Is trade deficit a cause for concern?

Financial and trade flows have to balance. So when we run a trade deficit, it means that foreigners are investing in the US, essentially supplying us with cheaper capital, resulting in lower interest rates.

Daniel Griswold, director of Cato's Center for Trade Policy Studies, comments: "Contrary to the claims of free trade critics, the trade deficit tells us almost nothing about the success or failure of U.S. trade policy. The deficit reflects the continuing inflow of foreign investment to the U.S. economy. Without that investment, millions of homeowners and businesses would be saddled with higher interest payments. It's ironic to hear Democrats complain about the trade deficit. Under President Clinton in the 1990s, the trade deficit exploded from $70 billion to $380 billion and by all accounts the American economy performed well."
- Cato Handbook on Policy: Trade, by Brink Lindsey and Daniel Griswold

How to keep profit from eroding (7 min lecture)

Oligopsony cartel breaks down

Cartels are inherently unstable, regardless of whether they are selling (oligopolies) or buying (oligopsonies) because individual incentives differ from those of the group. The city or Irving has cut an indepedent deal with a supplier, much to the chagrin of the "Regional Water District planning director," which seems like bureaucratese for "cartel manager":

"It makes for bad policy, and it is a real blow to regional coordination and cooperation, which historically this region has found a way to do great things."

Thanks to Michael Ward.

Are there gains to delaying marriage?

Only for women:

...delaying marriage increases hourly wages of women by nearly four percent for each year they delay. Marriage timing has no impact on the wages of men. They find that delaying marriage may have costs as well. All else equal, women who delay marriage marry spouses with lower wages.

Co-payments for the un-insured

Emergency Room waiting times rise to an hour.

“There are more people arriving at the ERs. And there are fewer ERs,”

Srategy is like pornography...

hard to define, but I know it when I see it. Here are some definitions from economists

• The strategic management field is—positively—the scientific study of the plans that firms build and implement in order to achieve and maintain competitive advantage, and—normatively—the attempt to identify optimal plans for achieving and maintaining competitive advantages
• A field aimed at understanding competitive heterogeneity
• Strategic management is the interdisciplinary field that studies the behavior of companies and other market parties, in terms of their strategic behavior, the choices they make with regard to organizing their production, their interrelationships, and their competitive positioning. All of this is set against a thorough understanding of the broader environment in which companies have to operate

You have to read the article to get the views from scholars in Sociology, Marketing, and Management.

The Costs of Socially Responsible Investing

One of the leading advocates of socially responsible investing in recent years has been the California Public Employees' Retirement System (CalPERS). Socially responsible investors avoid investing in countries, industries, and companies that engage in business that the investors find objectionable ("socially irresponsible"?).

A recent report indicates that this investment stance comes with some serious costs. For example, CalPERS had rejected investing in China, India and Russia. Avoiding these countries resulted in the fund underperforming an index without such a screen by just over 2.5 percent per year and reduced returns by $400 million according to a CalPERS report (note: last year the fund changed its policy on investing in these countries). Avoiding tobacco stocks has reportedly cost the fund over $1 billion in returns over the last seven years.

Capitalism at the Beijing Olympics

Ticket prices for various events at the Beijing Olympics tell an interesting story of what events are most popular. The opening and closing ceremonies command the highest maximum listed ticket prices at $729 and $438, respectively.

The top individual sports include basketball, swimming, and table tennis ($146, $117, and $117). Bargain hunters can catch the rowing for only $12 and shooting for $7.

No pay for bad performance

Medicare will stop paying hospitals for making errors:

Medicare officials announced Thursday that it no longer will pay the extra-care costs associated with treating dangerous blood clots in the leg following knee or hip-replacement. The program also will not pay extra for complications stemming from poor control of blood sugar levels.

EXTRA CREDIT: if reports of blood clots or poor control of blood sugar decline, is it because hospitals are making fewer errors (moral hazard) or because they are accepting fewer patients suceptible to these complications (adverse selection)?

Tearing down barriers to entry

The Internet is allowing amateur photographers to compete with professional graphic designers:

So-called microstock Web sites offer to sell photos submitted by users for as little as $1 an image. Other sites let buyers post open calls for designs and pay for only the submission they like best, a practice that riles graphic designers who say it amounts to working for free.

Watch for the professionals to ask government to regulate the industry to prevent "ruinous competition" and to "protect" customers from low quality work.