Sunday, April 08, 2007

Why Do We Neglect Lesiure and Cheer for Divorce?

How would you explain to a noneconomist CIA director what GDP can and cannot tell the CIA about countries around the world?
GDP can tell the information about CIA a country’s overall output and economic activities. GDP, essentially ‘the market value of all final goods and services produced in a country within a given period’ (most often a year), is a number that is the closest representation of this; this number can vary depending on the method used to measure GDP. GDP shows increases in money spent by a country, not including goods that are being resold or double counting goods that are used in the production of a good. GDP does not include stocks or bonds, as they are not a good that is produced. GDP cannot tell the CIA about the living standards in a country, the social welfare of the economy or the stability of an economy.

Prostitution, gambling, and some types of drug use are legal in some countries and illegal in others. What implication does this have for international GDP comparisons? What other issues might cloud such comparisons?
This has the implication that in some economies, additional goods are included in GDP and therefore, other countries GDP will differ because goods that are included in one economy are unaccounted for in another. This means that comparisons between countries economies are invalid, unless certain goods are decided upon to be included in GDP. Other issues that may cloud such comparisons are the population size and country size that is being compared. One country may have a greater GDP than another, but it also may be ten times the size of the country it is being compared to.

In which year did Armstrong make the largest contribution to GDP? In which year do you think he had the lowest level of individual welfare? In which year do you think he had the highest level of individual welfare? Discuss the relationships among income, output, and your own happiness.
a. out
b. out
c. in
d. in
e. out
f. out

How could leisure time be included in social welfare? Can you think of measurable values that coincide with leisure?
Leisure time could be included in social welfare by measuring the number of individuals involved in sports or other hobbies over a specific amount of time. Measurable values that coincide with leisure are the suicide rate of a country, as it is proven that people with more leisure time are less likely to commit suicide, or the amount of time people spend watching TV.

Monday, March 19, 2007

Australia Added 22,000 Jobs, Unemployment Rate 4.6%

Australian employers are hiring more staff in than economists have forecast, which is worsening a worker shortage that may stoke wages and inflation in the Asia-Pacific region's fifth-biggest economy. The number of full-time jobs in Australia rose to 20,700 in this February. Part-time employment gained 1,300. About 10.4 million of Australia's 20.8 million people are now employed. Mining investment soared 57 percent in 2006 from a year earlier, the government reported this month, triggered by a 54 percent surge in commodity prices over the past two years. The economy is expanding even after the Reserve Bank of Australia raised its benchmark interest rate three times last year, most recently in November, to stem inflation.

A low jobless rate adds to pressure on wages and inflation, according to the central bank and companies.
``It is a very competitive jobs market and wages reflect that in the mining industry,'' said Mincor's Reeve.
``We have had to increase wages for our workers this year, and that's because the labor market is tight and they might be attracted to another job with a better salary.''

Australia's participation rate, which measures the labor force as a percentage of the population aged over 15, gained 0.1 percentage point to 64.9 percent in February.

The market for jobs in Austalia is currently "very fully employed", and until more labor is introduced into the economy, will remain "very fully employed".

Tuesday, March 13, 2007

Theater snacks rarely a healthy choice
Although owners say trans fats are being banished, saturated fats remain a problem.
By John Horn and Sheigh Crabtree, Special to The Times
March 12, 2007

Jose Mier will be working the ShoWest convention floor in Las Vegas this week, peddling his Capital Churros to theater owners there for the annual convention. He envisions the fried and sugary snacks — about 16 inches long and stuffed with Bavarian cream, caramel and strawberries — spicing up movie theater concession stands across the nation.

In a nearby booth, Creative Concepts will be promoting Pucker Powder, a sour-powder dispenser — choose Sweet Blue Bubblegum or Sour White Apple — for movie fans who want to create edible sugar tubes. FuNacho will be pushing its cheese-and-chips program, American Licorice will showcase its many varieties (is the Saturday matinee crowd ready for pink strawberry twist?) while ConAgra Foods will try to entice theater owners into stocking Slim Jims and Crunch 'n Munch.

ShoWest, which kicks off today, is the industry showcase for a variety of products — rug shampoo as well as the latest DreamWorks animated movie. An estimated 2,700 exhibitors, distributors and vendors can shuttle from a demonstration of digital projectors to a movie-piracy presentation by the Department of Homeland Security. Studios will trot out finished movies and film clips — "Hairspray," "Transformers" and "Mr. Brooks" — while independent film companies will try to generate attention for smaller movies such as "Talk to Me" and "Away From Her."

And while everyone is trying to figure out what the summer's biggest popcorn movie will be, theater owners also will be wrestling with another weighty question: What kind of grease should the popcorn be cooked in?

Theater owners are determined to give audiences a thoroughly modern experience, with stadium seats, surround-sound speakers and 3-D digital projectors. But when it comes to peddling "Star Wars"-era junk food, exhibitors remain stuck in an artery-clogging time warp, health experts say: Although concessions are largely trans-fat free, the caldron-sized portions are still loaded with toxic saturated fats and tooth-rotting sugars.

Even after a highly publicized 1994 study forced many theater chains to steer away from cooking popcorn in coconut oil, several leading exhibitors — including Regal, the nation's largest, and AMC — pop their kernels in the unwholesome substance. Another top chain, National Amusements, says it is considering replacing its healthier canola oil with coconut oil too.

"Most foods in concession stands are high in fat. We wish they would minimize portion sizes, but we'd really like to see the more dangerous elements removed," says Dr. Pat Crawford, an adjunct professor in the School of Public Health at UC Berkeley.

Mary Beth Sodus, a registered and licensed dietitian at the University of Maryland Medical Center's weight management and wellness center, says concession stands advertising food as free of trans fat may be confusing customers.

"You shouldn't be told that if it's trans-fat free, it's OK," Sodus says. "When they use coconut oil, they can say they are trans-fat free. But coconut oil is 86.5% saturated fat."

The theater owners say they are only responding to consumer demand — heart doctors may wish their patients didn't soak their popcorn in butter-flavored sludge, but hot kernels coated in the flavorful fat is what moviegoers crave.

"The concession stand is an entertainment destination, just like a movie theater," says Larry Etter, the president of the National Assn. of Concessionaires and vice president of the Southern chain Malco Theatres. "You don't go there to work out like a gym."

The nachos problem

Just outside the convention floor is the entrance to Will Rogers Health and Fitness Fair, where ShoWest visitors can check their blood pressure and pulse. It might be good for them to monitor their vital signs before they hit the trade floor. Even with New York City's crackdown on trans fats, healthy movie snacks remain elusive.

All the same, Etter says the 900 members of the concessionaires association are focused on reducing trans fats, and there is even a ShoWest panel on the subject Tuesday afternoon. "There are some people in the theater industry wondering, 'What should we be doing?' "

Etter says some butter-flavored toppings are being reformulated to eliminate trans fat, which is an industrially created type of unsaturated fat that is neither needed in the diet nor beneficial to health. Eating trans fats is known to increase the risk of coronary heart disease.

A tougher challenge, Etter says, is reducing the amount of trans fats in the cheese sauce in which nachos swim. "They need the oil to hold the cheese particles together," Etter says.

Bill Towey, senior vice president of the 1,498-theater National Amusements, says the chain's customers send sometimes conflicting messages about how healthy — or unhealthy — they want their concessions to be. In the circuit's most upscale art houses, for example, patrons demand nothing less than real butter on their popcorn, Towey says.

Nonetheless, National Amusements has diversified its concession offerings, adding alternative menu items such as bottled water, fresh vegetables with low-calorie dips and fresh-squeezed juices at a number of its screens. Sales of some of these low-fat offerings have been surprisingly strong, Towey says.

"Do we have a moral obligation to make the community healthy? Yes, we feel we have some obligation," Towey says. "I don't think it's up to a retailer to make a decision for a patron, but we are giving them an option. Still, the idea of a healthy snack is kind of an oxymoron."

Although it now uses canola oil for its popcorn, National Amusements may soon switch to coconut oil, in part because that's what moviegoers prefer, he says. "Customers like the flavor — it tastes better," Towey says. "It makes a much better popcorn."

Keeping concession stand sales healthier than the foods being sold is critical to a theater's bottom line. Snack sales can account for as much as 45% of a theater's revenue, and the margins can be staggering (yes, that $5 popcorn may cost the theater only a nickel or two). In its last fiscal year, the 6,403-screen Regal reported concession sales of $696.7 million, with costs of just $104.8 million.

Pop goes the diet

But the concession counter has often been caught in the middle of the public health debate. In a famous report released more than a decade ago, the Center for Science in the Public Interest in Washington reported that movie theater popcorn could pack at least 400 calories and a day's worth of saturated fat into moviegoers' diets.

"A lot of movie theaters did change the oil they used for popcorn after our study was released," says Margo Wootan, the center's director of nutrition policy. "But we haven't been able to follow up since. And I don't see a lot of healthy new options here in Washington, D.C."

Alice Lichtenstein, the director of the Cardiovascular Nutrition Laboratory at Tufts University in Boston, suggests patrons' cravings are being knowingly teased at the ticket counter.

"I've trained my kids to bypass the concession stand, but it's tough. People may walk into theaters when they're not hungry, but the entrance ways are filled with the wonderful smell of freshly popped popcorn," she says.

Sensing an opening, candy makers such as Pure Fun Confections (which is not yet in any movie theater and is not attending ShoWest) are trying to make treats with organic sugars and no artificial colors. "Consumers don't want synthetic ingredients," says Pure Fun founder Luna Roth, whose candies include cotton candy and lollipops.

But not everyone is headed in that direction.

"We try to make them as healthy as possible," Mier says of his Capital Churros, adding that his products are trans-fat free. "But the churro is not something you are going to look for as a health food."


Sunday, March 11, 2007

Movie Snacks Causing Increased Cost in Health Care

Recently, movie theatre snacks suppliers have been urged to use products that are less damaging to ones health and limit the saturated and trans-fat present in oils used to cook the snacks. Although portion sizes are an issue, the current issue being addressed is the overall affect of the snacks on health. The main types of oil that can be used to cook popcorn are canola oil and coconut oil, which although it is high in saturated fat, contains no trans-fat and in the opinion of consumers, tastes better and thus increases the popcorn seller’s total sales, and subsequently their overall profit. In attempts to make butter-flavored toppings that contain less trans-fat, firms have found that they can create an unsaturated fat that is neither needed in the diet, nor beneficial to health. The possible affects of eating trans-fat is an increased risk of coronary heart disease.
Firms supplying another popular snack, nachos, have a different issue - the difficulty in creating a cheese sauce that contains a reduced amount of trans-fat. Their inability to create the reduced trans-fat cheese sauce is due to the need of oil to hold the cheese particles together. Firms will either have to continue the product as is, use real cheese, which will increase costs of storage and shipping as it needs to be refrigerated; or the firm can stop supplying the product. Firms could still make profits, even if their costs increased because of the use of cheese sauce that contains no trans-fat because according to last years costs in comparison to concession sales, $104.8 million and $696.7 million respectively, firms made astonishingly high profits, more than quadrupling their costs.
The movie theatre snack industry is a market failure because there are large spillover benefits towards firms (see figure 1), reflecting on their poor quality products that consumers are being overcharged for. This market failure results in the negative externality, a negative externality that results in costs on a third party other than the buyer and the firm, of increased costs in healthcare due to the large amount of risk of coronary heart disease in consumers purchasing the goods high in trans-fat and thus resulting in an increased demand for healthcare (see in figure 2). The cost of health care rises because of the increased demand for the good; this represents the productive inefficiency, the healthcare firms’ inability to supply enough healthcare to satisfy demand (figure 2), resulting from the market failure of theatre snacks. As seen in figure 1, the social cost exceeds the private cost of theatre snacks; therefore the optimum quantity is far smaller than the quantity at market equilibrium. The optimal price for theatre snacks is greater than equilibrium because the lower the consumption of theatre snacks, the lower the risk of coronary heart disease and thus lower costs of healthcare due to lower demand of healthcare (figure 3).
In order to remove the negative externality of an increased cost in healthcare, firms have to internalize their externalities; which essentially means that instead of society paying the costs of increased healthcare, the firms takes all the cost upon itself. Firms seek to maximize profit, and therefore will not willingly change their quantity of theater snacks produced to the optimum level unless they are forced to. In order to influence the firms to begin producing at optimum quantity, their incentives must be altered, most easily by placing laws on the amount of trans-fat they can produce. This then forces firms to come up with ways to limit the amount of trans-fat in there products. Another solution is to simply place a tax on trans-fats that equals the cost that has been externalized. The government can then subsidize healthcare firms to prevent productive inefficiency. These two solutions can be seen in figure 4.
Overall, this market failure must be dealt with in order to remove costs from consumers of healthcare; as healthcare can be considered necessity, it is vital that consumers have access to healthcare at affordable healthcare, therefore the government should take measures to internalize the firms costs as soon as possible to decrease peoples consumption of trans-fats and sat-fats as soon as possible.

Figure 1

Figure 2

Figure 3

Figure 4

Thursday, March 08, 2007

Labor to raise water prices

Water, an increasingly more scarce resource in Australia, has been placed under government control in order to conserve as much as possible. The government has limited hours in which consumers can use water for activities that are non-essential, such as washing cars or watering the garden. In addition to this control, governments have now begun to place higher prices on water to reflect its scarcity and thus forcing farmers to allocate water to higher efficiency crops as apposed to lower efficiency crops.
Farmers in Australia will now have to charge higher prices for their goods because the decrease in water is now being viewed as an externality and farmers have to pay for it by producing only high efficiency crops or paying higher prices for the creating this externality. This negative externality has been created by an overallocation of resources and in order to address this problem, the government is attempting to reduce this overallocation. Farmers are likely to make less profit, particularly if their prices become higher in comparison to imported goods. Farmers supply curve will shift outward to the social optimum and removing the social cost of using water as seen in the diagram below.
Although food prices may increase due to the increased price and limitation of the crop farmers can grow, this change is longer overdue, and will correct the problem efficiently. This resolve is more in favor of society because water is preserved, and farmers, overall make a loss or significantly decreased profits because of the increased cost of factors of production of their goods and the limitation of what goods they can actually produce.