The gross substitution axiom meets reality
The gross substitution axiom assumes that if the demand for good x goes up, its relative price will rise, inducing demand to spill over to the now relatively cheaper substitute good y. For an economist to deny this ‘universal truth’ of gross substitutability between objects of demand is revolutionary heresy – and as in the days of the Inquisition, the modern-day College of Cardinals of mainstream economics destroys all non-believers, if not by burning them at the stake, then by banishing them from the mainstream professional journals
via The gross substitution axiom — the backbone of mainstream economics | LARS P. SYLL.
Conspicuous Consumption: A(nother) Cautionary Tale
Unfettered capitalism is a road to extinction, and, sadly, not just a metaphor.
At first the frenetic pace of the killing didn’t matter: there were so many seals. On one island alone, Amasa Delano estimated, there were “two to three millions of them” when New Englanders first arrived to make “a business of killing seals.”“If many of them were killed in a night,” wrote one observer, “they would not be missed in the morning.” It did indeed seem as if you could kill every one in sight one day, then start afresh the next. Within just a few years, though, Amasa and his fellow sealers had taken so many seal skins to China that Canton’s warehouses couldn’t hold them. They began to pile up on the docks, rotting in the rain, and their market price crashed.
To make up the margin, sealers further accelerated the pace of the killing — until there was nothing left to kill. In this way, oversupply and extinction went hand in hand. In the process, cooperation among sealers gave way to bloody battles over thinning rookeries. Previously, it only took a few weeks and a handful of men to fill a ship’s hold with skins. As those rookeries began to disappear, however, more and more men were needed to find and kill the required number of seals and they were often left on desolate islands for two- or three-year stretches, living alone in miserable huts in dreary weather, wondering if their ships were ever going to return for them.
“On island after island, coast after coast,” one historian wrote, “the seals had been destroyed to the last available pup, on the supposition that if sealer Tom did not kill every seal in sight, sealer Dick or sealer Harry would not be so squeamish.” By 1804, on the very island where Amasa estimated that there had been millions of seals, there were more sailors than prey. Two years later, there were no seals at all.
Time for a New Theory of the Firm
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.
Paying with cash costs Americans $200 billion a year
I rarely use cash.
A new study by Tufts University, The Cost of Cash in the United States, puts that price tag at $200 billion a year for both American consumers and businesses. For the average American family, the cost of cash is about $1,739 a year.
via Paying with cash costs Americans $200 billion a year – TODAY.com.
How to Graph Specialised Growth with Two Production Possibility Curves
In response to my post on How to Graph a Production Possibilities Frontier in Excel 2007 and Excel 2003, several people have asked how to chart two production possibilities curves, so I have created the amendment for Excel 2010, which is substantially similar to Excel 2007, and the concepts still apply to Excel 2003, though the mechanics are different. Some texts reference these curves as PPC, PPF, or PPFC. No matter, they all server the same function, which is to graphically represent opportunity costs.
From the Insert menu, select Scatter, and choose the one with smooth lines and markers—unless you do not want markers.
The key is simply add the second item to be represented on the Y-axis; otherwise follow the same steps for a single curve,
The resultant chart will appear like this:
If you wish the specialisation to appear on the X-axis instead of the Y-axis, simply reverse the values for these on both data series. And there you have it. For details on how to swap X- and Y-axis data, refer to my post on Graphing Supply and Demand Curves in Excel.
California car dealers go crying to DMV about Tesla Motors’ website
Auto dealers have been dealing with disruption just about as well as any other legacy industry has. Instead of attempting to compete, dealers have chosen to respond to Tesla’s refusal to cut them in on the middleman action by throwing up as many regulatory roadblocks as possible. Sadly, this antagonistic attitude toward both their competition and the car-buying public somehow makes sense to them, and they seem very willing to bury both the upstart and their last remaining shreds of goodwill at the same time.
California car dealers go crying to DMV about Tesla Motors’ website | The Raw Story.
Chart: Know Your Economics
Know your branches of economics
From: http://www.smbc-comics.com/?id=3117
This was sent to me from a friend without ties to academic or professional economics.
Beats by Dre: More Disproof of a Rational Actors
In 2008, Monster, a tech company known for overpriced cables and zealous litigation against Rhode Island mini-golf courses, teamed up with Dr. Dre, the legendary hip-hop artist and producer who helped bring Snoop, Eminem, 50 Cent, and Kendrick Lamar to the masses. Just five years later you can look around any playground, subway train, or suburban mall to see the result, and it starts with a lower-case b: Beats by Dre headphones have locked down the market.
via Beats by Dre market share: How the headphones company conquered the market. – Slate Magazine.
Economics @ ITT 
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