Category: Economics

I Thought Europe Was Already a Museum ;)

“In that scenario Europe survives as an Asian and American theme park, with the manual labor done by Muslims. The French and German lifestyle will continue, but with smaller numbers and as a kind of museum piece.” – Tyler Cowen

The rallying cry for change:

Europe is too rich, too lazy and lacks a dream, a focus. And I am not quite sure if Europe values its liberties and its civilisation enough to fight for it, now that it is being challenged. Europe needs a wake up call. – Marcel Bullinga

Back over at Marginal Revolution:

“…when I think carefully about what delights me [about Europe] I find that it is less anything developed since World War II and more the remnants of the Europe that existed before the First World War.” – Andrew Smith

Later:

“A report by Eurochambers, the Brussels-based business lobby, published on Monday (5 March) argues that the US reached the current EU rate of GDP per capita in 1985 and its levels in employment and research investment almost 30 years ago.” – Lucia Kubosova, EU Observer

“If all of Europe looked like its postwar construction, Americans would be less likely to admire European policies and political institutions.” – Tyler Cowen

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Categorized as Economics

Real Wages Up, Not Down – Economists Fight

A biased New York Times article on wages being down gets a fisking:

“What keeps my wages high (and yours) is our alternatives…What sets workers wages are the wages of those alternatives…Workers are better educated than ever. That is why I believe that compensation, properly measured, is higher than it was five or ten or twenty or thirty years ago.” – Russel Roberts

Thanks to Tyler @ Marginal Revolution for the pointer.

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Categorized as Economics

Real Estate Agents and Dodo Birds

Steven and Stephen, the dynamic duo behind Freaknomics have a bit on Real Estate Agents being added to the Endangered Species list in the New York Times.

Nothing new to anyone with a little understanding of the real estate market and how the internet has dissolved both travel agents and stock brokers. The more conversations I have about the real estate industry, the more I see how ripe for change it is. Nice to see the issue in the NYT.

Let’s say it takes 5 years of owning a home to make it worth the closing costs. Now, let’s say the home sales slow just a tad. Just enough to push out the timeframe to 7 years. As the NYT article reminds us, 7 years ago stock brokers and travel agents had yet to be replaced by online tools.

Now just might be the last opportunity to sell or buy a home with an agent.

Is Closed a Cultural Benefit?

This weekend, I caught up with a college friend in central Wisconsin. Starbucks recently opened their first storefront in Wausau. Given Starbucks’ consistency and my lack of knowledge of other options, I suggested we meet there.

“How about something local, like Jeannie’s Cafe?”, Tom asked.

I’m always up for tasting the local flavor and we planned to meet there.

Neither of us were aware that Jeanie’s, like the majority of downtown Wausau, is closed on Sundays. This reminded me of my time in Germany. There the shops were also closed on Sundays. While I agree, closing at 6pm during the week, noon on Saturday, and all day Sunday, keeps a designated time for personal and preferably family-focused activities, it only works best when everyone plays along. And when the economy isn’t based on retail sales. Conversely, not playing along hurts everyone and can make actually getting things done a modern day, dual-income family a really hassle.

In Wausau, the ice cream shop, chocolate shop, gelato shop, and the downtown enclosed mall were all open – with a couple of patrons in each. With a handful of shops open and the majority closed, I imagine the traffic for the open shops is dramatically lower than what they see on Saturday. The open shops don’t get walk-in traffic from non-open shops.

In the end, Tom and I drove across town to Starbucks, it was packed.

To me, this felt like small-town American example of the EU’s economic issues.

“Because of” Not “With” in Traditional Media Also?

Last night, I was chatting with a copywriter about some story ideas. She mentioned how tough it is to get a story in free ad-subsidized weekly newspapers. Even when you get the by-line, the monetary compensation isn’t all that. Over in the music industry, Steve Albini reminds us how record companies put artists in the hole while Thomas Hauser tears apart the “standard” book contract.

Makes me wonder if Doc Searls’ statement about money and weblogs is true for traditional media also:

“I believe it’s far more important (and interesting) to make money because of our blogs, rather than with them.”

For example, musicians don’t make money with a record, they make money on ticket sales and merchandise (because of a record).

If there’s only two nickels to be made, directly, whether self-publishing (weblogs) or via a publishing company (newspaper, recording, book) and all the money is in the “because of”. It seems to me the quest is finding the shortest way to “because of”.

The Economics of Podcasting

First off, this post defines podcasting is an effective way to deliver highly niche audio to a very enthusiastic audience (the World English Bible translated into Klingon or Tips for Triathletes in the Southwestern US for example).

Secondly, the numbers used here are rough and make for easy math.

Let’s say you’re making one show a week for a year. Here’s a quick pass at some costs:

Monthly Server & Bandwidth costs ($40 * 12 months): $480
Production and editing effort per show ($200 * 52 shows): $10,400
Equipment Costs (mics, software, etc): $500

  • Beer, coffee, and other production/editing necessities per show ($20 * 52 shows): $1,040
  • Monthly Server & Bandwidth costs ($150 * 12 months): $1,800
  • Equipment Costs -mics, software, etc ($500 amoritized over 5 years): $100

Let’s say we’d like to gross $40,000 for the year (a fair amount for doing only one show a week).

Adding all this up puts your annual costs at $42,940.

For the sake of easy math, let’s say you have 1,000 listeners – the circulation of a small town Nebraskan newspaper like the Bayard Transcript. Frankly, the worldwide audience for a Klingon version of the Bible is probably a thousand.

Dividing the annual cost ($42,940) by the number of listeners (1,000) and the number of shows (52) makes the cost per listener: $0.8258

That’s less than a $1 per show per listener (iTunes – 99 cents, WalMart – 88 cents, coincidence?). One Dollar. $4 a month. $42.94 a year. Kris over at the Croncast settled on nearly the same numbers.

With numbers as small as these, I don’t see advertisers beating down the doors of podcasters. In the broadcast world, millions of dollars are sunk into spectrum, hardware, and talent. This gives advertisers the upper hand.

Early on, Heineken realized it was easier to start their own podcast than enter into an advertising agreement with the Rock ‘n Roll Geek Show. I agree. The economics of podcasting make it far more attractive to start your own thing than shoehorn in an awkward ad subsidized model.

If we go back to the original podcasting is best with niche audio assumption, there’s a point where the “ad message” is as valuable to the listener as the “show message”. One degreee further and the podcast is produced by the “advertiser” as part of their marketing campaign.

That’s far more interesting.

If your favorite podcaster has a tip jar (Croncast, IT Conversations, Evil Genius Chronicles) I encourage you to give them a dollar for every show you’ve enjoyed.

Micropayment pioneer Scott McCloud digs into this same issue in his I Can’t Stop Thinking comic.

Auto Insurance Companies Gamble Double or Nothing

This morning, NPR reported on a study finding auto insurance rates in No-Fault states 20% higher and rising more quickly than in “Fault” states.

In a No-Fault state, each driver’s insurance pays for their claim. Elsewhere the accident-causing driver’s insurance pays for both claim.

This means insurance companies prefer the double-or-nothing gamble over having to always pay something. Rather than having an incentive to make the roads safer as a whole (No-Fault), insurance companies are betting their customers to never be at fault. The end result – a greater chance the most dangerous drivers have no insurance (no one will carry them or they can’t afford it) and a lower chance your rates will go up. Seems to me, this keeps accident rates steady.

Gas Prices are like Bad Haircuts

Overheard at the Dunn Bros in downtown St. Paul:

“It’s like gambling, losing all that money at the gas pumps these days.”

Complaining about gas prices is like complaining about a bad haircut. Each of us has the power to change the impact it has on us. In the case of cars; drive less, use public transit, bike, buy a car that gets better than a mile per gallon, or just stop whining.

Similarly, it should be illegal to complain about traffic and gas prices. They’re directly correlated.

To finish the metaphor, in the case of bad haircuts; get it re-cut by the same stylist, get a wig, re-cut it yourself, get a new stylist, let it grow out.