• Weekly roundup and food waste prohibited at French supermarkets

    A Supermarket Where Expiration Dates Don’t Matter

    May 13 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Environment, Government, Labor, Lifestyle, Regulation, Thinking Economically • 117 Views

    Imagine a supermarket that only sells food with expiration dates that have passed. In the cereal aisle, the boxes could be somewhat smashed. As for the fruits and vegetables, I won’t even try to describe their unappealing appearance.

    So why go there? You will save a lot of money and also help our planet waste less.

    Where We Waste Less

    Last February, with a Danish princess proclaiming her approval of the surplus food concept, WeFood opened in Copenhagen. Although the prices at the WeFood supermarket in Copenhagen are 30 to 50 percent less, they tried not to be called a place for the poor. Instead, because an environmental cachet was a part of the message, their clientele was varied.

    Meanwhile the EU has pledged to cut food waste by 25 percent by 2025 and France has gone even farther. At the beginning of this year, the French parliament said it was against the law for supermarkets to destroy unsold edible food and large restaurants had to provide “un doggy bag” for leftovers to diners who request one. But Denmark seems to have made the most progress. Whereas their quest for ultra healthy eating habits led to more discarded food, more recently they’ve cut waste by 25 percent to 35 pounds a person per year.

    Our Bottom Line: The Cost of Food Waste

    Primarily from fruits and vegetables, the 141 trillion calories a year that the U.S. discarded in 2010 was nutrition from which no one will ever benefit. For the world, one-third of all food is destined for the garbage.

    Looking back at production, picture the land, labor and capital, the fresh water, the fertilizer and the transportation inputs that are wasted by discarding a lettuce. Looking forward, we have the impact of the garbage on the environment if it winds up in a landfill or of the dollars it might require to be recycled. Perceived as dollars, from “harvest to consumer,” the value of the food we wasted in 2010 was approximately $161.6 billion.

    I wonder if the EU, France and Denmark can make less waste as trendy as fresh food?

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  • Weekly roundup and Chinese chicken tariffs

    How China Protects its Chickens

    May 12 • Demand, Supply, and Markets, Developing Economies, Economic Debates, Economic History, Economic Thinkers, Government, International Trade and Finance, Regulation, Thinking Economically • 82 Views

    During the 1990s, no one in the U.S. cared about chicken feet. Used for animal feed, they were close to worthless.

    Now though they are big business.

    Chicken feet (called paws in China) are a perfect U.S. export. Plump because we grow big chickens and scarce since there are only two per chicken, U.S. chicken paws are a Chinese delicacy. Or, as one chicken executive explained, “Thankfully, paw exports are a win/win: The Chinese get more of what they love and we get the employment and profits from a part of the chicken that otherwise wouldn’t have much value.”

    Where are we going? To the benefits of free trade.

    Paw Wars

    Last Tuesday, the U.S. filed a trade complaint.

    We could say that the problems began when China said its chicken producers were being harmed by U.S. chicken subsidies. To remedy the situation, in 2010, they levied anti-dumping tariffs on chickens imported from the U.S.

    Chinese chicken tariffs

    Seeing the size of the tariffs, you can understand why they were successful:

    Chinese chicken tariffs

    From: WTO

    The U.S. responded by taking China to the WTO (World Trade Organization). Agreeing with the U.S. that China was violating WTO rules, they told China to lift the levies. During July 2014, China said it had complied; the U.S. disagreed.

    So now the U.S. and China are back in “court” again.

    Our Bottom Line: Comparative Advantage

    First explained by 19th century economist David Ricardo as the principle of comparative advantage, when nations do what they do best, specialization boosts worldwide productivity. How to decide what you do best? Comparing two items or tasks, just do whichever one requires the lesser sacrifice of land, labor and capital. As a result you will have the comparative advantage for producing that good or service and will optimize worldwide efficiency.

    Because the U.S. appears to have a comparative advantage for chicken paws, they should export them to China while China can use its resources for other goods and services.

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  • China's yuan and trade worries

    Why (not) to Worry About China

    May 10 • Businesses, Demand, Supply, and Markets, Developing Economies, Economic Debates, Economic Growth, Economic History, Environment, Financial Markets, Government, International Trade and Finance, Labor, Regulation, Thinking Economically • 72 Views

    Many of us are concerned about China.

    Where are we going? To knowing the tradeoffs that relate to our China worries.

    The Issues

    Among the eight issues that Pew Research polled to learn about our China concerns, four were economic:

    China worries that relate to the U.S. economy

     

    Politics

    And yes, our China concerns have influenced presidential politics:

    China's economy and the U.S. election

    Our Bottom Line: Tradeoffs

    Looking more closely at the top two of our four economic concerns about China, we can focus on the tradeoffs.

    The Debt

    China is the top holder of U.S. treasuries. Below you can see that at the end of February, China held $1252.3 billion of the U.S. debt:

    Top U.S. Treasuries Holders as of the end of February 2016 (in $ billions)

    China worries and U.S. debt concerns

    From: U.S. Treasury

    The tradeoff: The Chinese own a disproportionate amount of our debt but they are funding our deficit.

    Job Losses

    Local labor markets have lost jobs to China.

     

    China worries and U.S. manufacturing

    From: “The China Syndrome: Local Labor Market Effects of Import Competition in the United States”

    The tradeoff: We are losing higher paying manufacturing jobs but saving money for millions of consumers with cheaper imports.

    So, knowing the tradeoffs, maybe we should worry less about our economic relationship with China.

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  • Weekly Roundup and the income tax rate history and the Congress

    All You Need to Know About the Federal Debt

    May 10 • Economic History, Government, Macroeconomic Measurement • 90 Views

    I just had a tough time reducing the deficit in a new game from Brookings. Called The Fiscal Ship, the game lets you win only if you become a deficit hawk and maintain a steady federal debt level for the next 25 years.

    Budget news deficit xkcd

    “Budget News” from xkcd

    Where are we going? To two graphs, one chart and a game that tell you all you need to know about the federal debt.

    Past, Present and Future Debt

    Spending and Revenue

    Defined as when yearly spending exceeds revenue, the deficit became a bigger chunk of the GDP when we had the 1982, 1991, 2001 and 2008 recessions. You can see below that the deficit or surplus as a percent of GDP is shown as the gap between the blue and green spending lines, Do note that 1998-2001 was the only recent time we had a surplus:

    Federal debt from outlays and revenue gap

    Spending Categories

    As our next step, we should ask about where our money goes. Dominated by mandatory entitlements like Social Security and Medicare, federal spending also includes the interest we have to pay to our bill, bond, and note holders for the money we’ve borrowed from them. The third category, discretionary spending, is topped by defense but also takes us to interstate highway maintenance, the FDA, Homeland Security and many other smaller items.

    Federal debt history

    The Debt

    As a result, with more money going out than coming in, we have had to borrow. Defined as all that the nation owes at a specific time, the debt as a percent of GDP is growing larger:

    Federal debt history

    Our Bottom Line: The Federal Budget

    If you decide to play the game and steer “The Fiscal Ship” on a stable course, you will enter turbulent budgetary waters because almost any decision you make will be controversial. On the spending side, cuts would mean diminishing a social safety net, or education spending or neglecting the transportation infrastructure. Meanwhile, your tax decisions will shape the incentives that motivate individuals and business firms. As a whole, all you decide will reflect your vision of the role of government.

    So, for some insight about yourself and why Congress has made so little progress with controlling the federal debt, I recommend giving The Fiscal Ship a try.

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  • Hamilton tickets and Broadway theater

    The Many Prices of a Hamilton Ticket

    May 9 • Businesses, Demand, Supply, and Markets, Entertainment, Lifestyle, Thinking Economically • 106 Views

    To see “Hamilton,” you probably have to be lucky, famous, rich or very patient.

    Where are we going? To why a hit Broadway show can engage in some price discrimination.

    Hamilton Ticket Prices

    Lucky

    If you are in the lucky category, then one of the 21 front-row $10 tickets could be yours for a Wednesday matinee. You just have to join the 1500 individuals who show up outside the theater between 12 and 12:30 to participate in the lottery. Or you can compete against the 10,000 people who hope to win one of the 21 digital lottery tickets in the front row for other performance days.

    This lucky person got a pair of $10.00 “Hamilton” tickets:

    Monopoly pricing for Hamilton tickets

    From: NY Daily News

    Famous

    In a list of the famous people who have seen “Hamilton,” we can include the Obamas, the Clintons, Paul McCartney, Dick Cheney, Busta Rhymes and Weird Al Yankovic. According to Marketplace.org, it is likely that the show’s PR person, Sam Rudy was their ticket source.

    Rich

    As for those of us who can spend more than our rent on two tickets, the equilibrium price for one has gone beyond $2,000 in secondary markets where brokers resell them with a supply and demand fueled markup. Meanwhile, concluding that they have been underpricing premium seats if resellers can get so much more, the group that owns the Richard Rodgers Theater is reportedly going to charge $995 instead of $549 for their most expensive seats.

    Patient

    And finally, for the patient among us, during February, 2017, box office tickets should be available. Otherwise they are sold out.

    Our Bottom Line: Monopoly Pricing

    When your show has 16 Tony nominations that include the best show, the best actors, the best original score, you pretty much have monopoly status. As a result, charging different groups difference amounts, you can engage in price discrimination.

    Among monopolists, the market is seen through a lens that divides buyers according to what they can spend. So a student might get a low price as well as the person willing to go on a Sunday when Lin-Manuel Miranda’s understudy plays Hamilton. Also, our location preferences divide us as well as whether we are willing to sacrifice time or money for a seat.

    The theater owner’s goal?  By “sorting customers,” their pricing strategy lets them optimize their revenue.

     

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