• Globalization and problems with a shrinking kilogram

    Why should you care about a tiny grain of sand?

    Jul 21 • Businesses, Demand, Supply, and Markets, Developing Economies, Economic Growth, Economic History, Government, Innovation, International Trade and Finance, Lifestyle • 195 Views

    Thanks to a grain of sand, the kilogram is shrinking.

    The international prototype kilogram is triple locked under 3 bell jars in a vault in a chateau outside Paris. Handled only 3 times since 1889, it is secured with 3 keys that are each held by a different official. To those in-the-know, it is called Le Grand K.

    Le Grand K

    Globalization Requires Standardized Weights and Measures

    From: National Institute of Standards and Technology

    While people do have an annual look at Le Grand K, its “witnesses”—the 6 copies that were made long ago—are used for making the reproductions that are used around the world as a global standard. In Maryland, the US copy of Le Grand K sits 60 feet underground in a bell jar behind 3 thick doors. Now though, the US copy and the others to which it has been compared are the weight of a grain of sand heavier than the original. No one knows why. 

    I guess we could say that the standard kilogram on which we base all other kilograms is no longer a kilogram. Or…is it a kilogram and nothing else is??? The answer really does matter to engineers that require precision in fields like fiber optics.

    Where are we going with this? To the global commercial impact of standard weights and measures.

    Imagine what commerce was like without shared weights and measures. In 18th century France, there were 250,000 different units and some even had the same name. Assorted fabrics, grain, wood all had their own metric. Traveling from one village to another, you could have seen a 20% difference in the size of a pint.

    From here, the story continues with the French Academy of Science appointing 2 scientists who, during the 1790s, identified the size of a meter by calculating the distance from the North Pole to the Equator and dividing it by 10 million. The task was actually a huge trigonometry problem as each one traveled from one place to the next creating huge imaginary triangles to measure the distance. Once they knew the size of a meter, they said the kilogram was “a cubic decimeter of rainwater at 4 degrees Celsius” and then fabricated a platinum kilogram cylinder.

    Today, except for the kilogram, the 6 other basic metric units—candela, ampere, second, meter, mole and kelvin—are based on a “constant of nature.” No longer a physical artifact representing a distance, the meter, for example, has become the “distance traveled by light in a given fraction of a second.” Still though, specific manufacturers of items as disparate as batteries and pharmaceuticals differ in their own measures. I just heard about a supply chain being disrupted because batteries labeled with the same voltage in the US and China were not the same. Embedded within other products, the batteries did not function predictably.

    Our bottom line: Invisible because we are so used to having universally accepted standards, shared weights and measures are a basic requisite for the globalization of commerce.

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  • Minimal GDP growth, an output gap and slowly declining unemployment indicate a sluggish economic recovery.

    Chart of the Week: The Rare Disease Spending Dilemma

    Jul 20 • Economic Debates, Government, Health Care, Households, Regulation, Thinking Economically • 169 Views

    Our Sunday Chart of the Week

    Since our chart looks at Medicaid spending on rare diseases, we better start with Medicaid.

    It is complicated. Yes, Medicaid targets the poor and has federal and state funding. However, varying from state to state, it has 50 versions because individual states implement their own eligibility criteria.

    All states, though, face disproportionately high spending for a small number or illnesses:

    Opportunity Cost of Medicaid Spending on Rare Diseases

    High spending takes us straight to opportunity cost. Spend more state Medicaid money on one item and the opportunity cost is less for something else.

    For example, with the elderly population growing, long-term care will need more Medicaid money.

    Opportunity cost and long-term care Medicaid spending

    From: JAMA /Kaiser Family Foundation

    And therein lies our dilemma and our bottom line: With scarcity an unavoidable economic principle, we not only need to decide how best to allocate our dollars within Medicaid but also between Medicaid and other state spending obligations. One Princeton economist suggests using the QALY.

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  • Econlife.com Weekly Roundup 7.26.14

    Our Weekly Roundup: From Traffic Lights to Sneakers, Everyday Economics Explained by 5 Great Economists

    Jul 19 • Economic History, Economic Thinkers, Gender Issues, Government, Health Care, Innovation, International Trade and Finance, Macroeconomic Measurement • 143 Views

    Our Econlife roundup for the week

    Adam Smith and laissez-faire7.14.14 An island without traffic lights displays the benefits of Adam Smith’s laissez-faire…more

     

    Comparative advantage and everyday economics7.15.14 Why David Ricardo would approve of where your sneakers were made…more

     

    Everyday economics, entitlements and J.M. Keynes7.16.14 John Maynard Keynes could say why you’ll get less Social Security than your grandma…more

     

    JS Mill's support of redistribution from taxation in the AFA7.17.14 How to pay for the ACA the John Stuart Mill way…more

     

    Everyday economics and Joseph Schumpeter's entrepreneurs 7.18.14 For Joseph Schumpeter, entrepreneur Eileen Ford was about 2 new kinds of models…more

     

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  • Everyday economics and Joseph Schumpeter's entrepreneurs

    Joseph Schumpeter: Economic Models and Eileen Ford

    Jul 18 • Businesses, Demand, Supply, and Markets, Economic Growth, Economic History, Economic Thinkers, Fashion, Gender Issues, Innovation, Labor, Lifestyle, Macroeconomic Measurement • 146 Views

    Eileen Ford died this week. An entrepreneur who transformed the business of beauty, Eileen Ford’s talent was pairing a face with a camera. During its earlier years, the women her modeling agency represented included Martha Stewart, Ali MacGraw, Suzy Parker, Candice Bergen, and Jane Fonda.

    This is Martha Stewart. She says that she modeled to help pay for tuition at Barnard College.

    Entrepreneur Eileen Ford represented Martha Stewart when she was a model.

    From: Businessinsider

    Candice Bergen, in 1967, soon after she left the University of Pennsylvania.

    Entrepreneur Eileen Ford has Candice Bergen as a model.

    From: mylusciouslife

     

    Eileen Ford and her husband Jerry changed what it meant to be a model. Upending the prevailing standard, their agency insisted on a fee structure and moral standards. Initiating the 5-day workweek and organized scheduling, they based a model’s pay scale on how her picture was used. To be sure that a cancelled shoot would not mean a cancelled check, they implemented a pay-in-advance system. By 1978, top models were earning $3500 a week (equal to $13,740 today) and the supermodel market evolved. Put it all together and you get a business that, by generating respect for beauty, started an industry.

    Eileen Ford reminded me of Joseph Schumpeter.

    An academic superstar, an Austrian finance minister, and a Harvard professor, economist Joseph Schumpeter once proclaimed that he aspired to become the world’s greatest economist, horseman and lover. His biographer said he then said, “Things are not going well with the horses.”

    In 1883, Joseph Schumpeter was born in Austria. After working in government, business and academia, he went to Harvard in 1932–a perfectly timed departure from Europe. Explaining the evolution of capitalism, he attributed its growth to entrepreneurs and its eventual demise to the resentment that would build against its elite.

    Schumpeter tells us that entrepreneurs are the source of “creative destruction” because their businesses render others obsolete. With their new products and processes, entrepreneurs create jobs, progress and productivity. They change consumer habits, develop new means of production and new forms of economic organization. Not necessarily concerned with risk, they are unusually focused on making a difference in the world.

    Our bottom line: As the person who brought a new form of economic organization to the modeling industry, who had a passionate single-minded focus, and who built a massive enterprise with her husband, Eileen Ford was indeed a Schumpeter entrepreneur.

     

     

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  • Econlife Starbucks College Achievement Plan

    Starbucks College Achievement Plan

    Jul 17 • The Pulse • 123 Views

    Starbucks has partnered with Arizona State University to offer its U.S. employees the opportunity to complete their bachelor’s degree with tuition reimbursements. Vote and comment!

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