Wednesday, May 31, 2006

Democracy or Capitalism?

Freedoms Principals
Chapter 1. On Freedom
By freedom I mean a political condition in which an individual is:

• free to speak his mind,
• join and profess any religion,
• create or join any association,
• buy or sell whatever products,
• own property as an exclusive right,
• determine who governs him.


• Such freedom must be consistent with a like freedom of others.
• Be guaranteed by a fundamental body of laws he had a part in creating.
All democracies have an electoral system through which people choose their representatives and leaders, and thus give their consent to be governed and to have those representatives communicate their interests. The manner in which democracies conduct their elections varies from one to another, but all share this:

• regular elections for high office,
• a secret ballot,
• a franchise that includes nearly the whole adult population,
• open, competitive elections
Real competition in the elections is a key requirement. Many communist nations exhibited all the electoral characteristics mentioned in their periodic election of legislators handpicked by the Communist Party, who then simply rubber-stamped what the Party wanted. “Competitive” means that those running for office reflect different political beliefs and positions on the issues. If they do not, as in the communist nations, then the government is not democratic.

Besides its electoral characteristics, one kind of democracy has characteristics crucial to freedom, such as the freedom of religion and speech, and the freedom to organize political groups or parties, even if they represent a small radical minority, that then nominate their members to run for high office. In addition, these democracies provide an open, transparent government such that one knows how their representatives voted and debated.

One of the most important of the individual rights helping to guranteeing freedom is to a fair trial and rule by law. Above the state there must be a law that structures the government, elaborates the reciprocal rights and duties of the government and the people, and which all governing officials and their policies must obey. This is a constitution, either created as a single document like that of the United States, or a set of documents, statutes, and traditions, such as that of Great Britain.

If a democracy recognizes these rights and the individual freedoms listed, we call it a liberal democracy. If it does not, if it has only the electoral characteristics but suppresses freedom of speech, possesses leaders that put themselves above the law and representatives that make and vote on policies in secret, then we can call it a procedural, or better, an electoral democracy.

Thursday, May 18, 2006

Water Conservation Part Two.

This post will be a compilation of water saving techniques and devices and not meant as a recommendation or endorsement.
I had heard of No-Flush Waterless Urinal for some time but just recently saw one at UCSB.

They all work like the picture below shows as I have seen. There are additional links for all items in the links section.

It works on a chemical trap (Blue Seal as above) that keeps the smell from escaping and the overflow spills into a normal drain as the trap is filled.

Not that the She-Pee Urinals will catch on except for remote/special events (How to beat the Glasto toilet horror). But this has not stopped the development of a P-Mate for Women that is a disposable cardboard funnel to allow women to pee standing up, and the P-Mate Urinal stalls.

Warning next link is graphic, that talks about Advice on how to Pee Standing up for Females.

So if there is waterless urinals how about toilets? Envirolet® Composting Toilets by Sancor™ uses a fanned aeration system.

And SunMar® self contained composters use a handled rotating drum (much as a normal composter does).

Lastly there are some basement types as in:
Waterless composting toilet systems make too much sense!! and Waterless Toilets. But I am not sure how the solid waste gets down the drain without water and thus defeat the benefits.

But one area that I feel would be good to use this technology is rest stops or public restrooms that are not high traffic areas. Waterless toilets or 'dry sanitation' systems has a couple of ideas on this:

If these techniques above did not reduce the smell from normal outhouses then maybe the aeration system shown above might also be a possibility.

Another technique that is much easier to implement is the Dual Flush Toilets. I first read about this in the 70's when it was being used in Japan, and is still the simple concept that if it is liquid waste and maybe a small wad of toilet paper then only a smaller amount of water is needed to flush the waste. According to the web site, average old toilets used 18.8 gallons per day and the new low flow ones are at an average of 9.1 gallons per day and their new dual flush is 6.9 gallons per day. Instead of legislating the low flow toilets I wish that congress had let the market decide on how best to reduce water consumption, but that is for another day.

And now for something completely different...

Art's glass toilet tests courage
An artist has created a usable public toilet in a glass cube to challenge the curiosity - and bravery - of people passing London's Tate Britain gallery.

Monica Bonvicini said visitors would have to "defy their own embarrassment" to use the minimalist cubicle, made from one-way mirrored glass.

It is impossible to see into the toilet, which will be free to use, but the person inside can see passers-by.

The work, called Don't Miss A Sec, uses a prison loo as a historical reference.

Clivus Multrum, Inc. manufactures composting toilets and greywater irrigation systems for distribution throughout North America and beyond. Please contact us to discuss your project in detail.

New way to go green: Waterless urinals make a splash
Case Study for Flushless Urinals
Composting Toilets
What is a Composting Toilet System and How Does it Compost?
Simple Home Repairs: Splash Blocks and Drywells
Dry Well-Wiki

In Colorado, Rain Barrels Are Illegal. Yup. »

Is America Ready for the 'Smart Toilet?' For the kitchen and bath industry, the toilet is the final frontier.

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Sunday, May 14, 2006

Puerto Rico: Divergence not Convergence

The title link is to a chapter of a doctoral dissertation in economics by Fernando Lefort in June 1997. The basic economic theory he is working with is convergence theory. This is broadly defined as the farther away an economy is from the steady state level compared to it closest trading partners (other states), then the fastest the growth will be relative to the distance from the steady state. Steady state refers to the level of GDP that is relatively stable and growing at a steady pace. Much as what is expected of a mature economy such as the USA in this case. And this appears evident in that the Chinese economy is growing fast to catch up with the USA but by theory this growth rate will decrease as it approaches its steady state. But for Fernando's explanation:
In general, the level of technology can be affected by government policies and regulations that distort the markets and by the degree of integration with other economies with other technologies. The savings rate can be considered to be exogenous or can be endogenously determined by the underlying preference parameters. After completing its transitional dynamics, an economy reaches its long-run level of per capita income when the different per capita variables start growing at the same constant rate of growth given by the rate of exogenous technological progress. At that point, the economy is said to be in steady state, and its level of per capita income is known to be the steady state level.

Consider a group of economies that, because of cultural, political or physical proximity, share the same steady state value of per capita income. The neoclassical model of growth predicts that the countries with lower initial levels of per capita income will have higher rates of per capita income growth. Poorer economies will tend to converge or catch-up to wealthier ones, in per capita terms, if their economies differ only because of initial conditions. Thus, the theory of absolute convergence: of two economies aspiring to the same steady state levels, the economy with the lower, initial level of income will grow faster.

But the world is not that simple:
However, even the simplest of the neoclassical growth models, the Solow-Swan model, requires a restatement of this implication if all economies do not share the same steady state. What if different countries have different savings rates, population growth rates, or different technologies? It can be shown that economies with higher steady state levels will grow at a higher rate in per capita terms than those striving toward lower steady states. Hence, the theory of conditional convergence (after the revisions of the convergence hypothesis by Barro and Sala-i-Martin (1992), and Mankiw, Romer and Weil (1992)): of two economies with the same initial levels of income, the economy aspiring to the higher steady state will grow faster.

He states three other conditional factors for different steady states (ie different savings rates, population growth rates, or different technologies). But I see that there is more to this gap as these factors alone dictate. More later.

In summary, Puerto Rico showed an outstanding catch-up effect in the early post-WWII period compared to the US, out-performing all other Caribbean and Latin American economies. However, since 1973 Puerto Rico's per capita output growth rate has decreased relative to other economies in the region, and there is no clear indication that it will ever be able to close the income gap with the US.

So it did better than all other Caribbean nations but has not narrowed the divide much since the early 1970's. But it does not look as though divergence is happening or that it is becoming poorer relatively to the USA Per Capita Income.

This result remains largely unchanged after controlling for other determinants of the steady state level of income, such as the percentage of high school graduates in the population, the government's share of income, and the per capita level of federal transfers. The remaining gap between the actual and predicted individual effect for Puerto Rico must be attributed to some other unobservable variable. Differences in technology in a broad sense between Puerto Rico and the mainland US appear as the standard explanation for the gap. The high degree of integration of the Puerto Rican and American economies, however, make it implausible to attribute the gap to differences in the access to particular production techniques or any other purely non-economic factor.

So he is wondering why there is not a convergence to a higher steady state as theory would dictate. Again, he may not be considering all factors in this study.

A remaining candidate is the more obvious difference in political institutions. Puerto Rico is the only economy of the sample without the clear and permanent political status of statehood. The uncertainty about the future political status of the island might certainly have hurt Puerto Rico's ability to induce increases in the stock of capital at the rate predicted by the theory for an economy with initial low income and high steady state level of income.

I agree that politics has a major affect on the growth of any economy and in this he is starting on the theory that statehood would increase the steady state level of income.

I found that the coefficient in the non-statehood variable is large, negative, and significant. Given the initial level of per capita income and the structural composition of their income, the economies of the states have grown on average 2 percentage points faster than those of the territories. Although these results must be interpreted carefully, it is clear they highlight the existence of positive effects of the statehood status for growth.

A little technical but just saying that statehood garnered 2% increase more than expected without statehood. So if a state was growing at 3% per year and then became a state then it should grow at 5% per year.

The evidence found in this paper indicates that Puerto Rico is converging to a lower steady state than the one to which the United States is converging -- a shortfall that has meant Puerto Rico has been growing at a rate around 2.5 percentage points lower than the one we could expect from an economy with its initial level of per-capita income and the steady state level of income of the United States. Simple simulations performed using the convergence rates obtained in this paper show that the per capita income level of Puerto Rico could have been almost twice its actual value by 1994, completely closing the income gap with the poorest states, had Puerto Rico been converging towards Mississippi's actual income level since 1955.

The convergence to a lower steady state than the US implies that the income gap will not be closed just by waiting for it to happen. Unless Puerto Rico's steady state level of income increases substantially, the Puerto Rican economy will never be able to close the income gap with the US. In this sense, there is no meaningful economic reason for postponing the decision about statehood for Puerto Rico.

I agree that there is "no meaningful economic reason for postponing the decision about statehood". But I am not certain in the least it will:
All these examples, however, are minor cases of economic cooperation when compared to the potential for Puerto Rico. Were Puerto Rico to become a state, the convergence effect should guarantee Puerto Rico a higher rate of economic growth and its citizens higher income levels. Through the statehood process, Puerto Rico can become an integral part of the largest and wealthiest economy in the world, resolving once and for the question of political uncertainty associated with commonwealth and thereby fully enjoying the economic benefits of the catch-up process.

In Lefort's study he looked at the 48 lower states and Hawaii. But I see that Puerto Rico first is disjointed from the other states and thus may always lag behind the other states unless it finds it specialty and exploits it. In the continental states the Interstate Highway system prevented any state from being left out of the system but it does not apply to the island states. Even Alaska was helped in WWII by the Alaskan highway system even if it was through Canada. It is natural that the states close to each other would converge more easily than an outlier.

But then why did Alaska and Hawaii converge with the USA mainland? First and most importantly was they both offered something unique to the US. Hawaii had crops that could not easily be grown on the mainland and tourism from the west coast was a major growth industry. While Hawaii is a lone tourist destination for the west coast, Puerto Rico has to compete ferociously for tourism between all other Caribbean islands. The naval ports were unique to Puerto Rico but have been scaled back in recent years. As far as Alaska, I would think that it would even be worse than Mississippi if not for substantial Federal Subsidies in infrastructure and the vast oil and gas reserves.

Secondly, English speaking has been implemented in all 50 states. Not all Puerto Ricans speak or read English proficiently. I think this should be a requirement for Statehood, that to graduate all seniors must pass a proficiency in English exam. Thus a diploma means the same in all 50 states. Now they can teach Spanish all they want and even speak it on the streets, but must be able to converse in and read English.

So in conclusion, I want Puerto Rico to become a state if they also want it, but we should realize that it may never be on par with the mainland unless they find their specialty.

Title link broken so this one should work: Puerto Rico: Divergence not Convergence by Fernando Lefort* June 1997 Executive Summary

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Saturday, May 13, 2006

Aluminum Supply 1960-2000

The above link is to a PDF file of the following information.
The U.S. aluminum supply of 10,698,000 metric tons in 2000 originated from three basic sources:
primary aluminum (domestically produced), secondary aluminum (recycled domestic material),
and aluminum imports. This consisted of 3,668,000 metric tons of primary aluminum, 3,450,000
metric tons of secondary aluminum and 3,580,000 metric tons of imported aluminum.10 From 1990
to 2000, the annual U.S. growth of these supplies was -0.8%, 4.3% and 10% respectively. Since
1990, the total U.S. supply has risen at an annual rate of about 3.6%. Diagram 3.1 shows the
distribution of these supplies over the past 40 years (Appendix G).

The United States is the leading producer of primary aluminum metal in the world. However, its
dominance in the global industry has declined. The U.S. share of world production in 1960 accounted
for slightly more than 40% of the primary aluminum produced. By 2000, the U.S. share of world
production had decreased to 15.3%. U.S. primary production peaked in 1980, and over the past
twenty years has been gradually declining. Significant year-to-year variations occur as a result of
U.S. electrical costs and global market changes.
Secondary (recycled) aluminum is of growing importance to the U.S. supply. In 1960, only 401,000
metric tons of aluminum were recovered. In 2000, almost 3,450,000 metric tons of aluminum were
recovered. For the years 1991 through 2000, the secondary production of aluminum has grown at
an annual rate of 4.3% (Appendix G). Recently, the secondary aluminum growth rate has been
slowing because of a combination of maturing scrap collection programs and slowing market growth
of scrap sources. This is expected to change. Use of aluminum in the automotive industry grew at
nearly 10% annually between 1990 and 2000. This large and growing supply is now beginning to
enter the scrap markets and will produce new growth in secondary aluminum.

Monday, May 08, 2006

Water. Too much, too little or just right?

An interesting conversation again is happening at Thom's Board from above link about family farms and that the present industrial farming system will collapse. Why?
-- Sustainability.
It's a systems concept, which means it's not linear. Which means it fills up a blackboard in a hurry with circles filled with words, and arrows pointing to the circles and all sorts of mind scrambling visuals that don't fit into a Post A Reply window.

So instead of looking at every possible connection of how a system will collapse, I want to break it down to manageable components to discuss here. And of course one of the most important issue is water. This post is just going to look at some alternative ways to store/retain rain water.

The first link is to an "This Old House" special on This Roof Resists Hurricanes, Collects Water.
The thing about living in paradise is there's always a catch. In the case of Bermuda, where This Old House has been filming the renovation of a 200-year-old Georgian house, hurricanes hit the small mid-Atlantic island summer and fall, toppling trees, rattling shuttered windows, and peeling off roofs. Oh, and then there’s the absence of any fresh water source on the island. As a result, Bermuda’s roofs have evolved over four centuries to do two things: protect houses against gale-force winds and funnel whatever the heavens rain down into large cisterns that feed household taps. By law, every house must collect 80 percent of the water that falls on its roof.
The result is a strong, nearly self-supporting structure that holds its own against the weather while sending clean water into the tank. It’s the best and cheapest way to supply fresh water — up to 30 gallons per person are needed per day — to the 60,000-plus residents of this tiny island nation. It's also what accounts for Bermuda's signature white rooftops, perfectly placed amid the palms and set off by the pastel houses for which the island is famous.

Next is for another island (Key Westers) that has access to a supply of water but wants to save water and thus money to have it piped in, at Water Conservation Conch Style
For one, collected rainwater is ideal for irrigation--why pour potable water, at $5.20 per thousand gallons, out on the monkey palm? Some estimates claim irrigation accounts for nearly 40% of water use in Key West, so easing that load would leave a large proportion of the 14 million gallons of piped-in water the island uses each day back in the Everglades aquifer where it belongs.

Another benefit: Cisterns catch water that would otherwise become storm-water run-off--rain that falls, washes the island's building, streets and parking lots, and then needs a place to go. Currently, most of that greasy, dirty water ends up in the ocean, where it is implicated in killing off the living reef that surrounds the Keys.

But of course there will be some are always areas of concern...
Although many were destroyed as anachronistic and breeders of mosquitoes after the Navy's pipe came in, there are still 353 cisterns of record on the island. Old Henry Flagler, builder of the railway that linked Key West to the mainland, put a million-gallon one beneath his Casa Marina Hotel back in 1922, and it's still being used to water the grounds. Good enough for Conchs and capitalists, the cistern seems to be an old idea that's coming back.

The next link is a very useful guide for setting up cisterns/catchments at:1.1 Rainwater harvesting from rooftop catchments. I only want to add the concerns here at present.
· A procedure for eliminating the "foul flush" after a long dry spell deserves particular attention. The first part of each rainfall should be diverted from the storage tank since this is most likely to contain undesirable materials which have accumulated on the roof and other surfaces between rainfalls. Generally, water captured during the first 10 minutes of rainfall during an event of average intensity is unfit for drinking purposes. The quantity of water lost by diverting this runoff is usually about 14l/m2 of catchment area.
· The storage tank should be checked and cleaned periodically. All tanks need cleaning; their designs should allow for this. Cleaning procedures consist of thorough scrubbing of the inner walls and floors. Use of a chlorine solution is recommended for cleaning, followed by thorough rinsing.
· Care should be taken to keep rainfall collection surfaces covered, to reduce the likelihood of frogs, lizards, mosquitoes, and other pests using the cistern as a breeding ground. Residents may prefer to take care to prevent such problems rather than have to take corrective actions, such as treating or removing water, at a later time.
· Chlorination of the cisterns or storage tanks is necessary if the water is to be used for drinking and domestic uses. The Montserrat Island Water Authority constructed a non-conventional chlorination device with a rubber tube, plywood, a 1.2 m piece of PVC tubing, and a hose clip to chlorinate the water using chlorine tablets.
· Gutters and downpipes need to be periodically inspected and cleaned carefully. Periodic maintenance must also be carried out on any pumps used to lift water to selected areas in the house or building. More often than not, maintenance is done only when equipment breaks down.

Of course maitenance levels depends on what it will be used for as in if only irrigation then chlorine is likely to be overkill.

And now closer to home at Harvest the Rain.
Wrangle water from the sky for watering, washing and even drinking, no matter where you live.

Adapted from Environmental Building News

Rainwater harvesting systems can be as simple as directing gutters to a lidded garbage can or as complex as a concrete cistern, roof washer and filtration system. But whatever your application, rest assured that you'll be getting some of the purest - and cheapest - water around.
But after it falls from the sky, rainwater percolates through the earth and rocks, where it picks up minerals and salts. As Heinichen points out, in many cases, this water also collects other contaminants such as industrial chemicals, pesticides and fecal coliform bacteria found in the soil. Captured before it hits the ground, rainwater is free of many pollutants that plague surface and underground water supplies and, according to the Texas Water Development Board, "almost always exceeds [the quality] of ground or surface water."

Rainwater typically has very low hardness levels, which reduces the use of soaps and detergents, and eliminates the need for a water softener. Fewer minerals also saves wear and tear on your plumbing fixtures.

Now there can still be contaminants in the rain water but as far as acid rain, this should not be a problem for many people other than the east coast and most notably in the North East. On this map at National Water Conditions look for areas that have less than pH 5 as the article Acid Rain spells out.

More Links of Interest:
International Rainwater Catchment Systems Conferences
Save Family Farms, Save America


Sunday, May 07, 2006

More Nimbies in Santa Barbara County

An increasingly large contingent of Carpinteria residents has joined the battle against the Paradon Project, Venoco Oil’s proposal to pump offshore oil and gas via slant drills behind Carpinteria City Hall and above a harbor seal rookery. The project’s movable, 175-foot-tall drilling tower would rival UCSB’s Storke Tower as the tallest structure in the county, according to opponents. The project would increase the existing facility’s gas production by 10 times, and would produce an estimated 11,000 barrels of oil daily through the year 2020. Neighbors opposed to the proposal – including the Carpinteria Valley Association – foresee noise, air, and visual pollution, and are concerned about the possibility of leaks or spills and plummeting property values.

Now only has local environmentalists and statewide have blocked any chance of offshore drilling, now locals are preventing new technology from being able to use slant drills to get access to the reserves. There is no pleasing some people.

The noise and air pollution can be mitigated. So it comes down to a tower that is 175 feet high, which I assume they think it will lower property values. I always wonder when people complain about one sign or tower how much are they really losing out on. Is there value of life so dependent on what one tower is and how high it is?

In Santa Barbara there is a height restriction of 45-60 feet for new construction. Along with a multitude of regulations limiting growth outward has created such a shortage of properties that 1 bedroom condos go for 1/2 a million dollars.

Saturday, May 06, 2006

The Benefits of Trade, Part I

HT, Sawdust from above link.
Warren Buffett and Bill Gates have billions of dollars. Last year I took a piece of vacant land and built a cabin on it. I worked hard and put in some sweat equity and now my cabin is worth a lot more than I paid for it. I created value by using my capital both financial and physical.
Here is my question. How did the vast wealth of Warren Buffet and Bill Gates stop me from doing what I wanted to do and making a profit?
So called "hoarded wealth" is only called that by those who don't understand what wealth is. Wealth is the end result of creating value. People who inherit wealth benefit from the value created by their families or ancestors. The ability to create value exists in all of us, regardless of the wealth that others have created for themselves.

Which had me thinking of the strong liberal meme of Zero Sum Games:
Zero-sum describes a situation in which a participant's gain or loss is exactly balanced by the losses or gains of the other participant(s). It is so named because when the total gains of the participants are added up, and the total losses are subtracted, they will sum to zero. Chess is an example of a zero-sum game - it is impossible for both players to win. Zero-sum is a special case of a more general constant sum where the benefits and losses to all players sum to the same value. Cutting a cake is zero- or constant-sum because taking a larger piece reduces the amount of cake available for others. Situations where participants can all gain or suffer together, such as a country with an excess of bananas trading with another country for their excess of apples, where both benefit from the transaction, are referred to as non-zero-sum.

And this lead me to think back to a forum ( Economics) I visited that posed the following question:
Let's say that I need to cook 3 meals a day and mow my lawn once, and you do too. It takes me 3 hours to mow my lawn and 6 hours to cook one meal. It takes you 2 hours to mow a lawn and 1 hour to cook a meal. So, if we both mow our own lawns and cook our own meals, it takes me 21 hours and it takes you 5 hours. But, it look like you have a comparative advantage in cooking meals...

And costs per hour to complete tasks:
__Lawn | Meals

You(1)--- 2 --- 1

Me(2) -- 3 --- 6

Now the question is: can they trade the chores and benefit both parties at the same time? The writer of this question then falls into the trap that when the trade occurs, that both will specialize 100% in the relatively more efficient task...
If you specialized in cooking all our meals and I specialized in mowing both our lawns, then I would be better off (now only spending 6 hours mowing), but you will be worse off because now you spend 6 hours cooking meals.

But before we step to the conclusion of complete specialization let us first break down what each individual is willing to trade for and still get a benefit from trade.

Some assumptions that I will be using is that both tasks are both a negative utility (something you don't want to do) at the same level and thus the goal is to minimize amount of time doing labor. And secondly no transaction costs. Now You(person 1) is willing to trade 2 meals for any one mowing and still be the same off. Anything less than that trade off will make 1 better off. And Me(person 2) is willing to 2 lawns for 1 meal and be at the same level of utility.

To make the trade easier I will come to the conclusion that they negotiate a price of one mowing for one meal. So #2 will mow both lawns and #1 will do her three meals and do one meal for #2 and thus #2 will still have to fix 2 meals.
So what are the results:
#1 person (3+1) meals*1 +(0)lawn*2=4
So originally 5 hours and #1 saved 1 hour.
#2 person (2) meals*6 + (1+1)lawn*3=18
So originally 21 hours and #2 saved 3 hours.
And in conclusion both benefited from trade and society as a whole also got 4 more hours to spend with their kids or enjoy life more, with no one being worse off in the process!!!

Simple Trade

A Suggestion for Radio Shack

First some disclosures, yes I do own some Radio Shack common stocks. And even sent this suggestion by email to them. No response.
And on a side note I have started to look at NABORS INDUSTRIES LTD (NBR) as to add to my protfolio as some exposure in the energy market.

DVD Kiosks Soon at Wal-Mart? :
Wal-Mart (ticker: WMT) has been actively testing in its stores ‘music kiosks’ — booths that burn music to CD on customer’s demand. Now Wal-Mart, the world’s largest seller of DVDs, is considering DVD kiosks that would burn movies on demand, to alleviate a shelf-space problem and possibly spur lagging DVD sales.

But the question becomes is why should Wal-Mart be that concerned about floor space? A better place is Radio Shack, I believe. Radio Shack has had a long problem with getting into the intelectual properties distribution. Software for computers never was a hit. Music was only some stupid Christmas CDs that most stores could not give away. DVDs,CDs and software through the Radio Shack Unlimited (catlogue orders through the stores-12 catalogues in all) never got anywhere. And even the exclusive (forgot name) personal learning computer never sold enough units to justify the vast inventory of software that was supplied to the stores.

With the DVDs/CDs on demand then there is no need to stock anything except the blank discs, everything else is either included in the machine or is lifted off the intranet. And floor space is an issue since most Radio Shacks are 2000 to 3000 SF which includes office and storage space. Radio Shack has about 7000 stores which is in the ball park for the 9000 Blockbusters. And since many of the Radio Shacks are in more rural areas than Blockbuster this could wedge Radio Shack into that market.

This last assumption that it would compete with BlockBuster would assume that either the disks become disposable or low enough price that returning them is not an issue for the rental side. But the purchase side would still hold true in lots of markets.

Now from another perspective:
Print on Demand
Unfortunately, the article suggests that WalMart sees this as a ploy to keep customers in the store longer. That would increase the real cost of the service, but the "time rich" may not mind. I'm not sure how many of WalMart's customers are "time rich", but I do not see the value in keeping this segment in stores for longer.

True it may be time consuming for the burning process. But then again it could be called in or purchased on the internet and then picked up. And secondly, Radio Shack has always had a problem with customers being so narrowly foccused that many did not know what they had or what services they provided. Radio Shack was a destination place and was never a shopping spot. Now if the customers had to wait, they would have a chance to learn about all the great gadgets there.

Lastly check out:Wal-Mart and the Shanghai Pirates
Which confirms the prices could be as low as $5 for older videos and slightly higher for new ones. And the time is around 1/2 hour-just enough time to look at all the great gadgets at Radio Shack!

Monday, May 01, 2006

A Simple question for a Psuedo economist to answer.

The graph above is what I will use to help answer and analyze the question below from title link.
Why should profits on gas be higher during a period of shortage? If the cost is composed of the raw material, labor, marketing, overhead, etc., then profit comes on top of all that. I cna understand where the raw material costs, transport, etc are higher now, but why a larger portion of the cost going to profit? Something doesn't seem right about that.

And response by Dr. Haney:
You're right. It's wrong. It should be illegal (maybe it already is). Certainly it's at least immoral. I suspect it comes from simple greed, but they may be able to rationalize it some other way.

Without going into the derivation of supply and demand curves, I drew a supply and two demand curves that are inelastic above. Price elasticity of demand and Price elasticity of supply refers to a percentage change in quantity over a percentage change in price. Inelastic curves refer to when prices change as a percentage changes more than a percentage change in quantities.
When the price elasticity of demand for a good is elastic (Ed > 1), the percentage change in quantity is greater than that in price. Hence, when the price is raised, the total revenue of producers falls, and vice versa.

When the price elasticity of demand for a good is inelastic (Ed < 1), the percentage change in quantity is smaller than that in price. Hence, when the price is raised, the total revenue of producers rises, and vice versa.

Now what does this all mean to the question at hand? During the peak summer driving season the demand for gas shifts to the right from D1 to D2. I drew the Supply curve as being inelastic, but in reality for the short term the supply curve would be nearly vertical (perfectly inelastic) because of the long lead time from production and refinement to the local market.

And now we can see that while the equilibrium quantity has risen from Q1 to Q2, the price has risen more as a percentage from P1 to P2. So for the market to clear at the new equilibrium the prices went up more than the quantity. Since the new price is not constrained by a set profit level then firms that are able to deliver products are able to achieve above economic profits. If economic profits continue, then new companies get into the business or existing businesses will increase supply or alternatives will enter the market and thus reduce the equilibrium price.

When consumers or producers face inelastic curves, then this can be both a blessing and a curse. Farmers have the problem that when supply increases as in a good crop season, this drops the price drastically and thus will actually reduce income as percentage drop in prices is greater than the increase in quantity (as shown below). The demand curve is inelastic because as prices change consumers tend to purchase the same basket of products and will not change their spending habits at least over the short term.

Rate a Minute! "Every Change of Rate"

From my experience most economists have a healthy dose of humor. HT to Yelnick. I am not sure why this blog was on my list because I don't agree with his basic theories. The Elliott Wave Theorist (EWT) is a theory of long term trends that can be predicted. Many liberals on Thom's boards believe some of this stuff.

I actually like Ben Bernanke but there is a hilarious video at Columbia Business School.

A summary of the behind the scene joke is at WSJ/Glenn Hubbard: King of Pain and The Big Picture.
Today's best four minutes of the day: an uproarious parody of the Police's "Every Breath You Take" by students at Columbia Business School, which purports to show the school's dean, Glenn Hubbard -- and, no, that is not Mr. Hubbard, the school confirms, but a look-alike student -- taking Fed Chairman Ben Bernanke to task for monetary policy mistakes (in a fit of jealousy over not getting the position). It's hard to resist the charm of any attempt to poke at the Fed, especially one that includes the couplet "Hope your models break/bet that beard is fake." The real Mr. Hubbard was traveling and could not be reached for comment.

But in all honesty they are a little tough on Ben since he has only been on the job one month and supervised only one meeting. But then, since it is suppose to be from someone jealous then it seems logical.