Published on 2 Jan 2015
How do increases or decreases in demand affect the demand curve? An increase in demand means an increase in the quantity demanded at every price. Similarly, a decrease in demand means a decrease in the quantity demanded at every price.
This video takes a look at some important factors that shift the demand curve, such as changes in population, changes in income, prices of substitutes, and changes in taste. We’ll look at real-world scenarios that cause a change in demand — like how the demand for batteries increases when a hurricane is expected, how our demand for inferior goods decreases when our income increases, and how the demand for hot dogs increases when the price of the complement, hot dog buns, decreases.
April 9, 2015
The Demand Curve Shifts
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April 8, 2015
This is probably why so many people think businesses should pay more tax
At Forbes, Tim Worstall reports on a staggering misconception among Americans about what corporate profits amount to:
A wonderful little find by Mark Perry. Something that helps to explain quite why so many completely ridiculous economic ideas and public policies manage to gain traction. The problem is that the average person just doesn’t understand the economy at all. No, I don’t mean economics, or the abstruse arguments about whether we should use monetary or fiscal policy. But just the basic raw numbers of what’s actually going on out there. As Perry goes on to point out this, well, let’s not beat about the bush here, let’s call it what it is, this ignorance of the universe they’re inhabiting by the average person out there is what keeps the economic demagogues in business.
Here’s what Perry found:
When a random sample of American adults were asked the question “Just a rough guess, what percent profit on each dollar of sales do you think the average company makes after taxes?” for the Reason-Rupe poll in May 2013, the average response was 36%! That response was very close to historical results from the polling organization ORC’s polls for a slightly different, but related question: What percent profit on each dollar of sales do you think the average manufacturer makes after taxes? Responses to that question in 9 different polls between 1971 and 1987 ranged from 28% to 37% and averaged 31.6%.
That’s simply a ridiculous belief. Plain howling at the Moon crazy. The capital share of the economy isn’t that high and the capital share is made up of a great deal more than just profits (depreciation, rent, interest and so on as well as profits). There’s just no way that this is anywhere near true. As Perry goes on to point out:
According to this Yahoo!Finance database for 212 different industries, the average profit margin for the most recent quarter was 7.5% and the median profit margin was 6.5%.
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The Equilibrium Price
Published on 2 Jan 2015
In this lesson, we investigate how prices reach equilibrium and how the market works like an invisible hand coordinating economic activity. At equilibrium, the price is stable and gains from trade are maximized. When the price is not at equilibrium, a shortage or a surplus occurs. The equilibrium price is the result of competition amongst buyers and sellers.
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QotD: Top 10 reasons not to be a leftist
- Gun control. Liberals are completely wrong about this. A fair number of them know better, too, but they sponsor lies about it as a form of class warfare against conservative-leaning gun owners.
- Nuclear power. They’re wrong about this, too, and the cost in both dollars and human deaths by pollution and other fossil-fuel side-effects has been enormous.
- Affirmative action. These programs couldn’t be a more diabolical or effective plan for plan for entrenching racial prejudice if the Aryan Nations had designed them.
- Abortion: The liberals’ looney-toon feminist need to believe that a fetus one second before birth is a parasitic lump of tissue with no rights, but a fetus one second afterwards is a full human, has done half the job of making a reasoned debate on abortion nigh-impossible.
- Communism. I haven’t forgiven the Left for sucking up to the monstrous evil that was the Soviet Union. And I never will.
- Socialism. Liberals have never met a tax, a government intervention, or a forcible redistribution of wealth they didn’t like. Their economic program is Communism without the guts to admit it.
- Junk science. No medical study is too bogus and no environmental scare too fraudalent for liberals. If it rationalizes bashing capitalism or slathering on another layer of regulatory bureaucracy, they’ll take it.
- Defining deviancy down. Liberals are in such a desperate rush to embrace the `victimized by society’ and speak the language of compassion that they’ve forgotten how to condemn harmful, self-destructive and other-destructive behavior.
- William Jefferson Clinton. Sociopathic liar, perjurer, sexual predator. There was nothing but a sucking narcissistic vacuum where his principles should have been. Liberals worship him.
- Liberals, by and large, are fools.
Eric S. Raymond, “Top Ten Reasons I’m Neither a Liberal Nor a Conservative”, Armed and Dangerous, 2004-09-19.
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April 7, 2015
The Supply Curve
Published on 2 Jan 2015
In this video, we explore the relationship between price and quantity supplied. Why does the supply curve slope upward? The supply curve shows how much of a good suppliers are willing to supply at different prices. For instance, oil suppliers in Alaska and Saudi Arabia face different costs of extraction, affecting the price at which they are willing to supply oil.
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April 6, 2015
The Demand Curve
Published on 2 Jan 2015
Why does the demand curve slope downward? The demand curve demonstrates how much of a good people are willing to buy at different prices. In this video, we shed light on why people go crazy on Black Friday and, using the demand curve for oil, show how people respond to changes in price.
Update, 16 June: Forgot to link to the very first video in the series … here.
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April 3, 2015
Updating the old saying “where there’s muck, there’s money”
According to this story in the Guardian, a typical city of one million people poops out $13 million in (potentially recoverable) precious metals every year:
Sewage sludge contains traces of gold, silver and platinum at levels that would be seen as commercially viable by traditional prospectors. “The gold we found was at the level of a minimal mineral deposit,” said Kathleen Smith, of the US Geological Survey.
Smith and her colleagues argue that extracting metals from waste could also help limit the release of harmful metals, such as lead, into the environment in fertilisers and reduce the amount of toxic sewage that has to be buried or burnt.
“If you can get rid of some of the nuisance metals that currently limit how much of these biosolids we can use on fields and forests, and at the same time recover valuable metals and other elements, that’s a win-win,” she said.
A previous study, by Arizona State University, estimated that a city of 1 million inhabitants flushed about $13m (£8.7m) worth of precious metals down toilets and sewer drains each year.
The task of sifting sewage for microscopic quantities of gold may sound grim, but it could have a variety of unexpected benefits over traditional gold mining. The use of powerful chemicals, called leachates, used by the industry to pull metals out of rock is controversial, because these chemicals can be devastating to ecosystems when they leak into the environment. In the controlled setting of a sewage plant, the chemicals could be used liberally without the ecological risks.
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April 2, 2015
How do we measure prosperity? Badly
At Coyote Blog, Warren Meyer points out that we do not have a useful way to measure prosperity:
GDP growth and unemployment reduction are terrible measures. Just to give one example, these measures looked fabulous in WWII. But the average person living in the US had access to almost nothing — they couldn’t buy anything under rationing, they couldn’t travel for leisure, etc. GDP looked great because we were building stuff and then blowing it up, the economic equivalent of digging a hole and filling it in (but worse, because people were dying). And unemployment looked great because we had drafted everyone and sent them off to get shot.
[…]
How do we take into account that even if a person has the same income as someone in 1952, they are effectively wealthier in many ways due to access to medical procedures, travel, entertainment, electronic devices, etc?
Somehow we need to measure consumer capability — not just how much raw money one has but what can one do with the money? What is the horizon of possibilities? Deirdre McCloskey tends to eschew the term capitalism in favor of “market-tested innovation.” I think that is a pretty powerful description of our system. But if it is, we really are only measuring the impact of productivity and cost-reduction innovations. How do we measure the wealth impact of consumer-empowerment innovations like iPhones? Essentially, we don’t. Which, by the way, may be one reason our current crappy metrics say we have growing income inequality. With our current metrics, Steve Jobs’ increase in wealth is noted in the metrics, but the metrics don’t show the rest of us getting any wealthier by the fact that we can now have iPhones (or the myriad of competitors the iPhone spawned). The consumer surplus from iPhones undoubtedly dwarfs the money Jobs made, but it doesn’t show up in any wealth calculations.
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April 1, 2015
Colby Cosh on Albertan “Norwailing”
It’s been decades since my one trip to Alberta, so I’m far from current on what Albertans talk about when the national press aren’t paying attention, therefore it’s not much of a surprise to find that the term “Norwailing” is new to me:
The University of Alberta resource economist (and Maclean’s contributor) Andrew Leach calls it “Norwailing.” It has been a suffocatingly hot trend in print and electronic media for a while now. “Norwailing” describes a type of envious glance cast by columnists and editors at the sovereign wealth fund that Norway has built through the near-total sequestering of its oil revenues. The fund’s estimated value, as I write, is $6.94 trillion Norwegian kroner, the equivalent of $1.1 trillion Canadian. The fund is said to own about one per cent of the world’s financial equity.
Every year, the fund contributes a fraction of its value to the Norwegian public treasury. That fraction is set so that it equals the long-term expected return on investment from the fund. In short, Norway tries not to touch the principal. The idea is that the income from selling a non-renewable resource should be set aside as a permanent endowment.
There is a great deal of Norwailing inside and outside Alberta, a sheikhdom that briefly adopted a policy of setting aside oil royalties in the 1970s but abandoned it without accruing much value. The Norwailing inside Alberta is a form of self-abasement undertaken mostly, as far as one can tell, for social-signalling purposes. When oil prices drop and disorder strikes the Alberta economy, as it has this fiscal year, Albertans make a pious show of regret over “wasting” the good times.
[…]
What we Albertans are really regretting when we Norwail is that prior generations did not create a welfare program for us, at their expense. (The universities, hospitals and lines of business created with the oil money were supposed to be that, but they do not seem to count.) We stand in the same relationship to the selfish past that future generations do to us; we wish the saving had begun before we were born. That would have been convenient, assuming the money was not invested unwisely, squandered for political ends or just stolen.
Some of us are saintly enough to say that the saving should begin now. Future generations, you see, are better and more deserving than we. Future generations are always invoked in Norwailing. One cannot Norwail properly without summoning the image of a marching file of adorable hypothetical future-babies extending to infinity.
Let ’em shift for themselves. Judging from recent centuries, they are likely to be richer, healthier and more knowledgeable than us. They’ll be taller and have higher IQs. They’ll be raised better, cherished more closely, exposed to less violence, as you probably were in contrast to your own parents. They will be equipped with ever more sophisticated automata and yet will be more productive. And, yes, the planet may be warmer, but not, on any sane estimate, too warm to be incompatible with life or civilization.
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March 25, 2015
Millennials, philosophical malaise, and the moving target of “adulthood”
In Spiked, Tom Slater reviews a recent book by Susan Neiman, calling it “the philosophical kick up the arse my generation so desperately needs”:
Why Grow Up?, the latest book by American philosopher and essayist Susan Neiman, begins with a slyly subversive statement: ‘Being grown up is itself an ideal.’ In Britain today, this couldn’t seem further from the truth. Today, we’re told, is the worst time to be reaching adulthood. With economic strife, rising house prices, tuition fees and widespread youth unemployment weighing on Generation Y’s pasty back, coming of age merely means coming to the realisation that debt, destitution and living with mum and dad into your thirties is your inevitable inheritance. And that’s hardly an adulthood worth having.
The question this book seeks to answer is why growing up seems such a grim prospect today. From the off, Neiman dispenses with the sort of neuroscientific apologism that we’ve become accustomed to in recent years. Within the current, fatalistic climate, adulthood has been defined down. The Science now says that adolescence stretches into your mid-twenties. But, as Neiman observes in her introduction, there’s nothing scientific about growing up. The lines between childhood, adolescence and adulthood are mutable, and have changed over time. Less than a century ago, childhood, as a time of pampered play and dependence, lasted barely a few years for the vast majority of the population. And when most young people were out of school and married by the end of their teens, adolescence – the rebellious grace period between Tonka trucks and 2.4 children – didn’t even exist.
Instead, Neiman presents adulthood as a process of coming to terms with the circumstances you find yourself in and then committing to changing them – reconciling the ‘is’ and the ‘ought’. She situates this in the history of Enlightenment thought, in which the doomy realism of Hume clashed with the rugged idealism of Rousseau. ‘It would take Kant’, Neiman writes, ‘to appreciate the fact that we must take both seriously – if we are ever to arrive at an adulthood we need not merely acquiesce in but actively claim as [our] own’.
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Reason.tv – Sports Stadiums Are Bad Public Investments. So Why Are Cities Still Paying for Them?
Published on 17 Mar 2015
“Anybody that drives around Southern California can tell you the infrastructure is falling apart,” says Joel Kotkin, a fellow of urban studies at Chapman University and author of the book The New Class Conflict. “And then we’re going to give money so a bunch of corporate executives can watch a football game eight times a year? It’s absurd.”
When the Inglewood City Council voted unanimously to approve a $1.8 billion stadium plan on February 24th, hundreds of football fans in attendance cheered for the prospect of a team finally returning to the Los Angeles area.
On it’s face, the deal for the city of Inglewood is unprecedented — Rams owner Stan Kroenke has agreed to finance construction of the stadium entirely with private funds. The deal makes the stadium one of the most expensive facilities ever built and is an oddity in the sports world, where most stadiums require millions in public dollars to be constructed.
And while the city still waits to hear if it will indeed inherit an NFL team, the progress on the new privately-funded Inglewood stadium has set off a bidding war between other cities that are offering up millions in public subsidies to keep (or attract) pro-sports franchises to their area.
St. Louis has proposed a billion dollar waterfront stadium financed with $400 million in tax money to keep the Rams in Missouri. And the San Diego Chargers and Oakland Raiders have unveiled a plan to turn a former landfill in Carson, California, into a $1.7 billion stadium to keep the Rams from encroaching on their turf. While full details of the plan have yet to be released, it’s been reported that the financing would be similar to the San Francisco 49er’s deal in Santa Clara, which saw the team receive $621 million in construction loans paid for with public money.
Even the fiscally conservative Scott Walker is not immune to the stadium spending craze. The Wisconsin governor wants to allocate $220 million in public bonds to keep the Milwaukee Bucks basketball franchise in the area. Walker has dubbed the financing scheme as the “Pay Their Way” plan, but professional sports teams rarely pay their fair share when it comes to stadiums and instead use public money to generate private revenue.
Pacific Standard magazine has reported that in the last 20 years, the U.S. has opened 101 new sports facilities and stadium finance experts say that almost all of them have received public funding totaling billions of dollars. Politicians generally rationalize this expense by stating that stadiums will generate economic revenue and job opportunities for the city, but Kotkin says those promises are rarely realized.
“I think this is sort of a fanciful approach towards economic development instead of building really good jobs. And except for the construction, the jobs created by stadia are generally low wage occasional work.”
“The important thing that we’ve forgotten is ‘What is the purpose of a government?'” asks Kotkin. “Cities instead of fixing their schools, fixing their roads or fixing their sewers or fixing their water are putting money into ephemera like stadia. And in the end, what’s more important?”
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March 24, 2015
Tim Worstall on the economic emancipation of women
In his Forbes column last week, Tim Worstall made the point that perhaps the biggest economic story of the last century has been the economic emancipation of women:
There’s an interesting little rumpus going on over the new book by Robert Putnam on the class divide in American lifestyles. Put very simply, the middle and upper classes seem to take marriage and child rearing seriously and the poor have a more, umm, chaotic approach. Looking at the various think pieces that have been done on this book I find myself astonished by the way that the most important salient and relevant fact is simply not being mentioned. Marriage is many things but among them is that it is an economic contract. And the terms of that contract have changed: thus it’s not even remotely surprising that behaviour has changed too.
[…]
Which brings me to that headline: that the economic emancipation of women is the most important single fact of the past century. That past really was a different place. We can argue if we want to about whether that economic emancipation is complete (the famous womens’ 77 cents to mens’ dollar, or is it a motherhood pay gap and so on) but let’s leave that for another time. What is obviously and glaringly true is that women are much freer economically than they were a century ago. Wages for women back then were distinctly lower than they were for men. And no, this wasn’t particularly discrimination: some large part of what most people were hired for was physical muscle. Men have more of this so they got paid more. There were also strong social norms: I’m not quite sure of pre-WWI America but in my native UK the only respectable jobs for an adult woman (ie, something that the bourgeois would be happy to see their daughters go into) were nursing or teaching. And as a result of this paucity of choice the wages were low in both professions (there’s a strong truth to the point that the rising wages of both teachers and nurses in recent decades are the result of their being free to work in other sectors these days).
The result of both of these things was that the wages of a female worker were not, except at the most basic, basic, level, sufficient to raise a child let alone support a family. I’m not saying that being a single parent these days is easy but it is at least possible as tens of millions of people are showing us.
Which brings us to marriage: yes, this is many things. Love, sex, companionship and so on. But it is also an economic contract (the only proof we need of this is to read some divorce settlements)
and marriage always has been an economic contract. Pretty much since humans arrived as a species it has been necessary to have two parents around in order for a child to have a reasonable chance of survival to an age where it would have its own children. This was true of hunter gatherer societies, of agricultural ones, of industrial ones, feudal and so on. It really is only in this past century, more so in the past 50 years, that it’s been possible for one person to both earn a living and raise a child or children. Yes, obviously people did do so as a result of having to do so but it wasn’t something that anyone did by choice simply because of the penury that resulted from their doing so. And yes, all of this is much more true of women than men.
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March 23, 2015
Changing Times – Railroads & Canals I IT’S HISTORY
Published on 10 Mar 2015
It certainly is no big deal to have a small cruise along the canals or ride a train. But what is essential infrastructure today had to be invented out of necessity in the late 18th and early 19th century. In our new episode Brett tells you everything about canals and railways and how they changed the way we transport things.
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