I work on a casual basis in an Indian restaurant/Take-Away.  My shift was winding down and it was almost time to close up, I was cleaning up my workspace.  I started to hear loud voices coming from near the cash register, not yelling but a raised voice.  It was a customer complaining about one of the take away foods and how he thought it was really expensive. 

First the business has been around for 20 years now, you would think that the owners would have some sort of gauge on pricing.  Secondly, the customer, after complaining, still proceeded to buy some food!  Such hypocrisy!  

Capitalism is a form of monetary democracy, if you don’t like it, don’t buy it, the market will punish those that price their goods too high.  The man’s purchase of the food in the takeaway is a sign of support for something he is supposedly against.  Now there will be a case for him buying the food because he was already there and he had to bring home some dinner, so there was some opportunity costs at play. Nevertheless, the man still deemed the food there at a price level that he would find it acceptable to buy.  I don’t know if that’s good pricing or pure laziness (there are other take aways around the area). 

But c’mon, if you’re going to complain, back it up with some action.

I’m halfway reading a book by Roger Bootle called “Money for Nothing”.  It’s a very interesting read for those interested in Economics, it’s practically a book about inflation.  It starts of with an anecdote about Isaac Newton, who sold his stock in a company called South Sea and sold it when it gained in value by a considerable amount.  He famously said “I can calculate the motions of the heavenly bodies but not the madness of the people.”  So what did he do? He saw the market value go even higher so he bought back in, only to find out that the market had crashed.  He lost the equivalent of roughly $2 million because of that adventure. 

Asset price bubbles are normally considered as a scourge upon financial markets and the real economy.  Whether its housing bubbles, stock bubbles, dot com bubbles, tulip bubbles, history has seen it’s fair share of pricing bubbles.

But are they necessarily a bad thing?

I was reading an article (I’ll see if I can find the link) that had a good argument that not all bubbles are bad.  One argument was for the fast rate of investment in large infrastructure projects such as: railroads, telegraph lines and fibre optical cables.  Sometimes heated investment will lead to cheaper factors of production and therefore cheaper goods.  One positive of the effects of the sub prime crisis in the U.S. is that there are relatively some real cheap houses out there, if you can afford it.

The point of deflation in a bubble occurs when an underlying fundamental in the asset changes or when people just freak.  But what if none of these happen?  Lets imagine for a moment that we had a good that was initially priced at $1, there is only one good of its kind in the world and one person has it in his possession.  Now say that person sells it to the person at a $1 dollar mark-up, who in turn will sell it to another at another dollar mark-up and so on.  Let’s assume that you can only mark-up the price by $1.  Assuming no transport or trading costs theoretically that goods price will increase until its price is the amount of people in the world plus $1 mark-up (assuming that everybody in the world is an adult and can finance the trade).  Then the good can either go to someone that already had it once it its possession or there will be the greatest price crash of a single good ever known to man.  This constant trading of the good will only work if people had faith in the value (or the value it was last traded) of the good and had a good amount of certainty that they can gain a profit from it before it busts. 

Sorry if that whole thought experiment sounds muddled, it made sense in my head :p

The thing that intrigues me about price bubbles is the psychology about it.  It’s herd behaviour, its implicit trust in people yet you want to profit from them.  If you have the discipline you can ride the wave of hysteria, but just as the story of Newton pointed out, even the most logical of people get sucked in.

I love biased pollster questions.

The Adverister 13/06/08 the other day had a telephone poll, the question was “Are universities given enough funding for research projects?”  With an emphatic 93% saying NO. Well seems like the public want more research funding.   Well, 15 of them.  The 93% implies 13-14 people called in to say no.  

These kind of populist questions really grind on my nerves.  You might as well be asking “How cute are puppies?”

I don’t know if the low smaple rate was due to telephone costs (55c) or because the question was so weighted that really there was only “socially correct” answer.

While I profess no intimate knowledge on the industry, I am curious as to how a mass uptake of pure electric cars will affect electricity prices.  The cars I am talking about are the ones that are purely battery powered and need to be plugged in to charge.  The Perspective section in the Australian Financial Review (Weekend edition, 14/06/08 ) mentions the new Chevrolet Volt and Fords new electric Shelby Cobra as examples of a possible, if not, inevitable future for the automotive industry.

California company, Tesla motors claim that one their roadsters will only cost US1.25c a litre to charge.  However, this is with the caveat that it’s assuming present day electricity prices (and charging only at off-peak times?).  Can we assume higher electricity prices with mainstream use of plug-and-drive cars?

Speaking from anecdotal experience, I’m pretty sure Adelaide would not be able to sustain such a constant drain on it’s grid unless there was considerable infrastructure spending to go with it.  Which brings on the debate as to whether the government should have a hand in assisting industry establishing convenient recharge points.

There is hope that there will be batteries good enough that actually provide power to the grid, the tricky part is the interim when the adage of gas-guzzler will simple move to electricity.  Whilst the idea of a viable alternative to petrol powered combustible motors sounds great, I would hate to think that the drive (no pun intended) towards 100% electric powered cars becomes the new infltionary pressure craze.

Given the commonality of heatwaves here and the extreme strain that airconiditoning units take, will the future solution be us having to cool down in our electric powered cars?

If you tranpose the name onto this quote it kinda makes sense.

How fucking dare anyone out there make fun of Belinda after all she has been through!She lost her aunt, she went through a divorce. She had two fuckin kids.

Her husband turned out to be a user, a cheater, and now she’s going through a custody battle. All you people care about is….. readers and making money off of her.

SHE’S A HUMAN! (ah! ooh!) What you don’t realize is that Belinda is making you all this money and all you do is write a bunch of crap about her.

She hasn’t performed on stage in years. Her song is called “give me more” for a reason because all you people want is MORE! MORE-MORE, MORE: MORE!.

LEAVE HER ALONE! You are lucky she even performed for you BASTARDS!
LEAVE BELINDA ALONE!…..Please.

Perez Hilton talked about professionalism and said if Belinda was a professional she would’ve pulled it off no matter what.

Speaking of professionalism, when is it professional to publicly bash someone who is going through a hard time.

Leave Belinda Alone Please…!
Leave Belinda Neal alone!…right now!…I mean it!

Anyone that has a problem with her you deal with me, because she is not well right now.

LEAVE HER ALONE!

 

 

 

The MORE!MORE!MORE! section refers to preselection, not her singing career.  Moral of the story is, all she needs is Chris Crocker to be her PR rep and all will be well. Lest’ we see Belinda with a shaved head hitting the scenes with Paris Hilton (aka Iguana Part II).

Yesterday I attended another economics experiment held at my uni. It’s the second year I have now been participating and I have really started to enjoy them. The overwhelming majority of the sessions that I have been in were related to carbon/water permit trading schemes and how different agents act in a market. All of these sessions I participated as a seller of these permits. However, the session yesterday was different, whilst similar in terms of market behaviour, I found it more interesting.

There were two types of people in the group, buyers and sellers. There were 12 people in the whole experiment and there was a ratio of 2 sellers to 1 buyer. We were told that at the start of the experiment we would be told whether we were a buyer or seller and that we would be in that same role for 30 rounds.

Sellers have a marginal cost of $30. Given that a seller will be competing against another seller, if a seller fails to sell no units, they will get 0 profit. Therefore a sellers profit would be:

Profit = MC – P (given a sale occurs)

Buyers want to buy a good that they value (V) at $100. The catch is that the buyer will only be given one price given from the two that are assigned to the buyer. If the buyer wants to see the other price offered it will cost the buyer $15, which will be denoted as a search cost. Buyers also had the option of exiting the market and having no profit at all.

Profit = V – P – SC
or
Profit = 0 -SC (if exits)

The combination of buyers and sellers would change every round and the prices given to the buyer would be randomly selected.

I was given the role of buyer.

Now I don’t know if my strategy is the correct one, but it seemed to work. The first conclusion I arrived to when given this information was that the fair value for the good would be somewhere around $65 (resulting in $35 profit for both buyer and seller), I assumed for a few rounds that sellers might try and price competitively by pricing below this point. Worse case scenario was that either the seller will collude to price high (giving the buyers to either buy at low margins or exit) or we, the buyers fail to “punish” those that price above the fair value.  Another scenario I feared was that if all sellers colluded and the buyers wer intent on not accepting unfair prices, we all get zero profit.

The prisoner’s dilemna came to mind when I was developing strategies for this game.

Eventually I stuck to the strategy of accepting anything at the price of $65, rejecting anything above by searching for the other bid and accepting if it was at fair price or below.  If both prices were above fair price I left the market.  Hoping that  the other 3 buyers would adhere to a similar strategy and the sellers all acted independently.  At the end of the session, everything went pretty much to plan.  Probably due to the fact that there were only 4 buyers in the room, which meant greater price control as opposed to 15, which could yield some different results.

Like I said, I think my strategy worked.  But I don’t know if it was because of my strategy or because the strategy of the others, nonetheless the experiment was fun and I look forward to the next.

It’s that time of the semester when lectures finish and preparations for exams kick off.  I felt that I have stayed on top of all my coursework for this semester.  My main worry about exams is not whether I will do well or not, but I take too much time off studying.  Procrastination is a beautiful thing. 

I guess I wouldn’t put blogging under the heading of procastination for me.  Blogging for me has several forms of positive effects for me, the ability to get things off my chest for one.  Therefore blogging can be considered as a productive use of my time.  Hey, any excuse will do.

Hopefully I put my head in and focus, if that’s possible.

Procastination must be destroyed.

The irony hasn’t still left me that I have joined a party that is typically meant to resemble “big government”.  I do not really endorse the whole concept of a large bureaucracy, but even some of the most hardened libertarians that even a minimal government is needed.  I guess I’m still trying to find my stance when it comes to ideologies, possibly because I’m conflicted between my economics beackground mixed with my interest in equality.  But compared to the alternative, is the ALP really the party of big government now?

That’s not to say the ALP of champions of the free market, the party still enjoys putting its hand in market distortions and active interventions.  But I believe that the ALP is more open to smaller government than the former Howard government.

I would argue that it’s Australians at large that demand a Big Brother government.  We want more standards, code of conducts, scrutiny (‘watchdogs’), subsidies and tax breaks.  The Feds want to set up a scheme that is effectively another level of bureaucracy. Although the ALP are pushing hard on it, it was a coalition initative to begin with.  Another odd circle in Australian politics.

I’m not convinced more government is good government 100% of the time.  The betterment of the Australian people must lie with the people, the Government’s role must be passive and structural, not invasive.