• Blanket Competition

    Feb 12 • Thinking Economically • 295 Views

    Hearing that American Airlines was charging eight dollars for a blanket and pillow brought back memories of airline deregulation, Eastern Airlines, and People Express.

    Does anyone remember the Eastern Shuttle? With a government given monopoly on flights between LaGuardia and Washington, D.C., Eastern guaranteed fliers a seat on every flight. You could arrive at the airport with minutes to spare and know that Eastern would roll out a new plane if the scheduled flight was full. Because fares corresponded to costs, Eastern made money.

    In 1978 everything changed. With government no longer mandating interstate routes, competition surfaced and all airlines, including Eastern, had to change their behavior. Suddenly, someone else (New York Air) was charging a lower fare and advertising. They had to respond.
    Charging lower fares meant consumer choice. You could fly more expensively or take the “no frills” airline (People Express) and pay extra for everything, even food.

    Smiling, commentators are predicting what might be next.

    The Economic Life
    The market structure in which a firm competes shapes its behavior. As a monopoly, firms are price makers. They have considerable control over how to generate profits. At the other end of the competition continuum, perfectly competitive firms such as wheat farmers have their prices established through demand and supply in the marketplace. They have little power. With deregulation, the power of firms such as Eastern Airlines changed considerably.

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  • Random Snow Stories

    Feb 11 • Thinking Economically • 210 Views

    Property rights
    When you shovel a parking space, does it remain yours when you pull out? In Boston, if you shovel out your car during a snow emergency, the space is yours for at least two days. Just “reserve” it with a lawn chair or trash can. 

    Fiscal policy
    -Federal employees will be paid for snow days. The total? Close to $100 million a day.
    -Snow removal costs are exceeding all estimates. Virginia is beyond its $104 allocation. Philadelphia’s Mayor Nutter just said “We’ll figure out budget issues later.” Weeks ago, a Wisconsin town clerk said they would only plow curves, intersections, and hills.

    The headline said, “Robot Snowplow from Japan Eats Up Snow, Poops Out Bricks.” The snow bricks are then deposited in a river

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  • Not Always Dismal

    Feb 10 • Thinking Economically • 226 Views

    From assorted sources, I share the following:
    1. Poetry on the housing crisis from Karl Case (the Case in Case-Shiller Home Price Index)
    An excerpt:
    Fannie and Fred were always ahead,
    Then Countrywide got in the fray.
    Then Lehman and Merrill and Goldman Sachs
    Couldn’t be kept away.
    You can guess that MBS
    Helped make the trading brisk.
    Investors thought that the paper they bought
    Was traunched with well-measured risk.
    To that, add leverage and default swaps,

    2. From Yoram Bauman (an economist/comedian), some economic humor:
    Knock knock.

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  • PIIGS at the Trough

    Feb 9 • Thinking Economically • 239 Views

    Debt can be complicated.
    1.National borrowing is good.
    It leads to growth and recovery.
    In 1792, Alexander Hamilton said that a national debt could be a blessing. In 1936, John Maynard Keynes said that debt was good. Each realized that using someone else

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  • Silent Salons

    Feb 8 • Thinking Economically • 208 Views

    The Spanish Society of Authors (SGAE) receives a steady stream of income from Spain

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