EconAir

Americans love their suburbs.   Suburban living almost defines the American way of life.   Privacy, both homes and backyards.   Space.   Peace and quiet, except for power mowers and leaf blowers.   Compare this with the high cost of space, peace and quiet in cities. Suburbs are a refuge from the stress of live and work in America.   They are places where nothing happens.   Little or no violent crime.   No class conflict.   Family oriented.   Acceptable schools at a lower cost than private schools in cities.   Lots of space for playing fields and organized sports for kids.   I sometimes think this is the main activity in suburbs. When Americans retire, they move to “senior citizen” suburban developments that are often even more isolated and further removed from urban life than the suburbs they came from. But what about the excitement of a city?   For example, the live cultural events.   There is...

Baldwin Locomotive Baldwin, the largest producer of steam locomotives in the                 nineteenth century, faced problems typical of a dominant company in a bilateral oligopolistic industry.   Almost everything that               happened at Baldwin was conditioned by a highly cyclical, almost   unpredictable competitive environment.   A high level of business       risk followed from sudden, large fluctuations in demand. This         meant that Baldwin often had excess capacity with substantial         fixed investment, leading to a strategy based on economies of scope and not economies of scale.   Baldwin also depended on a skilled       labor force with firm-specific knowledge and experience that was    exposed to sudden and massive layoffs followed by the company’s   attempts to rehire the sam...

  The high and sustained price of crude oil is having unintended consequences.   Global consumption of crude oil rose by 14% between 2000 and 2010, about equal to the increase in population.   Almost all of the increase was in Asian countries, especially China and India, and, surprisingly, the Middle East and other oil-exporting countries.   The Middle East as a whole increased oil consumption by 56%, led by Saudi Arabia with a 78% increase.   Heavily subsidized and inefficiently used, domestic consumption of oil accounts for about one-fourth of Saudi Arabia’s huge oil output, about 2.5 million barrels a day.   In contrast, the U.S. and Europe decreased oil consumption by a small amount, less than 1% in the U.S, over the same period.   Some of this is due to the recession, but there are longer-term trends that might lead to continued decreases in total oil consumption. It is important to remember that crude oil is an input; peopl...

The post-war rule of autocratic, secular strongmen backed by their military and secret police is coming to an end.   Last year saw the fall of regimes in Egypt, Tunisia, Libya and Yemen.   There is open revolt in Syria.   Demonstrations continue in Bahrain, even after earlier demonstrations were suppressed by Saudi Arabian troops.   The kings of Morocco and Jordan have made concessions towards democracy.   A democratic election that went against the ayatollah-supported regime in Iran was disqualified and leaders were arrested; despite this, anti-government demonstrations continue.   Then there is the special case of the overthrow of Hussein in Iraq. The immediate issue is the lack of economic growth and development, the inability to provide jobs for its young population.   The demographic clock is ticking.   Within a generation or two, the Middle East will have a smaller, older population, with the possibility of far fewer resources t...

Why has the political and economic development of Russia since 1991 been so different than that of China?   Russia – political collapse of Communism and the Communist Party. China – Communist Party keeps political control after brutally suppressing               demonstrations in Tiananmen Square. Russia – loses Eastern Europe and much of old Russian Empire, creating                 economic disruption and political enemies on borders. China – keeps territorial boundaries. Russia – slow to reform agriculture. China – starts reforming agriculture in 1970s.   Increases food production and               income of farmers. Russia – tries to move quickly to democracy.   Ends up with disappointment        ...

In an earlier post, Them That Has, Gets: The Rich Get a Lot Richer , I mentioned that the 5% of the households with the highest income accounted for about 35% of total consumption in the United States.  This percent will probably rise in the future if the long-term trend towards more income inequality continues to grow. Two related comments. The relatively affluent probably account for an even higher percent of discretionary spending.  Other studies indicate that rising income inequality is a global trend, occurring in most wealthy countries.  Also, there is a rapidly growing elite of super rich in the rest of the world, as the Forbes list of the wealthiest families in the world indicates. This raises a number of questions.  Given the level of imports of mass produced products, is mass production still the basis of an industrialized economy?  And what about marketing?  Is it more profitable to go after the mass market or, invoking Pareto’s La...

Over this weekend (October 23-24), The Wall Street Journal had an article entitled “Putting a Price on Professors,” which you can read at http://online.wsj.com/article/SB10001424052748703735804575536322093520994.html As a reader of murder mysteries and a fan of the Sopranos, the title scared the hell out of me. After I calmed down, I realize they were talking about something more like economics (a non-violent major) – attempts at cost/benefit analysis. The main idea is that some states, especially Texas, are trying to determine which college professors, majors and programs make money and which lose money. The accounting methodology is a very primitive version of profit and loss statements, focusing primarily on salary costs. Excluded are revenue from grants and the cost of capital equipment, which makes analysis of the sciences particularly worthless. But at least it’s a crude attempt at accountability, in a financial sense, which is understandable since taxpayers pay for m...

I generally think management books are a waste of time. But occasionally I come across some advice I think is worthwhile. Such as this: Conscious organization is the great spiritual task of man. We speak of the “composition” of a picture; it is the way the artist has organized his material. The harmony of a piece of music depends on the way the musician has organized his material. The statesman organizes social facts into legislation and administration. The greater the statesman, the greater power he shows in just this capacity. It might be fun to try to do it in one’s own life, to say: “Here are the materials of my life. How would the artist arrange them in order to make the composition the most significant? How would he subordinate lesser values to higher values? How would he manage to give everything its fullest value? Or we might ask ourselves the craftsman’s question, “How can I make of my life a whole whose beauty and use shall be one?” Organization is what separate...

When al Qaeda struck the World Trade towers and the Pentagon in 2001, the United States had been the world’s only superpower for ten years. But what does it mean to be a superpower in the modern world? A world of over 200 countries, multinational corporations, global financial markets, global mobility of people and information, and a myriad of competing groups like non-governmental organizations (NGOs) such as Human Rights Watch, global religious groups, drug cartels and terrorist groups. How much power does the United States have to control, or at least influence, events outside the United States? What does it depend on? As throughout history, it partly depends on the strategic choices made by the political leadership of the superpower and how skillfully that leadership reacts to opportunities. Al Qaeda overplayed its hand with the attack on the World Trade center. As the only superpower, there was a lot of resentment aimed against the United States. Countries and NGOs tha...