APEC's Fight to Curb Corruption Continues

Craig A. Kelly, U.S. Ambassador to Chile has called for a renewed effort in the war on corruption. The Asia-Pacific Economic Cooperation (APEC). APEC is a group of Government anti-corruption agents that meet and discuss methods of corruption reform. Ambassador Kelly feels that the high rate of corruption among foreign nations is slowing their economic growth.

The two main parts of the economy that are most effected by corruption are:free markets and sustainable growth. With the constant threat of terrorist type leadership many are un willing to foster the ever popular democratic way of thinking. Fear is most detrimental to a capitalistic society. Corruption of government leaders fosters this fear.

Curbing this fear is a big problem, APEC is working towards implementing a transparency act which would give countries relief from corrupt leadership. Countries would be monitored by U.N. Officials that would deter corruption.

I feel that in order for the world trade to work and function properly every country must be able to enjoy the same capitalistic freedom that we do here in the United States, thus for this to happen we as a nation need to support our leaders in their quest to over power these corrupt governments and leaders.

Fingerprinting Our Allies?

In an article found on the Fox News web site I ran into an article that spoke of how we have implemented a new system for people entering the country. All it takes is 15 seconds longer for them the get their fingerprints digitally taken and also their picture taken.

Now honestly, is that to much to ask? Is 15 seconds longer in an airport to much to ask to do what we think is best for our security? I read as some of the people were offended by it, now seriously, don't be a wimp. I think people in this world are way to offended, way to easily. People need to get outside of the box that they put around themselves that says "I am the most important person in the world."

The need to put into perspective the effect that this will put onto terrorists. Suddenly there is a much greater chance for them to get caught. We always speak in economics of people responding to incentives, that is what this war is all about. We are providing ample evidence that there are major incentives for not being a terrorist, i.e. not dying from a bomb dropped by a unmanned Predator plane. So with those incentives is the way and which we can find you, and this is a darm good way to help us find them.

Lets look beyond our own self intrests for a few minutes, and if foreigners have a hard time with 15 extra seconds; then STAY THE HELL HOME!

Economic Improvement Due to Election?

An article written in BusinessWeek discusses improvement in the economy from the second quarter of the year. At the beginning of the year, I believe most Americans were occupied with the events that were taking place oversea's, which would have an impact on any economy. It mentions that many consumer's were impacted by the affects of increased gas prices. The sudden growth in the third quarter make many believe that it will continue to grow, or will it? Is this just the affects the Presidential election? Many have turned their attention to the election and I believe are influenced by promises that each candidate may have given if elected. These promises about continued economic growth may influece the consumer to believe it is growing and will continue to grow, and thus persuading to buy more. It will be interesting to see where we stand as an economy in the early part of 2005.

Assault Weapons Ban

The recent expiration on the "1994 Federal Assault Weapon Ban" has caused a political frenzy. It has been said that lifting the ban would "make the job of terrorists easier and make the job of American's police officers harder." With 23,000 gun control laws already on the books, what affect did the ban on assault weapons really have?

The ban was passed in 1994 after a series of shooting in US schools and fast food restaurants. The ban restricted the manufacture and sale of 19 different types of military assault weapon, which were selected by how they looked and not by how they operated. Also banned were high-capacity ammunition magazines holding more than 10 rounds. Many of the weapons targeted had been banned from importation in 1989.

A recent survey, conducted by the Bureau of Justice Statistics, found that firearm-related crimes have declined 54 percent since 1993. Yet a study commissioned by the National Institute of Justice stated, "We cannot clearly credit the ban with any of the nation's recent drop in gun violence." The most obvious factor attributable to the infrequent use of assault weapons in crimes is that most assault weapons are rifles and are harder to conceal, consequently, they are used less often than hand guns. Between 1985 and 2000, there was a decline in the number of law enforcement officers killed in the line of duty, however, the decline was in the use of handguns. The use of other types of guns stayed about the same.

Under the 1994 law, assault weapons already in circulation could continue to be sold. Buying and selling such weapons built was legal, but as the supply decreased under the ban, the cost of these weapons skyrockted. As I see it, the primary affect of the ban was on the value of the estimated 1.5 million privately owned assault weapons.

Oil Optimization

Another interesting way that optimization can be seen applied is in the oil industry. American oil refineries are scrambling to fix bottle necks in their systems in order to maximize profit and production.

Most refineries are running at almost-full capacity. Some are at 98% and the demand for oil doesn't appear to be decreasing even with higher prices. Some question the possibility of building new rifineries because of the cost and environmental regulations. Optimization will help them decide on how to overcome the capacity squeeze facing the restraints involved in oil production such as inventory and supply of raw material.

What to Believe?

I took a survey of films class, to fulfill a general requirement, and in that class I learned some things about how directors use camera angles, different types of lenses, and the actors positions in the seen to let the viewers see what the director wants them to see. Thus making the audience think and believe what the director wants them to think and believe.

As I watch the news, I see things that are happening throughout the world and also right here in the United States. I see a sixty minutes broadcast turn up papers on the president of the United States of American that basically says he tried to dodge the war in Vietnam, going against many things that he stands for and basically depicting him as a coward. After further investigation that turned out to be false and those papers were not authentic. We all know that the news, just like any other television program requires viewers. If there was no viewers there would be no television. Do we really know how much the news is "fudged", just a little, to get the latest breaking news?

Fannie Mae's Accounting Fraud

Recently, the US economy has seen many companies go under because of "cooking their books" by hiding liabilities. This is a clear view that accounting fraud has been done. Fannie Mae is one of the largest financial institutions in the United States and the OFHEO has found Fannie Mae's earnings misleading. The company did not hide its liability, instead they hide their earnings. Is this still accounting fraud by making the company look worse off financially? I believe that not disclosing all information is a criminal act and should be accounted for. The reason for this fraud is to keep earnings constant and not have large fluctuation. They wanted to be able to help themselves in times of need when they aren't make the large income. This has an effect on the small and large investor because there are still scandals going on even after Sarbanes-Oxley Act of 2002. The investor may not invest because they don't know if they can trust the financials of a company.


Are oil prices really to blame?

At the World Economic Forum (WEF) held Feb. 2002 in New York City one major focus of conversation was the critical role of oil prices on the global economy. High oil prices are generally seen as detrimental to the overall health of western consumer countries. With exception to countries in the oil exportation business, cheap oil prices are beneficial to developing countries. The WEF concluded that would increase OPEC revenues in the short run but that the price increases would have a negative effect on the demand for oil in the long run.
However, it seems that the effect of oil prices on the world econoomy might not be quite as critical as originally expected. IMF chief economist Raghuram Rajan siad that oil prices are going to have only a moderate effect on the world.

An article published by the BBC News states that the International Monetary Fund (IMF) raised its world's economy growth forecast to 5%, up from 4.6%, for 2004. If this forecast is correct, world growth will be that fastest it has been since 1973- despite the rising oil prices. Rising corporate profits and a solid housing market are cited as the reason for growth. The US is still the driving force behind global growth with a lot of support from Asian, Latin America, and Sub-Saharan African countries.

The increase in globalization and technological advances has given rise to many opportuties for growth in previously under-developed countries. Oil is important and oil prices definately have an impact on the economy but reasons for the world growth seem to be so diverse that it is only realistic that the economy would grow, despite oil prices.

High taxes for the rich hurt the poor.

The wealthiest Americans pay most of the tax burden in the USA. There are those that say that is fair. He who has more can pay more, but making the rich pay more in taxes may have a negative effect on the poor. If a poor person wants a job does another poor person hire them? Certainly not. The rich Americans are the ones who provide jobs for the poor or lower class. The more you tax the rich the less disposable income they have to hire the poor with. Some may be inclined to say, “you are just giving it to them anyway, so give it to them in government subsidies”. My opinion is that a person can get more from a wealthy American by working for them then they can get from a government subsidy. Tax the rich for what they use, not the welfare system and Medicare, and let them redistribute the wealth to the poor that deserve for it.

Ahhhhh, Moscow in the fall.

A story at msnbc.com describes the recent economic boom in Russia. Realistically, Moscow and St. Petersburg are booming while the rest of Russia is suffering. The main reason, if not the only reason, for the boom is Russia's oil reserves. However, the rest of their agricultural and industrial output are low. Something that is happening is a wide gap between the rich and the poor.

Inside of Moscow one will find expensive cars and luxurious homes, while just outside one will find homes without water or electricity. This has left some wondering whether or not they were better off in the communist days of the Soviet Union.

Some say that even though capitalism might create an uneven distribution of wealth, it increases the well being of the nation as a whole. In this situation, though, it seems that the populations of two cities are benefitting while the rest of the country's well being is decreasing.

One woman claimed that her refrigerator was always full when it was the Soviet Union. Another complains that while prices go up because of the economic boom, her pension remains the same.

Is this only a temporary effect? Will the rest of the country eventually catch up with Moscow and St. Petersburg?

Has Oil Prices reach the All Time High?

On September 28, 2004 the price for a barrel of oil reached and passed the dreaded $50 mark. The price hit $50.47 in New York crude futures. The question is will it go any higher and what is the outcome? On the 29 of September, the prices fell on average of $.80 for a barrel, but I believe the price will go back up. One of the largest suppliers of crude oil is Nigeria. Their country produces 2.3 million barrels per day. Recently, there is a fear from rebels saying they would start war with Nigeria unless some agreement can be made. If the war is started then we will see a large increase in the price of a barrel of oil. Many believe the price will soon push through $52-$53 a barrel. In the micros, this will have a large effect on many businesses. One in particular is the transportation business. Shipping cost will go through the roof and people will not buy as much because of high costs. I believe this will slow down the economy of the United States immensely.

Martha Stewart still going strong

Last Friday, September 24, 2004, it was annouced that Martha Stewart's contract would be renewed. According to the article that I read on msnbc.com, Martha will be receiving $900,000 a year for the next five years. It was also mentioned that she will be eligible for annual bonuses of 55% to 150% of her base salary. It should be noted that Martha will not receive any salary or bonuses in prison, but she will be allowed to receive this compensation will on home confinement.

When I first heard about this I was flabbergasted! Why would Martha Stewart Living Omnimedia, Inc. make such a bold move as to renew Martha's contract? Any normal person found in Martha's situation would have been fired, yet Martha Stewart still has a job. So did Martha Stewart Living Omnimedia, Inc. make a good decision? After looking at the economic benefits that the company would receive be renewing Martha's contract, I feel that they did.

Martha Stewart still has a strong image in the homemaking industry, and you can't just push her away for being thrown in prison. If Martha Stewart Living Omnimedia, Inc. was to do this some other company may hire her. It should also be known that a lot of people still enjoy Martha Stewart's ideas and the way she does things. Martha Stewart has made some bad choices in the past and I really don't agree with them. Martha Stewart Living Omnimedia, Inc. on the other hand, has made a good economic decision, and that is a really good thing.


Homeowner's Insurance

Regarding our class discussion from "The Armchair Economist" about insurance prices going up and pushing people out of the market, I found an article that talks about that very thing. Insurance companies are paying out $1.18 for every premium dollar they earn. They are have to raise their rates and stop writing new claims and stop renewing clients. They cannot afford to keep people insured so they are raising their rates. Those people at the very bottom cannot afford to pay for insurance so they deal without and drop out of the market.

When dealing with homeowners insurance there is a problem with prices rising for building a home and the upkeep costs. There was one story of a lady who had her house flood and the insurance company covered her claim but then refused to reissue insurance because there were other risks within her home. She now cannot afford insurance and has to find somewhere else to get coverage. It is interesting to me how you can find everyday items from Steven Landsburg's book.

Is Optimization too Late?

Not only has Delta declared bankruptcy, but along with them, US Airways says they may liquidate by February. They are concerned many of their investors will pull funding, including Air Transportation Stabilization Board (ATSB), which has financed US Airways and kept them functioning since March 2003 while in bankruptcy. However, funding in set to expire the 15th of October 2004.

In an effort to save themselves, they are making serious pay cuts to stewards and pilots, cutting salaries below other airlines' averages. They are also making reductions to retirement and pension plans. US Airways was one of the largest airlines, so what happened? Just as an airplane may set its course slightly off and end up miles from the expected destination, so has US Airways. I can't help but wonder if they had only tried to optimize sooner if they would not be having these difficulties. Obviously, they failed to maximize their profits, minimize costs, make their shareholders and stakeholders happy-- ATSB, current employees, retired employees, and cutomers. US Airways is a perfect example of why optimization is so important within a business. Without optimizing, a business can end up miles off course from its expectations and goals.


Productivity Trumps Demographics

Demographics are components in future economic forecasts. So naturally, baby boomers are a hot topic while discussing business, particularly economics. Economics predicted that savings will increase as baby boomers near retirement. They have also forecasted that housing demand would decline. Both of these assumptions have been wrong and chief economist Michael Mandel may have the answer to why.

Mandel states that demographics aren’t the dominate factor; instead it is growth, productivity, and income that have been taking the lead. Mandel also believes that it will stay that way unless there is a decline in productivity growth. Of course baby boomers will still have an impact on the economy, but the change will be spread out through so many years that the impact can be neutralized. The catch is that this will only happen if productivity continues to grow at current rates. Will productivity decline when the baby boomers retire? Perhaps. If there is a slowdown in productivity growth, demographic shifts may become larger. Mandel has a feasible solution to this economic dilemma: Focus on technological advancement (to increase productivity growth) and it will neutralize the demographic effects.


Should We Begin To Panic Yet?

In the recent article "How long will the world's oil last" by John W. Schoen, Americans and the world are being put on notice in regards to the world's vastly declining oil reserves and there almost certain negative impact on societial issues. America reached its crude oil production capacity in 1970. Now people such as Princeton University geologist Kenneth Deffeyes are claiming that the world has only until November 2005 before it too reaches its crude oil production capacities. Still some individual's such as Morry Adelman, an MIT economics professor, contend that " there is plenty of oil around as long consumers are willing to pay the price to produce it". Basically, whether we as a society are willing to face the facts or not, the world's supply of oil is not keeping up with demand anymore.

Oil is a vital part of our economy. Some would argue the most vital part of our economy. I believe we must either open up to the idea of drilling in places that up to this point have been off limits or speed up the exploration of other alternatives that will likely take the place of crude oil when it runs out. Geologists claim that half of the world's oil reserves have been depleted. Some three trillion barrels will have eventually been removed from the earth. Americans presently consume 25% of the world's oil usage per day: some 20 million gallons. There are websites like dieoff.com that believe the world will become anarchist and return to Stone Age like conditions when the oil dries up. The one thing people are agreeing on is that neither Bush or Kerry are going to be debating this issue in the upcoming Presidential debates. The reason: there are no simple answers and neither candidate wants to break the bad news to the American public. We, as the American public, cannot ignore this problem because it will not simply go away. Any suggestions?

Technology and Cars

The new Toyota Prius, or similar cars, may be the key for americans in the future! Why? These cars include an electric-gas hybrid engine. It uses an electric motor at low speeds and a small engine at high speeds allowing the car to get up to 60 miles per gallon. Theses are very fuel-efficient cars.

Since the release of this gas miser in North America in the year 2000 sales have been slow due to initial high prices. The savings on gas will still not cover the cost of the more expensive car, but in the near future it will. According to the article gas prices would have to increase to about $3.00 per gallon for people to start buying these types of cars right now.

Toyota is focusing so much on technology right now. It is the new technology that is keeping them in the game and helping them grow as much as they are right now. As prices begin to decrease little by little we will see a lot more of these hybrid engine cars on the roads .


Who is raising America's children?

Recently, I was listening to a discussion about the shift in family and child care in the last few decades, and I found it rather interesting. One factor of this has been the shift to dual incomes in most homes these days, but people aren't reproducing that much less. So what is everybody doing with their children? Day-cares have bad repuations, and most mothers don't want to be that far away from their kids. So society is evolving, and many corporations today are placing in-house day-cares for their working mothers.

After thinking about this, I happened to run across an article in the Salt Lake Tribune about this specific topic. The article describes how a women got back into the "swing of things" after recently having a baby, thanks to her employer General Mills, Inc. The article also relates the information that Working Mother magazine released its 19th annual list of the best 100 companies for working mothers, with, of course, General Mills, Inc. having a spot on that special list.

This recent trend illistrates the basics of economics: supply and demand! The social shift in dual incomes results in the demand for better places to drop off our kids, therefore, here comes the supply!


Americans or Chinese?

Who is more willing to take risks: Americans or Chinese? Stereotyping is what we do best. We instantly say Americans because we of course take more risks while the Chinese are more conservative. However, when asking both American and Chinese students to choose between a high-risk, high-return investment and a low-risk, lower-return investment, Chinese were all about taking a high-risk investment. They enjoy risk more than Americans.

We concluded in class that men are more willing to take risks. But who defines risk? We all have our own definition of risk. Risky to a woman could be riding a motorcycle. But to a guy, that is just an everyday thing. We may think that we as Americans are all about risk-taking when compared to Chinese, but this is only our definition of risk.

Situations change the idea of risk. When it came to investments, Americans do not want the risk. We want to be able to get an investment without risking much. The Chinese are up for more risk in investments. However when it comes to other situations, like riding a motorcycle, Americans may find themselves back at the top.

Do we consider ourselves conservative when it comes to business? Or are we more knowledgeable to know when to take these risks?

Optimization in Football

On Sunday I happened to catch a short blip of a story on 60 minutes about the key success in football: the coach. They explained a little bit about how coaches today use stats to not only find the probability of what an opponent will do in a certain situation but other strategic moves involved in contracts and trades.

Bill Belichick, the head coach of the Super Bowl Champion- New England Patriots, was actually an economics major in college. I found that very interesting.

Anyone who follows sports knows about the salary cap. Teams cannot exceed this limit in aggregate salary paid to its players. Belichick, in particular, uses optimization to decide when it is time to release a high paid star and find a new, emerging player with star potential. This way, his team stays under the salary cap, while having a consistently successful team.

Amusing Trivia

After finishing the calculus chapter, I had to put in a link to this for the guys in the class. Check out the college major.


Hockey's Prisoner's Dilemma

I have loved hockey ever since my high school boyfriend introduced me to it years ago. It's fast-paced, loud, and exciting. I really do love it. So, it only slightly irritates me that hockey players, along with players in most professional sports, get paid thousands and thousands, and sometimes millions, of dollars to play a game. The owners of hockey teams are no better. They get millions of dollars to organize these games. Wow, seems like a good gig to me.

Obviously the players and owners disagree. They want more. Last Thursday, September 16, 2004, the NHL's Board of Governors locked out the players, endangering the upcoming season. The NHL Player's Association and the NHL owners can't agree on a payroll system, so nobody plays. Fox Sports warns that the longer hockey is absent the farther removed from us it will become until someday it ceases to be a professional sport. They argue that the fans are the big losers of this current scenario, but I disagree. Even the most devoted fans, including me, will eventually turn to other sports, albeit sadly, if we no longer have hockey to watch.

So who does lose from the lockout? If anybody, it's the players and the owners who lose. They are caught in a prisoner's dilemma. Ideally, each side wants the most they can possibly get from the other without giving anything in return. They could negotiate, but each side is unwilling to give any concessions to the other side for fear that they won't get anything in return. It's in their best interests to cooperate and work out a payroll system that will benefit both sides. Instead, they hold their ground and both lose. If hockey ceases to be a professional sport, as suggested by Fox Sports, the players and owners will both have to find...well, jobs!


The U.S. continues its Anti-Dumping Campaign

The U.S. seems to be fighting an uphill battle with the World Trade Organization or the (WTO). This article found on the U.S. Department of the State website, discusses the issue of the dumping of foreign goods into the U.S. economy. According to the article the U.S. is continuing its fight to stop foreign countries from dumping their goods into the somewhat fragile American economy. All of this inspite of the WTO'S efforts to bring world trade.

Since 2000 when the Byrd amendment was passed the U.S. has continued to put high tariffs on dumpers and continued to subsidies those companies of whom were considered to be dumped upon. The Byrd amendment is a direct violation of the WTO code therefore U.S. is now going head to head with the WTO trying desperately to do what it feels is best for the American Worker.

I feel this is a big mistake on the part of the U.S. Any good economist can see that the dumping is only making the market more competitive, which is actually better for the consumer. The economic principle which best suits this is that of comparative advantage. I feel that the U.S. is doing its people a great injustice by not allowing these type of opportunities to enter into the U. S. Market place. Sure in the short run our economy will suffer; however, in the long run we will be able to capitalize on our neighbors advantages. Fighting the WTO will only delay the recovery of our economy. Thus it is very important the we open up the avenues of free trade and continue to support it, our very lively hood could depend on it!!

Incentives Save Lives

Have you ever wondered why people do the things they do? Why people would sleep-in for twenty more minutes then franticly speed off to work? Why people will buy ten items for ten dollars at a store promotion, when a week earlier that same item cost a dollar?

As you think about that consider this. In Fairfax Virginia they installed some intersection cameras to catch drivers in violation of running red lights. Research showed according to the article entitled "Camera use deters red light running in Virginia community", in the Status Report for Highway Safety. Red light violations dropped by 44% in the first year the cameras were installed. Similar results were shown in Oxnard California with a 42% drop in red light violations with the introduction of intersection cameras. That's not even the interesting part. Research also showed that in both cities, they experienced a halo effect on other intersections that didn't exhibit intersection cameras and red light violations on those dropped by 34%.

So what does that mean to you and I? Well it's now safer to drive in Fairfax Virginia and Oxnard California, but to an economist its more than that. This is statistical evidence that people respond to incentives. In abiding by the law to not run red lights. That incentive was so strong it caused the same behavior to be exhibited at other stop lights not adorned with cameras. So if the incentive is strong enough, you could get a population to do just about anything.

Terrorism & Security

Next week senators plan to start voting on whether to implement a National Intelligence Director or not. The national intelligence director will oversee all of the intelligence agencies in the U.S. This would include the CIA, FBI, National Security Agency, Homeland Security, etc. The intelligence director would have power over all of these agencies including controlling their budgets.

Having all of the intelligence agencies under one director is a great way to secure our country. By so doing, all of the security intelligence agencies will have to work together to an extent to ensure our safety.

According to the article, the Defense Department receives $40 billion annually. (About 80 percent of the budget to the intelligence agencies.) This will be cut to 20 percent of the budget, and the rest will go to the intelligence director to be distributed. By so doing, will the seperate agencies have sufficient funds to carry out there responsibilities?

School Voucher

The school voucher is the means of putting the power back into the hands of the consumer. Companies are forced to continually improve themselves in order to retain their costumers. For example, if a consumer does not like the service they received at a restaurant they can choose whether to ever return to the restaurant. If the restaurant is beginning to loose a substantial number of costumers they will have to make some improvement or go out of business.

Vouchers will give parents the ability to choose forcing schools that are not performing up to par to improve or close down.


Coca-Cola shares have reach a 52-week low in the stock market. Coke has claimed, unseasonable cool and wet weather in northern Europe and volume pressure in North America has caused the stock to fall. Comparing summers between 2003 and 2004, in 2003 northern Europe had extreme high temperatures where as in 2004 was cooler and wetter than normal.

Weather can take an affect on a company but how much? Can weather be such a hindrance that it could destroy small or a large company or is weather a temporary excuse to explain why share prices are low? Coca-Cola is saying weather has kept their share prices declining instead of increasing.

In the short-run weather can have effect a companies shares. In the long-run can a company continue to blame the weather of its short fall? In my opinion weather can change a company for a short time but not in the long-run. The business needs to make the changes necessary to adapt for the change in weather.

Antidepressants and Teen Suicide

Teen suicide rates have tripled since 1970, and statistics indicate that for every suicide, there are 50 to 100 attempted suicides. The impact of this increase is felt in our own community. Just last week, I attended the funeral for one of those teens. What needs to be done to control the increase in teenage suicide? Is prescribing antidepressants the answer?

Astralian researchers have found that antidepressants such as Prozac, Zoloft, and Paxil offer only a modest benefit over placebos in depressed patient under age 18. But they also carry significant risks. And a researcher, appointed by the FDA, concluded that children given antidepressants were nearly twice as likely to become suicidal as those given a placebo.

At a recent hearing held by the FDA, parents related stories of teenagers committing suicide with no warning signs and with in days or weeks of beginning treatment with antidepressants. These stories prompted the FDA to issue a warning about a possible link between antidepressants and suicidal behabior in teens. But despite the warning, many doctors are still prescribing Paxil to teens. Although Paxil has never been approved by the FDA for use in children under 18, there are over 11 million children in the United States on antidepressants.

With the uncertainty of how these drugs affect the risk of suicide, is prescribing these drugs, as stated by one Washington, D. C. doctor, preferable to doing nothing? http://abcnews.go.com/wire/Living/ap20040914_66.html



Earlier this year Gregory Mankiw stated that if there was a service that could be produced more cheaply abroad then Americans were better off importing it than trying to do it on home soil. Outsourcing, both within and outside of the country, has become a major form of doing business. Many people, including a large number of politicians, see outsourcing as a possible cause for concern, but an article I read on the economist.com webpage suggests otherwise. The article states that a pretty tiny proportion of jobs lost in America are acutally going overseas.

The article suggest three themes for what is actually going on. The first is that most of the jobs being lost are cyclical in nature and not structural. Now that the economy is recovering after the 2001 recession a dramatic change in the job picture is expected. The second theory seems to go along with the theory of comparative advantage. Outsourcing has been going on for centuries. The process allocates money and resources to areas in which they will be most productive and, helped by competition, lowers prices. The third theme states that even though more IT jobs will be done abroad, many more, higher paying jobs will be created in America due to outsourcing.
The creation of new jobs always overwhelms the destruction of old jobs by a huge margin.

I have a hard time seeing how outsourcing and globalization can be detrimental to our economy as a whole and in the long run. Naturally there will be certain groups that will be adversely affected by outsourcing but I think the process will be beneficial overall.

Electronically Cleared Checks

Last year, The Check Clearing for the 21st Century Act, known as Check 21, was passed by Congress. Digital images of checks will now be used for proof of payment. This will run checks through just like a debit card. A substitute check will be sent out instead of the actual check.

Society today has become used to the "floating" time between writing a check and when it is actually deposited. Checks have become more of a short time loan to some consumers. When there is no money in their account to cover the check, they merely use time for their advantage. Americans are far enough in debt with using credit cards and by adding Check 21 only more debt will follow.

Checks will bounce. Consumers will complain. Change will occur. Is Check 21 really going to help anything or is it just another technological change?

Bush Moving Toward a Flat Tax?

During the election, President Bush and John Kerry have very different views on the current tax system in the United States. For this election neither one of the candidates have specified how they were going to change the tax system, but they have said they will change something on the tax code. Kerry does not agree with the tax cuts that Bush has given the upper class, even though the upper class is the ones who pay for the taxes. Kerry wants to increase the tax to the top 2% of the income earners and drop the tax cuts that Bush has given over his four years in office.

Bush, on the other hand, wants to achieve a flat tax. Most of the tax provisions he made will expire in the near future. Bush is proposing a flat tax on the sales tax of merchandise and trying to eventually eliminate the current federal income tax and payroll tax. The amount of tax proposed will be close to 30% on sales. This will help the individual on their tax returns because it is much simpler. The current tax code is 60,000 pages long and this new tax will help individuals by making it less confusion to file taxes. A flat tax will make sure that each individual will pay their fair share to this great country. The current tax code is constructed to tax the top income earners but there are many deductions and lope-holes that they can use to lower their taxes. Can a flat tax help the tax system in the United State? I believe that it could.

Economies of Scale in the Hurricane Industry?

A strange thought came to mind while reading through the news and pondering economic principles. I realized that the circumstances of late have given us a peculiar opportunity- three hurricanes in a matter of a month or so and landing in roughly the same area of the country. This lead me to wonder about the costs that insurance companies will bear after Ivan hits. Will the costs follow the economic laws dealing with economies of scale and marginal costs?

Given, that to measure this accurately it would probably need to be assumed that each hurricane was identical in size, damage, etc. and that they hit the same exact spots on the map. However, suppose that we set up a model involving cost and number of hurricanes. The cost would be on the vertical axis and the quantity of hurricanes on the horizontal. Would incurance companies experience economies of scale as the number of hurricanes increased? Though insurance companies are paying out millions of dollars, could they reach a point where they actually make a profit?

TheStreet.Com analysts say that it is not uncommon for stocks to fall shortly before a hurricane and rise shortly after due to the perception that insurance companies will raise premium rates. It will yet be determined if insurance companies will raise premiums, but for reason of experimental thought, we can assume they will. Could it happen where, if enough hurricanes happened, that the marginal cost of hurricanes will equal the marginal "gain" that companies experience from the rise in stocks and premium hikes?

Suppose someone were crazy enough to invent a hurricane machine that could create hurricanes on demand. This person would probably be tied to an insurance company and have some sort of possibility of capital gain, not to mention a lack of morals evident by their willingness to kill strangers. However, suppose the machine was made and the person or a group of people strategically planned a series of hurricanes in order to make a profit, unbeknownst to innoccent policy holders. Granted that these individuals would not be acting rationally, but then again, Adam Smith didn't even believe that we can count on everyone acting rationally all of the time.

What do you think? Are there other factors that need to be considered that either make this possible or throw the idea right out the window?

The poverty line crunch.

A recent article in The Economist magazine, commented on LBJ's fabled "War on Poverty." In the 1960's LBJ and his administration adopted a political goal to wipe out poverty, like the current administration's "War on Terror" Johnson had a particular difficult time identifying the enemy. The poverty line that was adopted and used to define what being impoverished meant (this poverty line is still used by the government today) is $18,660 for a family of four.
This number in no means truly addresses the actual cost of raising a family in America today. Mollie Orshansky, administrator of Social Security during LBJ's administration, determined the number by calculating the needs of a family's nutritional needs and multiplied by one-third, because families of that era on average spent a third of their income on food. The current threshold poverty amount is really the cost of feeding a family in the 1960's adjusted for current inflation. This is leading to criticism that there are a greater number of Americans that are living in poverty than the Census Bureau and the Dept. Of Health and Human Services account for.
The recent economic boom and welfare reform are agravating the problem. Due to the welfare reform initiatives enacted by Bill Clinton while the economy was booming several Americans who are in desperate need of assistance will not qualify. While the welfare reforms of the 1990's were heralded as reducing poverty, they are hitting the working poor the hardest -- those who work, but are unable to find work that pays a fair wage. Poorly designed welfare limits exclude the working poor from the needed relief that the government spends their tax dollars to provide.
This article was found at: http://www.economist.com/agenda/displayStory.cfm?story_id=3146724

Hurricanes on the Market

The hurricanes we've been seeing on the east coast have done more that damage homes and business. In fact, Florida's crisis will be felt outside its borders. Hurricane Charley did about $150 million dollars worth of damage to Florida's citrus industry alone as it hit the southwest side of the state. Then, Frances rolled in on the Atlantic side of Florida and caused severe damage to areas where grapefruit is grown. The damage from these hurricanes may seem unsubstancial in world terms because after all, it is only one state, right? . . . Wrong! Florida dominates the national and international markets by 75% , bringing in $9.1 billion dollars to its industry.

Currently, Hurricane Ivan is on track for the Gulf Coast with about 155 mile per hour winds. Is damage to the citrus industry still on the rise? How will the world market compensate for this loss? Demand for citrus products will be high, while the supply will be limited, driving up prices. How much will you be willing to pay for orange juice with your breakfast?

Is it Good or Bad for Baseball?

The most memorable times in baseball, the most illusive records, and the most dominating player. Would we be mentioning these things in our era if there was no steroids/performance enhancing drugs? In the year 2000 Barry Bonds joined a nutrition company called BALCO, who is under investigation for dissemination of steriods. Ever since then he gained 20 pounds of muscle and his home runs jumped from 46 to 73. He has also earned the MVP award every year since then. Before the year 2000 Barry Bonds has never hit a homer over 450 ft. He has now done that over 21 times.

As you know Mark and Sammy's performances in 1998 was considered a baseball's revival. At the decline of baseballs attendance, millions of fans tuned in to watch them battle it out for the title of home run leader in a single season, a record that has been there for over 30 years. Now in 2004 millions of fans tune in to see Barry go for 700 and in the near future we will be tuning in to see him go for 755 to beat Hank Aaron for all time home run leader. Would this be possible if there were no performance enhancing drugs? That is my question to you, are these drugs good or bad for baseball?

Oil Prices Are Up; How Businesses Will Make You Pay

Oil prices are rising to around $50 a barrel which directly or indirectly makes everything more expensive. The problem is, wages aren't rising to match inflation. Businesses can't raise prices to cover increasing costs without losing sales, or rather, without losing even more sales. Retail over this last summer was weak. The majority of Americans have middle, or low range incomes, and they do most of the buying.

Prices of products that are "needs" such as heating fuel are soaring, but what about everything else? The price of jet fuel is up 40% but airline ticket prices are going down. The airlines are finding other ways to push cost to customers. One way is by adding on an extra surcharge to customers that don't purchase tickets online.

The increased cost of fuel affects just about everything by raising the cost of moving products to wherever they will be sold. All things plastic are more expensive to manufacture. Even stock prices have dropped. Rich or poor, everyone is affected, but what will be the outcome? Will oil prices drop before it is replaced? Or will new alternatives be implemented that will make the use of oil obscolete?


Honda's New Solution: Home Fueling

Honda announced they will begin selling home fueling stations for natural gas cars in the spring of 2005 . Priced at $2000, Honda will only sell the stations in California but may eventually expand nationwide. The fueling stations, known as Phill, connect to natural gas lines in homes and take approximately six hours to refuel. Introducing the home fueling stations is an attempt of overcoming the biggest obstacle for natural gas vehicles. Marketed as a company fleet car, Honda Civic GX will now be looking to target individuals with their new “personalized solution”. Will more people make the switch to compressed natural gas once the fueling unit is conveniently available at home?

For the last decade, Honda has been developing natural gas cars. They thought the low-price benefits of a natural gas car would outweigh the high cost of gasoline. Honda has now realized that there needs to be more incentives than just price. In this case, convenience plays a great role. The convenience of refueling at home is quite an incentive. Along with convenience, Honda is also promoting the natural gas as a solution for environmental concerns such as the limited supply of petroleum in the United States and pollution. Natural gas is cheaper and more abundant than gasoline. It could be a replacement for petroleum. Natural gas also provides a way out for strict emission rules. I think that Honda has carefully evaluated this issue from an economical standpoint. If Honda has studied other areas such as introducing and marketing Phill, I believe they will be successful with their new product.

Delta: Too little, too late?

Delta Airlines is planning an overhaul for the record books. Their plan to re-engineer is an effect of the success of low-cost carriers. In fact, it is likely that if something isn’t done quickly, Delta will not survive. Some fear that if the majority of their pilots decide to retire and cash in their benefits, Delta will be faced with Chapter 11 bankruptcy.

The main focus of the re-engineering is to, of course, minimize costs. Experts say they need to cut costs by $2.7 billion by 2006, and the most likely of strategies is through wage concessions from Delta pilots' union and executives as well. Some of their plans include cutting 7,000 jobs, re-structuring their network, and expanding Song.

One of Delta’s errors, in my opinion, is that their attempt is too late. It may be too late for the re-engineering plan to save them. It sounds like they know what they have to do, but time is against them. Could they have forcasted this a long time ago and dealt with the necessary changes in a different way?

The Ultimate Trade-off

Recently, Dateline NBC aired a story on a man by the name of Aron Ralston. At first glance you may not remember this man's name, but his story is unforgettable. In April of 2003, Ralston decided to go for a hike in Southeastern Utah. While climbing through a small slot canyon Aron grabbed a loose boulder that shifted under the weight of his body. The 800 lb. boulder then fell onto Ralston's arm, trapping him between the rock and the cliff wall.

After several days of being ensnared by this enormous boulder Ralston began to loose hope of ever being found. In the final moments of his life Aron etched his own epitaph in the cliff wall next to him so that he could be identified if he was ever found. Things looked pretty bleak, but there was one chance for survival. Aron could either die or he could free his body by amputating his own arm.

Life is made up of many decisions. Some decisions may not be of the same magnitude as Aron Ralston's, but some may be. In economics we learn that there are trade-offs for every decision that we make. In order to make the best decision the future benefits should outweigh the costs. In this particular story Aron weighed his benefits as well as his costs and in the end Ralston chose his arm for his life. Today Aron only has one arm, but he is truly grateful to be alive.


New Check System

During the summer I did an internship at a financial institution and it amazes me how many people try and cheat the system. By this I mean they will write checks and know that it will take about three to four days to hit their account if the company cashes it right away and they try to give themselves some extra time to put money into their accounts. Most of the time this never works. There were at least twenty checks every night that would never clear a members account. Checks are not being used for their intended purpose. People are trying to use checks as a temporary loan and they are not intended for that.

I read an article from MSNBC that stated that checks are now going to be coming out of people's accounts within hours. This will cause a lot of problems. People now have to rethink their ideas about checks. A lot of people will end up with bounced checks if they write the check with out the money in their account. The financial institutions will now be scanning all of the checks and a scanned copy of the check will be sufficient for proof of payment. Many people instead of making sure they have enough money will now be paying for service charges for the return checks that they write. They will end up paying more if they don't have the money to begin with. It was stated in the article that there will be about 7 million more checks will be hit with overdraft charges. With the new check system it will be interesting to see how badly it will affect the public. It is nice to see that financial institutions are now doing something about this problem.



The Salt Lake Tribune had some good and bad news for Utahns on Wednesday; the Mortgage Bankers Association reported that Utah's foreclosure rate for April-June was 1.56 percent, which is down from 2.03 percent in 2003's second quarter. Our delinquency and bankruptcy rates are down as well. That's the good news. The bad part about the report is that the rate at which families in Utah are losing their houses to foreclosure, ranks as the 10th highest in the United States.

Jeff Thredgold, an economist from Salt Lake City, claims that "Utah's ranking in terms of delinquencies and foreclosures compared with other states probably always will remain high." He says, "We have 50 percent more kids than the average American, which puts added financial stresses on families, combined with the fact that people in Utah get married younger and there's a tendency for them to try to keep up with friends and neighbors by buying a house."

In relating this to Managerial Economics, there are many different approaches one could take. Since we have been talking about incentives, and the theory that people behave rationally, Thredgold's comment about people getting married younger provoked questions in mind about what kind of incentives young people in our culture recieve in getting hitched at a young age? Don't they know they are going to be poor? It seems that the threat of bankruptcy, forclosures, and other such matters are things they might as well register for, along with other things they desire at Target or Pier 1!

So what are the incentives? Most people say sex at first. Could it really be? I don't have the answers, I'm not married. I know that many students here at SUU, and even in our small class, may have gotten married at a young age, and maybe they could help solve this mini-mystery. Is It government assistence with school? Is it truly undying love? I'm sure it depends on each specific couple, but I know Landsburg could come up with some interesting ideas.

Dupont Ditches Waste and Gets Caught

In this particular article, Dupont is settling a class action lawsuit which alleges that the company is guilty of contaminating water supplies in West Virginia and Ohio with a key ingredient used in its Teflon products. While no admissions of guilt have yet been heard from Dupont, interestingly it has promised to pay a sum of at least $85 million and possibly up to $340 million to settle the case.

I find it hard to believe that a company can, in good judgement, knowingly contaminate the environment and in-turn possibly do harm to millions of people. What is wrong with the way businesses operate? Are we only taught in school to care about the almighty dollar? Aren't the lives of our children and further generations in our minds or do we just worry about what happens on earth doing our lifespan?

Maybe I'm getting too deep, I mean the contamination of water by Dupont is only going to affect a few states back East. Why do we care? We have to care because who knows what and where Dupont will contaminate again. Hopefully, the public becomes aware of this behavior made by a company as well regarded as Dupont and holds them responsible in cleaning up not only the contamination, but also their behavior.

Is Landsburg’s idea of the Indifference Principle too simplified?

Landsburg’s fable “The Tale of Two Cities” is simplified, I understand that, but is it simplified beyond the point of being applicable to real world situations? The comment at the begging of the chapter “who cares if the air is clean” directly contradicts the idea of rational thinking that he uses in the same book and each idea is with in 40 pages of each other. A rational person living in Grimmyville would have two choices to live in Grimmyville with clean air or live in Grimmyville with dirty air. The rational person would see that clean air is superior to dirty air in that you can breathe easier and the health risks of breathing clean air are a lot lower. The rational person would defiantly want clean air if given the choice. It is not just the land owner that receives the benefit of the law passed. The renter now has two equally good places to live and can chose between the two.

The Case of Landsburg is an article that looks at some of these ideas that are two simplified and unrealistic to what would happen in a real world circumstance. There could be other intrinsic values to living in Grimmyville that would keep a person there and, therefore clean air in stead of the dirty air would only be another benefit of staying there. Not to mention the cost of moving to Cleanstown.

I can see the underlying principle that Landsburg is trying to get across but these fables that he uses may be too simplified. However I am no expert I this subject in anyway shape or form. This might be the only way to get others to grasp the basic concept behind the indifference principle. I do concede that the fables he does use paint a clear picture of the basic principle and idea but can not be carried to far.


lack of ethics in business

In this latest scandal, Invesco, the reputable Denver based mutual fund giant, has agreed to pay 376.5 million to settle allegations of improper trading. Invesco, headed by their former CEO had arranged for a handful of wealthy stockholders to participate in market-timing stock buying and selling (quick in-and-out trades that can skim profits from longer-term shareholders). The settlements will end investigative probing of the company from the attorney generals in Colorado, New York, Georgia, and the SEC.
The generally accepted goal of firms is to maximize wealth over the long term. Do to this generalized goal, many argue that a goal to maximize profit over the life of the firm is a better goal for a firm to subject to. However, as one can see, often times profits and ethics become conflicting interests. In this case, satisfying customers and ethics became conflicting interests.
This illustration of unethical behavior of business is a far cry from the Enron-Anderson disaster, but still criples confidence of american business ethics. When are companies going to understand that the market punishes and rewards ethics??http://www.msnbc.msn.com/id/5941226/