Market Power

Musings by an academic economist on the power of markets and the power over markets.

Saturday, January 01, 2005

Tsunami Warning Systems

The areas that were devastated by the recent tsunamis did not have adequate warning systems. Most of those killed in areas, like Sumatra, probably would not have been saved even if there had been adequate warning because of the closeness of the epicenter of the earthquake that started the giant waves. But other areas, like Sri Lanka and India, where it took 2-3 hours for the waves to come ashore, would have seen many fewer deaths.

I hope that some of the funds raised in response to this horrible disaster go to installing tsunami warning equipment in this area and other areas not covered by such equipment. The next time this happens, many will be spared. Think of it as an investment in the future.

Even so, if the bureaucracies and other sorts of things that slow down the flow of such critical information don't change, even the best warning systems won't have an effect.


Private Fundraising

We have been called stingy. President Bush's original public donation was ridiculed by columnists throughout the country. $35 million - what a paltry sum, many said. That works out to be about 12 cents per person. President Bush has upped that amount o $350 million.

Regardles of the amount, these donations understate the total donations given by the US because it only counts the public donations given by the federal government. It does not include private donations and it does not include donations from local and state governments in the US. Bloggers, such as myself and Russell Roberts at Cafe Hayek have made private donations. Roberts wondered:

"It will be interesting to see how it (Phil - the size of private aid) compares to the government aid. Even though that $35 million will discourage some private giving, I'm sure it will be a sizeable number."

Some numbers are starting to come out. From a recent Wall Street Journal article from 12.31.2004 entitled "Global Aid Effort Gains Momentum:"

"Gifts of cash and vital supplies from foundations and corporations continue to stream in. Coca-Cola Co. said it would donate $10 million to relief efforts. The Bill & Melinda Gates Foundation has pledged $3 million. The charitable foundations of J.P. Morgan Chase & Co. and Citigroup Inc. said they would donate $3 million each, while health-care company Cardinal Health Inc. pledged $2 million in cash and personal-hygiene and medical supplies. Northwest Airlines has offered to carry as much as 200 tons of supplies during the next 60 days for relief group AmeriCares.

"Exxon Mobil Corp., which employs about 5,000 people in India, Indonesia, Malaysia and Thailand, said it was contributing $5 million and will match additional employee gifts. The Wal-Mart & Sam's Club Foundation said it would give $2 million to the Red Cross, and will collect customer and employee donations in all U.S. Wal-Mart and Sam's Club stores."

Not counting the Northwest Airines offer, these donations from these private American companies/foundations total $28 million alone. has taken much of its website and transformed it into a centralized website where people can give donations. This is a donation of resources to help raise funds.

Here is an article from this morning's LA Times that lists donation amounts given to various charities. Here's an important quote pertinent to this post:

"The big question is whether people will consider this (their private donations to help the tsunami-ravaged areas) an additional gift or whether it's replacing one of the charitable gifts that they would otherwise have made."

I only speak for my family. The donation we made was in addition to our other charitable contributions.

Just because the federal government in a wealthy country does not initially donate what some people think it should does not make the people in the country stingy. Before judging us, please consider how much we are privately giving in addition to what our governments are publicly giving.


Friday, December 31, 2004

What Will $45 Million Buy?

This kick-axe house and its associated acreage and furnishings bought by pharmaceutical distributor Stewart Rahr described in this New York Times article (free registration required):

Of course, there is the usual aghast comment on conspicuous consumption:

"It's a sickness," said Mona Holzman, who oversees sales for Laffey Associates, a real estate firm on the North Shore of Long Island. She said she was shocked that a Hamptons home had fetched $45 million. "I guess people just don't know what to do with their money. I don't know what could be so spectacular about this house."

Why are we to think that Mr. Rahr isn't going to get at least $45 million worth of benefits from this house and the included furnishings? And who's to say how he's to spend his money? Would Ms. Holzman have been happier if Mr. Rahr had bought a doublewide with one flat tire and a broken window on a half-acre of property outside Eminence, Mo.?

The coolest thing about the whole transaction?

"I don't even have a mortgage on that property," Mr. Rahr said. "I'm able to write a check."

He paid cash! Hell, I'd have to use a credit card to afford the down payment! Damn. It must good to be the king!


Thursday, December 30, 2004

Charter Schools

Katie at A Constrained Vision gives a nice defense of charter schools. In a game of good cop, bad cop, she's a good cop! Her papa must be proud.


What (not) to Include in an Economic Impact Report

Boulderites skipped work to watch the Buffs play UTEP in the I' Houston Bowl game. Is this stuff included in the studies quantifying the economic impact of a bowl game (he asks facetiously)?


The (Accounting) Cost of College Bowl Games

The Colorado Buffaloes beat UTEP in last night's Houston Bowl. Now I know I could just look this up easily on the web, but that would spoil the fun I am going to have by typing the following sentence. What in tarnation is But I digress.

Have you ever been to an official university-sponsored "soiree" at one of the bowl games? I haven't. I've never been to a bowl game (the opportunities to do such things at the University of Missouri don't come along very often), This article in a recent Boulder Daily Camera article puts some numbers on the accounting expenses of said "soirees" put on by CU and the sorts of goodies one may find at these shindigs. Here is one passage that I got a kick out of:

"One soiree at the 2002 Fiesta Bowl in Tempe, Ariz., featured $11,250 worth of hors d'oeuvres and 84 bottles of wine and champagne. A reception for donors at the Alamo Bowl in San Antonio the following season cost $7,322.13 and was attended by as few as six donors and 71 university administrators, employees and spouses."

Maybe the donors had better opportunities or maybe these shindigs are really intended for administrators etc. I also don't know who those donors were who showed up. They may have been very generous friends of the university and they may have been the only ones invited. Regardless, the administrators, employees, and spouses probably had a great time.

And this one:

"The CU Foundation spent more than $48,000 on five parties for the team's Fiesta Bowl appearance on Jan. 1, 2002, and the Alamo Bowl on Dec. 28, 2002. One party included 48 bottles of wine and 36 bottles of champagne — all at $32 a bottle. Some of the parties appeared to be attended largely by university administrators, staffers and their spouses."

Once again, who's to say from this report who those donors were. Still, I bet a good time was had by those in attendance! After all, on the homepage of the CU Foundation, it states "The CU Foundation is committed to providing a wide spectrum of donor opportunities." They ain't lying, and others can get in on the act as well!

P-A-R-T.... Why? Because I GOTTA!


Tuesday, December 28, 2004

Natural Disasters

No Virginia, the tsunamis are not a good thing for the economy. The tsunamis have killed tens of thousands of people. That is not a good thing! Sure enough, the tsunamis will cause an increase in business for those available to work in the construction industries in the nations so horribly affected by the waves, but that business comes at the expense of other activities that would have occurred in their absence. If people thought that they would be better off by having their property destroyed and rebuilt, we expect that they would have done this in the absence of the tsunamis.

I guess I don't get a free donut.


Big Brother

My father, Dr. James Merle Miller, died 29 years ago at age 44. I was 10 years old. When I was 13, my mother enrolled me in the Big Brothers Big Sisters program at the local Y. I hooked up with a local pastor named Terry Graham. We played racquetball and I spent a lot of time at his church, banging around on the musical equipment. He was a very good friend to me.

We kept in touch at times over the years, basically through Christmas letters. My mother frequently saw him at performances at the Sioux City Symphony, but I hadn't seen him in over 15 - 20 years.

Terry Graham was murdered yesterday in Clive, Iowa, allegedly by a man he had met a few hours earlier online.


Monday, December 27, 2004

File This Law under "Dumb"

Missouri has a new law: if you are using your wipers, you are violating the law if you don't use your headlights too.

So, while driving in Mizzourah during a sunny summer day, if I decide to use my wipers to clean my windshield, I could be pulled over and ticketed for breaking the law? Next time I travel down to Mizzourah, remind me that it's just a little safer now.



Don Boudreaux on Price Gouging

Don Boudreaux of Cafe Hayek has an excellent post today on price gouging. Writing on the inevitable claims of price gouging that will come from the countries ravaged by yesterday's horrible tsunamis in the Indian Ocean, Professor Boudreaux wonders if poor people are helped by price controls designed to lower the prices of goods. Not likely, he argues.

When natural disasters, especially disasters like tsunamis and hurricans which cause widespread damage, prices of construction materials are going to rise because there is a big increase in demand for these goods and services as well as a decrease in their supply. The result in a well-functioning market is an increase in the price of the goods. People often worry about the effect these price increases will have on poor people. If poor people were less likely to be able to afford construction materials at their usual price, they are going to be even less likely to be able to afford them now. Therefore, the argument goes, the prices need to be kept low and various forms of political pressure get applied to keep prices low. Unfortunately, these artifical prices have the effect of causing shortages of the goods - a greater amount is demanded than is supplied, meaning some have to do without.

How does the unmet demand get cleared? Through rationing schemes where people get around the low legal price in various ways. For example, people can be forced to wait in line to acquire the good (they pay the low price PLUS they have to give up some valuable time), black markets can develop (where goods get traded at a high ILLEGAL price), government can ration the good (which won't have much of an effect if it can't prohibit resale - those with high valuation of the good buy from those with low valuation who were lucky enough to get the good), those who want the good can bribe those who possess the good (people pay the low price of the good PLUS a bribe), etc. The goods still get exchanged, and those who acquire the goods are those who have the resources necessary to operate within these rationing schemes.

Does a poor person who doesn't have the requisite resources to buy at a high legal price have the requisite resources to acquire the same goods through some other rationing scheme? Probably not.