From Yahoo! Finance: 2019-01-04
AAPL
CNBC Videos • Fri 1:57 PM
Trump: China is paying us tremendous tariffs
AAPL
Fox Business Videos • Fri 1:59 PM
Trump: I want Apple to make their products in the US
AAPL
CNBC • Fri 2:53 PM
Trump says he's not concerned about Apple because it builds products in China
Who is paying the “tremendous tariffs? It is not the Chinese. They just pass those tariffs on to the U.S. customers.
But the complexity gets worse. Do U.S. manufacturers cut their costs by manufacturing in other countries. If they cut their costs, do they pass those savings on to their customers or do they just add them to their profits.
If the savings are passed on, the customers benefit. If the savings are considered profits, do those at the top get bigger bonuses or do the share-owners get bigger dividends or bigger profits when they sell their stock.
Showing posts with label costs. Show all posts
Showing posts with label costs. Show all posts
Saturday, January 19, 2019
Monday, February 27, 2017
Spending money saves money
Too many “budget cutters” think that taking benefits from one group of people will save lots of money for a few other people. Actually taking benefits away will just transfer costs elsewhere.
Take for example health care. “Conservatives” think that spending less on Medicare and Medicaid will save billions.
No, it will just transfer costs to somewhere else. Corporations will have to spend more on employee healthcare or risk having more sick employees. States will have to pay more for healthcare, if they so chose.
If people can’t afford health care, they will be less able to work and have less taxable income. They will also have less money to spend on all the goods and services companies provide. If there are fewer buyers, then there will be fewer goods and services sold. If there are fewer goods and services sold, then there will be less profits.
“Conservatives” should be careful what they ask for. They may just get the opposite.
Take for example health care. “Conservatives” think that spending less on Medicare and Medicaid will save billions.
No, it will just transfer costs to somewhere else. Corporations will have to spend more on employee healthcare or risk having more sick employees. States will have to pay more for healthcare, if they so chose.
If people can’t afford health care, they will be less able to work and have less taxable income. They will also have less money to spend on all the goods and services companies provide. If there are fewer buyers, then there will be fewer goods and services sold. If there are fewer goods and services sold, then there will be less profits.
“Conservatives” should be careful what they ask for. They may just get the opposite.
Monday, July 20, 2015
A little math test
A headline on Yahoo! Finance reads:
American families spent 16% more on college this year
Just what does it mean?
Did all the families who spent money on college last year spend 16% more this year?
Or:
Did 16% more families spend money on college this year?
The article does mention that tuition only rose about 2%, and it does mention that some families are spending more because they can afford to.
So, the short answer is that more analysis is needed and that headline writers have to be careful of their wording. Good journalism is factual, not sensational.
American families spent 16% more on college this year
Just what does it mean?
Did all the families who spent money on college last year spend 16% more this year?
Or:
Did 16% more families spend money on college this year?
The article does mention that tuition only rose about 2%, and it does mention that some families are spending more because they can afford to.
So, the short answer is that more analysis is needed and that headline writers have to be careful of their wording. Good journalism is factual, not sensational.
Thursday, April 10, 2014
Up to no good about public goods
On April 2, the Duluth News Tribune had an “Our View” titled “Road repairs: Hold on to your wallets” about the report of a task force on the repair of city streets. Why is it that increased taxes to pay for necessary public goods is a bad thing, but increased prices of things provided by the private sector are just seen as “passing on costs”?
It is estimated that a thirty percent increase over two years in property taxes is necessary to pay for the needed repairs. This is partly required because Duluth can no longer count on the money it had received from the Fond-du-Luth Casino. In other words, the “tax” paid by gamblers will now have to be paid by all the citizens.
The oldest real estate tax record I have is from 2002. Our 2014 Duluth property taxes are 2.28 times as much as 2002. Assuming the proposed 30 percent increase, our 2016 taxes will be 2.97 times as much in 2002.
Now lets compare this to the price increase of Duluth News Tribune. When I first came to Duluth in 1999, the DNT costs 50 cents. I’m not sure whether it first went up before or after 2002. It now costs $1.25 for a single copy. That is 2.5 times as much. That’s “worse” than the increase in my Duluth property taxes up to now. Will it go to $1.50 by 2016? If so, that will be 3.0 times as much. Where’s all the shouting about the Duluth News Tribune not living within its means?
How about food prices? The price of Stonyfield yogurt sticks in my mind from years ago as 54 cents for an eight-ounce container. One can now get it online for about $1.42 for a six-ounce container. That is 3.5 times as much per ounce! Can’t Stonyfield and the grocers live within their means?
The lowest I remember gas prices being in Duluth was 99 cents a gallon. Now the price per gallon has been around $3.59 per gallon. That is 3.6 times the low. Can’t the oil companies live within their means?
What are some major costs in repairing streets? Asphalt, gasoline, and diesel fuel! Maybe we can keep our taxes at the 2002 level if we can keep the price of oil and the derivative products at the 2002 level.
But this year, the city took a big hit on fuel expenses. Lots and lots of snowplowing. Should the city cut back on the snowplowing to “live within its means”? How loud would the howls be from the public if the city “lived within its means” for snowplowing?
The same goes for street repair. It seems many expect city streets to be built to Interstate standards, but they complain both about the potholes and the taxes to fill the potholes.
We could go back to an ancient custom of every road being a toll road. Barons and other large landowners charged everybody to use the roads across their lands. This was a big drain on commerce. In fact, some writers say that the British economy in the 1700s did much better than the French economy because of internal tolls. The British had practically none. A French merchant couldn’t travel 20 miles without encountering an internal tariff. Add that to the super-rich in France ripping off the peasants even more than the super-rich in Britain did.
Ah, toll roads! Some think that the toll prohibition on Interstates should be lifted. Actually, there is no blanket prohibition as anyone who has driven I-90 in Illinois or the Ohio Turnpike knows.
As the need and costs of repairs to the Interstate system increases, so does the talk of charging tolls for use of the system. See “Agreement on Interstate Repair Needs, but Not on How to Pay for Them”, New York Times, April 3, 2014. Interestingly, some of the big shippers like FedEx and McDonalds object to the tolls. Many smaller businesses such as restaurants and convenience stores object because they think people will avoid the Interstates to avoid paying a toll each time they exit for a short stop. Another consideration is what will be the cost to add on the infrastructure to collect tolls?
I bet you dollars to donuts that many of those who want and even demand public goods such as a highway system also object to almost every single tax that makes them possible.
In many ways, taxes are a good bargain. If we didn’t pay taxes for fire departments, we would be paying a lot more for fire insurance. If we didn’t pay taxes for an extensive sewer system, we would be paying a lot more for hospital bills. If we didn’t pay taxes for snowplowing, we would be paying a lot more for auto insurance and maybe even lawyers.
Yeah, I was grumbling as I filled out my state and federal taxes and robbed my bank account to pay what’s due. And I’m grumbling as I try to figure out how to better spread out payments for the 2014 tax year. But then I think of the words of George Washington and Justice Oliver Wendell Holmes, Jr.
In his “Farewell Address”, George Washington wrote, “that towards the payment of debts there must be Revenue; that to have Revenue there must be taxes”.
Justice Oliver Wendell Holmes, Jr. supposedly wrote, “I like taxes; they buy me civilization.”
It is estimated that a thirty percent increase over two years in property taxes is necessary to pay for the needed repairs. This is partly required because Duluth can no longer count on the money it had received from the Fond-du-Luth Casino. In other words, the “tax” paid by gamblers will now have to be paid by all the citizens.
The oldest real estate tax record I have is from 2002. Our 2014 Duluth property taxes are 2.28 times as much as 2002. Assuming the proposed 30 percent increase, our 2016 taxes will be 2.97 times as much in 2002.
Now lets compare this to the price increase of Duluth News Tribune. When I first came to Duluth in 1999, the DNT costs 50 cents. I’m not sure whether it first went up before or after 2002. It now costs $1.25 for a single copy. That is 2.5 times as much. That’s “worse” than the increase in my Duluth property taxes up to now. Will it go to $1.50 by 2016? If so, that will be 3.0 times as much. Where’s all the shouting about the Duluth News Tribune not living within its means?
How about food prices? The price of Stonyfield yogurt sticks in my mind from years ago as 54 cents for an eight-ounce container. One can now get it online for about $1.42 for a six-ounce container. That is 3.5 times as much per ounce! Can’t Stonyfield and the grocers live within their means?
The lowest I remember gas prices being in Duluth was 99 cents a gallon. Now the price per gallon has been around $3.59 per gallon. That is 3.6 times the low. Can’t the oil companies live within their means?
What are some major costs in repairing streets? Asphalt, gasoline, and diesel fuel! Maybe we can keep our taxes at the 2002 level if we can keep the price of oil and the derivative products at the 2002 level.
But this year, the city took a big hit on fuel expenses. Lots and lots of snowplowing. Should the city cut back on the snowplowing to “live within its means”? How loud would the howls be from the public if the city “lived within its means” for snowplowing?
The same goes for street repair. It seems many expect city streets to be built to Interstate standards, but they complain both about the potholes and the taxes to fill the potholes.
We could go back to an ancient custom of every road being a toll road. Barons and other large landowners charged everybody to use the roads across their lands. This was a big drain on commerce. In fact, some writers say that the British economy in the 1700s did much better than the French economy because of internal tolls. The British had practically none. A French merchant couldn’t travel 20 miles without encountering an internal tariff. Add that to the super-rich in France ripping off the peasants even more than the super-rich in Britain did.
Ah, toll roads! Some think that the toll prohibition on Interstates should be lifted. Actually, there is no blanket prohibition as anyone who has driven I-90 in Illinois or the Ohio Turnpike knows.
As the need and costs of repairs to the Interstate system increases, so does the talk of charging tolls for use of the system. See “Agreement on Interstate Repair Needs, but Not on How to Pay for Them”, New York Times, April 3, 2014. Interestingly, some of the big shippers like FedEx and McDonalds object to the tolls. Many smaller businesses such as restaurants and convenience stores object because they think people will avoid the Interstates to avoid paying a toll each time they exit for a short stop. Another consideration is what will be the cost to add on the infrastructure to collect tolls?
I bet you dollars to donuts that many of those who want and even demand public goods such as a highway system also object to almost every single tax that makes them possible.
In many ways, taxes are a good bargain. If we didn’t pay taxes for fire departments, we would be paying a lot more for fire insurance. If we didn’t pay taxes for an extensive sewer system, we would be paying a lot more for hospital bills. If we didn’t pay taxes for snowplowing, we would be paying a lot more for auto insurance and maybe even lawyers.
Yeah, I was grumbling as I filled out my state and federal taxes and robbed my bank account to pay what’s due. And I’m grumbling as I try to figure out how to better spread out payments for the 2014 tax year. But then I think of the words of George Washington and Justice Oliver Wendell Holmes, Jr.
In his “Farewell Address”, George Washington wrote, “that towards the payment of debts there must be Revenue; that to have Revenue there must be taxes”.
Justice Oliver Wendell Holmes, Jr. supposedly wrote, “I like taxes; they buy me civilization.”
Monday, October 28, 2013
BYOD and corporate efficiency
"Call it a movement of sorts, but employees are increasingly ditching their company issued computers and smartphones in favor of using their own devices to get work done. One big reason: Their company's tech is, well, terrible."
- "BYOD or bust: How bad tech hurts companies", Cadie Thompson, CNBC, 2013-10-24.
However, read the full article about all the complexities companies face when employees use their own devices.
- "BYOD or bust: How bad tech hurts companies", Cadie Thompson, CNBC, 2013-10-24.
However, read the full article about all the complexities companies face when employees use their own devices.
Thursday, June 20, 2013
If regulation is bad for business, then…
Why are so many breweries opening in Duluth and elsewhere in Minnesota? See "Canoe give me a Bent Paddle". Alcohol production and sale is very highly regulated. Why are so many other small businesses opening, if they don't compete with giant corporations? See "Big corporations hinder little corporations".
This blog entry was inspired by an interview with Niall Ferguson about his book "The Great Degeneration". The interview was by Lauren Lyster "The Daily Ticker" and entitled "The 1.8 Trillion Tax You've Never Heard Of". This huge tax is the supposed cost of all the government regulations. Among other indicators for increased regulations is the increased number of pages in the Federal Regulations.
The premise is if we only cut back on regulations then we'll free up businesses to be more productive. What Ferguson doesn't say is less regulation pushes costs off on everybody else. Yep, if businesses were free to pollute they would be more productive and their prices would go down (or would it be the CEOs salary would go way up). But if they were free to pollute what would our costs be in health? If they were free of regulations in construction then rents would be less (or CEO salary…). But if they were free of construction regulations how many of us would die when their buildings collapsed or caught fire? Triangle Shirtwaist Factory anyone? Bangladesh garment factory? Salvation Army building collapse?
Regulations have increased not because government is eager to have more control. Regulations have increased because we live in an ever increasingly complex and compact society. Regulations increase because we understand more about the harmful effects of many activities and substances on ourselves. Lead in gasoline was seen as beneficial because it reduced engine knock. But then lead was seen as harmful to growing brains. Factories could dump whatever pollutants into nearby streams and lakes, but then people realized that the pollution was killing fish and costing cities more to clean up the water for drinking.
A counter to Niall Ferguson's position can be found at "Niall Ferguson Cites Flawed Evidence to Stoke Regulation Fears", Albert Kleine, Media Matters for America.
This article cites an Office of Management and Budget report of the costs and benefits. Two of my selections from this report follow.
"The estimated annual benefits of major Federal regulations reviewed by OMB from October 1, 2001, to September 30, 2011, for which agencies estimated and monetized both benefits and costs, are in the aggregate between $141 billion and $691 billion, while the estimated annual costs are in the aggregate between $42.4 billion and $66.3 billion. These ranges are reported in 2001 dollars and reflect uncertainty in the benefits and costs of each rule at the time that it was evaluated."
"It is important to emphasize that the large estimated benefits of EPA rules are mostly attributable to the reduction in public exposure to a single air pollutant: fine particulate matter. Of the EPA’s 19 air rules, the rule with the highest estimated benefit is the Clean Air Fine Particle Implementation Rule, issued in 2007, with benefits ranging from $19 billion to $167 billion per year. While the benefits of this rule far exceed the costs, the cost estimate for the 2007 Clean Air Fine Particle Implementation Rule is also the highest at $7.3 billion per year. In addition, the Cross-State Air Pollution Rule (CAIR Replacement Rule (2060-AP50)) has benefits ranging from $20.5 to $59.7 billion and costs of approximately $0.7 billion."
- 2012 Report to Congress on the Benefits and Costs of Federal Regulations and Unfunded Mandates on State, Local and Tribal Entities
This blog entry was inspired by an interview with Niall Ferguson about his book "The Great Degeneration". The interview was by Lauren Lyster "The Daily Ticker" and entitled "The 1.8 Trillion Tax You've Never Heard Of". This huge tax is the supposed cost of all the government regulations. Among other indicators for increased regulations is the increased number of pages in the Federal Regulations.
The premise is if we only cut back on regulations then we'll free up businesses to be more productive. What Ferguson doesn't say is less regulation pushes costs off on everybody else. Yep, if businesses were free to pollute they would be more productive and their prices would go down (or would it be the CEOs salary would go way up). But if they were free to pollute what would our costs be in health? If they were free of regulations in construction then rents would be less (or CEO salary…). But if they were free of construction regulations how many of us would die when their buildings collapsed or caught fire? Triangle Shirtwaist Factory anyone? Bangladesh garment factory? Salvation Army building collapse?
Regulations have increased not because government is eager to have more control. Regulations have increased because we live in an ever increasingly complex and compact society. Regulations increase because we understand more about the harmful effects of many activities and substances on ourselves. Lead in gasoline was seen as beneficial because it reduced engine knock. But then lead was seen as harmful to growing brains. Factories could dump whatever pollutants into nearby streams and lakes, but then people realized that the pollution was killing fish and costing cities more to clean up the water for drinking.
A counter to Niall Ferguson's position can be found at "Niall Ferguson Cites Flawed Evidence to Stoke Regulation Fears", Albert Kleine, Media Matters for America.
This article cites an Office of Management and Budget report of the costs and benefits. Two of my selections from this report follow.
"The estimated annual benefits of major Federal regulations reviewed by OMB from October 1, 2001, to September 30, 2011, for which agencies estimated and monetized both benefits and costs, are in the aggregate between $141 billion and $691 billion, while the estimated annual costs are in the aggregate between $42.4 billion and $66.3 billion. These ranges are reported in 2001 dollars and reflect uncertainty in the benefits and costs of each rule at the time that it was evaluated."
"It is important to emphasize that the large estimated benefits of EPA rules are mostly attributable to the reduction in public exposure to a single air pollutant: fine particulate matter. Of the EPA’s 19 air rules, the rule with the highest estimated benefit is the Clean Air Fine Particle Implementation Rule, issued in 2007, with benefits ranging from $19 billion to $167 billion per year. While the benefits of this rule far exceed the costs, the cost estimate for the 2007 Clean Air Fine Particle Implementation Rule is also the highest at $7.3 billion per year. In addition, the Cross-State Air Pollution Rule (CAIR Replacement Rule (2060-AP50)) has benefits ranging from $20.5 to $59.7 billion and costs of approximately $0.7 billion."
- 2012 Report to Congress on the Benefits and Costs of Federal Regulations and Unfunded Mandates on State, Local and Tribal Entities
Sunday, November 25, 2012
Free market and the Internet
Like lots of people, I'm looking for faster internet or even internet. One thing I can say for certain that it is not a free market - few sellers and very little useful information.
At our cabin, we use dialup on our phone that costs us about $37/month. Periodically I dig around Frontier's web site to find information. The latest pricing is $50/month additional for "up to 6Mbps". If I had a internet-dependent business this might make sense. But not for 4 to 8 evenings a month.
In Duluth, our phone bill is $58/month, but I can't break it down at the moment. My wife doesn't save the detail pages of our bill. Given that we used to pay $23/month for land line, then we are paying about $35/month for "up to 7Mbps". I just did a CenturyLink speed test that showed 6Mpbs at 12:50 on a Sunday. Other speed tests in evenings have shown 4Mpbs. Trying to determine what higher speeds would cost is a big hassle. See http://advrider.com/forums/showthread.php?t=787754 for some users experiences with CenturyLink.
When I bought my iPhone, I switched from Verizon to Virgin Mobile because the pricing was more advantageous to me, only $30/month including data. When we visited our daughter at her lake house near Grand Rapids MN, I thought I would be able to use my iPhone to access the web. I was, sort of. I would get a one-bar 3G signal, then without moving I would get a roaming signal, then no service, then searching, then back to one-bar 3G, even standing by an upstairs window. Our daughter's house is 10 miles from Grand Rapids and less than 2 miles from a major highway. Granted that there are many trees, but can waving leafless trees cause that much variation? The second surprise was that we thought with the iPhone and a low-power FM-to-car-radio cable that we would be able to listen to Minnesota Public Radio all the way back to Duluth without changing the dial. No such luck! On the major highway we were on, the cell signal kept coming in and out. Oh, well, at least the Virgin Mobile/Sprint coverage map doesn't claim that that area is covered.
I knew that AT&T had put up a couple of towers in the Brimson area where we have our cabin, but I've heard many complaints that many AT&T's customer are not satisfied. I checked AT&T's coverage map and did discover coverage areas in Brimson; they are a whole bunch of small islands that make no sense. Besides telling me that our cabin address is could not be matched (other web sites can find it), it shows a coverage area that starts just west of where our cabin is and ends less than a mile farther west. That's too iffy to make a decision with.
The lesson is that you have to make a long checklist of all the features you want in a product and then spend hours and hours to find out what portion of those features are available to you at a price you want to pay. Nobody else is going to help you. And of course, after you buy the product, you'll find a new feature you want but your choice doesn't provide – like listening to public radio without switching stations.
At our cabin, we use dialup on our phone that costs us about $37/month. Periodically I dig around Frontier's web site to find information. The latest pricing is $50/month additional for "up to 6Mbps". If I had a internet-dependent business this might make sense. But not for 4 to 8 evenings a month.
In Duluth, our phone bill is $58/month, but I can't break it down at the moment. My wife doesn't save the detail pages of our bill. Given that we used to pay $23/month for land line, then we are paying about $35/month for "up to 7Mbps". I just did a CenturyLink speed test that showed 6Mpbs at 12:50 on a Sunday. Other speed tests in evenings have shown 4Mpbs. Trying to determine what higher speeds would cost is a big hassle. See http://advrider.com/forums/showthread.php?t=787754 for some users experiences with CenturyLink.
When I bought my iPhone, I switched from Verizon to Virgin Mobile because the pricing was more advantageous to me, only $30/month including data. When we visited our daughter at her lake house near Grand Rapids MN, I thought I would be able to use my iPhone to access the web. I was, sort of. I would get a one-bar 3G signal, then without moving I would get a roaming signal, then no service, then searching, then back to one-bar 3G, even standing by an upstairs window. Our daughter's house is 10 miles from Grand Rapids and less than 2 miles from a major highway. Granted that there are many trees, but can waving leafless trees cause that much variation? The second surprise was that we thought with the iPhone and a low-power FM-to-car-radio cable that we would be able to listen to Minnesota Public Radio all the way back to Duluth without changing the dial. No such luck! On the major highway we were on, the cell signal kept coming in and out. Oh, well, at least the Virgin Mobile/Sprint coverage map doesn't claim that that area is covered.
I knew that AT&T had put up a couple of towers in the Brimson area where we have our cabin, but I've heard many complaints that many AT&T's customer are not satisfied. I checked AT&T's coverage map and did discover coverage areas in Brimson; they are a whole bunch of small islands that make no sense. Besides telling me that our cabin address is could not be matched (other web sites can find it), it shows a coverage area that starts just west of where our cabin is and ends less than a mile farther west. That's too iffy to make a decision with.
The lesson is that you have to make a long checklist of all the features you want in a product and then spend hours and hours to find out what portion of those features are available to you at a price you want to pay. Nobody else is going to help you. And of course, after you buy the product, you'll find a new feature you want but your choice doesn't provide – like listening to public radio without switching stations.
Saturday, January 14, 2012
Cost savings – Penny-wise, pound-foolish?
Wisconsin has a cost-cutting commission of some kind in operation. One of the recommendations was that schools could save $177 million by getting cheaper health insurance.
But what is the true cost of cheaper health insurance? Do employees pay more for premiums? If so, won't they want higher wages to offset their increased costs? Do employees pay more health care costs out of pocket? If so, will they be less willing to get needed medical care? If they get less medical care, will they be taking more sick days? If they take more sick days, will costs of staffing the schools go up or the effectiveness of staff go down? So, will the savings from cheaper health insurance be more than offset by higher costs elsewhere?
If any government wants to reduce costs, I have a couple of suggestions. Let's take away computers from police cars. Even assuming they cost as little as $1,000 each and if we have 1,000 police cars across the state, that would be one million dollars in savings. Let's stop using full-size especially equipped sedans for police cars. Let's replace them with Tatas from India. Instead of $30,000 plus sedans we could replace the police cars with $3,000 mini-cars. Gosh, if we have 1,000 police cars across the state, that would be a savings of 27 million dollars! Wow! Of course, what would be the cost of less effective law enforcement? I bet it would exceed 28 million dollars.
I have a better suggestion. Legislatures should write fewer and simpler bills. Then they could spend more time considering the costs and benefits to all of their constituents rather a select noisy or high-paying few. I think this would really make our 18th century politicians proud.
But what is the true cost of cheaper health insurance? Do employees pay more for premiums? If so, won't they want higher wages to offset their increased costs? Do employees pay more health care costs out of pocket? If so, will they be less willing to get needed medical care? If they get less medical care, will they be taking more sick days? If they take more sick days, will costs of staffing the schools go up or the effectiveness of staff go down? So, will the savings from cheaper health insurance be more than offset by higher costs elsewhere?
If any government wants to reduce costs, I have a couple of suggestions. Let's take away computers from police cars. Even assuming they cost as little as $1,000 each and if we have 1,000 police cars across the state, that would be one million dollars in savings. Let's stop using full-size especially equipped sedans for police cars. Let's replace them with Tatas from India. Instead of $30,000 plus sedans we could replace the police cars with $3,000 mini-cars. Gosh, if we have 1,000 police cars across the state, that would be a savings of 27 million dollars! Wow! Of course, what would be the cost of less effective law enforcement? I bet it would exceed 28 million dollars.
I have a better suggestion. Legislatures should write fewer and simpler bills. Then they could spend more time considering the costs and benefits to all of their constituents rather a select noisy or high-paying few. I think this would really make our 18th century politicians proud.
Thursday, December 29, 2011
Externalities - the market component forgotten by "free marketers"
A true free market is defined by many buyers and sellers, complete information to both buyer and seller, freedom of buyers and sellers to enter and leave the market, and no externalities.
In other words, ideal conditions that will never happen on any large scale in any functioning society.
Externalities are something that happen with almost all commercial transactions and are ignored at a society's peril.
I was thinking about externalities as I walked a short distance from where I parked my car to the post office. Rather than park twice, I parked in front of the liquor store and walked to the post office with my package. As I walked I thought about all the proposed post office closings.
Many of these closings will mean that many people will have to drive farther to a post office. The customer travel time is one cost of this change. Second, is the increased fuel usage. Third is a possible longer wait at the post office, more customer time. If we use more fuel, then the cost of gas can go up because of higher demand. If we keep using gasoline, we will need more oil. Because access to oil is considered a "national security issue", trigger-happy politicians would stump for yet another costly war. For want of a post office, a war was lost.
Sure, this is a far-fetched scenario, but a similar lack of looking at the bigger picture permeates our "free market" society. We shouldn't abandon a "market economy" because of its flaws, but we should at least recognize these flaws and their added costs.
Now, how many externalities are there in my driving to buy those heavy wine bottles shipped from Italy?
In other words, ideal conditions that will never happen on any large scale in any functioning society.
Externalities are something that happen with almost all commercial transactions and are ignored at a society's peril.
I was thinking about externalities as I walked a short distance from where I parked my car to the post office. Rather than park twice, I parked in front of the liquor store and walked to the post office with my package. As I walked I thought about all the proposed post office closings.
Many of these closings will mean that many people will have to drive farther to a post office. The customer travel time is one cost of this change. Second, is the increased fuel usage. Third is a possible longer wait at the post office, more customer time. If we use more fuel, then the cost of gas can go up because of higher demand. If we keep using gasoline, we will need more oil. Because access to oil is considered a "national security issue", trigger-happy politicians would stump for yet another costly war. For want of a post office, a war was lost.
Sure, this is a far-fetched scenario, but a similar lack of looking at the bigger picture permeates our "free market" society. We shouldn't abandon a "market economy" because of its flaws, but we should at least recognize these flaws and their added costs.
Now, how many externalities are there in my driving to buy those heavy wine bottles shipped from Italy?
Monday, December 19, 2011
Shoplifters hamper free markets
Or is it companies save pennies and lose dollars?
I was pondering this problem mentioning what I might like for Christmas - a pair of decent earbuds or headphones for my iPod. When I'm at the fitness center, the earbuds I have do not stay in my ears. The previous headphones would not stay on my ears and they eventually fell apart. The original earbuds fell out of my ears.
I said to forget buying something like this as a present. One can't try them on, but one must buy them all sealed in a dangerous-to-open plastic box. Why are they in a plastic box? To deter shoplifters.
So, is the loss of merchandise to shoplifters greater or less than the loss of potential sales? Probably the shoplifting loss is less than the lost sales. Enough people put up with the packaging to buy the sealed up stuff.
This shopper will buy tools and standard products like batteries in these god-awful packages, but if it is a more personal product, like earphones, I will have to be desperate.
I was pondering this problem mentioning what I might like for Christmas - a pair of decent earbuds or headphones for my iPod. When I'm at the fitness center, the earbuds I have do not stay in my ears. The previous headphones would not stay on my ears and they eventually fell apart. The original earbuds fell out of my ears.
I said to forget buying something like this as a present. One can't try them on, but one must buy them all sealed in a dangerous-to-open plastic box. Why are they in a plastic box? To deter shoplifters.
So, is the loss of merchandise to shoplifters greater or less than the loss of potential sales? Probably the shoplifting loss is less than the lost sales. Enough people put up with the packaging to buy the sealed up stuff.
This shopper will buy tools and standard products like batteries in these god-awful packages, but if it is a more personal product, like earphones, I will have to be desperate.
Friday, January 21, 2011
No new taxes, but lots of new costs
I just came back from the hardware store where I bought my second 50-lb. bag of salt, $21.99 per bag plus tax.
I have put no salt on the garage apron next to the alley, none on the sidewalk to the garage, a little bit on the sidewalk around the house, practically none on the front walk and steps. I have put almost all the previous salt on the public sidewalk in attempt to get rid of the ice buildup from the street snow plowed on the sidewalk.
Now let's put some perspective on taxes and costs. Our real estate taxes to the city are about $330, half what we pay to the county and about two-thirds what we pay to the school district. The city taxes are what many people complain about the most.
Let's see if I can figure out Duluth's 2009 financial report correctly. From the summary of revenues, expenses, and changes in net assets, page 17, Duluth spent 124.942 million dollars of which Public Works spent 7.616 million. That's six percent of the city budget, or I paid far less than $20 per year for snow removal by the city.
But I've personally paid over $40 in 2011 for snow reduction. I've spent many hours working on snow reduction, and there is still much to go.
I assume the city could keep my walk practically clear for far less money and in less time than I have. But that would mean I would have to pay more taxes. So, it is a good thing I'm paying more out of pocket for a bit of service than I would pay in taxes for more service.
I think I'll go have a cup of tea.
I have put no salt on the garage apron next to the alley, none on the sidewalk to the garage, a little bit on the sidewalk around the house, practically none on the front walk and steps. I have put almost all the previous salt on the public sidewalk in attempt to get rid of the ice buildup from the street snow plowed on the sidewalk.
Now let's put some perspective on taxes and costs. Our real estate taxes to the city are about $330, half what we pay to the county and about two-thirds what we pay to the school district. The city taxes are what many people complain about the most.
Let's see if I can figure out Duluth's 2009 financial report correctly. From the summary of revenues, expenses, and changes in net assets, page 17, Duluth spent 124.942 million dollars of which Public Works spent 7.616 million. That's six percent of the city budget, or I paid far less than $20 per year for snow removal by the city.
But I've personally paid over $40 in 2011 for snow reduction. I've spent many hours working on snow reduction, and there is still much to go.
I assume the city could keep my walk practically clear for far less money and in less time than I have. But that would mean I would have to pay more taxes. So, it is a good thing I'm paying more out of pocket for a bit of service than I would pay in taxes for more service.
I think I'll go have a cup of tea.
Business-friendly? Friendly to which businesses?
One of the current political buzzwords is "business-friendly" or more likely "business-unfriendly". "Business friendly" generally means minimum or no interference with businesses or giving of breaks, tax or otherwise, to businesses.
Although some consider "business-friendly" to mean "people-unfriendly", one "business-friendly" act for one business can be "business-unfriendly" to another business.
I read a case of this in today's Star Tribune, "TCF gains in fight over debit-card fee limits", 2011-01-21. TCF and other banks are complaining that new Federal Reserve rules on exchange-fee limits will hamper their profits.
However, other businesses complain that the exchange fees cut into their profits. And of course, the exchange fees may cut into people's pockets with higher prices.
It wouldn't surprise me that many of the proponents of higher fees see no conflict with their call for lower taxes. It's all right for businesses to raise prices when their costs go up but not all right for government to raise taxes when its costs go up.
Another example of one business' gain being another business' loss is fuel costs. Maybe the producers will have more profits, but the truckers and the airlines, will have higher costs. The fuel users will do their best to raise their prices, but another fuel user, the governments that clear the snow will be constrained.
Maybe we should have a mantra to match "No new taxes" with a people-friendly "No new prices".
The same issue of the Star Tribune reports that the newly elected governor of Wisconsin want to increase the setback for wind-farms, "Wind showdown". On first glance, this would seem a business-unfriendly move. But I suspect it's only towards a new business many Republicans don't like - alternative energy.
Were these politicians opposing a high-voltage power line when many Wisconsin residents were fighting against it? The line went across, not near, their property, and they were forced to sell the right-away at a cost determined by others. Doesn't sound very free market to me.
I wonder if the Wisconsin Republicans will bend to the popular will if there is land-owner opposition to a new nuclear plant.
Although some consider "business-friendly" to mean "people-unfriendly", one "business-friendly" act for one business can be "business-unfriendly" to another business.
I read a case of this in today's Star Tribune, "TCF gains in fight over debit-card fee limits", 2011-01-21. TCF and other banks are complaining that new Federal Reserve rules on exchange-fee limits will hamper their profits.
However, other businesses complain that the exchange fees cut into their profits. And of course, the exchange fees may cut into people's pockets with higher prices.
It wouldn't surprise me that many of the proponents of higher fees see no conflict with their call for lower taxes. It's all right for businesses to raise prices when their costs go up but not all right for government to raise taxes when its costs go up.
Another example of one business' gain being another business' loss is fuel costs. Maybe the producers will have more profits, but the truckers and the airlines, will have higher costs. The fuel users will do their best to raise their prices, but another fuel user, the governments that clear the snow will be constrained.
Maybe we should have a mantra to match "No new taxes" with a people-friendly "No new prices".
The same issue of the Star Tribune reports that the newly elected governor of Wisconsin want to increase the setback for wind-farms, "Wind showdown". On first glance, this would seem a business-unfriendly move. But I suspect it's only towards a new business many Republicans don't like - alternative energy.
Were these politicians opposing a high-voltage power line when many Wisconsin residents were fighting against it? The line went across, not near, their property, and they were forced to sell the right-away at a cost determined by others. Doesn't sound very free market to me.
I wonder if the Wisconsin Republicans will bend to the popular will if there is land-owner opposition to a new nuclear plant.
Wednesday, December 22, 2010
City to be run like a business
Bowing to critics who say that government should be run like a business, Mayor Les S. Moore has announced several initiatives to follow certain business practices.
Following the lead of orange juice companies who reduced the size of their cartons from 64 ounces to 59 ounces, he has ordered all snow plow drivers to clear only 59/64th the width of city streets.
Noticing that facial tissue now comes in 132-count boxes instead of 200-count boxes, he has ordered the police department reduce its staff from 200 sworn officers to 132.
When Mayor Moore goes grocery shopping, he'll be looking for more examples to apply to city government.
When the city produced its new quarterly to keep citizens informed of the activities of the city government, he followed the lead of the newspapers and had no one proofread the articles. He was embarrassed to see that a library manager wrote that the library had materials for geneology.
To centralize citizen/customer communication with the city, he has ordered that the phone numbers and email addresses of department heads no longer be published. Instead, a single 800 number and a single email address, customersupport@city.gov, will be provided. These both will be handled by a limited staff in India.
Taking a cue from the telecommunications industry, he will offer more and more services electronically with greater and greater speeds. Each increase will be advertised as with no new taxes in the first six months.
He did balk at following one business example as he thought it would reduce his chances of re-election. He didn't think he would be very popular if he increased his salary as he cut the number of employees.
Following the lead of orange juice companies who reduced the size of their cartons from 64 ounces to 59 ounces, he has ordered all snow plow drivers to clear only 59/64th the width of city streets.
Noticing that facial tissue now comes in 132-count boxes instead of 200-count boxes, he has ordered the police department reduce its staff from 200 sworn officers to 132.
When Mayor Moore goes grocery shopping, he'll be looking for more examples to apply to city government.
When the city produced its new quarterly to keep citizens informed of the activities of the city government, he followed the lead of the newspapers and had no one proofread the articles. He was embarrassed to see that a library manager wrote that the library had materials for geneology.
To centralize citizen/customer communication with the city, he has ordered that the phone numbers and email addresses of department heads no longer be published. Instead, a single 800 number and a single email address, customersupport@city.gov, will be provided. These both will be handled by a limited staff in India.
Taking a cue from the telecommunications industry, he will offer more and more services electronically with greater and greater speeds. Each increase will be advertised as with no new taxes in the first six months.
He did balk at following one business example as he thought it would reduce his chances of re-election. He didn't think he would be very popular if he increased his salary as he cut the number of employees.
Thursday, July 15, 2010
So-called costs can be investments
Too many people look at many expenditures as costs as if reducing costs was always a good thing. On the other hand, many expenditures are really investments that lead to greater income in the future.
A case in point is the reduced rent that the owner of Local D'Lish, a unique grocery store in Minneapolis, receives from her landlord*. Rather than charge her for the total benefit that she receives from her space, he looks on reduced rent as an enhancement for his property. He receives the benefit of an attraction for his other tenants, an attraction that will keep his building more occupied and probably even give him an ability to charge higher rent to them.
But too many employers, especially governments, look upon employees as a cost and not an investment. If an organization cuts employees, then there is less buying power in the community. Less buying power means less sales. Less sales means less jobs. Less jobs means less taxes. Less taxes means less government employees. Where it ends nobody knows.
When Grover Norquist drowns government in his bathtub, will he have enough water to put out the fire in his kitchen?
* "Grocer specializes in stocking small-town flavor in the big city", Dick Youngblood, Star Tribune, 2010-07-15
A case in point is the reduced rent that the owner of Local D'Lish, a unique grocery store in Minneapolis, receives from her landlord*. Rather than charge her for the total benefit that she receives from her space, he looks on reduced rent as an enhancement for his property. He receives the benefit of an attraction for his other tenants, an attraction that will keep his building more occupied and probably even give him an ability to charge higher rent to them.
But too many employers, especially governments, look upon employees as a cost and not an investment. If an organization cuts employees, then there is less buying power in the community. Less buying power means less sales. Less sales means less jobs. Less jobs means less taxes. Less taxes means less government employees. Where it ends nobody knows.
When Grover Norquist drowns government in his bathtub, will he have enough water to put out the fire in his kitchen?
* "Grocer specializes in stocking small-town flavor in the big city", Dick Youngblood, Star Tribune, 2010-07-15
Thursday, September 17, 2009
Seeking healthcare around the world
Abigail Zuger, M.D., wrote an interesting review of "The Healing of America" by T. R. Reid. He had a chronic shoulder problem for which he sought medical advice around the world. The advice ranged from thousands of dollars for shoulder replacement in the U.S., outright refusal in Britain because it was not serious enough, and relief in India for $42.85 out of pocket per night.
The book is on order at the Duluth Public Library and already has four reserves.
The book is on order at the Duluth Public Library and already has four reserves.
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