EconAir

  THE COMPANY Parker Hannifin (PH) is something of a mystery. How does economic theory explain the existence of a large capital goods corporation that produces 800,000 different industrial products, many of them commodities that could be produced by specialized small companies?  Parker Hannifin (PH) is a $12 billion industrial parts manufacturer that produces its 800,000 parts and systems in 100 divisions.  They produce valves, hoses, motors, pumps, tubing systems, metering devices, and many other products that are components in larger industrial products or systems. PH competes with other large, diversified capital goods companies.   Customers are large companies and wholesale distributors, in virtually all parts of the transportation, aerospace and manufacturing industries.  One example is Ingersoll-Rand, a large producer of industrial equipment, including Bobcat loaders and excavators.  The hydraulic system that opens and closes the d...

  To an economist, the word “cost” implicitly has the word “opportunity” in front of it.  Not knowing the difference between accounting cost and opportunity cost can lead to some serious pricing mistakes and misallocation of resources. Saudi Arabia is one of the world’s three large crude oil producers, pumping over 10 million barrels per day. (A barrel is 42 gallons.) About 2.5 million barrels per day are refined for domestic consumption. Consumption of domestic oil has been rising rapidly. Saudi Arabia is the world’s most inefficient   user   of oil. The country subsidizes the price of gasoline and electricity. It has the world’s highest oil consumption per capita. Besides fuel, oil is used to generate electricity and desalinize water. It has been common for families to leave their air conditioning on even when going on vacation. Some offices are so cold that employees wear sweaters.   Prices to consumers are low because of low crude oil production costs and th...

    WHY STOCK PRICES GO UP   The movement of a stock index such as the S&P 500 or an individual stock depends on two things:   Earnings per share (EPS) and changes in EPS. Stock price/earnings per share ratio (PE ratio) and changes in the PE ratio.   If the PE ratio stays the same, an increase in EPS leads to an increase in the stock price. The same is true of a stock index. Rising EPS combined with a rising PE ratio is often the reason why a stock goes up more than the average stock.   Well, that was easy. Well, not really.   The stock market is “forward-looking,” that is, it tries to anticipate changes, especially changes in EPS and the PE ratio. There is a great amount of forecasting. But since the forecasted changes are in the future, they are inherently uncertain. The forecasts of some companies’ EPS are more uncertain than others. Some are very uncertain. For example, the future sales and earnings of a small biotech company may depend on the ...

    Full disclosure.    I’m a retired professor of Economics.  I was a full-time professor but also taught as an adjunct at other colleges. I taught both traditional age day students and adult night students. I designed and taught online courses. I was on my college’s budget committee for many years and twice served on the accreditation review committee.   Before becoming a professor, I was an economist and strategic planning manager at three large corporations, a consultant to small businesses, and ran a small company. I’ve been on the boards of five nonprofit organizations.   What Does Your Tuition Buy?   There is a private college near me that charges full-time students tuition an average of $40,000 a year (after discounts off of list price). About $4,000 a course.  The professor is paid about $8,000 to teach a course (half that if the professor is an adjunct).  Assuming 20 students in the course, each student is paying...

    A Professor’s Guide:  How to Be a Superior College Student   This is a summary of what I’ve observed during 25 years as a college professor and student advisor. There are many online posts, YouTube videos, and books on how to be a good college student but most of them are mostly lists of generalities. This post is from a professor’s perspective (not usually made public). It gives specific, helpful hints on how to perform better as a student.   To be a superior student, you must become a skilled student, use your limited resource (time) efficiently, and understand your market – professors.   This post also discusses a strategic plan on how to finance college.   How to read a textbook For each new chapter, look at the end-of-chapter summary (and any online summary) first. That tells you what’s important. Concentrate on this material.   Be an active reader. Underline. Make marginal notes. Talk to yourself (“What the hell does this mean?”) Ha...