Beer Story

The "Demand and Supply" Story of Beer and its ingredient - Barley.

A disaster has occurred in Germany: The staple drink—beer—is rising in price. The reason is that there is a worldwide shortage of barley, a major ingredient in the brew. This has pushed up the price of barley, and shifted the supply curve of beer to the left. I would think that the shortage is temporary—with higher prices of barley, more farmers will plant the crop. That should alleviate the shortage, bring the price of this input back down, and after a year or two lead beer prices back more or less to their current levels. Not much consolation for those wishing to quaff the brew of the holidays, but their pain is probably going to be short-lived (and, if they drink enough, they won’t remember it anyway!).

Link to this article on Freakonomics, and the many more from the Economics Thought of the day.

Now consider these scenarios
What if due to higher prices, the consumer shifts to cheaper drinks - perhaps carbonated drinks, or decides to reduce the consumption of beer. Thus reducing the demand for beer.

1) The farmers on the other hand continue to grow similar quantity of barley shifting the supply curve and bringing down the price of beer

2) Due to reduced demand for Beer, the cost of barley reduces. Thus alternate uses of barley (bread?) become available for a lower price

Left Turn Economics

UPS saved three million gallons of gas and reduced 28.5 million miles off its delivery routes. How? By reducing the number of left-hand turns. Read on

Some questions now.

1) How can we implement such a thing in India? Does the complementary rule - Reduce right-hand turns - help?
2) Can we derive an optimal number for the small vans (shorter trips) big vans (longer trips, complex turn schedules? ) combination.
3) Incorporate drop off schedule based on local traffic patterns?

Econ e-books and e-mags

e-books
e-magazines


Disclaimer: The above URLs point to a search engine of e-books on the Internet. Please contact the content providers to delete copyright contents if any.

Cheap Economizing Officer (CEO)

An interesting article about an american family of 7 who were able to live on an annual income of $35000.

What can the corporate world learn from this family -

1) Plan. A very crucial aspect of any business. Even though the corporates come up with beautiful literary pieces in the form of mission and vision statements, where they fail is to form a plan to achieve the same.

2) Organize. A well defined organization hierarchy is very important. It should define the reporting structure and help in establishing accountability.

3) Shop wisely. Not every outsourcing deal can result in cost savings. Shop wisely for vendors.

4) Communicate Effectively.

5) Team work.


Passing Note. Citi group is also looking out for a CEO. They could definitely use one cheap economizing officer.

Lose Leader

After having witnessed four Black Fridays and Cyber Mondays, I am just not convinced about the "Real" savings that a consumer makes. All this seems to be a marketing gimmick. The stores try to establish credibility thru the early bird sale and then just walk their way back smiling to the cash registers for the rest of the day. See this article for a detailed example of how stores try to establish such credibility.

Bangalore Economics

Mint explains the out sourcing activity w.r.t Bangalore in economics terminology.

Internal transaction costs went up while market transaction costs fell after the mid-1990s. That was the economic cue for outsourcing to take off, as companies found it cheaper to get certain things done outside rather than from within the boundaries of the firm

In his theory, The theory of the firm, British economist - Ronald Coase explains why the economy is populated by a number of business firms, instead of consisting of exclusively of independent people who contract with one another. According to him, Transaction Cost determines whether firms seek hired help or contract out for some particular task.

In an attempt to expend this theory to how departments are formed within a firm, I see why we have separate departments for Sales, Operations, Business Units, Technology units etc. For any service provided by one department to the other, there is a transaction cost incurred. Ex - the (tech) support dept charges the technology dept for all its services, technology charges the business units for its services etc.

Further, individual departments can get contracted out and this is where Bangalore has a major share.

How to increase the value of falling U$D

What is the value of four $1 currency notes? Did you say the answer is $4? You maybe right, but it can be worth more than that. US Bureau of Engraving and Printing sells uncut currency notes of various denominations. For example, a sheet of four $1 bills can cost $15. (as of 11/08/2007). The Bureau is trying to market its product as a gift idea for the holiday season.

Even shredded currency is sold at a highly economical price of $165 per ounce.

Bear and Bull

The Indian stock Index, Sensex, has been very bullish lately. Reasons - Contributions from RIL, ICICI Bank, ONGC, L&T and Bharti Airtel.

My blog entries have taken a bearish dip. Reason - Opportunity Cost.

Will return back soon in November.

Ig Nobel Winners in Economics

My Compilation of Ig Nobel Prize winners in Economics

1991 - Michael Milken, titan of Wall Street and father of the junk bond, to whom the world is indebted.

1992 - The investors of Lloyd's of London, heirs to 300 years of dull prudent management, for their bold attempt to insure disaster by refusing to pay for their company's losses.

1993 - Ravi Batra of Southern Methodist University, shrewd economist and best-selling author of The Great Depression of 1990 and Surviving the Great Depression of 1990, for selling enough copies of his books to single-handedly prevent worldwide economic collapse.

1994 - Juan Pablo Davila of Chile, tireless trader of financial futures and former employee of the state-owned Codelco Company, for instructing his computer to "buy" when he meant "sell." He subsequently attempted to recoup his losses by making increasingly unprofitable trades that ultimately lost 0.5 percent of Chile's gross national product. Davila's relentless achievement inspired his countrymen to coin a new verb, "davilar", meaning "to botch things up royally."

1995 - Nick Leeson and his superiors at Barings Bank and to Robert Citron of Orange County, California for using the calculus of derivatives to demonstrate that every financial institution has its limits

1996 - Dr. Robert J. Genco of the University at Buffalo for his discovery that "financial strain is a risk indicator for destructive periodontal disease."

1997 - Akihiro Yokoi of Wiz Company in Chiba, Japan, and Aki Maita of Bandai Company in Tokyo, for diverting millions of person-hours of work into the husbandry of virtual pets.

1998 - Richard Seed of Chicago for his efforts to stoke up the world economy by cloning himself and other human beings.

1999 - None

2000 - The Reverend Sun Myung Moon, for bringing efficiency and steady growth to the mass marriage industry, with, according to his reports, a 36-couple wedding in 1960, a 430-couple wedding in 1968, an 1800-couple wedding in 1975, a 6000-couple wedding in 1982, a 30,000-couple wedding in 1992, a 360,000-couple wedding in 1995, and a 36,000,000-couple wedding in 1997.

2001 - Joel Slemrod, of the University of Michigan Business School, and Wojciech Kopczuk, of the University of British Columbia, for their conclusion that people find a way to postpone their deaths if that would qualify them for a lower rate on the inheritance tax.

2002 - The executives, corporate directors, and auditors of Enron, Lernaut & Hauspie (Belgium), Adelphia, Bank of Commerce and Credit International (Pakistan), Cendant, CMS Energy, Duke Energy, Dynegy, Gazprom (Russia), Global Crossing, HIH Insurance (Australia), Informix, Kmart, Maxwell Communications (UK), McKessonHBOC, Merrill Lynch, Merck, Peregrine Systems, Qwest Communications, Reliant Resources, Rent-Way, Rite Aid, Sunbeam, Tyco, Waste Management, WorldCom, Xerox, and Arthur Andersen, for adapting the mathematical concept of imaginary numbers for use in the business world. (All companies were forced to restate their financial reports due to false or incorrect accounting and are U.S.-based unless otherwise noted.)

2003 - Karl Schwärzler and the nation of Liechtenstein, for making it possible to rent the entire country for corporate conventions, weddings, bar mitzvahs, and other gatherings.

2004 - The Vatican, for outsourcing prayers to India.

2005 - Gauri Nanda of the Massachusetts Institute of Technology, for inventing an alarm clock that runs away and hides, repeatedly, thus ensuring that people DO get out of bed, and thus theoretically adding many productive hours to the workday.

2006 - None

2007 - Kuo Cheng Hsieh, for patenting a device to catch bank robbers by ensnaring them in a net

Supreeth Quarterly

It has been 92 days and 38 postings since I started this blog. I also happen to have completed one quarter. How have I fared so far? What has been the learning experience? Has any reader of my blog been benefited by my postings? Where do I go from here? Do I see myself celebrating 5 years completion, 2 years completion or at least one more quarter of blogging?

Individually, it has been a great learning experience. I have been talking a lot in "Economic Terminology" and this has been irritating few of my friends. I do not know how long I will be able to continue to blog but my Economic learning will definitely continue.

One of the major learnings for me this quarter is about how narrow is the differentiating line which separates MicroEconomics from MacroEconomics. One can not talk about either of these in total isolation. I quote this because when I started blogging, I intended to study only microeconomics.

Happy Blogging to me :-)

10 businesses facing extinction in 10 years

MSNBC lists down 10 businesses that might go extinct during the next decade. Lets examine each of them

1) Record stores

Online music stores are slaughtering record stores. Could this phenomenon be carried over to other kinds of stores as well? There is hardly anything that can not be purchased online.

2) Camera film manufacturing

Photoprinting is also reducing, but might not go extinct. I recently bought a photoprinter myself.

3) Crop dusters

Sorry what?

4) Gay Bars

Yeah right !!

5) Newspapers

Even though I like my epaper, the touch, the smell, the feel of newspaper and its ink is irreplaceable.

6) Pay phones

Imagine this for the next decade- WiFi everywhere, WiFi enabled PDA. Now connect to Google Talk over the WiFi Internet and speak to any one across the globe. All that you have to imagine is that every person on this earth has a Google account and is always logged on :-)

7) Used bookstore

What did I tell you in my point about Record stores

8) Piggy Banks

We won't have Piggy Banks anymore. In fact, we would be seeing fewer real banks (branches) too.

9) Telemarketing

Go back to point 6. As long as Google is being used, marketing is covered

10) Coin operated arcades

Sorry I am lost.

Pizza Wars

One of the trade-offs common to economic decisions is between Efficiency and Equity. While Efficiency refers to the size of the economic pizza, Equity refers to the slice of the economic pizza.

On a different note, Pizza companies seem to be working on increasing both efficiency and equity in the Indian market. Link here

Updated Knowledge Links

Found some online material for learning economics. Most of them are webcasts of college courses. Please see the updated Knowledge Links ====>

Coffee and Fries

The world ruled by Coffee and Fries.

Any takers for Latte Index to Big Mac Index

Economic Growth in Iraq (on lighter side)

Economic Growth in Iraq

Economic Growth Vs Economic Freedom

What is more important to a country (and its people) - Economic Growth or Economic Freedom?

Economic freedom is an index composed of the following factors

• Business Freedom
• Trade Freedom
• Monetary Freedom
• Freedom from Government
• Fiscal Freedom
• Property Rights
• Investment Freedom
• Financial Freedom
• Freedom from Corruption
• Labor Freedom

whereas Economic growth is measured in terms of rise in GDP.

India ranked 121 during 2006, well behind its neighbors Pakistan and Sri Lanka but India ranks 4th in terms of economic growth for the same time period.

The term "freedom" is wide open to interpretation but India definitely needs to address its freedom to corruption !!!

Two CIAs

Economics teaches us that competition is good. No system of resource allocation is more efficient than pure competition. Going by this analogy, Michael Higgins asks an interesting question - Why not two CIAs?

In the free market, if I don’t like the information the Washington Post provides, I can always buy the New York Times. However, if I don’t like the information the CIA provides (and who does?), then I cannot opt to spend my taxes on CIA2. We can hope the government reforms CIA1, but CIA1 is the only choice we have, except for not having a CIA altogether.

The obvious problems here

1) CIA does not follow the free market principles in a true sense. More to do with political economics.

2) Cost of maintaining additional CIA.

3) Risk involved. Two CIAs = Double the blunder.

Michael also suggests extending the idea of "Dueling" other govt. agencies besides CIA. Getting into the organizational structure of "Dueling" would imply that for every employee E1 of the organization, there would be another employee E2 who is assigned the same job and we expect at least one of them to perform. Does not seem to be an economically viable decision.

Trendalyzer

I have no words to describe this tool. Simple yet so powerful. A break from the regular pdf and xls. I am yet to analyze and observe the trends thoroughly. Will have more posts about the trends soon.

Why Your Boss Is Overpaid ?

Does the following line strike any resemblance to your life? "My boss and I work almost the same number of hours. In fact, I have done 'his/her' work most of the time and he/she takes credit for it. Not only credit, he/she also takes a fat pay check".

An economist's answer to the above (fat pay check) is called Tournament Theory. An article in Forbes concurs the same.

The ugly truth is that your boss is probably overpaid--and it's for your benefit, not his. Why? It might be because he isn't being paid for the work he does but, rather, to inspire you. In other words, we work our socks off in underpaying jobs in the hope that one day we'll win the rat race and become overpaid fat cats ourselves.

Economics meets Physics

Slate's UnderCover Economist tries to find answer to questions like "Why poor countries are poor."

The physicists' map shows each economy in this network of products, by highlighting the products each country exported. Over time, economies move across the product map as their export mix changes. Rich countries have larger, more diversified economies, and so produce lots of products—especially products close to the densely connected heart of the network. East Asian economies look very different, with a big cluster around textiles and another around electronics manufacturing, and—contrary to the hype—not much activity in the products produced by rich countries. African countries tend to produce a few products with no great similarity to any others.

Religion and Economics

Recently read another paper (earlier one here) by Dr. Robert J. Barro, titled "Religion and Political Economy in an International Panel". Makes quite an interesting reading.

Two important theories of religiosity are the secularization hypothesis and the religionmarket model. According to the former theory, economic development reduces religious participation and beliefs. According to the latter theory, religiosity depends on the presence of a state religion, regulation of the religion market, suppression of organized religion under Communism, and the degree of religious pluralism.

Passing Note: The dollar bill reads, "IN GOD WE TRUST". I infer that more the dollar bills in my pocket, more is my religiosity ;-)

Caste Based Reservation

Caste Based Reservation (CBR) in India finds its roots to Dr. B. R. Ambedkar’s Poona Pact of 1932. It found new faces with the adoption of Constitution of India and the more recent Mandal Commission. With clauses to apply and observe the reservation system for just a decade, India recently turned 60 year old free republic.
CBR can be considered similar to Rent Control, where the government regulates and controls the supply/demand. So can we call CBR a good thing? In my opinion - Yes. But how would one decide the percentage of reservation? This is where the matters get complicated. In a free economy, the forces of supply and demand would reach equilibrium. In case of Rent Control, degree of rent increases are limited by the Consumer Price Index (change in Consumer Price Index is a measure of Inflation). What is the rationale for fixing the percentage of CBR? It seems to have been largely political driven rather than any “market forces”. It is also proposed to introduce CBR in private sector. I wonder how longer the MNCs can keep calling themselves “Equal Opportunity Employer”

Distance Education

I recently was having a debate with a colleague of mine about the admissions process in Distance Education in India. My colleague was of the opinion that there is no upper limit to the number of students who can enroll via distance education while the economist in me was suggesting otherwise. I was suggesting that it’s not economical viable. This would be a case of limited resources (teaching faculty and administrative staff) being allocated without a limit? (Number of applicants)

The universities do apply rationing instruments, which limit the number of enrollment. Below is a list of a few such instruments. Some are obvious, some not so obvious and some apply to specific cases only

0) Screening test
1) Number of application rounds per year
2) The Last date for applying
3) Fees
4) Reservation (Caste based or otherwise)
5) Duration of the course
6) Prior academic qualification
7) Relevant work experience
8) Age limit

Even though the university claims to be an "OPEN UNIVERSITY" (no entry criteria), in my opinion, the combination of the above instruments does seem to limit the number of applicants.

Bargain vs Fair Price

Scene One - Bargain
National Market, Bangalore – Customer enters the air cooled shopping complex. He is flocked by sellers. “…yes…hello sir, shoes belts watches ….” The list goes on. Customer sees an item he likes.

“How much does it cost?”
“Top item sir….imported…only Rs 1500…full guarantee”
“No no…too costly…I will pay 600”
“Sir latest item, you won’t find anywhere else….best in class, yours for 1200 only”
“That’s too much…I will pay 700 max”
“Tell me a final price, 900…”
“No no…750”
“Ok 800”
“Done”



Scene Two – Fair price
Forum Mall, Bangalore – Customer enters the air cooled shopping mall. He enters the desired shop.

“Hello sir how may I help you”
“I need one ….”
“Sure that’s the item selling like hot cakes….only Rs 999.90….discount price for the festival”
“Seems good…I will have one”
“Sir, cash or card?”
“Credit card”
“Final price 1200 after VAT”



Let’s forget the quality of the product being sold here. How does bargaining fair against fair price? Or is fair price really fair since the customer is not given a fair chance to bargain?

Economic Blog vs Photography Portfolio

My "economics blogging" activity had been dormant during the last week. That does not mean that I have not been reading about economics. It could only mean that my opportunity cost towards another activity was more favourable. I have been spending time building my photography portfolio. Photography has been my hobby way before my interest in economics but recently the photographic hobby is seeing a new chapter. I have been reading and experimenting with post processing techniques using Adobe Photoshop and Photomatix. But the economic question which remains unanswered is what are the incentives that define my behaviour of choosing to work on my portfolio vs blogging about economics? (Still trying to think of an answer)

Traffic Lights

Traffic Lights and Traffic Police as economic agents.

Limited Resource - Roads and side walks.
Consumers - Motorists and pedestrian.
Price - Amount of time spent waiting at stop signal.
Higher the demand, higher the price (since supply of resource can't be improved immediately) - Higher waiting time during peak traffic hours (especially true in case of Bangalore traffic)

Chocolate Economics

Interesting article here on Chocolates and Economics

Role of Substitute

But the shift would make chocolate cheaper to produce, since cocoa butter can be four or more times the cost of Shea, palm oil and other vegetable fats.

Buyer's Preference

“To me, it’s a delicacy. I don’t eat it every day — I don’t want the calories. But when I do enjoy it, do want real chocolate. I don’t want any change in flavor by cheapening the product,” said one opponent, Avanele Bush, 83, a Malibu, Calif., resident who counts chocolates made by See’s Candies Inc. and Ghirardelli Chocolate Co. among her favorites.

Seller's Incentives

“If you’re able to replace cocoa butter with another fat, even at the 5 percent level, you’re saving lots and lots of money, especially if you are a major manufacturer of chocolate bars,” said Bernard Pacyniak, editor in chief of Candy Industry magazine.

Graduate Study in Economics

I have been doing a small (re) search about Graduate Study in Economics, offered by various universities across the globe, and I am amazed to find out that most Graduate Programs in the United States are PhD courses. Only 1 out of top 10 universities in economic studies, offers a masters course. However, the scene is different in Europe and India, where there seems to be a healthy mix of PhD and Masters Courses.

What could be the incentives for these universities to offer these types of courses?

• India has basically mimicked the British Education system.
• 50-60% of American graduate students are immigrants and US has always encouraged research.
• The infrastructure and facilities for higher education in India are poor. (I do not have any statistical information to provide). This could be the reason why, in spite of low cost of higher education in India, number of graduate students (including immigrants) is low.
• The general mentality of the Indian COMMONS is to become a bread winner ASAP. Higher education is still for the privilege few.
• Research funding in US usually comes in the form of corporates pouring in the dollars hoping to reap the benefits of the research at a later point of time. This does not seem to be happening at a similar scale in India.

The above points cover Graduate study in general but my question still remains specific to graduate study in economics. Why do most US universities offer only PhDs and not Masters in Economics? The answer could lie in the answer to the following questions - What do graduates in economics worldwide do after their graduation ?

I am still (re) searching for this answer.

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Footbath Economics

Stunned to see this article in NY-Times today. What could be the economics behind this?

• More than 10% of the students are Muslims. University of Michigan seems to be interested in attracting more Muslim students. After all, Michigan has higher percentage of Muslim residents than any other American State.
• $25,000 towards foot washing stations in several wash rooms. Who pays for this? This can not be imposed on the Muslim students alone since the washrooms could be used by any student
• Altering the rest rooms to install wash stations would mean lesser space for regular closets, sinks etc.
• Training janitors to clean the new wash system.
• The scene would be similar to the common house hold bathroom in India - Wet !!!. So the new washrooms in the University would have a permanent sign "piso mojado"

Economist: An Introdution

A section in Mankiw's book, "Principles of Economics", quoting some advice from the great economist John Maynard Keynes:

The study of economics does not seem to require any specialized gifts of an unusually high order. Is it not . . . a very easy subject compared with the higher branches of philosophy or pure science? An easy subject, at which very few excel! The paradox finds its explanation, perhaps, in that the master-economist must possess a rare combination of gifts. He must be mathematician, historian, statesman, philosopher—in some degree. He must understand symbols and speak in words. He must contemplate the particular in terms of the general, and touch abstract and concrete in the same flight of thought. He must study the present in the light of the past for the purposes of the future. No part of man’s nature or his institutions must lie entirely outside his regard. He must be purposeful and disinterested in a simultaneous mood; as aloof and incorruptible as an artist, yet sometimes as near the earth as a politician.

Growing Rupee and growing concerns

Currency Conundrum: Is the strong Rupee Good or Bad for India? This article discusses the ups and downs of the rupee appreciation but itseems to lack the other side of the story. The problem has to do more with depreciating dollar than it has to do with appreciating rupee. Dollar is falling against all major currencies while rupee rise is significant against dollar only and not pound or euro. The dollar side of the story

Coming to the I.T. chapter of this article, one good thing is that in recent years, the non-US clients have started paying in local currencies. A few years ago most european and asian clients would pay in US dollars, and if that situation were to exist today, then the dollar depreciation would have had far severe impact.

Caesar III and AOE II

Caesar-3 and Age of Empires-2, two of my favourite computer games. I like them more these days as I started learning economics. Both these games are very good econ simulations. Allocation of limited resources, marginal costs-benefits, trade-offs. Let me quote examples from each game.

AOE
Limited Resources: Gold, wood, stone, food (farm/fish/sheep).
Players must constantly assess priorities and allocate scarce resources between creating new units, upgrading existing units, and researching to upgrade to the next Age.

Marginal Costs-Benefits: Research
Cost of undertaking a research (Cost of mining research) and the benefit (faster mining)

Trade-offs: Building wonder
Once a wonder is built, the game is over in 100 years. While some players might use this technique for victory, I find this method least appealing. For me, the trade-off for this technique is that the game is over. For a player like me, who plays a single game for days together, using wonder technique is a trade-off.

Caesar
Limited Resources: Limited farm land

Marginal Costs-Benefits: Gardens and Plazas. (cost of building gardens vs improved desirability of the housing area)

Trade-offs: Distance of Markets from housing area
While a far off market reduces the availability of food and provisions for housing area, a very close by market has a detrimental effect.

MANKIW : TEN PRINCIPLES OF ECONOMICS

HOW PEOPLE MAKE DECISIONS
#1: People Face Tradeoffs
#2: The Cost of Something Is What You Give Up to Get It
#3: Rational People Think at the Margin
#4: People Respond to Incentives

HOW PEOPLE INTERACT
#5: Trade Can Make Everyone Better Off
#6: Markets Are Usually a Good Way to Organize Economic Activity
#7: Governments Can Sometimes Improve Market Outcomes

HOW THE ECONOMY AS AWHOLEWORKS
#8: A Country’s Standard of Living Depends on Its Ability to Produce Goods and Services
#9: Prices Rise When the Government Prints Too Much Money
#10: Society Faces a Short-Run Tradeoff between Inflation and Unemployment

Google vs Yahoo

A friend of mine has been a blogger for quite sometime now. His current blog is Epistles and he has managed to maintain several blogs simultaneously. When I try to compare his blog to mine, I tend to think of them as Google vs Yahoo, his being Yahoo. His posts are relatively longer and tend to keep the readers at his site for a longer time. Yahoo too, wants its visitors to hang around its sites for longer time. My blog, like Google, will keep the readers for a much shorter duration (that is if I happen to have any readers at all ;-) ), taking them to the links that I provide. Other than this and the fact that Yahoo is an older corporation than Google, I see not much to relate the two blogs to the search engines.

B.T.W, he got recruited at Yahoo recently. Congrats Sharath.

Potteronomics

An excellent chapter for my economics learning, Megan McArdle of The Economist explains why Harry Potter novels are very poor examples of economics.

But this actually presents a problem for authors. If magic is too powerful then the characters will be omnipotent gods, and there won't be a plot. Magic must have rules and limits in order to leave the author enough room to tell a story. In economic terms, there must be scarcity: magical power must be a finite resource.

Economics of Airline Ticket Costs

Few months ago I had watched a programme on CNBC titled, "Inside American Airlines : A week in Life". I was amazed to find out about the narrow margins in airline industry, not to mention the various cost cutting mechanism already in place and the tricks of frequent flier trade.
One interesting aspect is the economics behind the ticketing. And I thought distance and fuel costs were the main criteria.

Some more interesting reading here

Q: You also got access to American's Dallas command center.
A: It's so quiet. Guys on headsets. Total Mission Control. They're tracking the performance of every flight. They're on the phone with NORAD (North American Aerospace Defense Command). There was a Tokyo-New York flight where a passenger was beating his wife and then punched a flight attendant. Now it's standard procedure to just call NORAD and get an escort of fighter jets. You act first and ask questions later.

Drive thru ATMs and Low Cost Indian Car

Why do drive thru ATMs have braille keys? Answers found here and here from the Economic Naturalists Series by Prof. Robert H. Frank.
Mass production reduces cost, but I wonder why this principle can not be applied in manufacturing the Rs 1 lakh car by the TATAs. Instead the cost cutting principles seem to be these.

The car will come in two or three levels ⿿ the lowest level being priced closest to the 1 lakh mark ⿿ which the Tata calls the ⿿rudimentary⿿ model, the other word for something that moves and has four wheels and nothing else. The challenge Tata has is to make this appealing enough for the consumers.

Why Economics ? (Part 2)

Back to the old question, why learn economics?

• People who have known me since childhood might argue that since I am a banker's son, economics becomes a default choice. In that case, I should have opted to study economics in junior college itself but then I preferred science instead.
• People who have known me in recent years might argue that since I have been working for a leading American Bank for almost 4 years now, econ became an acquired taste. I would hate to disagree but the kind of work that I have been involved with this American Bank has got nothing to do with its core business. I have worked on technologies to keep track of their internal business and cost savings.
• I figured that the main reason why economics attracts me now is since I have started earning and spending in multiple currencies, living in best of both worlds - from rapidly developing to highly developed, between an economic giant of yesteryears to an economic giant of the future.

The Lost Theater Ticket

I wish to conduct a poll. Someday, when my blog would have sufficient traffic, I would return to the below scenario and try to gather statistics. I came across this example in a presentation at Principles of Economics, student center.

Consider the below scenario

1) A Theater ticket cost $10
2) You have $20 and you wish to see the play

A) Would you buy the ticket after losing a $10 bill?
B) Would you buy a second ticket after losing the first?

People seem to make inconsistent choices !!!

Microeconomics of "Deal or No Deal"

Interesting article on Risk vs Utility

“Deal or No Deal” is a prime example of microeconomic theory at work. If the show lasts long enough (and I hope that it does), it could be a useful tool for more expansive studies of the relationship between risk and utility.

Business Vs Philanthropy

Which is better for the society? Business or Philanthropy? Prof. Robert Barro takes the example of Bill Gates in his study here.

Mr. Gates has pointed out that it's difficult to give away such a large sum of money in a productive way. This isn't exactly true. He could cut a $300 check to everyone in the U.S., or donate the money to the U.S. Treasury with the aim of reducing the national debt. The last method is easier but has different effects on income distribution.

But Mr. Gates's plan is, instead, to use the Bill and Melinda Gates Foundation to reduce world poverty, with an emphasis on advances in health. This is a noble goal. But it will likely just supplement the much larger existing programs of aid and debt relief that have been carried out
for many years by international organizations and governments. These programs have, at best, a checkered record. Although Mr. Gates is probably smarter and more motivated than the typical World Bank bureaucrat, he likely won't do much better.

Economics of Medicine (mal)Practice

Dilbert

Globalization

iPod's manufacturing process is an excellent example of Globalization. A research by Greg Linden, Kenneth L. Kraemer and Jason Dedrick of UC offers a fascinating illustration of the complexity of the global economy, and how difficult it is to understand that complexity by using only conventional trade statistics. Also, the parent article from NY Times.

On a lighter note, below is another example of globalization - a mobile phone text message that I received recently.


Princess Diana's Death : An English princess with an Egyptian boyfriend crashes in a French tunnel, driving in a German car running on a Dutch engine, driven by a Belgian who was drunk on Scottish whisky, followed closely by Italian paparazzi, on Japanese motorcycles. She was treated by an American doctor using Brazilian medicine. This message was created by an Indian on a Chinese phone.

Econ Fundas

Few basic fundas in mircoecon

1) Trade offs - What are the benefits or losses due to an economic decision

Few scenarios - If price of a certain product is reduced do we have more buyers or fewer sellers?If minimum wage is raised, does it result in those who got less than minimum wage earlier are now getting the minimum wage or does it result in less employment opportunity?

2) Price - Price is a rationing device. Since resources are limited, price helps us in decisions wrt to allocating the limited resources.

3) Markets

4) Opportunity Cost

Micro Vs Macro

There are two branches of economics

MicroEconomics - deals with individual economic units such as consumers, investors, business firms etc, and explains why and how these units make economic decisions

At some point of time in future, I would be able to explain, in microeconomic terms, as to why am I creating this blog instead of having slept. Its 2:48 am local time :-)

MacroEconomics - deals with aggregated economic units such as inflation, interest rates, national output etc.

Why Economics?

Why Learn Economics? Why not learn to speak French, or learn to play piano, or study for a technical certification? Well, I am planning to do all the above but I choose to learn Economics 1st because I am hoping that economics will provide me with a tool to provide an educated justification for having defered to learn the rest of the items mentioned above :-)

Opportunity Cost, as always, plays an important role here. So what is Opportunity Cost? We will learn soon. Happy learning to me

How to Learn Economics?

I have been asking the below questions to myself for the past couple of months.

- How to learn Economics ?

- Which is the easiest way to learn Economics ?



I figured out that the answer itself lies in the economics of learning ecomomics i.e. allocation of limited resources. Limited resources being Time, Books, Online material etc. Opportunity Cost also plays an important role.

I basically set out, determined to learn economics the way it would be taught in a graduate school of business, and my findings were about to astonish me the most. Apart from the curriculum itself, some colleges have published the lecture notes, recitations, assignments (MIT OpenCourseWare) while some others have webcast of the lecture itself (UC Berkeley Webcast).

So the remainder of the blogs are going to be my learnings of economics with the aid of the above resources, and other resources that I might come across. Like I mentioned earlier, opportunity cost is going to play a crucial role. We will find out how.