Dr. Hegde's Blog

2008 Farm Bill Side-by-Side: Video Introduction

aaronhegde — Thu, 29 Dec 2011 18:32:54 +0000

2008 Farm Bill Side-by-Side: Video Introduction.

Subscribers Flee Netflix: via HuffPost

aaronhegde — Fri, 16 Sep 2011 04:43:00 +0000

Great example of inelastic demand. As the article indicates, there are roughly 25 million subscribers. One million of them are expected to not purchase this product due to the price increase of approximately 70%. Whereas the change in quantity is about 4%. This means that the elasticity of demand for netflix is about 0.057 (4%/70%). Great example of economics in action…

http://huffingtonpost.com/2011/09/15/netflix-price-increase-subscriber-loss_n_964026.html

Farm Flooding Keeps Grain Supplies Tight – WSJ.com

drhegde — Sun, 12 Jun 2011 16:49:28 +0000

According to this article in the WSJ, the recent floods in the mid-west will lead to a decrease in corn production by 2% (from the USDA), a basic case of a shift in the supply curve to the left, thereby raising the prices. However, compared to years past, this harvest is expected to be a record high, for corn. “Even though the wet spring has yet to dent the production potential for soybeans, which is planted later than corn, the two crops compete for the same land. As a result, the USDA raised its one-month-old forecast of the average price of the new soybean crop by 7.7% to a range with a mid-point $14 a bushel, give or take a dollar a bushel.”

Article: Farm Flooding Keeps Grain Supplies Tight – WSJ.com.

Fair Trade – Fair Trade = Regulations?

aaronhegde — Sat, 04 Jun 2011 07:45:22 +0000

So what is the difference between fair trade and free trade? In this case it might be regulations. All ipads, designed in California, are built in China, specifically in a factory in Chengdu. Recently there was an accident at the Foxconn factory in Chengdu. This explosion was caused due to lax safety protocols. An event which might have led to the closing down of such a factory in the US, did not lead to much government sanctioning since China does not have strict safety regulations. Many Chinese factory conditions are similar today to what factories in the West had during industrialization: low morale, subsistence wages, overcrowding and excessive hours on production lines. This gives China the comparative advantage in manufacturing, which allows their economy to grow as the GDP increases due to increased production and trade. When importing countries do not have any barriers to trade, such as tariffs or quotas, there is free trade. However, if there is to be fair trade, then the playing field should be level, i.e. wages should be more than at the subsistence level, there should be safety regulations and other conditions equivalent to those in the importing countries. But of course, these would decrease the comparative advantage China has, leading to less trade and slower economic growth.

Article: Human Cost of iPads Made in China

Gingrich supports mandated coverage

aaronhegde — Tue, 17 May 2011 23:01:05 +0000

Sounding different than majority of his party, former Speaker of the House of Representatives and potential Republican Presidential Candidate, Newt Gingrich, supports the mandated health insurance in the health care reform act, the Patient Protection and Affordable Care Act of 2010 (PPACA). An article in the WSJ discusses Gingrich’s views on his party’s stance in the House. He is also against the idea of making Medicare for seniors into a voucher program that would subsidize their insurance purchase, rather than the present system which provides coverage. He also makes it known that is he against the PPACA as it currently stands, but does support some of the principles upon which it is based.

Article: Gingrich Knocks GOP Proposal for Medicare – WSJ.com.

Cultural and institutional impact on development

aaronhegde — Mon, 16 May 2011 21:49:01 +0000

There are typically four elements of development: (1) Technology; (2) Resources; (3) Population growth and Structure; (4) Culture. The last element, culture is typically hard to measure, so it typically does not get its proper place in neo-classical (mainstream) economics. However, it does get its due in institutional economics. Here institutions are seen as being just as influential in affecting development as the other three elements, in some cases perhaps even more important.

The economist magazine recently (May 12) published an article that focused on young South Korean entrepreneurs. In South Korea, much of the economy is dominated by chaebols, the word translates roughly to “business family”. Chaebols are essentially large conglomerate multinational corporations that control many aspects of the Korean economy. They are steeped in culture and formalities, as is much of Asian society. One of the cultural aspects of many Asian economies is the hierarchy according to age, where younger people have to be respectful of elders, both at home and at work. Parents expect their children to find stable employment, another common element of many Asian societies.

This article presents the ‘new’ South Korea, where young entrepreneurs are eschewing the traditional employment route and are instead are opting for “one-man creative enterprises” which tend to focus on technology, especially social media and gaming, something the chaebols are not particularly interested in at the moment, thus honoring the age old saying of “Everyone knows you don’t compete with the chaebol”, since they tend to be in manufacturing, shipbuilding and other traditional economic sectors. The economic growth in South Korea is also attracting entrepreneurs of Korean descent from the west, in hopes of starting technology firms.

Article: Young, gifted and blocked: South Korea needs fewer wage slaves and more entrepreneurs

Farm Exports Rise

aaronhegde — Thu, 12 May 2011 13:39:45 +0000

A recent news item on local TV talked to a peach farmer in Kern County who has seen an increase in his exports, especially to the Middle East and Southeast Asia. It aired on Wed, May 11, 2011 on Channel 17 KGET (NBC affiliate).

http://eplayer.clipsyndicate.com/cs_api/get_swf/3/&pl_id=21515&wpid=9597&page_count=5&tags=CCTVI_NEWS_LOCAL%2C9597&windows=1&va_id=2454380&show_title=0&auto_start=0&auto_next=1

That’s got to be worth something!

aaronhegde — Wed, 11 May 2011 16:35:16 +0000

History is riddled with nations going through bouts of hyperinflation, the astronomical rise in the general price levels. The excessive printing of currency is the usual suspect in such cases. Zimbabwe is a current example of super hyperinflation. At one point, just before the Zimbabwean dollar was retired and the US dollar and the South African Rand adopted as official currencies, the government of Zimbabwe issued a 100-trillion dollar bill (Zimbabwean dollar). Apparently a few million of them were printed, but few thousands made it in to circulation. That left a whole bunch of 100-trillion dollar bills in mint condition in reserves. After the suspension of the Zimbabwean currency in 2009, they become worthless. Well not anymore! Collectors have now placed a value on such bills, specifically about $5. This article in the WSJ discusses the collector’s market for ‘worthless’ Zimbabwean currency. Thanks to e-bay, those are worth something!

Article: How to turn 100-trillion dollars in five and feel good about it, May 11, 2011

Let’s drink to that!

aaronhegde — Wed, 04 May 2011 15:58:02 +0000

An article in the Guardian UK discusses a new energy source in Scotland, land of great Scots and scotch! By 2013, by-products of the whisky-making process will be used in a biomass combined heat and power plant in order to produce energy. This power plant will “…burn the draff with woodchips to generate enough electricity to supply 9,000 homes.” ‘Draff’ is the spent grain used in the distilling process. The article also mentions that “[w]aste products from around 16 of the area’s 50 distilleries will be used at the site, including well-known brands such as Glenlivet, Chivas Regal, Macallan, and Famous Grouse”. I will pour myself a 12 year old Glenlivet (actually purchased in Scotland) and toast this great new venture.

Article: Scotland toasts new whisky-powered bioenergy plant – Guardian, May 4, 2011

Creating Jobs for India’s Rural Poor

aaronhegde — Mon, 02 May 2011 00:09:00 +0000

An article in this weekend’s Wall Street Journal discusses The Mahatma Gandhi National Rural Employment Guarantee Scheme started by the government of India. This is a $9 billion job creation program designed to help the rural poor, but has had limited success. Corruption, quite rampant in many aspects of Indian life, has resulted in many workers not getting the promised jobs, or requiring to pay officials bribes to receive those jobs. The program is designed to create jobs for unskilled labor, majority of whom are in rural areas. Some people argue that it is this design itself that is flawed, since it does not provide skills to the unskilled, thereby limiting them opportunities to pull themselves out of poverty. Those supporting the program point out that by providing rural workers jobs, rather than skills, they limit the movement of labor from rural areas to urban areas. This is typically what happens in developing areas, as the skilled workers in rural areas find that their skills are better compensated in urban areas, thus creating a rural-urban migration.

The program guarantees up to 100 days of work a year at up to 100 rupees ($2) per day for any household that wants it. The daily income of $2 is typically considered to be worldwide threshold for poverty. There are approximately 42% of Indian households who presently make less than this threshold, and are therefore considered to be poor.

Article: Job Program in India