Food for Thought

Hi. Instead of articles, I bring to you people some ekonzz entries posted on the most popular ekonzz blogz.

From http://freakonomics.blogs.nytimes.com/
The Rich Drink Better Beer, Not More
By Daniel Hamermesh

The average item bought by the average buyer has an income elasticity of nearly one: most people roughly double their spending when their income doubles. But everything we buy consists of both a quantity dimension and a quality dimension.
What’s clear is that the income elasticity of demand for quantity is less than one: when our income doubles, we don’t double the number of cars we buy, the number of beers we drink in a day, or the number of houses we own.
The income elasticity of demand for quality must therefore be more than one: as our incomes rise, we increase the quality of what we consume. We shift from Honda Civics to Lexuses (Lexi?), Budweiser to Belgian dobbels, prefab houses to mini-mansions.
The reason is simple: it takes time to consume quantities, while the consumption of high-quality goods takes no more time than low-quality goods; and as we get richer we have no more time — we all face 24 hours in the day.
With incomes rising over time, businesses are smart to bet on the demand for quality rising — and to enter markets where the payoff is to quality not quantity.

Review 1:

This entry is related to lecture series 4-7 on supply and demand since it is based on income elasticity of demand. It is short on quantity but high on quality, as it explains why income elasticity of quality demanded > 1 and why income elasticity of quantity demanded < 1 as income increases due in part to the indivisibility of goods. We simply can't logically own 2 Lexuses instead of 1 even if our income doubles.
However this is also not always true as quantity can still increase by a ratio of 1 or more such as in the case of golf played, vacations taken per year, number of computers owned etc. But this is also obviously outside of the context of the writer as he is linking the income elasticity of quality demanded back to how intelligent businesses would bet on quality demanded to rise to gain maximum profit.
But after all this is down to opinion and we cannot assume perfect competition for all cases. For example, people might not necessarily want to increase the quality or quantity of their goods simply because they have raised income levels. Furthermore the context the writer is discussing in is based increasing incomes over time in MEDCs, which has not necessarily been the case if one observes inflation levels over the past years.


Because, Not In Spite Of
By Daniel Hamermesh

A recent article notes that attendance in Major League Baseball parks is actually above last year, despite, so the story says, the economic downturn (recession?).
But despite is incorrect — it should be “because” of the economic downturn. The story notes that cheap seats at the Dodgers Stadium go for $8 to $13. Not bad for three plus hours of entertainment; but in good times who can afford that time?
In bad times, when the opportunity cost of time is reduced, the total price of an afternoon at the ballpark is lower for many people than it is when jobs are more plentiful. I see this in my own planning. Though I like baseball, I haven’t been to an M.L.B. game in over five years — I’ve been working too hard; but I do plan to attend more once I partially retire and the opportunity cost of my time drops.
Baseball watching is a time-intensive activity; and when time becomes “cheaper” for many people, as it does in a recession, it’s not surprising that the demand for watching M.L.B. games rises. The price of the complementary good to the ticket price — the price of one’s time — has fallen.

Review 2:
This is another intelligent entry on the blog based on an economic perspective of how cheap baseball tickets constitute the next best alternative for those American feeling the 'crunch', now they can no longer proudly afford the previous luxurious pastimes they used to engage in.
Perhaps the increase in ticket sales could also be due to the increase in focus on the commercialisation of baseball teams, such that the locals would be more than inclined to support their teams despite the downturn. This could also be down to the herd factor which causes more and more followers of local baseball teams.
For lack of a better explanation Americans could perhaps be searching for some form of emotional relief or support for the massive amounts of increased stress they go through in these bad times.
Yet down to its roots it is still the cheap ticket prices that are driving up ticket sales.

When blended with politics, like on http://robertreich.blogspot.com/
Hillary Clinton Doesn't Listen to Economists

When asked this morning by ABC News' George Stephanopoulos if she could name a single economist who backs her call for a gas tax holiday this summer, HRC said "I'm not going to put my lot in with economists.”

I know several of the economists who have been advising Senator Clinton, so I phoned them right after I heard this. I reached two of them. One hadn’t heard her remark and said he couldn’t believe she’d say it. The other had heard it and shrugged it off as “politics as usual.”

That’s the problem: Politics as usual.

The gas tax holiday is small potatoes relative to everything else. But it’s so economically stupid (it would increase demand for gas and cause prices to rise, eliminating any benefit to consumers while costing the Treasury more than $9 billion, and generate more pollution) and silly (even if she won, HRC won’t be president this summer) as to be worrisome. That HRC now says she doesn’t care that what economists think is even more troubling.

In case you’ve missed it, we now have a president who doesn’t care what most economists think. George W. Bush doesn’t even care what scientists think. He rejects all experts who disagree with his politics. This has led to some extraordinarily stupid policies.

I’m not saying HRC is George Bush. And I'm not suggesting economists have all the answers. But when economists tell a president or a presidential candidate that his or her idea is dumb – and when all respectable economists around America agree that it’s a dumb idea – it’s probably wise for the president or presidential candidate to listen. When the president or candidate doesn’t, and proudly defends the policy by saying she's "not going to put my lot in with economists,” we’ve got a problem, folks.

Even though the summer gas tax holiday is pure hokum, it polls well, which is why HRC and John McCain are pushing it. That Barack Obama is not in favor of it despite its positive polling numbers speaks volumes about the kind of president he’ll be – and the kind of president we’d otherwise get from McCain and HRC.

Haven’t we had enough of politicians who reject facts in favor of short-term poll-driven politics?

Review 3:
Disclaimer: extremely anti-Clinton

While HRD (Hillary Rodham Clinton) continues on her increasingly pestilent (to me) campaign, continuing to compromise the chances of a democrat majority come the faceoff, and despite it being unenviable that she has to continue receiving similar critiques of her words by critics, it is undeniable that this critic is right to voice his case.
The writer cleverly uses the collective intellectual 'authority' economists would naturally have to criticise the political strategy of Clinton to go on with the proposed gas tax holiday despite its obvious flaws of the law in the long run, simply because it polls well. He goes on to use this line of argument to highlight how Obama is a leader who leads based on logical facts and not on popularity.
If you have been following politics, you would note this interesting fact.
The reason why George Bush is hated so much is because Americans are not as foolish as they are thought to be by their leaders. A functioning government is wanted, and while responsible governance was part of her promises and she posed as a saviour of all things American. But now that her time is almost up (finally), she is promising what is impossible and lining herself with 'them evil oil companies'.
Are we for old hardball politics or for real change that would really evolve the society? Definitely the latter.




I won't spend too long speaking to you academics as I know most of you are here to listen to yourselves speak.
~ Wee Keat