Economics @ ITT

Time for a New Theory of the Firm

Posted in economics, microeconomics by ittecon on January 20, 2014

In first year economics when the supply curve was shown as upward sloping, the annoying undergraduate in me asked: why? When we get on to exactly why the supply curve is upward sloping, lo and behold, it is simply a representative firm’s marginal cost curve. Amazing!

But wait. If that’s true then firms operate at a point where there are diseconomies of scale. Yet didn’t most goods come down in price as output increased? What happened to the whole idea of economies of scale?

via Fresh economic thinking: Time for a new theory of the firm.

Have You Ever Tried to Sell a Diamond? A History of Exploitation

Posted in economics, microeconomics by ittecon on February 15, 2013

An old but wonderfully insightful article about the scam of diamonds.

The diamond invention—the creation of the idea that diamonds are rare and valuable, and are essential signs of esteem—is a relatively recent development in the history of the diamond trade. Until the late nineteenth century, diamonds were found only in a few riverbeds in India and in the jungles of Brazil, and the entire world production of gem diamonds amounted to a few pounds a year. In 1870, however, huge diamond mines were discovered near the Orange River, in South Africa, where diamonds were soon being scooped out by the ton. Suddenly, the market was deluged with diamonds. The British financiers who had organized the South African mines quickly realized that their investment was endangered; diamonds had little intrinsic value—and their price depended almost entirely on their scarcity. The financiers feared that when new mines were developed in South Africa, diamonds would become at best only semiprecious gems.

via Have You Ever Tried to Sell a Diamond? – Edward Jay Epstein – The Atlantic.

If Drug Companies Could Charge Higher Prices, Why Arent They?

Posted in economics, microeconomics by ittecon on February 15, 2013

What the hell is economist Douglas Holtz-Eakin smoking when he implies that pharmaceutical companies are not maximising profits?

Economists usually believe that companies try to make as much money as possible. This is why readers of an NYT article on plans to reduce Medicare payments for drugs might have been surprised…

via If Drug Companies Could Charge Higher Prices, Why Arent They? | Beat the Press.

Oversight or Intention?

Posted in economics, microeconomics by ittecon on January 17, 2013

I passed by a Dunkin’ Donuts shop this morning—alright, so I stopped in—, and the pricing structure caught my eye. For $0.99 I could buy 2 donuts, $2.99 for 6, or a dozen for $5.99. This means the more I buy, the higher the unit cost, so I’d be better off buying a half-dozen pair of donuts for $5.94 rather than a dozen at the stated price. What gives?

A dozen Dunkin' Donuts

This is not the first time I have noticed an establishment with such a discrepancy, but it leaves me wondering: Is this intentional? Clearly, a rational person would choose the cheaper option, though most people won’t even notice the discrepancy.

Perhaps the time spent getting the cashier to ring my order would cost more than a nickel, thereby making ordering a dozen cheaper when accounting for transaction costs, but I prefer to chalk this up to people being Predictably Irrational.

McDonalds Testing Mighty Wings In Chicago

Posted in economics, microeconomics by ittecon on January 7, 2013

An example of supply meets demand.

Prices for chicken wings have been climbing over the past year, reflecting an increase in the number of restaurants serving them, said David Harvey, an agriculture economist who specializes in poultry and eggs at the U.S. Department of Agriculture. In December, the cost of wings in the wholesale market in the Northeast was 26 percent higher than a year ago. Wings sold for $1.90 a pound that month, compared with $1.30 a pound for boneless, skinless chicken breasts.

via McDonalds Testing Mighty Wings In Chicago.

A Case for a $15 an Hour Minimum Wage

Posted in economics, employment, Income Redistribution, microeconomics by ittecon on December 4, 2012

This report analyses and calls for a minimum wage in Chicago of $15 per hour. It is short and worth a quick read.

via A Case for $15.

Raising Taxes On The Rich?

Posted in economics, employment, microeconomics, Policy Issues, progressive taxation, Taxation by ittecon on November 30, 2012

Economics is not some monolithic discipline, and it is consitently misrepresented by those with Corporatist and otherwise Elitist agendas. Take the following statement:

Economic theory says that when the government takes a bigger bite of your income as you move up the ladder into higher tax rates, you are less likely to work more, invest and build businesses. So economic growth and job creation suffer.

Some theories—and admitedly the mainstream theory—do make this claim, but it falls apart quickly when we understand that persons at those wage levels are not hourly workers; they are salaried. Likely, you will work just as hard, and your gross wages will remain somewhat the same; your net income—what you can’t shelter to avoid or evade taxes—will undoubtedly fall somewhat at the affected margin. Lots of smoke; no fire.

Reference: Raising Taxes On The Rich: Canny Or Counterproductive? : Its All Politics : NPR.

Air Canada and United May Not Coordinate Supply and Pricing

Posted in economics, microeconomics by ittecon on October 25, 2012

Canadian government offers consumers protection against monopoly power.

Under the deal, the airlines have agreed not to coordinate prices or the number of seats available at each price, to pool revenue or costs or share commercially sensitive information on the 14 high-demand routes.

via Air Canada, United settle with Canada on routes | Business | Reuters.

Economics Might Be Coal’s Worst Enemy

Posted in economics, environment, microeconomics, Policy Issues by ittecon on September 26, 2012

Coal-fired power plants and coal mines are being shuttered at an unprecedented pace mainly because the price of natural gas has dropped so far that it has made coal power uncompetitive. Specifically, electricity from natural gas power plants comes at less than half the cost of electricity from coal generators. As utility executives hustle to remain competitive in the deregulated marketplace, they are increasingly turning to the cheaper alternative.

via Why Obama might not be coal’s worst enemy – US news – Christian Science Monitor | NBC News.

Near-shoring Wall Street Jobs

Posted in economics, microeconomics by ittecon on July 2, 2012

New York’s biggest investment houses are shifting jobs out of the area and expanding in cheaper locales in the United States, threatening the vast middle tier of positions that form the backbone of employment on Wall Street.

via Coming to a city near you: Wall Street jobs – Business – US business – msnbc.com.