Market Power

Oh Goody!

I received the following bit of processed ham today (emphasis mine):

We are pleased to inform you the result of the computer random 
selection for  the LUCKY DAY LOTTO NL International program held 
on 3rd of August, 2006.  Your personal or company email address, 
attached to ticket number 205-11465886-629, with serial number 
3772-99 drew the lucky numbers 7-14-17-23-31-44, and consequently 
won the lottery in the 2nd category.

My email address did that?  Wow.  You might want to patent that 
technology.

You have therefore been approved for a lump sum pay out of 
(One Million Untied Stated Dollars) $1.000.000.00 in cash credited 
to file REF NO: NLD/2300786008/06 and Batch No 10/044/SLN, This is 
from total prize money of Two million Dollars shared among two 
international lucky winners in this category. 

1 million Untied Stated dollars?  What is the exchange rate between these dollars and United States dollars?

Ice cream's on me!

Today's International Trade Story

Today's international trade story comes from the market for learning:

Private tutors are a luxury many American families cannot afford, costing anywhere between $25 to $100 an hour. But California mother Denise Robison found one online for $2.50 an hour -- in India.

And for those worried about the quality of tutoring and the accents:

...Many of the tutors have masters degrees in their subjects, said Ganesh. On average, they have taught for 10 years. Each undergoes 60 hours of training, including lessons on how to speak in a U.S. accent and how to decipher American slang.

They are schooled on U.S. history and state curricula, and work in mini-call centers or from their homes across India. One operates out of Hong Kong, teaching the Chinese language.

International trade (outsourcing/globalisation):  improving the standard of living of humans since the beginning of time.

Update: King has more here.

Who's to Blame for the Weather?

So far, this year's hurricane season hasn't been what many expected.  Blame El Nino.

Scientists at the NOAA Climate Prediction Center reported today that El Niño conditions have developed in the tropical Pacific and are likely to continue into early 2007. Ocean temperatures increased remarkably in the equatorial Pacific during the last two weeks. "Currently, weak El Niño conditions exist, but there is a potential for this event to strengthen into a moderate event by winter," said Vernon Kousky, NOAA's lead El Niño forecaster.

...Also, the development of weak El Niño conditions helps explain why this Atlantic hurricane season has been less active than was previously expected. El Niño typically acts to suppress hurricane activity by increasing the vertical wind shear over the Caribbean Sea region. However, at this time the El Niño impacts on Atlantic hurricanes are small. "We are still in the peak months of the Atlantic hurricane season, and conditions remain generally conducive for hurricane formation," said Gerry Bell, NOAA's lead seasonal hurricane forecaster.

People Respond to Incentives: The Airline and Wine Edition

From Yahoo! news comes this story about how wine lovers and officials of wineries have responded to new airline restrictions:

Taking home a bottle or six is a tradition for many wine country tourists, and a good way for smaller wineries to build customer relations. That tradition was rattled in the immediate aftermath of the London terror plot revelations last month that led to a ban on toting liquids aboard.

Since then, some of the restrictions have been modified, but passengers still can't take wine purchased outside the airport in the cabin with them. Duty-free shop sales are allowed under a system in which the merchandise is delivered as passengers board.

Wineries have reacted by advising customers to sip and ship, offering to have purchases delivered — sometimes at a discount — to customers' homes if they live in states where that's allowed. They're also handing out free shipping containers and other packing materials so customers can be confident their wine will survive the flight in checked luggage.

..."It's amazing how adaptable wine lovers are," said Wendy Peterson, executive director of the Sonoma Valley Visitors Bureau.

Actually, I'd argue that this is typical human behavior.  You build a dam to hold water, the water still seeks the deep.  Similarly, you place a barrier that keeps wine lovers from enjoying their wine and wine producers from selling their product, these people tend to cooperate to find ways around the barriers.  That's how competitive markets work (and why the term "competitive" is, in one sense, a bit of a misnomer).

The Mother of All Meltdowns

The term "epic" is used waaaayyyy too often to describe sporting events.  Notre Dame scored a flurry of points to beat Michigan State at East Lansing this past Saturday.  Was that a comeback or a choke of epic proportions?  No.  But here is a link to an MP3 of a Detroit radio personality who truly had a meltdown of epic proportions in describing that game. 

And I'm not talking about the melting of polar ice here.  I'm talking about the melting of the entire earth into molten nothingness.

HT to Tigerboard.

People Respond to Incentives: An Ongoing Series

From Marginal Revolution comes this story providing further proof (as if we needed any) that people are not inanimate objects and do, indeed, respond to incentives (emphasis mine):

From homeless-outreach workers to zoning inspectors, Fairfax employees are driving hundreds of vehicles across the county -- or are swapping cars with those who drive more -- simply to run up the odometers. They know that if they don't use their cars, they could lose them.

Of all the perks of public service, few are more treasured than the government car. So when the county established 4,500 miles as the annual minimum to determine whether a vehicle could be weeded from its fleet to save money, many employees and managers got creative. Their efforts -- heightened even as gasoline prices soared this year -- are documented in hundreds of e-mails and memos obtained by The Washington Post under the Virginia Freedom of Information Act.

The e-mails show that, in the bureaucracy that serves Fairfax's 1.1 million residents, a change in policy can have unintended results.

Unintended?  Definitely.  Obviously ex post?  Definitely (Alex Tabarrok agrees), once again.  A priori obvious?  One would hope so, but apparently not.

CU Coach on Risk Aversion

It seems almost everyone is either a blogger or a guest blogger... including Colorado University football coach Dan Hawkins on risk aversion:

If we’re afraid to take risks, if we’re afraid of challenge, if we’re afraid of failure, we’ll never truly be all that we can be. I always say that we know this “big boy” football. We know that wins and losses matter; we know that. But how you go about the day to day operation is dramatically different than that.

If I’m a banker and my #1 goal is to make money then I’m missing the point. You have to take stock in the process over the product. You invest yourself emotionally in the process. You know that process is a soul-searching every day of how do we get better, how do we chase excellence, not being afraid of perfection, understanding that we can only get stronger through our mistakes. If we’re so afraid to make a mistake and so afraid to fail, we will never truly grow. It’s much like when you lift weights you’re actually tearing muscle fiber and allowing blood to infuse in there so that muscle can grow. That experience we have in life allows us to grow and that fear of failure keeps so many people from accomplishing the things they can accomplish because the reality is the real true failure is not allowing yourself to jump in the fire.

I suddenly feel like going out and giving 110%.

HT to Behind the Stripes

Demand and Supply Conventions

Greg Mankiw writes:

On the axis question: The instructor is right that, given the way we now teach supply and demand, it makes more sense to have price on the horizontal axis. The price is viewed as the variable that determines quantity supplied and quantity demanded, and we usually put the dependent variable (which here is quantity) on the vertical axis.

So why is it switched? Here is a guess. The early economists may have been imagining that, in the very short run, a given quantity of goods was supplied to the market (an agricultural harvest, for example). The supply curve is then vertical, and the price adjusts to ensure that quantity demanded equals this exogenous quantity supplied. So, in this very short run, the price seems more like the dependent variable. Now, however, the choice of axes is based more on historical convention than logic.

Like Professor Mankiw, I am not a historian of economic thought nor do I play one on TV.  But in a sense it really doesn't matter where one places price and quantity because, in the grand scheme of things, they are simultaneously and endogenously determined by demand and supply conditions in the marketplace:  they are both dependent variables.

Update:  a couple of commenters to Mankiw's post agree with my analysis. 

Terrell Owens Apparently Attempts Suicide

From the Dallas Morning News:

Dallas Cowboys star receiver Terrell Owens swallowed prescription pain medication Tuesday night in an apparent attempt to commit suicide, according to a Dallas Police Department report released Wednesday morning.

    

The police report says the complainant, identified as Owens, “stated that he was depressed” and that he had emptied a bottle of pain pills and was trying to harm himself, the report said.

    

According to the report, a woman who was with Owens saw him put two pills in her mouth, and she tried to get them out. She also said he had filled a prescription for 40 pain pills on Sept. 18, and taken only five through Tuesday, the report said.

    

Under questioning, Owens said he had taken the remainder of the prescription. He was described as having “ingested unknown large quantity of RX pain medication,” and was transported to Baylor University Medical Center for a drug overdose.

Remembering Someone who Came In Second

Carl Edwards, many long-time readers know him as a former student of mine at Mizzou, came in second today at the Dover 400.  Carl has struggled this year, not winning any Nextel races so far.  He is out of the chase for the Nextel Cup but currently is in second in the Busch Series.  He had issues with Tony Stewart, but the biggest flap came after Dale Jr. rear-ended Carl during a race and caused Carl, who was leading the race, to spin out and all but ended his race for the chase.  Carl had a chance to be the good guy of this ugly incident, but he decided to ram Jr's car and got the bad boy tag.  That's not the Carl Edwards I remember from my Mizzou days.

I chalk this up to the sophomore slump and the frustration that comes with it.  One of his fellow racers told him after his successful first year that (paraphrased) "now it gets harder because success is expected of you."  I hope his junior season is stronger than his sophomore season.