Saturday, 26 November 2011

The problem with Price Gouging Laws. Is optimal pricing during an emergency unethical?

"The problem with Price Gouging Laws. Is optimal pricing during an emergency unethical?" written by Micheal Giberson illustrates how the price gouging laws during an emergency situation might do more harm than good to both the consumers and the merchant. He points out that, although the intention of having a price gouging laws is ethical, the unintended harms towards the consumers, especially those who are really in need, makes the law itself unethical.  The author gives strong reasoning on why price gouging law is unethical based on the ideas that it distorted the natural response and flow of the goods in the market, the law is vaguely defined, and the unintended consequences that affects the behavior of merchants.

Some of the questions that intrigue me are:
1. What are the unintended consequences from not having a price gouging laws? Probably the merchants would stock out their stocks in order to sell it in a much higher price later on, isn't it going to affect those who are in need as well during an emergency time?
2. The author argues heavily based on the assumption of consequential ism that "the end justify its means." But isn't it hold true to a lot of people that the "end does not justify its means"? How about those people who believes that we have to have ethics in the means of economics?
3. Taking the example of Japan, during the time when tsunami struck Japan, they do not increase their price. Rather, culturally the whole society helps each other by saving without even relying on the price gouging laws. Through this, the cities around Tokyo manage to save electricity that can sustain the whole Tokyo for a month. They do not have Price Gouging Law, the price did not increase as well, but still, the goods are handled and allocated efficiently. How does that going to say about his idea that "Price Gouging Laws is unethical and impractical"?

I think that I partially agree with the author on Price Gauging Laws because not every country can be like Japan. Price Gauging Laws, in my view, works only to certain countries. It depends heavily on the culture of that particular country as well. If you are in Malaysia, without Price Gauging Laws or the intervention of the government, the price can literally go up like crazy and it leads to more corruption. However, isn't it that we all want to create a civilization that values ethics and help each other in times of disasters? 

Black Friday

Awesome! My very first black friday in US. I was at the NYC times square area on Thursday Night (sadly I didn't join the midnight madness because I don't think that it's worth the time I spend on waiting in the line.) It leads me to think, is there something as a discount/ sale? Does the thing actually become cheaper on Black Friday? From my point of view, on Black Friday the thing does not get cheaper because it costs you a lot more things in reality. You spend the whole night waiting in the line to get the deal. You can be spending that time to be with your love one which is even more productive. You need to fight to get the deal that you want! In fact I saw an article saying that in LA a woman used pepper spray on her competitors in order to stand advantage on the other buyers!
woman pepper sprays others

So instead I went to shop in the afternoon at a mall called Roosevelt Mall somewhere in the long Island. I found that there's less people as compared to the midnight madness. There's still some great offer but less than midnight madness. Most of the great deals are off the shelves, what's left is just some ugly stuffs on the shelves with less discounts. I still think that there is actually not a big difference because you have less attentive care from the salesgirls. you lack the convenient and comfort while shopping. I can't even find a place to try my new shoes. The line to pay is like crazily long. We can't find a seating while having our lunch. When we eventually found a seat to enjoy our meal, at the very right moment when I stood up just to get a new drink, a Chinese Old guy sitting next to me just literally grab my chair behind me, pull it towards him and put his leg onto the chair, and stared arrogantly to the sky pretending that nothing had happened!

Maybe the price is cheaper, but overall cost? It could be even higher than usual.

Friday, 25 November 2011

Class 35: Centralized knowledge and decentralized knowledge

Today, Mr Rizzo talks about the idea of centralized knowledge and decentralized knowledge through the example of czar of titanium. Decentralized knowledge is better than centralized knowledge is because of it's practicality with the help of a well functioning markets and democracy. The market, determined byu the price system, solves the problem as it reveals who has the particular specialized knowledge to solve the problem. A person with all the knowledge required to do certain thing is just impossible to be found in this world.

Class 34: Supply and Demand

Today, Mr Rizzo talks about the relationship between supply and demand as well as the equilibrium point. Sometimes there's surplus and sometimes there's shortage when supply and demand are not at the equilibrium point. The relationship between buyers and sellers are also talked and how prices affect the behavour of buyers and sellers towards the goods.

Friday, 18 November 2011

POSTERS

http://www.propagandaposters.us/poster4.html Waste helps the enemies, conserve materials.

When consumers conserve materials, the demand for the new materials  in the market will drop significantly. When demand drops the producers will either produce less or they will drop the price of the materials to earn more profits form the consumers. This can cut down the resources spent on producing materials in order to channel the resources to the war.

http://www.propagandaposters.us/poster10.html When you ride alone, you ride with Hitler.

During the world war II, these kind of posters often will affect the behaviors of consumers to carpool with others. This will cut down the demand for the resources used to ride a car such as petrol, time, space, materials to build car and so on. Subsequently these resources can also be used to channel to the war.

http://www.propagandaposters.us/poster19.html This world cannot exist half slave and half free, sacrifice for freedom.

During world war II the army requires a lot of recruitment from the public. This kind of posters affect the behavior of people and diverge their action to join in an army. This can affect the supply and demand of the market as people, regardless whether they have comparative advantage in becoming a soldier, might waste a lot of marginal opportunity cost. Resources are not efficiently used and then subsequently increase the price of every products in the society because the society becomes poorer.

http://www.propagandaposters.us/poster31.html I pay no more than top legal price. I accept no ration goods without giving up ration stamps.

During the war time, each household is given the ration book to ration the goods such as sugar, oil and so on so that no waste is produced during the transaction. Each household needs to pledge to pay no more than the top legal price that can stand advantage against the others to get what they want. It hurts the economics even more because not everyone is there to do what they interest and what motivates them the most. The stuff and goods are not being allocated to the most needed and most valued places. It becomes destructive to the economy because it is not efficient. It does not produce the things which everyone wants in the lowest cost. Demand and supply is controlled by the central planner, and central planner cannot possibly know everything. The price of stuff might increases while the supply and demand is not increases.

A bunch of buffalo wings

1 hour ago my roommate and I invited a bunch of friends to have buffalo chicken wings together. Awesome! However there are about 60 chicken wings and we have 5 people here. It seems enough right?

Nope. It is definitely not enough for 5 of us because we have unlimited desire and wants, and we would always want more even when we are already full. There is also the element of peer pressure as those who eat less will be deemed as weak and useless. (haha!) Each of us also has our own preference. For instance I would prefer chicken legs while Siqi only likes to eat wings. Jeff doesn't like to eat spicy stuff while Hogan eats really slow, he eat less and he only takes chicken that's near to him.

Although there is no money transaction between us, there is the simple mechanism of economics that plays in between us: the idea of trade among us that allows us to put the less valued chicken wings to those that value them the most! Eventually we sanction the chicken wings successfully. I am not sure whether we became richer or not through this system, but surely we were all very satisfied.

Class 33: Rationing through the price system

Today, Mr Rizzo talks more about the idea of rationing and the advantage and disadvantages of non-price system and price system. The non-price system fails greatly because it decentivizes people's motivation to produce more. However, rationing through price system allows efficient flow of low value products to people who value them most. All individuals through this mechanism can eventually get what they want without any law enforcement or central planning.

Class 32: The rationing

Today, Mr Rizzo draws 5 fishes and 12 people on the board to illustrate the idea of rationing: equally divide the fish to all 12 people. Some of the sample rationing criteria are need, queue, lottery, equal share, might makes right and merit. None works better compared to the price system as each of them have the information problem and efficiency problem. Therefore, we have to evaluate the rationing mechanism from multiple perspectives. With that he introduces the idea of competition arose from scarcity. An effective rationing system would be a system that encourage constructive competition so that the world becomes richer.

Class 31: The supply curve

Today, Mr Rizzo talks about the supply curve and what we can learn and observe from the supply curve. Similar to demand curve, it has the supply and the quantity supply that will be affected by either prices of the product or the other factors such as expectation, technology and prices of all other factors. It also has the elasticity of supply. For instance, if m=2, for every 1% of change of price of the goods, it will affect change of the quantity of supply by 2%.

Saturday, 12 November 2011

The theory of the Leisure Class

This week reading is actually taken from several pages from the book "The Theory of the Leisure Class" written by Veblen, Thorstein. The main idea of the book is the role played by the upper level social class, which the author introduces it as the "leisure class", in the emerging of the market system and economics. However, the selected readings emphasize more on the idea of "conspicuous leisure" and "conspicuous consumption".

At page 36-37, although in the past the working force are very comfortable with their current social status, the more upper level social class naturally shows superiority over the lower class to feel more secure and appreciated. Such thinking and acts propagates our development from the poor to the rich, even until today.

At page 70-71, the article talks about the idea of conspicuous consumption through the example of ceremonial differentiation. One of the consumption good would be alcoholic drinks/ stimulants. Where the price is high, alcoholic drinks are seemed as luxury and noble. Through this, male shows superiority and nobility to women.

At page 230-232, the idea of "conspicuous leisure" and "conspicuous consumption" are further elaborate into today's profession and employment. The idea talks about that men are merely purposeless in competing against each other but only for the mere idea of status, respect and nobility. A lot of things serve no practical use, but because of "conspicuous leisure" and "conspicuous consumption", certain things evolve to gain respect and higher social status against others.

Some rhetorical question,
1. Isn't that the idea of "gaining respect" or show superiority one of the purpose of human? If humans are all merely purposeless then we will all just act randomly and by chances.
2. Like greed is bad and self interest is good, then should "showing superiority" be categorized as good or bad?
3. Is the attitude of conspicuous leisure and conspicuous consumption one of the cause to the complicated system of economics and the market?

Personally I think that the whole passage is very confusing because the reading lacks complete picture of the whole article. However, the idea that certain rituals and ceremonies are in our today society is because of the leisure class and the need to show superiority against others is very interesting. I remain neutral to the author opinion because the concept is vague to me.

Friday, 11 November 2011

CSA audition for China Nite 2012

Last Thursday Chinese Student Association have a audition session for China Nite 2012 at Haven Lounge, which is the night before our economics test. (Since I am in the eBoard I will also be one of the judge to vote on who will get the limited spots to perform during China Nite). Out of 10 participants, only four singers will be selected to be the official performers during China Nite. This is related to the concept of scarcity and competition, ethical problem.

The spots of performance opportunity is a form of scarcity because eventhough there is spots available, the  unlimited number of participants who wants to perform is far more than the spots that we can offer. CSA can't allow everyone to perform because time will be wasted largely if everyone is given the time to perform. Time in here is a scarce resource. We also have to let them fight in between so that we can have the best singers out of all of them through competition. As such, the quality of the night will increase.

However, not everyone is born to have good voices. What if someone really wants to have the opportunity to perform on the stage but just not the lucky one to get picked up? Is that consider fair and equal? I hope one day we can figure up a way to solve the limited scarcity problem.


Class 30: Summary for test + supply

Today, Mr Rizzo summarizes all the important stuffs that are required to know before entering the exam, such as "cost requires an action and a person", the law of demand and elasticity for normal goods and inferior goods. Then he talks about the law of supply, which basically means if you can make money, you will want to respond to it more. Similar to demand and the law of demand, there is also the concept of supply and quantity supply.

Class 29: Elasticity

Today, Mr Rizzo introduces us the idea of elasticity and explain it thoroughly. He gives the example of Rachel and Michael in graph forms. There are a lot of factors that affects the elasticity such as time, budget and the presence of substitutes. The main idea is that when there is more substitutes, there will be more elasticity for the products. Based on the elasticity, we can tell that whether we should increase or decrease the price of that particular products in order to increase the maximum profits earned.

Class 28: Market Demand

Today, Mr Rizzo shows us lots of graph on demand and aggregate demands. With all those graph, he introduces us the concepts of quantity demand and demand, and how different factors affect both concepts. Quantity demand is affected by the prices of the good itself while demand is affected by "all other stuffs", such as income of the buyers, the prices of other things, the expectations to the good, the tastes and so on. In the end he touches a part on elasticity, which is the concept in explaining "how much more" is the change.

Saturday, 5 November 2011

The economic organization of a P.O.W camp

The economic organization of a P.O.W camp demonstrates the emergence of the market system and the price system in a stimulated environment called the P.O.W camp. Through the disorganized and decentralized activities of those prisoners in the camp we can see clearly that the spontaneous emergence of the market system and the magnificent role played by the price of the goods. It also demonstrates that a controlled system by a central planner is more harmful than beneficial to the market. Based on this simulation, we can see that this is how our real market system rise into our society, and how it eventually becomes part of our life and redefines the meaning of economy.

Some of the rhetorical questions that comes into my mind when I read this article are:
1. Can we play this experiment in a class scale with a time frame of 2 hours? I think most probably it will work though!
2. Can this simulation truly describe how the market system emerge in our real society when those prisoners might be exposed to the idea of exchange and trade already before they were even in the camp? So I think that although most probably this example can explain the process of the emergence of price and market, it still doesn't explain how the very idea of trade come into existence in a society with no exposure of any idea relevant to trade and exchange.
3. Why tobacco at the first place? it's so unhealthy.

I think this article is really interesting and it explains well the instability of the price and the importance of the price itself in keep motivating us and incentivizes us to earn more profit. It resonances with Mr Rizzo's classical quote, "trade is the road to wealth, self-sufficiency is the road to poverty".

PPSMI. My economics way of thought

PPSMI news

This news is about Malaysia's latest government policy in phasing out PPSMI, which stands for Teaching Maths and Science in English. PPSMI is a national project implemented by the government in 2003 which enforces all students to learn science and mathematics in English starting from standard one. The latest policy is that the government is going to phase out PPSMI in year 2012 and restores the teaching of science and maths in Malay Language, which is the national language of Malaysia. Such act causes outraged reaction from the public, both supporters and oppositions in PPSMI, mainly in the issue of the quality of the education in maths and science in future. Form the economics point of view, this particular articles is related to the idea of ethical trade, unintended consequences, and incentives/ behaviors of the public.

Some questions in my mind:
Who does the government counts to? Who do these policies makers represent? Does it lead to inequality between the people from the rural area and the urban area, since the people from the rural area does not have the opportunity to be exposed to maths and science in English if such policy is made?

How about paternalism problem? Why should government spend so much money on forcing the public to learn/ teach maths and science in Malay language just to "preserve the status of national language"?

Shouldn't the government just let the people choose what interest them most so that they can be incentivized the most from the learning process?

How about the unintended consequences? Does it really going to improve the grades of maths and science if the language is changed into Malay Language? When student becomes demotivated in learning the courses because of that particular language, will they still do well? How would the behaviours of students and parents and all people change after such policy is made?

This particular article also has the sham reasoning elements: by just showing that the result of maths and science drop during the implementation of PPSMI, it doesn't mean that PPSMI is the cause of dropping in grades of students in Maths and Science. Is there a causation fallacy in there?

In my opinion I do not agree with what the deputy prime minister's opinion in the abolishment of PPSMI mainly because I believe that such policy is made without the consideration of particular economics point of views. It is more like a political candy rather than an education policy.

Class 27: the Demand Curve

Today, Mr Rizzo talks about Burrito and his wife Rachel's demand for the burrito to the price of the burrito. He explains on what are the things that we can observe and analyze based on the demand curve, and some of the points from the curve that can explain why we behave in certain ways. The things that we can see are marginal values, total expenditure, total values and buyers' surplus. The reason why we behave in certain ways are because of wealth effects, substitution availability and diminishing marginal utility.

Class 26: The law of demand

Today, Mr Rizzo introduces us the law of demand by first explaining how prices come from. He defines that market as any decentralized, inorganized interaction between buyers (which are the demanders) and sellers( the suppliers) of goods and factors. He also talks on quantity demand and the relationship between price and demand. (the law of demand).