News for everyday life

It's hard to feel like this is breaking news anymore. The news that the price of oil hit a new all-time high is almost a daily occurrence anymore. This AP article is filled with all sorts of the economic principles we have discussed throughout the semester; supply and demand, constraints, etc. Relevant to our more recent study is the externalities of the situation. We are all intimately familiar with the effect this has on our personal, everyday lives. Just driving our personal cars is cramping our style and effecting our decisions. I'm not sure where the locus of control falls with this, but we should be aware of the effect these conditions have on all other aspects of life too. As stated in the article, with the rising costs of fuel, especially diesel fuel, the cost of anything transported by truck, rail, or ship is going to have to rise as well. Obviously, this affects everything. How's that for an externality?

Do Girls Cause Divorce?

In this article there were many things discussed about divorce. There is a lot of research and there are a lot of people reading the research to "create" facts. There is a relationship between low income and divorce but it is unclear which comes first. The part of the article I found interesting was that couples were more likely to get divorced if their first born was a girl. The other thing that I found alarming was that non traditional families cost the American people "$112 billion per year, or $1 trillion each decade" in taxes. That is money coming out our pockets. This statistic really surprised me. There are tax benefits to getting married and there aren't benefits to getting divorced. As I continued to read this article I realized that we all need to be careful of the facts we are believing, and the evidence that are supporting the conclusions. This article did a good job of explaining both sides in the end.

Economic Hypochondriacs Unite

Forget recession, bring on the depression, and make it a great one! I think there is a disconnect between the generation of Americans that made this one of the most influential in modern history and those that drive contemporary, mainstream opinion. Widespread diffusion of responsibly, spill over of the great society, and instant everything have changed the makeup of America’s character and I find it to be tragic. The greatest generation of Americans was born from one of the worst economic periods of our history, considering current sentiment, I welcome the forecasted economic downturn.

Squeezed By The Staples!!!

HELP HELP, the food costs are rising!! It’s ok though, because wages are also rising to offset… no wait, oh crap, only food and fuel costs are rising, everything else is unresponsive! Good thing these facts are kept under control with our exceptional MBA degrees that will undoubtedly land us successful high paying jobs no matter what the economy has to say about it right, right.

This little peach of an informative helps shed some light on our current inflationary saga. Interestingly enough the article begins by stating that the even Wal8Mart’s “Always Low Prices” aren’t so low these days and that around the world we are seeing food-related riots. That’s right, I am not just talking about the common food fight, these bad boys are riots! “Nearly every food staple has seen a double-digit percentage increase over the past year, including a 38% hike for a dozen eggs, to $2.16, and a 19% jump, to $1.78, for a loaf of white bread, according to American Farm Bureau data.” Basically the average American has turned into a coupon hunter. I don’t know about you, but it looks and is starting to feel like we have been thrown into a painful circle of, dare I say it, recession-linked inflation. Unfortunately for the consumer, all of the goods that are seeing price increases are staples, with little if any elasticity and discretionary spending. We need food, we need gas. Apparently we also need a big fat kick in the pants, or at least our pocketbook

Organ market-proof of concept

According to the article Organ Sales and Moral Travails: Lessons from the Living Kidney Vendor Program in Iran Iran has a program that allows donors to recieve compensation for donating a kidney. The government pays donors $1,200 plus some limited health insurance coverage. The program has been successful in eliminating the shortage of kidneys in Iran, proving the concept that if the price of a good is too low there is a shortage and increasing the price can stop the shortage. As we all know from our Aplia assignment "under an existing law passed by Congress in 1984, it is illegal to offer a financial incentive to organ donors." Perhaps it's time to take a look at these laws, make some adjustments, and save some lives.

The End of Windows XP

Microsoft has announced it will stop selling windows XP for new PC's beginning June 30, 2008. The decision has sparked some controversy, and a petition, among loyal XP users who prefer it over the company's new operating software, Vista. The article states that many chief technology officers and IT managers found "no compelling reason" to switch. Stating that the amount of money this is needed to be spent on new hardware and training to support the new interface is not worth what added features Vista has to offer.

Given Microsoft's market power; it only makes good business sense for the company to make this move. As current user's PC's age and they shop for a new replacement, they will have little choice but to buy a new PC with the more costly Vista OS. Microsoft is only doing what any business with market power would do. I say, let them go for it.

What's Your MBA Worth?

I enjoyed this analysis of the MBA curriculum and how it has been changing at particular business schools. Apparently, Yale recently shifted the emphasis of its program from functional to thematic--offering coursework covering customer, employee, investor, and so on. In the past several years MBAs have been the focus of much scrutiny, specifically the degree of coursework relevance for real world applicability and resultant unscrupulous activities of MBA grads in the business world (see Jeffrey Skilling of Enron and, depending on your perspective, President G. W. Bush). Many practitioners suggest that most MBA curricula still has some ways to go, in terms of career preparedness, before it gets to where it needs to be. Also, ethics doesn't seem to be so easily taught. Business grad students rank highest amongst other schools with regard to dishonesty with 56% admitting to cheating at sometime during their academic career. The article has a rosier picture to paint though; come graduation, we're not all deceitful first year cub scouts. Maybe I'm naive, but I've enjoyed the MBA curriculum so far and I think SUU offers a unique experience. Surely, there could be improvements here. Is our education meeting our expectations and if so, are our expectations in line with what lies ahead?

Bush's Economic Perspective of Iraq

President Bush gave a statement today (April 10, 2008) on the state of Iraq's political, economic, and diplomatic state.  The interesting part of the article was that Iraq is currently in a process of rebuilding.  The country is stabilizing, other countries' embassies are reopening, and people are now feeling safe enough to rebuild.  Iraq's proposed budget plans to outspend us ten to one in construction projects.  

With a stabilizing environment and rapid growth, I would not be surprised to see investors begin their search for high returns.  There will continue to be a large element of risk but a definite ability to find projects with higher returns.  Iraq's rebuilding will definitely afford many the opportunity to find high returns on their foreign direct investment.   

Fight for Old Subway Cars

One of the best ways to make an artifical reef is to push old subway cars into the ocean. Many states are realizing how great the subway cars are for the fish population and want to use them also. However, the problem is that there are not a lot of subway cars to go around. Using subway cars for artificial reefs started in 2001 when Delaware was the first state to receive the old New York subway cars for free. First of all, this was not good for the New York economy because simply giving things away is not always the best way to get rid of old products. There should be a price involved. Secondly, New York needs to open up to other states besides Delaware so that the best market price will be received for the old subway cars. Utilizing the knowledge that the old cars from New York are useful to other states can increase the benefits of getting rid of the cars. The benefits would come in because the subway cars would then have a price on them. Overall, this will actually help New York, as well as the other states that are purchasing the cars. To better the economy, states need to work together, like a business, rather than just simply giving away free hand outs.

Nobody Can Say Indiana Jones Is Inferior

Everywhere I look businesses are worried sick about the thought of a recession. Every industry is looking for ways to either cut costs or increase profit margins. Every industry is panicking except one, movies. The first thought that ran through my head when I saw the title of this article was what a bad time for producers to release such a great movie like Indiana Jones. But upon reading the first sentence of the article, I discovered this is actually the best time for great movies. Dating back to the depression people with lower incomes have skimped and saved to visit the theater just to catch a glimpse of their favorite inspirational heroes and heroines. Movies are an inferior good. When people have less income they see more movies. Who would have thought? When money is tight Indiana Jones will come to an encouraging rescue.

A Second Stimulus Package?

This article discusses the possibility of a second stimulus package. Up to $1200 per couple is expected to be mailed in May and a talk of another package is swirling in Washington. Democratic lawmakers are trying to pass a second economic aid package that would help homeowners avoid foreclosure and increase spending on bridges and transit systems. Lawmakers believe that bridges and transit systems are deteriorating due to the lack of attention brought on by the Iraq war. The success of the first stimulus package is still unknown; therefore, would it be smart to compose another package? Many believe that infusing the economy with money is not going to help the economic situation. If you believe the economic stimulus plan is going to help, what do you think about a second stimulus plan? I believe that the first stimulus plan will work; on the other hand, it needs to be watched carefully in order to determine whether a second plan should be introduced.

Where have all the salmon gone?

If you love to eat King Salmon you probably won't be eating it for awhile. King Salmon populations in Oregon and California have dropped from 775,000 in 2002 to 90,000 in 2007 and the number is expected to drop to 59,000 this year. This is prompting fish and wildlife experts to ban the harvesting of King Salmon for an undetermined amount of time starting in May. Fisherman are not opposing this action and generally support it to allow salmon populations to replenish themselves. Scientists do not know exactly why this is happening but believe it has been caused by cyclical changes in the oceans environment. Because of short term temperature changes the food supply for juvenile salmon swimming to the ocean for the first time in 2005 was significantly decreased possibly causing the salmon population to decrease. Salmon disappearing. So what does this have to do with economics? If you like to eat seafood this problem is going to make your meal more expensive even though King Salmon won't be on the menu. Fishermen will need to make up income somewhere and the most likely thing for them to do is raise the price of the other seafood they catch. With the decrease in supply for King Salmon the demand for other types of salmon will increase and make them more expensive. Don't be shocked the next time you head to a seafood restaurant and your bill is more than you expected. The question that will remain unanswered is how long will this ban on King Salmon be in effect and what will this do to seafood restaurants during this ban?

Legalizing Polygamy

I was watching a special polygamy Oprah a few weeks ago, and as always my full attention was captivated by Oprah as she interviewed a young mother who escaped life in the Fundamentalist Church of Jesus Christ of Latter-day Saints community. Living so close to Colorado City, Arizona I believe the economics of the issue are very pertinent to Utah citizens. The woman being interviewed had many children. Her eldest daughter was turning 14 years old when she decided to leave the fundamentalist community in the middle of the night. She refused to let her daughter be married at such a young age, so she took her many children and started a new life.

In this article another underage girl became pregnant at the age of 15. Police raided a Fundamentalist compound but found no young girl. The Fundamentalists have only begun constructing these compounds to keep away outsiders. The woman interviewed on Oprah supported the legalization of plural marriage in attempts of reducing the religion’s secrecy. Authorities could more easily investigate underage marriage and save more girls like herself because polygamists would be less inclined to secrecy if polygamy was legal.

Would legalizing plural marriage decrease underage marriage in the Fundamentalist community? My answer is no. First of all secrecy is how the community survives. The church members are not allowed to view television, read the paper, and some days leave the “compound.” The religion is all people know and the fear of the unknown keeps people in it. Secondly, reducing the punishment for plural marriage would not reduce the demand for the religion to be secretive because the religion survives on this secrecy. The third reason is police more aggressively prosecute underage marriage rather than plural marriage. This still makes secrecy a priority.

Risk averse or a risk taker?

Men should forget studying economics and finance because psychologists have determined that their decisions come down to how much testosterone is flowing in their blood. A "new but growing field called neuroeconomics attempts to take the hard-wired science of brain biology and mix it with the softer sciences of psychology and economics to figure out why we make the financial decisions we do." Read More. With MIR technology psychologists were able to show that the same part of the brain that makes financial decisions was also active when men were shown erotic pictures. These same men were also more prone to making large financial gambles after being exposed to the erotic images. Is there a lesson to be learned from this study or is it just an article that we can all laugh at? Calculated risk taking is part of business but if certain other activities are going on risk taking can be taken too far. It is obvious that there are multiple factors in determining why people make risky decisions but we have seen recently several wealthy and powerful men pulled down because of their secret lives, such as the Governor of New York. So how can we draw a real life application to this study. If men can't keep their minds on their work, you know what I mean, they will make emotional and uneducated decisions that are too risky. So, I conclude, for men to make the best business and financial decisions they need to focus on their work and keep their minds out of the gutter. If this isn't possible then decision making should to be turned over to women because psychologist's haven't found evidence linking them to this problem.

Duck and Cover Boise

There are many economic factors in deciding how vulnerable a city might be against a terrorist attack. Boise, the same Boise located in the state of Idaho, was the only western city to be ranked in the top ten most vulnerable cities in the United States. The cities people might perceive as more probable targets like Los Angeles and San Francisco are ranked 41 and 66 respectively. Why so low and why lower that Boise? The research is based on socioeconomics, infrastructure, and geophysical hazards. Boise is a risky city because it is located near the Lucky Peak Reservoir. This creates an opportunity for potentially flooding the city. These issues are weighted to determine how terrorists could potentially hurt the most people with the least amount of action. Essentially the report defines the opportunity costs for terrorists looking to destroy American lives.

Doctor Give Me The News

Dr. Tutfe has explained this week the power of a monopsony or single buyer. One example he cited was teachers of secondary education in the United States. These teachers staunchly advocate for the government but do not realize that the government is the main source of their compensation. Privatizing education would actually help teachers be compensated more fairly because it would reduce the power this single buyer has in the market. Which is why I was surprised to read this article in Business Week, that stated the majority of doctors are now in favor of a single government-sponsored medical insurance. I can see only two logical reasons for their rising support. The first would be the doctor’s ethical responsibility to help low-income people in this country get the proper health care. The second is more self-interested. Many people now just do not visit the doctor because it is too expensive; however, with the government-sponsored insurance more people will be more inclined to see the doctor. With increased patients doctor’s offices are able to earn more despite the projected lower earnings resulting from a national insurance.

Wireless Price War

Verizon Wireless recently commenced its $99 unlimited calling plan and competitors of course quickly followed suit. Is this really smart? Cell phone companies have typically sold minutes in “buckets” of time, packaging deals to get the most surplus out of customers. By creating plans with unlimited minutes, wireless providers “could lose 25% to 40% of the revenue from some of their most lucrative customers.” I'm not sure how lowering the price like this could be good for the industry, except to get people away from landlines.

MBA Grads in the Recession

This article conveys that MBAs and business undergrads who graduate during an economic downturn have much lower lifetime earnings, sometimes by millions of dollars. A Citigroup spokeswoman said their offers were down 10 to 15%. One study showed that for every percentage-point increase in the unemployment rate at graduation, there was a 7% to 8% initial wage loss. This loss is multiplied when the grad's annual raise comes around and there's not as much to multiply. Different industries are also more apt to hire than others during economic downturns, and so a grad's entire career path may have to be shifted. So how should grads combat the sagging market? The article suggests that students should stay in school until the economy picks up again, arguing that it may hurt in the short run, but it will pay off in the long run. I'm not so sure on that. Although it's always great to be learning, if you aren't going to use additional advanced degrees, it doesn't seem worth it to go in debt for it. I think we'll have to just take the economy as it is and try to make money with a degree instead of slowing down school and continuing a part-time, low-wage college job.

Elephantiasis and Philanthropy

The CEO of GlaxoSmithKline has spent a couple hundred million dollars to fight Elephantiasis in third-world countries. He has also spent countless hours promoting and working on the project. It's great that a person and company are so willing to help mankind. However, is philanthropy smart, economically speaking? There are benefits (good PR and that warm, fuzzy feeling), but there are also costs. I once heard someone say that Bill Gates has done more collectively for the world by creating jobs and personal computers for millions of people than Mother Teresea did for the few thousand lives she individually touched. What do you think?

Oil Chiefs Shift the Blame

Wow! Does anyone feel trapped by this endless ordeal over soaring gas prices? If you don't, then read the article "Congress Presses Oil Chiefs on Big Profits."

You can look at this conflict from two standpoints: a consumer or a producer. The consumer standpoint, as we all know, is extreme frustration over volatile gas prices and reported "big profits" for the oil industry at our expense. The last thing we want to hear after paying $3.29 per gallon at the pump is anything to do with increasing profits for oil producers.

As consumers, we know the complaints and frustrations of the American people; however, how much have we considered the oil industry as a business rather than the enemy. If you remove yourself from your consumer shoes and put on the hat of an executive in the oil industry, you'd be singing a different tune. Don't get me wrong--I am just as frustrated as the next person over the extremely volatile gas prices; however, as a business student I also recognize the reasoning behind some of the strategies practiced by businesses in order to grow and survive long term.

In the article, J.S. Simon made some "valid" points regarding the high profits of the oil industry. He pointed out that you have to put the profits in perspective relative to the investment requirements for the industry as well as the need for sustainability over down cycles that are likely to follow the market upswings.

As a business owner, what would you do? You are dealing with a potentially limited natural resource requiring a huge capital investment in order to distribute. There has to be some middle ground here: I understand that a business must be profitable in order to justify staying in business; however, does this justify virtual "rape" of the American economy?????

Cigarettes…… Do we still need more regulation?

I could not believe this article when I read it. It seems that they want to once again put more regulation towards cigarettes. According to the article they hope to, “dramatically reduce tobacco marketing, to ban many flavored cigarettes, and to prohibit the labeling of cigarettes as ‘light’ or ‘low-tar.’”
Is it just me or does it seem like our government focuses way too much on cigarettes. It may be because at one time in history they freely gave them out to all the military or maybe there are stronger groups pretesting against it. I am not quite sure, but it seems to me that there are a lot more harmful things then this that seem to get no regulation.
Economically we have talked about how regulation for anything ends up hurting the economy more. Instead of banning certain cigarettes I think they should allow them and possibly just tax them more heavily and use that money to help our school systems that seem to be lacking funds. I think banning would not solve the problem, in fact I think it could be even worse. Maybe I am just a biased business student, but I don’t think that regulation is the answer in this case.

Monopoly Power

In class we have recently been talking about monopolies. In reading this article about the recent writer’s strike and how now the major TV stations are starting to negotiate with the writer’s unions it seems as though the writer’s have somewhat of a monopolistic control over the TV stations. The TV stations seem to be at some point willing to meet the writer’s demands. I guess it is kind of how Dr. Tufte was saying that movie stars or famous sports players have a monopoly for their name. I think in this case the writers exemplify their monopoly through their special writing styles that no one else can duplicate. With having the monopoly power the TV stations are practically forced to follow their requests. I think over time this power will decrease (the long run effect). If the writers demand is too high then over time they will replace them with other writers that do not demand as much.

Truckers Protest

This article discusses the protest that was staged by some independent truckers on April 1. The truckers are hoping Pres. Bush will use the nation's oil reserves to help combat the rising price of diesel and hopefully influence some companies to pay more per mile. Though it was a small protest, some of the shippers chose not to send goods because they feared truckers who worked would be retaliated against. There are no articles about a continuing strike today or another strike being organized for a future date - yet. One wonders if any changes will come from this strike. Will the government help out the struggling truckers? Should the government step in and use the nation's oil reserves? Will there be more protests? How high will the price of food go as truckers protest more and shipments aren't delivered? Will there be any effect on food from these few hours of strike on April 1?

New Reform Moving Cuba Towards Capitalism

Raul Castro is furthering policy reform to help Cuba's economy and its citizens. This article reports that he has authorized the release of unused government lands to be transferred to private farmers and cooperatives that may choose which crops they wish to grow and sell. The government hopes that reforms like this will help put more food on Cubans table. One interesting statistic stated in the article was: 35% of arable lands controlled by private cooperatives produce 60% of the islands agricultural output. Numbers like these demonstrate the efficiency and productivity of capitalism over communism.

With this new reform, we can expect to see the supply curve shift to the right, causing prices to decline.

Start Packing Lighter, Folks

According to this article, Northwest is changing its luggage policies. Beginning in May of this year, passengers are only allowed to check one bag for free. The second bag will cost $25. Unless you're first class--in which case the second bag is still free. In addition, charges for overweight bags are getting steeper, too. Obviously, this move is in an attempt to discourage passengers from checking a second bag in order to better manage and cover fuel costs. But what do you think this will do to demand? I doubt people will fly first class instead of coach just to check their second bag for free. No, I think in the short run Northwest will probably suffer from lost ticket sales. But I have a feeling that (as fuel prices keep rising) more and more airlines will move to this kind of policy. So in the long run, it may not make a difference.