Overheard at the Airport

When taking the early (5:40AM) flight last Thursday to visit some college buddies, I overheard a too-wide-awake earnest fellow making conversation with the sad sap unfortunate enough to sit next to him (I was pretending to sleep).

"Its a fire retardant suit, not retarded, retardant."

Jose Garcia Fixes Cars

While I was traveling to Bolivia and Peru, Jose Garcia fixed my Geo Prizm.

I had a large dent in the car on the drivers side, because of an accident a couple years ago. The insurance company totaled the car and didn't give me enough to fix the dent through a shop.

Jose replaced a door, did the body work, fixed my drivers side mirror, painted the car, and either replaced the rims or made them look like new. All in all, my car looks NEW....it looks fantastic!!

Jose is looking to continue this work on the side...a couple Saturdays each month.

You should call him at: 402-208-6476. He does fantastic work. I have included pictures as proof.

Paranoid

Some people have a lot of faith in our government. I'm not one of them.

Here are some everyday events that normal Americans are either excited about or in which they take comfort:

1) Flyovers by military aircraft at sporting events. When F-16s fly in formation over some baseball game, most Americans think that these flyovers are cool, or they elicit some patriotic zeal, or think this demonstrates how innocuous our military is to ordinary Americans.

I find them tedious and a sign that we, as a nation, are militaristic at our core. I also suspect that they are a demonstration of might and try to scare the rebellious sort. I wonder if they are taking pictures of the crowd as they flyover.

2) ROTC in college campuses. Lots of Americans believe there should be compulsory national service to instill a sense of country, patriotism, and believing in something bigger than themselves. ROTC is designed to build up leaders within our military and ensure that the best and brightest receive officer positions.

I have been to a number of countries where civil strife started in the universities. Many universities in the last 50 years have been hotbeds of communist, anarchistic, and/or anti-corruption thought. I think the ROTC was put on campuses in the States to keep trouble at a minimum and ensure a quick response to radical ideas. I like the idea that universities are the testing ground for radical ideas and hate the idea of ROTC being on college campuses.

3) American flags being in churches.

Do you know that flag statutes declare that the American flag must take the position of honor above any other flag (including the Christian flag), even in a church? Besides questioning why there is or needs to be a Christian flag, I'm also distraught that the American flag is even placed in a church.

Our allegiance as Christians is to Christ alone. (Why I also don't say the Pledge of Allegiance. gasp.)

4) Saying the Pledge of Allegiance
The "Under God" part of the pledge is the LEAST offensive part of it.

5) The Star Spangled Banner as our national anthem (from the War of 1812). The only worse song might be: This Land is your Land.



Just to let you know I'm not completely unpatriotic, here are a list of my favorite things about the US political system:

1) The Constitution and the Bill of Rights
2) Our founding fathers; flawed but genius (Read the Federalist Papers)
3) Separation of powers (not just Legislature, Executive, and Judicial but also Federal/State separation and structuring state capitals as different from the state's most populous cities).
4) Civic institutions
5) Volunteering

Great Movie

I just watched "In Bruges" this week. Sad, funny, thoughtful.

Beware of the many, many, many, many bad words.

Great movie...I think may be in my top 10. Stupid movie poster though.

Market Failures Con't

Menu Prices:
In the beginning of any micro or macro- economics course, university students are taught about supply and demand curves. One of the fun things about continuing on in study is the ability to entertain ideas that turn that understanding on its head. For instance, 4th year students may be invited to throw out the supply and demand curve entirely.

In a normal supply and demand curve, any increase in demand (with the same supply) will increase the price of the good and over the long run invite new suppliers into the market to meet the new demand. If supply of a particular good increases (and demand remains the same), the price of the good immediately goes down until demand recovers and/or suppliers leave the marketplace.

A Keynesian critique of the law of supply and demand is “menu prices”. The term “menu prices” refers to the standard practice of businesses to figure out their costs and then charge a premium over those costs that is consistent with their industry. Supply and demand changes too quickly, is costly to calculate, and therefore difficult to implement price changes quickly. Managing to figure out costs and then charge a premium is a much simpler way for small businesses to operate. Plus, the internet can provide industry-specific mark-ups. Look at Inc. or Entrepreneur and one of the authors will encourage you to enter an industry with high margins (high mark-ups over costs).

If there were true supply and demand, a new entrant would enter the market to drive down these margins. Price stability, rather than the supply and demand curves and their fluctuating prices, is much more of the priority for our economy.

The specific term “menu prices” refers to the prices set by a local restaurant, which vary little over days or weeks. The owner of the restaurant believes that customers will become angry if she offers a hamburger for $4.00 Monday night but because business has been brisk in the days after, she is selling the same hamburger for $10 Friday night. This price instability endangers customer’s goodwill. She is also upset at having to print new menus every week, which can be expensive. Therefore, she keeps the value of price stability over fluctuations in price caused by demand or supply changes.

Since the free market dictates that prices change and change as often as each input (supply and/or demand) changes, there are only a few businesses that change their prices as frequently as supply and demand changes.

The problem that "menu prices" introduces into the market is a certain inertia that helps price stability but ensures a lack of true competition in certain industries. New suppliers entering a particular market with high margins have entered that market FOR its high margins and would not jeopardize those profits. So there are industry pockets that remain insulated from competition and the market. (Restaurant or medical equipment sales anyone?)

Unemployment and Inflation Numbers Suspicious

The US likes to taut its low unemployment figures and criticize Europe for its higher unemployment figures...suggesting that it is Europe's rigid labor unions, overly generous worker safety nets, or employee protections that drive up their unemployment.

Unemployment figures are rated from U1 to U7, U1 being the narrowest definition of unemployment and U7 the widest definition. One of the reasons the US unemployment figures are lower are they choose to report a different figure than most of Western Europe. The US quotes from U3 and most of Western Europe quotes from U6. There is nothing wrong with using either number, per say, except when used to suggest economic superiority.

U3 Total unemployed, as a percent of the civilian labor force (the official unemployment rate for the US)

U6 Total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers


I have heard some economists and businessmen recently suggest that the inflation numbers being published in the States are cooked and bear no resemblance to inflation figures published twenty years ago. Core inflation, the number the economists worry about, doesn't take into effect volatile energy and food prices. However, these are the numbers that have been rising exponentially and affecting all sorts of other prices. Inflation is rising and the Fed should act but can't because higher interest rates may predispose the economy even more to recession.

3 Things You May Not Know About Oil

From "The End of Oil" by Paul C. Roberts

1) Oil fields are considered mature when they pump more water out of the ground than oil. As such, every major oil field in the world is already pumping more water out of the ground than oil (The US is very mature at something like 100 to 1; Saudi Arabia one of the least mature at 5 to 1). As such, oil will just continue to get more expensive because the cost of retrieving oil increases dramatically as the well matures. Add increased demand from China and India and supply cannot keep up with demand.

2) The oil fields that we will find in the future will in large part be harder to get to, harder to extract, and harder to ship to appropriate markets. Geologists largely know where the remaining oil will come from. One boon for oil companies was previously "closed" countries....say communist countries that opened to outside investment and outside exploration. Do you know how long it took oil executives to find the largest oil well in all of Kazakhstan, once it opened? 36 minutes.

3) OPEC sets the quota for each country's oil production based on how many oil reserves they establish. (Oil reserves meaning how much oil a country has already discovered but has not yet tapped). This encourages participating OPEC to inflate their oil reserve numbers to be able to pump more oil today. A geologist traveling to Saudi Arabia several years ago concluded that Saudi Arabia had VASTLY overestimated its own oil reserves.