Candy Clearance Sale

After every holiday I can’t resist checking out the clearance aisles at WalMart and Target.  Why?  I’m interested in cheap candy and chocolate.  In the past year or so I’ve noticed something:  WalMart often waits a few days to mark down its holiday candy.  Why is this?

Was Adam Smith Wrong? A Scene from “A Beautiful Mind”

The Supply and Demand for Organ Donors

A few weeks ago, my dad celebrated the 6th anniversary of his 3rd kidney transplant. Around this time of year I always find myself checking the current statistics on how many people are awaiting transplants in the country. As of February 1st there were 105,499 people on the nationwide waiting list. Between January and October of 2009 there were 12,186 donors that resulted in 23,847 transplants. Every 90 minutes someone on the waiting list dies. It doesn’t take a statistician to figure out that there is a shortage of organ donors. The National Organ Transplant Act of 1984 outlawed the sale of human organs, but regardless of the this law there has been activity on the Black Market for the sale of organs. Since I have nothing better to do at midnight on a Saturday night I started looking up papers on the subject and I came up with this one by Gary S. Becker of the University of Chicago and Julio Jorge Elias of SUNY at Buffalo. The abstract reads:

“We evaluate the introduction of monetary incentives in the market for live and cadaveric organ donations. We show that monetary incentives would increase the supply of organs for transplant sufficiently to eliminate the very large queues in organ markets, and the suffering and deaths of many of those waiting, without increasing the total cost of transplant surgery by more than 12%. We build on the value of life literature and other parts of economic analysis to estimate the equilibrium cost of live transplants for kidneys and livers. We also show that price will be determined by the cost of live donations, even though most organs will come from cadavers.”

I found the article rather interesting. I was a bit skeptical reading through section 4.1 on the price of an organ, and their mathematical calculations which put a monetary price on a life, but it provided some research on a long debate of whether organ donors should be compensated. The authors present that a monetary incentive would cause the inelastic supply of organ donors to become elastic. The cost of organ transplants is incredibly high, and an monetary incentive would only raise it.

The article doesn’t go into depth about who would and how this monetary incentive would be supplied, but what if there was compensation for living donors or the families of cadaveric donors? Would it be the invisible hand that would create an equibrium in this market?

Another Poor Argument From Paul Krugman

Anyone who has taken a course in macroeconomics and is familiar with Paul Krugman would not be surprised to learn he’s unconcerned about the current budget deficit. That’s fine. He can have his opinion. (After all, who am I to question the economic judgments of someone who’s won the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel?) In today’s New York Times, he claims that recent concerns about the growing U.S. budget deficit (which is forecasted to be 1.56 trillion this year) amount to little more than the “fear-mongering has become a key part of the Republican political strategy.” He compares the public’s fears about the deficit to the WMD hysteria leading up to the Iraq War. This really is a poor argument. How is pushing for war analogous to spending less money? Calling for war involves asking government to do more. Skepticism about government spending is asking government to do less. A better argument would compare the Bush Administration’s push for war after 9/11 to Congress’s aggressive assurances about the necessity of passing a stimulus bill in order to avert a second Great Depression.

Of course, Paul Krugman cannot make this argument, because he supports efforts to stimulate the economy through government spending. I am not asking him to change his economics. That is irrelevant here. Krugman writes, “The trouble, however, is that it’s apparently hard for many people to tell the difference between cynical posturing and serious economic argument.” Where is Dr. Krugman’s economic argument, here or in other pieces? I read his column regularly and see very little sustained economic reasoning. Instead, he opines openly and sublimates the bad economics that drive his (frequently partisan) convictions: this process frequently results in his producing the kind of shaky argument I mentioned above.

Winning the Nobel Prize does not make you exempt from making real arguments. Until Paul Krugman realizes this, he won’t convince me of anything.

Is College Worth It, in the Long Run?

This opinion from the WSJ is an excellent follow up to Kayla’s post.

Peter Schiff: Government Programs Drive Up College Tuition

Peter Schiff, well-known for predicting the 2008 financial crisis, explains the continual rise in college tuition.  According to Schiff, government attempts at lowering tuition costs to students have the opposite effect.  Student loans that were meant to lower the cost of college are instead making college more expensive.  Watch the video and decide for yourself if you agree with his reasoning.

Deficit Nonsense

My good friend Hobie posted a link on his FB discussing the deficit, so naturally I had to read it. This article from the Huffington Post (and yes I actually read an article from the HP) paints the picture that the concern over the deficit is all unfounded.  My first reaction was one of disbelief. Then I calmed down and came up with my top two objections to this article and wrote Hobie back. My response is below.

Interesting article. Although I was disappointed that there was no discussion of the major swing under the Bush Administration to financing our deficits through international lenders versus domestic. This to me is the major issue with the current deficit and spending. It’s sustainable to run budget deficits but its crucial that the interest being paid is going back to domestic lenders so that it can be in turn invested. My second problem is with the end of the Bush tax cuts. Its easy for people to agree that those who make $250,000 should pay more in taxes but what they don’t realize is that those individuals comprise of the majority of small business owners in this country. In this economic recession straining small business is the last thing we should consider doing.

Hobie’s Response:

Keith, I never thought about domestic debt financing. That’s an excellent point. I haven’t read a single article on that – and I’ve read a ton on the subject. Have you thought about writing on that subject? The lost interest to domestic financiers must be huge.

My Response:

Its substantial. (Estimated federal debt financed by foreigners since 2000 has quadrupled to 4 trillion.) And yes I have considered writing about it. I think its the major issue in this debate.

TARP Funds to Small Businesses, Setting Them Up for Failure?

This WSJ article discusses President Obama’s plan to create a lending program for small businesses using TARP funds. The basic premise is to allow banks to lend to small businesses for the purpose of hiring more people in hopes of reducing unemployment. Let’s look at this from the small business owner’s point of view. When you open your own business, what’s your ultimate goal? Duh, to make profit and reduce debt. When times are tough the last thing a small business owner is going to want to do is hire more people. Will this program encourage them to? I say no. I don’t foresee savvy small business owners to see the benefit in increasing their debt to hire more people which may or may not increase their revenue. If it doesn’t increase their revenue and they can’t repay it…you guessed it, they fold up. Is that a risk they should take? I say no.

To put this in perspective I thought of the small, independent coffee shop I worked at while I was in high school. Like many small businesses today it’s hanging on by string, and every penny of revenue counts. My boss recently decided to reduce payroll hours by having only one staff member working on week nights, and he himself is working more hours instead of staff taking them. He’s discovered that this is working, money is still tight but he’s still open. The thought of hiring additional staff hasn’t crossed his mind, and I’m pretty sure he’d laugh me out of the shop if I suggested he take advantage of this program if it was implemented.

The advantages to this program are non-existent. Increasing small business debt is more likely to lead to their demise than to reduce the unemployment rate.

Falling Energy Stocks

Interesting interactive map of the energy market. In the last quarter many of the country’s top energy stocks like Exxon Mobil, Chevron, and ConocoPhillips have seen a fall in value.