Market Power

Giving Back to the Community?

I was reading a brochure about Finnegans Irish Amber Ale, brewed by the good folks at Summit Brewing in St. Paul.  This passage caught my eye:

Finnegans Inc. is an organization based in Minneapolis, MN, which builds partnerships with community-minded businesses in providing the marketplace with a means of giving back to the community.

Here is the website.  I'm not sure what is meant by "providing the marketplace with a means of giving back" because the marketplace is not a person and cannot, therefore, give back anything.  It seems, by the wording, that the writer of the passage meant that Finnegans Inc. provides business owners with a organization to assist in giving back to the community.

Business owners "give back" to their communities every day.  Imagine a world where all voluntary exchange is somehow prohibited.  If we wanted to eat, we'd have to grow our own food (or exchange on a black market and risk getting caught).  But in a world of voluntary exchange, we can go to our local grocery store and find a wide variety of foods available to us at lower costs than if we produced our own food.  Moreover, we have the ability to choose our careers/jobs to obtain the means to get the foods we want.  We don't have to be gardeners. 

By doing business, owners give us things we value at a lower cost than if we produced them ourselves.  This frees us up to do other things we enjoy.

Philanthropy is commendable, especially when it is done voluntarily and without being spurred by others who feel business owners should be philanthropic.  But to expect business owners to "give back to the community" seems somewhat despotic, especially given that "giving back" is in the normal course of doing business.

More than Just MWI

King thinks we might have to get a blog entirely devoted to stories about folks who imbibe (second comment) and then get on their riding lawn mower.  There are certainly lots of stories

A case from Wisconsin:

Davis admitted to drinking a six-pack of beer, but said he did not know driving a lawn mower while intoxicated was illegal. Judge Andrew Gonring asked Washington County Assistant District Attorney Peter Cannon what the definition of a motor vehicle was. Cannon told the judge, according to state statute, a motor vehicle is any vehicle that is self-propelled.

There's this MWI, also from our neighbors to the east:

On May 18, police recieved a complaint and found Mark D. Baxter, 42, driving his riding lawnmower on 14th Street. Police gave him a field sobriety test and Baxter was arrested for operating while under the influence of an intoxicant, sixth offense, said Lt. Rob Sinden of the Baraboo Police Department.

Stay off the lawn mower in Ohio if you've been drinking.

A man is scheduled to appear in court Tuesday for a drunk driving charge. He says he never should have been charged in the first place because he was on a lawn mower.

You can't do it in Australia either:

Kocur, 39, was arrested in July 2001 for driving a riding lawnmower while intoxicated. It was his fifth drunken-driving offence, the first involving a lawn mower.

He pleaded guilty and was sentenced in May to serve on an inmate work crew each weekend for one year.
 

After Kocur missed two weekends, the judge ordered him to show up for his community service or be jailed. Kocur showed up intoxicated on Sunday.

Mr. Kocur, we have a problem.

How about this one from Aussieland?

A champion rodeo rider and registered ploughman was arrested for drink driving while riding his horse and charged with driving under the influence.

Also, from the same story:

A local man is accused of driving an electric-powered shopping cart around a grocery store while drunk and endangering other customers.

Not to make light of all of this.  After all, somebody who's chugged too much at Cheers and then decides to make like Bobby Boucher by hopping on his Cub Cadet does pose a threat to others when he's driving down a road.

People Respond to Incentives

One of the hallmarks of economic thought, one of the beliefs that binds those in our discipline, is that people respond to incentives.  Case in point:

Thousands of college students and parents are clogging phone lines and rushing to Internet sites in a scramble to refinance college loans before a sharp interest rate increase this weekend.

An almost 2 percentage point interest rate increase for federal student loans kicks in Saturday, and advisers say that not refinancing could cost thousands of additional dollars in interest in the decades after a student enters the work force.

C'Mon Jim, Be Serious

Jim Hendry, the Cubs general manager, says:

"I feel awful for how poorly we've played at home,'' Hendry said, with Tuesday's crowd at 39,399. "We've got the best fans in the world. They're still coming out and packing the place, and they deserve better baseball than what we're giving them.''

You know as well as I that a whole mess of those who go to Wrigley Field are there to experience the park and Wrigleyville - and that's what they pay for.  They know how to get their money's worth.  If the Cubs win, so much the better.

Getting Ready for the Westerns

I apologize for the relative lack of posts over the past few days.  The Westerns are approaching and I'm putting finishing touches on my presentation.  I haven't decided whether to take my laptop with me, but I'll do some blogging from the meetings if I do.  If not, then blogging will be light over the next week.

A New Meaning for the Blue "W" Flag

So, the Brewers score 4 runs off of Ryan Dempster of the Cubs in the 9th, after the Cubs had taken their first lead since Friday, to send the Cubs to their 5th straight loss, their 12th in 14 games, and their 9th straight loss at the Unfriendly Confines.  Since the beginning of May, they are 15 and 38, a robust 0.283 winning percentage.

After each victory, a white flag with a blue "W" is hoisted over the scoreboard in Wrigley Field.  Perhaps a white flag is all that's needed, but I still like the "W."  But this year, the "W" shouldn't just stand for "win."  It should also stand for wretched and it should never be taken down, because that's what this Cubs team is.

Update 1:  I think that someone kidnapped a D-League softball team, buffed them up (there aren't too many beer bellies in the Majors (David Wells?), and put them on display at Wrigley (emphasis mine).

After Aramis Ramirez's solo homer and Todd Walker's two-out RBI single gave the Cubs a 5-4 lead in the eighth, Dempster's throwing error to third base on Gabe Gross' sacrifice in the ninth brought home the tying run. Then Ronny Cedeno let Corey Hart's grounder go through his legs to allow the go-ahead run to score. The Brewers added two more runs on a pair of sacrifice flies, adding to the Cubs' misery.

Update 2:  Hey, Cardinal fans.  It's not all that bad.  Sure, the Redbirds are stinking it up right now, having lost 8 in a row and I'm sure you're all frustrated.  But consider this seemingly bad bit of news (emphasis mine):

Assured of their ninth series loss this season - and their sixth in the past 32 days - the Cardinals received five determined innings from impressive rookie Anthony Reyes (1-2) and four competent ones from righthanded relievers Adam Wainwright and Braden Looper.

The Cardinals have lost as many series as the Cubs have been swept (9 times so far this season)!

Private Water Provision: Down the Drain?

From the Wall Street Journal ($$$):

To RWE AG, Germany's biggest electric company, the water business a few years ago seemed to promise a gusher of profits. Governments in the U.S. and around the globe were eager to privatize their water systems. RWE was already experienced in delivering electricity and gas to millions of homes.

But dreams of heady profits evaporated amid heated opposition in places like this town of 6,500 people, in California's coastal redwood forests. Today, RWE is in the midst of dismantling an international water empire that cost more than $10 billion to assemble and spanned more than 40 countries at its height.

And the reasons:

Water turns out to be less like electricity than RWE hoped. It's heavy and hard to transport, making it difficult for a big company to build economies of scale. Regulation is never predictable. In the U.S., RWE found itself fighting in town referendums and state legislatures across the country, winning many battles but losing the war.

The first statement is particularly interesting, given that water provision (and sewage removal) are often thought to be natural monopolies:  the economies of scale are so great that one provider provides output at the lowest cost.  Perhaps the sort of regulation the providers must deal with has taken too many incentives away from searching for economies of scale.  Perhaps the author meant "economies of scope."

What concerns me about the resistance to private provision of things from water to health care to electricity are statements such as this (emphasis mine):

Many people see clean water as a basic right and balk when their bills go up, especially because municipally run systems often keep prices low through tax benefits and subsidies.

When someone says they have a right to some product, they implicitly say that it is someone's duty to give it to them.  Moreover, as I've written before on water, cleaning water requires resources that have alternative uses.  So, by saying that "we"  have a "right" to have clean water (or beer, healthcare, or whatever) is the same as saying that it is someone's duty to give up something else to free up resources for cleansing water. 

I recall a former neighbor from California who had just moved to Columbia, Missouri.  She was disturbed at the thought of having to pay for the water she used in Columbia.  Apparently that was not the case where she grew up.

Doc has more on using prices to ration water.

THE Thing to Do In Mankato

I think I'll pay a visit here.

Having Options

The Door opens to 8 negotiations tips.  All are good.  Number 8 is very important for obtaining/keeping a good reputation.  Number 7, in particular, also caught my eye:

Don't act too interested
Just giving the impression that you're willing to walk away can do wonders for getting a better deal. Always play the reluctant buyer or seller.

Economists talk about a "contract zone," a collection of potential outcomes that negotiators prefer to walking away from a deal.   How about a little ASCII???

Our preferences:

Us<---------------------------------|

                        |--------------------------------------->Their preferences

                        |---Contract Zone---|

One's bargaining power, in a nutshell, is the ability to shape final contract terms towards his/her most-preferred outcome in the contract zone.  The concept of bargaining power really only matters in a relative sense:  how much more willing am I to walk away from a deal relative to the other guy? 

In the limit, there are so many options to consumers in perfect competition that no-one needs to bargain.  In the limit, there are no options for consumers in pure monopoly that it does no good to bargain.  Similar things can be said of sellers.  Most of the time, we're not in either limit.  In such cases, it's good to have options and to be informed.  Shop around when buying a new car.  Be willing to walk away from that house purchase even though you know it's the one.

Come to think of it, number 7 also comes in handy when dating.

Festival Envy

Hey King! Our festival is cooler than your festival.