The Hobbit… And Blue Wizards?!

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The Hobbit, An Unexpected Journey, is the perfect ideal of how to adapt a book to screen. Almost better than the trilogy, this movie is a Tolkien geek’s dream. Absolutely amazing. Gorgeous cinematography, incredible adaption of storyline, and epic characters. Jam-packed with detail, and dozens of obscure references. Like the blue wizards… Now that’s just […]

Grow Dat? Yes, Grow That!

"Go ahead, you know you want some strawberries. You don't have to hide under there, you can eat them."
Photo from growdatyouthfarm.org

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It’s an old observation that connecting with the land and the natural cycles of agriculture is a great teacher of humility, wisdom and common sense.  This is why agrarian philosophies are resurgent.  Some mull over philosophies, other live them. New Urban News highlights the Grow Dat program in New Orleans.  As the video shows, they’re […]

Invisible Hand, what up? Part 1

New Castle, NH
flicker commons/inaweofGodscreation

The Invisible Hand is perhaps the most well-known economics turn of phrase. During a recession, it may seem not only invisible, but missing altogether. What does it really mean? And, where is it these days? This post will cover the first question and we will explore the second question in a part 2 post.

Here’s economist Peter Leeson, author of The Invisible Hook: The Hidden Economics of Pirates, on the first question:

“In 1776 Scottish moral philosopher Adam Smith published a landmark treatise that launched the study of modern economics. Smith titled his book, An inquiry in the Nature of Cause of the Wealth of Nations. In it he described the most central idea to economics which he called the “invisible hand.” The invisible hand is the hidden force that guides economic cooperation. According to the Smith, people are self-interested; they’re interested in doing what’s best for them. However, often time, to do what’s best for them, people must also do what’s best for others.

The reason for this is straight forward. Most of us can only serve our self-interests by cooperating with others. We can achieve very few of our self-interested goals, from securing our next meal to acquiring our next pair of shoes, in isolation. Just think about how many skills you’d need to master and how much time you’re require if you had to produce your own milk or fashion your own coat, let alone manufacture our own car.

Because of this, Smith observed, in seeking to satisfy our own interests, we’re led, “as if by an invisible hand,” to serve others’ interests too. Serving others’ interests gets them to cooperate with us, serving our own. The milk producer, for example, must offer the best milk at the lowest price possible to serve his self interest, which is making money. Indirectly he serves his customers’ self-interest, which is acquiring cheap, high-quality milk. And on the other side of this, the milk producers’ customers, in their capacity as producers of whatever they sell, must offer the lowest price and highest quality to their customers, and so on. The result is a group of self-interest seekers, each narrowly focused on themselves but also unwittingly focused on assisting others.”

Here’s what Adam Smith, author of The Wealth of Nations, wrote:

“It is not from the benevolence of the butcher, the brewer or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.”

That is, we pay the butcher and the baker a monetary price for their effort. We don’t tell them we are hungry and hope for the best; we give them the means to satisfy their own needs when we pay them. Thus, we ourselves had better find a way to satisfy someone else’s needs or else we won’t have the resources to pay for diner.

So that’s the invisible hand, the order in society generated by many people freely seeking their own, but only able to do so successfully by serving others.

In troubled economic times, the second question, ‘where is the invisible hand?’, comes to mind because something about the system seems not to be working. What’s blocked it or made the unseen force disappear? Has something bound the hand, or blocked its effect?

Part 2 will cover the question of why the invisible hand seems to be missing these days.

A pi-ful of people

The U.S. Census has at least one employee too many.  They’ve noticed and sent out a press release to let us know they estimate that at about 2:29 PM on August 15, 2012, the:

“U.S. population clock will reach … 314,159,265 residents, or pi (3.14159265) times 100 million. Pi is a mathematical constant that is the ratio of a circle’s circumference to its diameter.”

And, by the way, we passed that threshold on automobiles quite some time ago.  Our means of transportation have long out-numbered us.

Praise for Nanocivics

Randal O’Toole of the Cato Institute says it’s “full of creative ideas.”

Each of us face a choice that’s so basic to everyday life, we take it for granted and neglect it.  Booker T. Washington and Mao Zedong had radically different approaches to the choice.  Which one are you following?

Check it out here.

 

Taxing Food

San Fransico is home to many things and confusing food taxation seems to be one of them. 

This SF Weekly article takes the approach that not taxing food is hurting the poor:

In 2009-10, California collected $42.2 billion in sales tax. In the current year, California’s Department of Finance estimates revenue losses from exempting food and bottled (non-carbonated) water to be nearly $10 billion — with much of this money staying in the pockets of people who would be difficult to categorize as requiring “tax relief.” This comes at a time when programs aiding the needy — the very people California aims to benefit by limiting food taxes — are being systematically dismantled due to lack of funds.

Hmm… If only everyone paid taxes on food, we could give money to the poor to help them buy the expensive food.  Great thinking, SF Weekly.  Perhaps low prices on food for everybody would be a better idea.

Nevertheless, the article does a great job highlighting the arbitrary nature of government oversight of any field, and food taxation in California does seem to provide some comic examples: 

Among many hundreds of rulings, California’s Board of Equalization has decreed that, specifically, a product called “Dr. Chen’s Secret Sauce” is food (as are “Tom and Jerry Eggnog Batter” and communion wafers), and therefore exempt from tax; aloe vera juice is a dietary “adjunct” and therefore taxable; and honeybees’ royal jelly could be either, depending on the description on its packaging, and may or may not be taxable.

Carbonated water and most carbonated juice drinks are taxable; carbonated 100-percent juice is not taxable; but carbonated alcohol-free wine is. … Hearings before the Board of Equalization determining that the sale of the very same batch of carrots would or would not require collection of sales tax if the buyer is a homeless shelter (no), a racetrack (yes), an ostrich farm (no), or a zoo (maybe) take on [an] absurd specter …

 We’d love to hear some feedback from any of our California friends, let us know any of your stories.

Only Heterogeneous Ideas Reproduce and Other Insights of Urban Economics

Agglomeration economics is the bulky name for one of the most interesting ideas of urban economics.  Mainly, that there are benefits, some measurable, other not, to putting lots of different activities and enterprises close to one another.  Edward Glaeser describes for us in City Journal:   

… a city’s long-term success depends on its hosting many industries, since real breakthroughs pull ideas from more than one field. More than 40 years ago, Jane Jacobs argued in The Economy of Cities that new ideas came from combining old ideas. Nighttime baseball combines baseball with electric lighting; graphic computer interfaces merge old-fashioned pictures with basic computing functions. Michael Bloomberg became a high-tech billionaire not in Silicon Valley but in New York, thanks to his firsthand knowledge of what technology a stock trader needed at his desk. To innovate, in Jacobs’s view, you often need to borrow the insights of another occupation—and since diverse cities contain many occupations, they should encourage more leaps of insight.

As a hint for my microeconomics class, the whole article linked above is well worth reading prior to the next test. 

Also, check out these urban economics links:

     A classic example of applied urban economics

     My answers to the extra credit on Urban Economics Answers

 

Ikea City

Can Ikea be a City, too?

IKEA’s announcement that they will be building an entire city took many by surprise.  Yet, look at it as a logical extension of their brand.  Sure, we in America know them as stores but in Russia, for example, they also serve as mall and retail center developers.  

If a running shoe seller (NIKE) can methodically expand their brand to football jerseys, why not IKEA?  It just goes to show the power of identity in economics: being known is a pre-requisite to making an exchange. 

But, can they be successful?

Taken together, the excerpts below lend some hope that they understand the small-scale relationships of public life (nanocivics!) enough to pull it off: 

  • “We are in keeping with the Ikea philosophy: We don’t want to produce for the rich or the super-rich; we want to produce for the families, for the people,” says Harald Müller, the head of LandProp, the property-development branch of Inter IKEA…
  • The 1,200 homes and apartments, 40 per cent of them large enough for families (making it a much more child-filled place than most post-industrial developments), will be priced to appeal to a range of incomes, the Swedes promise.
  • “We’re about human scale, we’re about building things to a high design and a good quality, because we are long-term investors,” explains Andrew Cobden, the project’s manager.
  • Ikea’s builders say they’re not interested in a Disney-style kind of an animatronic spectacle. Rather, they’re seeding Strand East with evocations of spontaneous urban life in hopes that it will become spontaneous urban life; they say they’d be happy to see it shift and evolve to suit market conditions.

Good luck, IKEA, the last phrase, suit market conditions, is certainly one we’d like to see more often.

Micro Link for April 2

Traffic congestion in Singapore provides a classic example of a negative externality.

Kickstart your art and more….

This is nanocivics built for the electronic era. 

Kickstarter provides a means for developing the seed funding necessary for small-scale projects.

Here’s a great example.