Price of gas and Dr. Dow perform perfect 10 Swan Dives...

...and now we know, price of gas is more a function of demand then it is of disparity.  Demand takes a dive as so do the prices.  I made a bet with a financial advisor less then a year ago that the price-per-Barrel would surely drop below $100 before the end of my life.  He was convinced that cheep gas was a thing of the past.  

Can someone please explain the implications of this recent fall in gas prices?!  but no one will...

The relevant question to ask, from a humble analytical perspective, is: what is the level of urgency we face?  It seems that gasoline is rather elastic.  What does this mean?

It's like Halloween

how's about some scare tactics with your bailout?

http://news.yahoo.com/s/ap/20081203/ap_on_bi_ge/meltdown_autos

This article is such a load of phony science I needed to go to thesaurus.reherence.com to capture the perfect word for this. Plunder just doesn't have the emphasis it used to have.

This is pure claptrap!

the "visable" hand of government subsidies.

My mom (and yea most of my posts are in responce to family members... seems like they are the only ones challenging me now a days) was most concerned with how we could get out of this bail-out crisis in the most humane way.

I responded with this letter...

oh... here I go...

Frankly. I think it's humane to let them die. But you already know that about me. People forget the secondary unseen effects. Milton Friedman called them the smoke stack on every regulation spreading a ring on effects from every policy. Bastiat rants about them as "the seen" and "the unseen" Anything that changes the natural course of human behavior (a policy) can never be alone in its effects after all if you stop someone or something from happening in it's course then it does something else and that makes something else in everyone/thing they encounter... the economy is fluid, nothing is isolated. The primary influence of anything is never alone. In fact if I were to define economics, and the system of, I would say that it is entirely a system of reactions and the study of how people/organizations react. The important lessons, similar to contemporary studies in physics, are that nothing can be distilled to a single source or a single cause or a single reason or a single result and value is never a zero sum game. Anything that would work to negate the previous sentence should be considered a gross underestimate of the world's complexity.

What about the people who won't get a chance in the economy because the fat American car companies won't move over? I'm sorry, bad decisions mean bad outcomes. This should never change except maybe for my own baby. One of my favorite analogies is that of an economist I recently heard speak. He said, we don't have ice delivered to our door do we? That industry failed and there was no question of bailing out all the people who knew no other in their life but to deliver ice to ones doorstep. Now we have refrigerators and the world is better because of it. If we bailed out the ice deliverer where would we be now? Maybe if it's your grandpa it's a different story, or maybe if it's the last endangered species, but if it's a company we can very rationally show consistently that there will be significantly more cost to society when old industries are saved by the "visible" hand of government subsidies. Do you seriously want to send a message to the American auto industry worker that it is ok to go on working in the auto industry? No. Dude. That industry is past its prime. I don't care if you don't want to, it's time to adapt. Would you please go get a job with that other company that really wants to make us a refrigerator right now?

Unions in the auto industry.

sent my little bro this article... http://online.wsj.com/article/SB122809320261867867.html

and he responded by asking me what I thought about Unions.

I wrote him back this novel...

In short you’re right, there was a bigger evil at hand before they came about but Unions aren't a perfect solution. Fact they carry some implications that can be quite scary. So again in short they had a very important use but I think they have no place in today’s economy where media provides buyers with very fast information. Information that hurts companies when they treat their employees bad. If I'm a crappy company and I screw my employees people stop buying, I get hurt, and if I don't change my ways I go out of business. Furthermore in the time period when unions came about people did not have much freedom to move around if they did not like the job (horizontally or vertically). They were forced to deal with what they had. Consequentially it the dilemma began to arise in much the same way as democracy started to form in countries that had monarchies. (If you like this idea check out "Ronald Coase" theory of the firm, this was a question that stumped economists for a long time, essentially firms are islands of totalitarianism within a free society, why does this exist if freedom is better than totalitarianism? Coase has a pretty good explanation) Anyway workers rose up and demanded rights (democracy within a company) and the business leaders gave them a seat at the table. Now this sounds great, and it did work in the short run, the workers went back to work and the companies carried on producing profit.

Over time though a problem arises, and for this I'll use the case of the auto industry. The union, with its seat at the decision making table, has alternative incentives then the other people at the business leaders at the table. The business leaders want to create profit, while the union wants benefits for its employees. On a marginal decision making basis this creates situations where compromises are reached and unions can leverage their power as a cohesive whole over the influence of the business owner him/herself. Ultimately forcing the business into inefficient contracts that it would not normally opt into. For example, retirement benefits for all line employees. High wages for line employees. medical for factory worker. Again this sounds good, but the cost is that the money going toward employee benefits is not going into developing a better product. The problem ultimately turns into a disease where the company is locked into contracts it can't keep with its employees and at the same time its product cannot compete with other companies that did not make those decisions for its employees. Again in short the unions forced the company to give the employees more then the company could sustain. In the long run the employees ate their cake before they were supposed to get it and there's no more cake now. I say "supposed" here because I assume that in a free market economy a company makes decisions to stay alive. Therefore allocating resources in such a way where employees voluntarily opt into a job (the alternative being slavery) and people voluntarily opt into buying your product. The numbers come in and you should also make a profit. Most good companies reinvest profit. You pay what people are worth and you put the rest back into staying on top.

The people I work with have a philosophy to capture this. They pay me for the value I create. That is the difference between efficient and effective. I can take a shit very well and efficiently but that action has very little effectiveness to them. The business of business is business. Look at Honda. No unions. And as the article said they can produce a better product for less and right now they are opening new plants hiring more people. I don't disagree with democracy. But I would be skeptical to place it in a firm. I mean it probably wouldn't be effective for dad, every time he makes any business decision to have his workers vote on it. He would be out of business in a second. (No race reference, just practical there's no time to round the troops and decide) here at the office when we have a project we delegate tasks in the group. One person is the leader and we are accountable to that person. The other does the data, the other the research, and the other gives the presentation. We found that if everyone tries to be the leader we're up shit creek it a butt load of egos. By giving that up we make a better product.

Again I agree Unions have a purpose. I would question what the purpose of a union is today. And I don't have a clear answer for that.

I do know that unions can push around elections too. I don't really like this idea. Politicians should focus on the topics that they determine help the most citizens possible. Not the topics that help a specific company or a specific group of people over another. That’s unfair. Special interest groups are sketchy business in Washington. I don't like it one bit. Be it a union or an oil company. The business of politicians is everybody equally, not one group over another.

To touch on one last thing. Unions aren't my forte. If you can dig something up to counter what I laid down. Let me know. I'm not completely convinced about anything on this subject. This above is what I could piece together based on the news and theory I read. Not on theory regarding the specific issue. As I said before. I think you and I are very academically alike. We reason before we feel. a lot of people are the other way around.

Peace dude,

Lincoln McLain

And I totally forgot to even mention one of the most basic arguments. It’s hard to hire and fire based on skill. People get locked in to jobs and performance stagnates.