Monday, October 27, 2014

No one is 'Actually' Running Out Of Water

I do believe that water in its drinkable form does have periods of scarcity. However, for the grand picture of this topic, I think not. Cheap 'anything' is at risk. More is always purchased at a lower price, and when it comes to life's essentials, this concept will be more factual than ever. The consumer is not at fault for indulging in a good deal. The supplier did not use a rational approach in distribution.

Farmer's should have priority on water because its consumption redistributes goods back into the economy. They are using that water to grow food, they should get it at a less expensive rate than everyone else.

General consumers should not be wasting water. Although we aren't running out of water per se, the resources used to handle and treat the water to make it available for public use may be scarce, or expensive.

Sunday, October 26, 2014

What About Agriculture?

The article does address that water is not conserved effectively, but there were serious blunders in the reading material. At one point the article stated "And they are legion: California has granted rights to five times its average annual flow of surface water. These restrictions have perverse consequences.", which makes no sense to me. Either the article missed a key point of what exactly the restrictions are or granting too much water rights that exceed annual flow of surface water by five times is apparently a restrictions. This appears to point to the bias of the author. I understand that I am somewhat critical, but it appears as if the premise of the post was for an attack on farmers. The author kept on bringing up California as if the state making up 12% of the nation's population is the determinant of the policies that need to be taken with regard to water for the entire nation. I have been in Southern California for a few weeks this summer and can attest that there is a huge drought, but there was still much water being used to spray many lawns that would simply dry up in the dry heat. There is an incredible amount of attacking farmers that require water to produce food, so if irrigation would discontinue in dry regions then how would much of the food we eat today be grown? This is a rhetorical question, so do not bother answering.  The arguments presented were very one-sided, so they are likely to demonstrate either the convictions of the author or possibly interest groups he may represent. It's very difficult for me to just believe everything written on the internet because the solutions to the problem were not very clear. Raising the price of water may sound like a great idea, but what about the rising costs of agricultural products and shortages of them associated with such a change? How popular would the change be if there are millions of Americans that can afford to purchase food? I believe raising the cost of water can be a very unpopular move, even though many economists may acclaim such a move. Thus, blaming the pricing system of water simply appears to point towards incompetence or bias in favor of certain interests groups being backed by them. The article should discuss the costs of relocating agriculture and present the positions of the other side such as the position of farmers before making hasty solutions to the problem that is much more complicated than the article attempts to make it appear. 

The realities of water pricing

The New York Times article "The Risks of Cheap Water" provides a fascinating overview of the water crisis in the USA, with an emphasis on the situation in California.

California is an extremely productive agricultural state. Thanks to its climate and soil, it has a comparative advantage in producing certain  fruits and vegetables. Unfortunately, it's water resources are exploited and used in an unsustainable manner. As the NY Times article correctly argues, part of the reason for this is inefficiencies in the water pricing structure. Currently,  water prices are too low and do not cover infrastructure maintenance nor do they take into account negative externalities. As it is, the prices provide no incentive to conserve water.

Water pricing is a politically sensitive topic. This is unfortunate as prices are one of the most efficient ways of allocating resources. They are definitely more effective than laws, and are more likely to provide the desired result.

Part of the reason is that water is essential for life and the general public and politicians often conflate an increase in the price of water with denying people access to water. This is untrue.  The UN estimates that each person needs a minimum of 20L of water per day to meet basic physiological and social needs.Those first daily 20L per capita are very valuable, and very few people (even cold hearted economists) would argue for a system that makes this amount of water unaffordable.

There are ways to avoid this. A proven way is to use an increasing block rate payment structure.In truth however, spending political capital on changing the structure of water prices charged to private individuals is not the most efficient use of time.  The Californian agricultural sector accounts  for roughly 62% of water usage in the state (estimates vary based on data source and analysis). Thus, changing prices charged to this sector will have a more significant impact on conservation efforts.

Because of this year's record drought, prices have already increased. In some areas of California, farmers are paying ten fold what they did the previous year. As California farmers produce approximately half of the fruits and vegetables consumed in the nation, there is a likelihood this increase will reverberate in food prices. And while water prices are a heavily politicized issue, food is a given political tangle. Thus, water pricing is likely to get even trickier than it was.

Cheep Water

Farmers don't want to give up their property rights to water, and why should they? California's Government has helped farmers keep water property rights by giving out substitutes and using a "first come first serve" water use system. Consumers in urban areas have large water usage, even in the middle of a severe drought. why? Because the more water consumed, the cheaper the monthly bill is. What a nice incentive for consumers in the United States. The Western United States has attempted to limit water consumption by proposing consequences on water usage. Some of those consequences are rewards for not using water and others are penalties for using water. However the price of water stays the same. The equalibrium price for water is not being acieved in the market. consumers and producers are not having a say in what they would pay and supply for water. If the government would take away the substites of water to farmers, and the flat rate of water consumption in uran areas, then the market price of water could start to be reached. Yes the unseen consequences of this would most likely be a rise in food prices and water prices and it will also probebly affect employment. but in relasing the Government's price control on water, water consumption will decrease as the price rises. So next time there is a drought in the United States, there will be less of a panic on the availability of water because the market will sort itself out like it does for other consumer goods.

Monday, October 20, 2014

Taxi Medallions in Alaska.

    Taxi business is not as profitable in Anchorage, Alaska as it was 10 years ago. Anchorage municipality has hired 10 new driver every year for the past 10 years. There is a huge surplus of Taxi drivers in the business. I have a friend who is going through the struggle of owning a taxi medallion. The way the money is made reminds me of some type of gambling system. He is required to pay 80.00 $ every day before money is even made.I don't think I would enjoy running a business where I woke up 'in the red' (in debt, owing money) before I even start to turn a profit. In order for him to maximize on his investment, he rents his cab to another driver. This means that the vehicle is on the road for nearly 72 hours at a time with extremely brief intervals. That can run into some heavier expenses later. And if the for-mentioned wasn't enough, its currently over 150k just to have a taxi medallion in the city of Anchorage.

     With all of the alternatives out there such as : phone apps, bus systems, trains, the shoelace express,etc, There is still a demand for taxis. I foresee the market leveling itself out. If everyone remains stubborn and tries to obtain employment then the profits will be low, kind of like they are now. But hopefully people will lose the incentive and then those who remain can make a decent wage. people who own a medallion do have an advantage. they can rent it out and that gives them leisure time, and if not, at least the business is still operating.

      Communities/municipalities hold too much power by granting entrepreneurs 'permission' (via permit) to make a living. People jump through hoops to get permits and licences. In return, there is  high risk and generally low profits.

I would say that due to the variables that create the price, its not really worth it.But we do live in a service economy and tips are probably appreciated! The article was interesting and seemed pretty true to life with experiences that I have watched people encounter.

Sunday, October 19, 2014

Taxi Medallion Cartel

I do not think the taxi medallions are particularly good to taxi drivers by them being compelled to work longer hours, which is not that much of a voluntary decision they would make otherwise, in my opinion. Forcing someone to behave differently shows the power of the taxi medallions on people who often struggle to make ends meet with such relatively low average annual incomes. There are many differing opinions on the internet about how taxi medallions either cause great harm or benefit, so this issue is a matter of opinion for many. In my opinion, taxi medallions cause harm to the economy by artificially limiting the number of taxis in many cities. Why should taxis be limited in number when it causes them to become very expensive and hard to find. Still, the regulations do cause great benefit by showing medallion numbers that can have the driver easily identified if there is ever a need by a rider in case there is some violation and the interior of the new taxis often have a camera mounted over the rear-view mirror for security, a dispatch radio on the console, and a credit card reader for the passengers to pay. There is even a fee for vomit cleanup to help protect the driver and there are many required stickers that would become fees for the drivers if they were not placed. Meanwhile the price of medallions have outperformed the S&P 500's stock index by far everywhere medallions exist. If the market was open then the medallions would lose their exclusivity and value, and many believe that the taxi industry would die if the right to transport the public was open to everyone.  The taxi industry without medallions would become subject to free market forces, which can be a good thing if the medallions created a cartel or monopoly that operates for its own benefit. Still, it would cause cities to lose control over the public service that is essential for any city to survive. There are many stakeholders that would stand to lose, but it would, in my opinion, be very beneficial to the market and the general public. Many even consider that the taxi medallion was the best investment that could have been made in the U.S. 30 years ago, so does this mean that the stakeholders have too much benefit for the taxi medallion being a sort of cartel?

Introducing Free Market Economics Into Archaic Systems

In the article "The Tyranny of the Taxi Medallions" the author describes the archaic system of Taxi Medallions that was introduced in the 1930's. At the time of introduction the idea made sense, have the government require a certificate or medallion to legitimize the taxi business and provide a safe environment for people needing a fare.
As the years progressed this need for safety dissolved as medallions were stuck on a specific amount in the marketplace and the price for one exploded from a simple fee to sometimes over a half million dollars for a medallion. This situation negatively affected the consumers as well as the cabbies in multiple ways. While the demand for taxis increased as cities grew the limit on the marketplace made it so that there were never enough taxis to provide for the consumers demand. The negative affect on the cabbies was even worse. The system allowed the distribution companies to hold a lot of power over the cabbies with their monopoly on the medallions.

The burgeoning economy of apps designed to connect cabbies to the consumer directly are attacking the medallion problem head on. What negative affects could this potentially have on the consumer and cabbies alike? What other industries could this similair model be applied to?

Sunday, October 12, 2014

Nobody Knows What To Do

Income inequality has been growing since the early 1970's because of great support for free market capitalism. Free market capitalism causes such great income inequality to be higher than in other developed economies. Much of the population lives in poverty, while most of the income growth has been for the middle and upper class. Meanwhile, many Americans think income has not been increasing when in fact it has been for decades and for the most recent few years. There is much disinformation supporting income inequality, and many debate whether capitalism causes income inequality by questioning whether corporatism is the actual cause. Many economists have laid blame on other factors, but it is still not well understood exactly why income inequality has been growing so much for so long. Many supporters of income inequality argue that creates an incentive to create wealth, innovate, and product. Still, that notion in widely disputed. It is also important to address that more income inequality been argued by many to cause the harm to the economy by lowering output, which research appears to confirm. Why is real gross domestic product growing much faster than real median household income and how much harm does it cause to the national economy? These questions are the subject of many ongoing debates, and the great amount of disinformation and dishonesty from both sides only exacerbates the situation. Too many interests are involved in this issue to make a solution easy or quick. Simply slowing down the growing income inequality is a monumental task that even the president may not handle without painful consequences without even considering lowering that very income inequality. Income distribution may likely continue its current trajectory of increasing disparities between lower and higher earners, so is it in the best interests of someone to make the best out of the situation? How to make the best out of the situation without incurring huge costs? I believe nobody truly knows the answers to those questions, and anyone that claims to should do everyone a favor and stop claiming that. Furthermore, blaming a specific individual or program only demonstrates someone's incompetence and/or political or ideological bias on the issue because the issue is much deeper than that. Capitalism has important side effect called income inequality, and anyone that even tries to argue that income inequality has not actually been increasing recently or in the long-term should do themselves a favor and do some research because that is not what the facts indicate.

Distribution of wealth

     In the country ( USA ) we can tell that the distribution of wealth is not fair and hardly allows people to make a living wage. There are very wealthy families is controlling the entire country and other parts of the world. I have a hard  time with this heavily beaten dead horse of a conversation topic. It is multi-faceted in depth and meaning. It does exist no matter what people say and will continue to grow as long as there are wage and price increases occurring at a time when it may not be economical.
      People have a lot of opinions on the dynamics of inequality. I chose the article about the data showing the way the rich gained wealth while the poor got poorer. ( Tax situations were discussed but that isn't the only problem! Entire industries have disappeared. Outsourcing and technology development has left plenty of people out of a job. Also other factors that are just as oppressing that lead to the gap between the rich and the poor. Inequality is not a good thing but without the poor and middle class demanding, the rich would not supply. If everyone sought self Self sufficiency in the forms of subsistence then wealth wouldn't be an issue.

     Jamie Johnson of "Johnson and Johnson" ( a family company) created some opening eye opening documentaries bringing this topic into depth and perspective. one titled "born rich" (2003) and the other titled " the one percent" 2006. Very good explanation about the wealth gap.

Saturday, October 11, 2014

Blame Maestro Greenspan

The article containing all the graphs about income inequality really does tell the story of income inequality over the past few decades, it does bury it a little. The first graph it talks about shows inflation adjusted incomes since the 1980s. Looking at this graph, it appears that the bottom half of the income ladder was stagnant over this period, while the top half's income actually grew, with a drastic increase in the very top percentiles.

This picture is a little bit misleading. To understand why, consider this scenario: two men make deposits at a bank. One man deposits $100, the other deposits $1,000. The men return to their respective bank account in a year and discover they have earned interest; the first man has made $5, while the second man has made $50. So who made more money? Clearly, the second man made more dollars than the first did in interest, but the rate of return was exactly the same for both of them.

If we zoom in on the graph they give us, we can see a similar picture. From roughly 1982 until 2000, incomes rose across all income brackets (including the bottom five percent). After 2000, however, most brackets' incomes begin to fall, except for the very top income brackets, which remain stagnant. Due to the scale of small incomes relative to large incomes, however, it is difficult to see anything but the change in large incomes.

Why this occurred is an entirely different issue which I'm sure we will all debate on Wednesday, but I would credit the "boom" years from 82-2000 to Reagan (in part) and credit the 2000-present tragedy to Alan Greenspan (and his mindless minion, Ben Bernanke).

Monday, October 6, 2014

The Spirit of Serial Entrepenuership

Amazon has yet to limit themselves with any isolated capitalistic venture. Amazon has no profit because they are using capital to move on to the next department within the growth of their company. They are a multifaceted empire using innovative tools to develop a stake in as many industries as they possibly can.

I see this working because they are heavily employed and utilized by people who have their one business venture in mind. When amazon became the forefront for a more independent retailer's vision, they went through the roof.

Some people prefer to purchase businesses that have already been in existence. The reasons for this are because you have a name, a reputation, and hopefully a strong following of well established customers. I think the average person, small businesses, and larger established businesses apply this theory to their supply experience by using amazon. They don't have to pay a space rent, seek customers, and all the other potential hardships that may be stifling in the progression of a newer business.

I see a little bit of an intrepeneurial style on a mega global level  happening also if you were to look at the independent retailers and entrapenuers as employees inside the Amazon firm.


Regarding Amazon, its profits, and why it works.

Amazon was originally a novel model of business: a book sales website, offering new and used books at rates much lower than you might find at the local Campus Bookstore. The model was so successful that they expanded into, eventually, pretty much everything legal to trade. The prices are incredible because they have so many different competing suppliers all selling through the same website.

Amazon's income is no surprise, given the model. They provide what consumers want at low prices. So why is profit so low? Because of their investments. They developed the kindle, are considering drone delivery systems, are developing digital media streaming services, and are expanding internationally. Investment is an essential component of growth, and the people at Amazon are clever enough to know that investing essentially all of their revenues is a long-term move designed to get a larger payout eventually.

Investors may be upset with having to wait for their payout, but the people at Amazon have accounted for that too, of course. Whatever investors want out will certainly be able to find investors who want in: Amazon isn't going to be disturbed by a loss of investors any time soon.