The heart that pumps innovation

The article "The Heart That Pumps Innovation" from the book "From Poverty to Prosperity" written by Kling, Arnold and NIck Schulz, 2010 talks about what makes a person an entrepreneur and its source of innovation. Innovation comes from entrepreneur and a strong sense of private property ownership. Because of US unique economy that promotes small business to mobilize rather than having big businesses that dominate the economy, it ensures the competitiveness of US economy. However, the biggest problem that an entrepreneur will always need to dwell is the resistance of change that dominates in our action and behavior.

Some of the questions in my mind:
1. How to become a successful entrepreneur? The theory sounds very fantastic, but if you put into practice that might be a different story. The article talks about the story of Steve Job, but it also mentions lots of failure like netscape. It's a gambling, and only one out of the million can be truly successful.
2. Is everyone suitable to be an entrepreneur? It needs charismatic, it needs luck... ... which is like, not everyone?
3. Is change really a good thing? At least according to the ex-Prime Minister of Malaysia, change might not be a good thing. :P

I think there's nothing much I can argue back to the article because I personally very much Pro-entrepreneur. I like the article part that emphasizes on change and the resistance of change faced by many people around the world. The world is unfair but if we can tackle the unfairness with techniques we can definitely become a successful entrepreneur.

Class 41: Profits losses and entrepreneurs

Today, Mr Rizzo moves into the topic of entrepreneurship. He talks about the reason of people being motivated so hard to produce something productive: the profit. He specifically talks about the healthcare sector. While people are fine with prostitution to sell sex and earn more profit, people are not fine with healthcare sector to earn profit. We have to understand the reason that prevent people from choosing a cheaper alternatives instead of asking why it's so expensive. In the end of his class he reveals the magical formula of Profitability equals to the sum of rental rate, appreciation rate minus the interest cost. If the number for profitability is positive, it means we should buy that product instead of renting it.

Class 40: the economic incidence of supply and demand part II

Today, Mr RIzzo talks about the second part of the taxation which is the income tax. We can see that although the tax charge to different side of the market, eventually they still bear the same burden of the tax. SO it comes to the ultimate question: who gets to determine which side bears more? The elasticity of the curve that determines it. If buyers are not sensitive to the changes, the buyers bare the burden.

Class 39: The economic incidence of supply and demand changes

Today, Mr Rizzo talks about the application of economic incidence of supply and demand changes in terms of taxation. Tax is actually neutral because it's actually a form of transfer of money. For excise tax, the burden will still be on the buyers more than on the sellers when the graph shifts. He also talks about drugs and illegal stuff and its application. When drug is illegal, the cost is actually higher because we spend more money on the enforcement of the law, but the money can be spend on something even more beneficial. Besides, the marginal cost for people to commit crime becomes lower and it actually leads to unintended consequences: the increases of violent crimes rate.

Bethpage Gray

The article Bethpage Gray written by Max Adler illustrates the idea of how to sanction things when it is scarce. Based on this article, Bethpage State Park is one of the most popular spot for people to play golf for free. However, despite that getting there is a phone call away, it is going be costly to get there. This profitable opportunity is seen by the company nygolfshuttle.com, which golfers would have to make an appointment to them in order to have his/her tee time right at their most preferable time at the state park. Although it is ridiculously expensive, but people still buy it because they value that much of it.

Rhetoric questions in my mind are:
1. Can this method be applied to any other field in the world? It seems to be a very lucrative business because what the company did is actually  abridging the consumer and the products, which reduces the cost between them two. It holds the information to allocate the resources (the tee time) to the consumers (golfers).
2. Is this really something illegal? I think it is just a smart business plan.
3. What would happen if we legalize it but set a price ceiling on the price offered by the company?

I think the whole article is fairly interesting, mainly because it shows that there is always people value something (which might not be obvious), and one of the way to make money is definitely bringing these valuable things to those who value them.

Scarcity and Rare

This picture specifically intrigues me because it illustrates an economic concept that is really hard to be understand. Rare and scarcity. When a football player earns more than a firefighter, does that mean that we value a football player more than a firefighter? Or does it means that we value someone who can kick a ball more than a person who saves life? Or does it mean that a football player is rarer/more costly than a firefighter? In this situation, which one is rarer, a football player or a firefighter?

Probably there's some factor that makes the salary of a football player higher than firefighter. Probably because a person who can really kick football is both really rare and scarce. Not everyone can kick football, so it makes a goodfootball player really rare. There is also the competition arise from different teams and companies and countries who are fighting against each other to get that football player. It makes a good footballplayer scarce. The cost of raising a firefighter is definitely lower than raising a football player subsequently.

Although it somehow demotivates me, this is the true face of reality: things become expensive when it's rare and scarce.

Class 38: Price Floor and Price Ceiling

Today, Mr Rizzo talks about the idea of price ceiling by further using the example of house rent. It is not good to anyone of us, even if the reason is good to help the overall population, because it creates inefficient use of resources; we end up using taxpayer's money to build houses. Next, he talks about the price floor through the illustration of minimum wage. The principle works the same: we end up not creating new jobs but worsening the unemployment rate because of the surplus that we created by setting up a minimum wage.