RefBan

Referral Banners

Yashi

Saturday, July 30, 2011

BookDaily Update

 
BookDaily
BookDaily.com My Sample Shelf
(0) Books remaining on Shelf
BookDaily Update
Sunday July 31, 2011

Mermaid: A Twist on the Classic Tale

By Carolyn Turgeon
ISBN: 9780307589972
 

The Princess

It was a gloomy, overcast day, like all days were, when the princess first saw them. The two of them, who would change her life. There was nothing to herald their appearance, no collection of birds or arrangement of tea leaves to mark their arrival. If anything, the convent was more quiet than usual. The nuns had just finished the midmorning service and scattered to their cells for private prayer. The abbess was shut in her chamber.

Only the princess was out in the garden, wandering along the stone wall that overlooked the sea. Here, near the old well, the wall dipped down to her knees, and an ancient gate led to a stairway that curved to the rocky ...

Read more
 
 

AnaLogon Book

By Jorita Lockwood
ISBN: 9781419678127
 
A valuable tool that allows internet users to manage logons and passwords in an organized way! Alphabetically sequenced. AnaLogon Book TM Website Name______________________________________ Logon_____________________________________________ Password Hint_____________________________________
Read more
 
 
 
 
BookDaily Top Five
  1. A Dance with Dragons: A Song of Ice and Fire: Book Five
  2. Heaven is for Real: A Little Boy's Astounding Story of ...
  3. In the Garden of Beasts: Love, Terror, and an American ...
  4. The Girl Who Kicked the Hornet's Nest
  5. Incognito: The Secret Lives of the Brain
 
Browse by Category
Fiction
Romance
Mystery & Detective
Westerns
Sci-fi/ Fantasy
Thrillers
Political
Religion
Classics
Historical
Action & Adventure
Humorous
Children
Non-Fiction
Biography
Travel
Religion
Political
History
Social Issues
Business
Arts
Science
True Crime
Sports
Poetry
 

Manage Your Subscriptions

You are currently subscribed as dwyld.kwu.careers@blogger.com.
To unsubscribe from this newsletter, please notify us here.

BookDaily, ArcaMax Publishing, Inc., 729 Thimble Shoals Blvd., Suite 1-B, Newport News, VA 23606 | FAX (757) 596-9731
Copyright © 2010 ArcaMax Publishing, Inc. All Rights Reserved.

Contact Us | FAQ/Help | Privacy Notice

 
 

Today's Business & Economics Chapter

 
BookDaily
BookDaily.com My Sample Shelf
(0) Books remaining on Shelf
Business & Investing
Sunday July 31, 2011
The Undercover Economist
by Tim Harford
 

Who Pays for Your Coffee?

The long commute on public transportation is a commonplace experience of life in major cities around the world, whether you live in New York, Tokyo, Antwerp, or Prague. Commuting dispiritingly combines the universal and the particular. The particular, because each commuter is a rat in his own unique maze: timing the run from the shower to the station turnstiles; learning the timetables and the correct end of the platform to speed up the transfer between different trains; trading off the disadvantages of standing room only on the first train home against a seat on the last one. Yet commutes also produce common patterns—bottlenecks and rush hours—that are exploited by entrepreneurs the world over. My commute in Washington, D.C., is not the same as yours in London, New York, or Hong Kong, but it will look surprisingly familiar.

Farragut West is the Metro station ideally positioned to serve the World Bank, International Monetary Fund, and even the White House. Every morning, sleep-deprived, irritable travelers surface from Farragut West into the International Square plaza, and they are not easily turned aside from their paths. They want to get out of the noise and bustle, around the shuffling tourists, and to their desks just slightly before their bosses. They do not welcome detours. But there is a place of peace and bounty that can tempt them to tarry for a couple of minutes. In this oasis, rare delights are served with smiles by attractive and exotic men and women—today, a charming barista whose name badge reads “Maria.” I am thinking, of course, of Starbucks. The café is placed, inescapably, at the exit to International Square. This is no quirk of Farragut West: the first storefront you will pass on your way out of the nearby Farragut North Metro is—another Starbucks. You find such conveniently located coffee shops all over the planet and catering to the same desperate commuters. The coffee shop within ten yards of the exit from Washington’s Dupont Circle Metro station is called Cosi. New York’s Penn Station boasts Seattle Coffee Roasters just by the exit to Eighth Avenue. Commuters through Shinjuku Station, Tokyo, can enjoy a Starbucks without leaving the station concourse. In London’s Waterloo station, it is the AMT kiosk that guards the exit onto the south bank of the Thames.

At $2.55 a tall cappuccino from Starbucks is hardly cheap. But of course, I can afford it. Like many of the people stopping at that café, I earn the price of that coffee every few minutes. None of us care to waste our time trying to save a few pennies by searching out a cheaper coffee at 8:30 in the morning. There is a huge demand for the most convenient coffee possible—in Waterloo Station, for example, seventy-four million people pass through each year. That makes the location of the coffee bar crucial.

The position of the Starbucks café at Farragut West is advantageous, not just because it’s located on an efficient route from the platforms to the station exit, but because there are no other coffee bars on that route. It’s hardly a surprise that they do a roaring trade.

If you buy as much coffee as I do you may have come to the conclusion that somebody is getting filthy rich out of all this. If the occasional gripes in the newspapers are correct, the coffee in that cappuccino costs pennies. Of course, the newspapers don’t tell us the whole story: there’s milk, electricity, cost of the paper cups—and the cost of paying Maria to smile at grouchy customers all day long. But after you add all that up you still get something a lot less than the price of a cup of coffee. According to economics professor Brian McManus, markups on coffee are around 150 percent—it costs forty cents to make a one-dollar cup of drip coffee and costs less than a dollar for a small latte, which sells for $2.55. So somebody is making a lot of money. Who?

You might think that the obvious candidate is Howard Schultz, the owner of Starbucks. But the answer isn’t as simple as that. The main reason that Starbucks can ask $2.55 for a cappuccino is that there isn’t a shop next door charging $2.00. So why is nobody next door undercutting Starbucks? Without wishing to dismiss the achievements of Mr. Schultz, cappuccinos are not in fact complicated products. There is no shortage of drinkable cappuccinos (sadly, there is no shortage of undrinkable cappuccinos either). It doesn’t take much to buy some coffee machines and a counter, build up a brand with a bit of adver- tising and some free samples, and hire decent staff. Even Maria is replaceable.

The truth is that Starbucks’ most significant advantage is its location on the desire line of thousands of commuters. There are a few sweet spots for coffee bars—by station exits or busy street corners. Starbucks and its rivals have snapped them up. If Starbucks really did have the hypnotic hold over its customers that critics complain about, it would hardly need to spend so much effort getting people to trip over its cafés. The nice margin that Starbucks makes on their cappuccinos is due neither to the quality of the coffee nor to the staff: it’s location, location, location.

But who controls the location? Look ahead to the negotiations for the new rental agreement. The landlord at International Square will not only be talking to Starbucks but to other chains like Cosi and Caribou Coffee, and D.C.’s local companies: Java House, Swing’s, Capitol Grounds, and Teaism. The landlord can sign an agreement with each one of them or can sign an exclusive agreement with only one. She’ll quickly find that nobody is very eager to pay much for a space next to ten other coffee bars, and so she will get the most advantage out of the exclusive agreement.

In trying to work out who is going to make all the money, simply remember that there are at least half a dozen competing companies on one side of the negotiating table and on the other side is a landlord who owns a single prime coffee-bar site. By playing them off against each other, the landlord should be able to dictate the terms and force one of them to pay rent, which consumes almost all their expected profits. The successful company will expect some profit but not much: if the rent looks low enough to leave a substantial profit, another coffee bar will be happy to pay a little extra for the site. There is an unlimited number of potential coffee bars and a limited number of attractive sites—and that means the landlords have the upper hand.

This is pure armchair reasoning. It’s reasonable to ask if all of this is actually true. After I explained to a long-suffering friend (over coffee) all of the principles involved, she asked me whether I could prove it. I admitted that it was just a theory—as Sherlock Holmes might say, a piece of “observation and deduction,” based on clues available to all of us. A couple of weeks later she sent me an article from the Financial Times, which relied on industry experts who had access to the accounts of coffee companies. The article began, “Few companies are making any money” and concluded that one of the main problems was “the high costs of running retail outlets in prime locations with significant passing trade.” Reading accounts is dull; economic detective work is the easy way to get to the same conclusion.

Strength from scarcity

Browsing through the old economics books on the shelf at home, I dug out the first analysis of twenty-first-century coffee bars. Published in 1817, it explains not just the modern coffee bar but much of the modern world itself. Its author, David Ricardo, had already made himself a multimillionaire (in today’s money) as a stockbroker, and was later to become a Member of Parliament. But Ricardo was also an enthusiastic economist, who longed to understand what had happened to Britain’s economy during the then-recent Napoleonic wars: the price of wheat had rocketed, and so had rents on agricultural land. Ricardo wanted to know why.

The easiest way to understand Ricardo’s analysis is to use one of his own examples. Imagine a wild frontier with few settlers but plenty of fertile meadow available for growing crops. One day an aspiring young farmer, Axel, walks into town and offers to pay rent for the right to grow crops on an acre of good meadow. Everyone agrees how much grain an acre of meadow will produce, but they cannot decide how much rent Axel should pay. Because there is no shortage of land lying fallow, competing landlords will not be able to charge a high rent . . . or any significant rent at all. Each landlord would rather collect a small rent than no rent at all, and so each will undercut his rivals until Axel is able to start farming for very little rent—just enough to compensate for the landlord’s trouble.

The first lesson here is that the person in possession of the desired resource—the landlord in this case—does not always have as much power as one would assume. And the story doesn’t specify whether Axel is very poor or has a roll of cash in the false heel of his walking boot, because it doesn’t make any difference to the rent. Bargaining strength comes through scarcity: settlers are scarce and meadows are not, so landlords have no bargaining power.

That means that if relative scarcity shifts from one person to another, bargaining shifts as well. If over the years many immigrants follow in Axel’s footsteps, the amount of spare meadowland will shrink until there is none left. As long as there is any, competition between landlords who have not attracted any tenants will keep rents very low. One day, however, an aspiring farmer will walk into town—let’s call him Bob—and will find that there is no spare fertile land. The alternative, farming on inferior but abundant scrubland, is not attractive. So Bob will offer to pay good money to any landlord who will evict Axel, or any of the other farmers currently farming virtually rent-free, and let him farm there instead. But just as Bob is willing to pay to rent meadowland rather than scrubland, all of the meadow farmers will also be willing to pay not to move. Everything has changed, and quickly: suddenly the landlords have acquired real bargaining power, because suddenly farmers are relatively common and meadows are relatively scarce.

That means the landowners will be able to raise their rents. By how much? It will have to be enough that farmers earn the same farming on meadows and paying rent, or farming on inferior scrubland rent free. If the difference in productiveness of the two types of land is five bushels of grain a year, then the rent will also be five bushels a year. If a landlord tries to charge more, his tenant will leave to farm scrubland. If the rent is any less, the scrub farmer would be willing to offer more.

It may seem odd that the rents changed so rapidly simply because one more man arrived to farm the area. This story doesn’t seem to explain how the world really works. But there is more truth to it than you might think, even if it is oversimplified. Of course, in the real world, there are other elements to consider: laws about evicting people, long-term contracts, and even cultural norms, such as the fact that kicking one person out and installing a new tenant the next day is just “not done.” In the real world there are more than two types of farmland, and Bob may have different options to being a farmer—he may be able to get a job as an accountant or driving a cab. All these facts complicate what happens in reality; they slow down the shift in bargaining power, alter the absolute numbers involved, and put a brake on sudden movements in rents.

Yet the complications of everyday life often hide the larger trends behind the scenes, as scarcity power shifts from one group to another. The economist’s job is to shine a spotlight on the underlying process. We should not be surprised if, suddenly, the land market shifts against farmers; or if house prices go up dramatically; or if the world is covered by coffee bars over a period of just a few months. The simplicity of the story emphasizes one part of the underlying reality—but the emphasis is helpful in revealing something important. Sometimes relative scarcity and bargaining strength really do change quickly, and with profound effects on people’s lives. We often complain about symptoms—the high cost of buying a cup of coffee, or even a house. The symptoms cannot be treated successfully without understanding the patterns of scarcity which underlie them.

“Marginal” land is of central importance

The shifts in bargaining power don’t have to stop there. While the farming story can be elaborated indefinitely, the basic principles remain the same. For example, if new farmers keep arriving, they will eventually cultivate not only the meadowland but also all of the scrubland. When a new settler, Cornelius, walks into town, the only land available will be the grassland, which is even less productive than scrubland. We can expect the same dance of negotiations: Cornelius will offer money to landlords to try to get onto scrubland, rents will quickly rise on scrubland, and the differential between scrubland and meadow will have to stay the same (or farmers would want to move), so the rent will rise on meadow too.

The rent on meadowland, therefore, will always be equal to the difference in grain yield between meadowland and whatever land is available rent-free to new farmers. Economists call this other land “marginal” land because it is at the margin between being cultivated and not being cultivated. (You will soon see that economists think about decisions at the margin quite a lot.) In the beginning, when meadowland was more plentiful than settlers, it was not only the best land, it was also the “marginal” land because new farmers could use it. Because the best land was the same as the marginal land, there was no rent, beyond the trivial sum needed to compensate the landlord for his trouble. Later, when there were so many farmers that there was no longer enough prime land to go around, scrubland became the marginal land, and rents on meadows rose to five bushels a year—the difference in productivity between the meadowland and the marginal land (in this case, the scrubland). When Cornelius arrived, the grassland became the marginal land, meadows became yet more attractive relative to the marginal land, and so the landlords were able to raise the rent on meadows again. It’s important to note here that there is no absolute value: everything is relative to that marginal land.

From meadows back to coffee kiosks

A nice story, but those of us who like Westerns may prefer the gritty cinematography of Unforgiven or the psychological isolation of High Noon. So, David Ricardo and I get no prizes for our screenwriting, but we might be excused, as long as our little fable actually tells us something useful about the modern world.

We can start with coffee kiosks. Why is coffee expensive in London, New York, Washington, or Tokyo? The commonsense view is that coffee is expensive because the coffee kiosks have to pay high rent. David Ricardo’s model can show us that this is the wrong way to think about the issue, because “high rent” is not an arbitrary fact of life. It has a cause.

Ricardo’s story illustrates that two things determine the rent on prime locations like meadowland: the difference in agricultural productivity between meadows and marginal land, and the importance of agricultural productivity itself. At a dollar a bushel, five bushels of grain is a five-dollar rent. At two hundred thousand dollars a bushel, five bushels of grain is a million-dollar rent. Meadows command high dollar rents only if the grain they help produce is also valuable.

Now apply Ricardo’s theory to coffee bars. Just as meadowland will command high rents if the grain they produce is valuable, prime coffee-bar locations will command high rents only if customers will pay high prices for coffee. Rush-hour customers are so desperate for caffeine and in such a hurry that they are practically price-blind. The willingness to pay top dollar for convenient coffee sets the high rent, and not the other way around.

Spaces suitable for coffee kiosks are like meadows—they are the best quality property for the purpose, and they fill up quickly. The ground-floor corner units of Manhattan’s Midtown are the preserve of Starbucks, Cosi, and their competitors. Near Washington, D.C.’s Dupont Circle, Cosi has the prime spot at the southern exit, and Starbucks has the northern one, not to mention staking out territory opposite the adjacent stations up and down the Metro line. In London, AMT has Waterloo, King’s Cross, Marylebone, and Charing Cross stations, and indeed every London station hosts one of the big-name coffee chains. These spots could be used to sell secondhand cars or Chinese food, but they never are. This isn’t because a train station is a bad place to sell a Chinese meal or a secondhand car, but because there is no shortage of other places with lower rents from which noodles or cars can be sold—customers are in less of a hurry, more willing to walk, or order a delivery. For coffee bars and similar establishments selling snacks or newspapers, cheaper rent is no compensation for the loss of a flood of price-blind customers.

Portable models

David Ricardo managed to write an analysis of cappuccino bars in train stations before either cappuccino bars or train stations existed. This is the kind of trick that makes people either hate or love economics. Those who hate it argue that if we want to understand how the modern coffee business works, we should not be reading an analysis of farming published in 1817.

But many of us love the fact that Ricardo was able, nearly two hundred years ago, to produce insights that illuminate our understand- ing today. It’s easy to see the difference between nineteenth-century farming and twenty-first-century frothing, but not so easy to see the similarity before it is pointed out to us. Economics is partly about modeling, about articulating basic principles and patterns that operate behind seemingly complex subjects like the rent on farms or coffee bars.

There are other models of the coffee business, useful for different things. A model of the design and architecture of coffee bars could be useful as a case study for interior designers. A physics model could outline the salient features of the machine that generates the ten atmospheres of pressure required to brew espresso; the same model might be useful for talking about suction pumps or the internal combustion engine. Today we have models of the ecological impacts of different disposal methods for coffee grounds. Each model is useful for different things, but a “model” that tried to describe the design, the engineering, the ecology, and the economics would be no simpler than reality itself and so would add nothing to our understanding.

Ricardo’s model is useful for discussing the relationship between scarcity and bargaining strength, which goes far beyond coffee or farming and ultimately explains much of the world around us. When economists see the world, they see hidden social patterns, patterns that become evident only when one focuses on the essential underlying processes. This focus leads critics to say that economics doesn’t consider the whole story, the whole “system.” How else, though, could a nineteenth-century analysis of farming proclaim the truth about twenty-first-century coffee bars, except through grossly failing to notice all kinds of important differences? The truth is that it’s simply not possible to understand anything complicated without focusing on certain elements to reduce that complexity. Economists have certain things they like to focus on, and scarcity is one of them. This focus means that we do not notice the mechanics of the espresso machine, nor the color schemes of the coffee bars, nor other interesting, important facts. But we gain from that focus, too, and one of the things we gain is an understanding of the “system”—the economic system, which is far more all-encompassing than many people realize.

A word of caution is appropriate, though. The simplifications of economic models have been known to lead economists astray. Ricardo himself was an early casualty. He tried to extend his brilliantly successful model of individual farmers and landlords to explain the division of income in the whole economy: how much went to workers, how much to landlords, and how much to capitalists. It didn’t quite work, because Ricardo treated the whole agricultural sector as if it were one vast farm with a single landlord. A unified agricultural sector had nothing to gain from improving the land’s productivity with roads or irrigation, because those improvements would also reduce the scarcity of good land. But an individual landlord in competition with the others would have plenty of incentive to make improvements. Tied up in the technical details, Ricardo failed to realize that thousands of landlords competing with each other would make different decisions than a single one.

So Ricardo’s model can’t explain everything. But we are about to discover that it goes farther than Ricardo himself could ever have imagined. It doesn’t just explain the principles behind coffee bars and farming. If applied correctly, it shows that environmental legislation can dramatically affect income distribution. It explains why some industries naturally have high profits, while in other industries high profits are a sure sign of collusion. It even manages to explain why educated people object to immigration by other educated people, while the working classes complain about immigration by other unskilled workers.

Different reasons for high rent

Do you care if you get ripped off?

I do. A lot of things in this life are expensive. Of course, sometimes that expense is a natural outcome of the power of scarcity. For instance, there are not many apartments overlooking Central Park in New York or Hyde Park in London. Because so many people want them, those apartments are expensive, and a lot of people end up being disappointed. There is nothing sinister about that. But it’s not nearly so obvious why popcorn is so expensive at the movies—there was no popcorn shortage last time I checked. So the first thing we might want to do is to distinguish between different reasons for things being expensive.

In Ricardo’s terms, we would like to know the different causes of high rents. Knowing this about meadows is only mildly interesting (unless you are a farmer) but takes on a sudden significance when applied to the question of why your apartment rent seems so extortionate, or whether banks are ripping us off. But we can start with meadows and apply what we learn more widely.

We know that rents on the best land are determined by the difference in fertility between the best land and the marginal land. So the obvious reason that rents might be high is that the best land produces very valuable crops relative to the marginal land. As mentioned a couple of pages ago, five bushels of grain is a five-dollar rent at a dollar a bushel, but at two hundred thousand dollars a bushel, five bushels of grain is a million-dollar rent. If grain is expensive, it’s only natural that the scarce meadows that produce it will also be expensive.

But there’s another way to drive rent on meadows up, and it is not nearly so natural. Let’s say landlords get together and manage to persuade the local sheriff that there should be what in England they call a “green belt,” a broad area of land around the city on which property development is very strongly discouraged by tough planning regulations. The landlords claim that it would be a shame to cover beautiful wild land with farms, and so farming on the land should be made illegal.

The landlords stand to benefit hugely from such a ban, because it would drive up the rents on all legal land. Remember that rents on meadowland are set by the difference between the productivity of meadowland and the productivity of the marginal land. Ban farming on that marginal land, and the rent on meadows will jump; where once the alternative to paying rent and farming on meadows was to farm on grassland rent-free, now there is no alternative. Farmers are much more eager to farm on meadows now that farming on the grassland is illegal, and the rent they’re willing to pay is much higher too.

So we’ve found two reasons why rents might be high. The first is that it’s worth paying a lot for good land, because the grain that good land produces is so valuable. The second is that it’s worth paying a lot for good land because the alternatives that should be available are not.

Those readers currently renting property in London may have furrowed brows at this point. London is surrounded by the original “Green Belt,” created in the 1930s. Is that why property in London is so expensive to rent or buy—not because it’s so much better than the alternative, but because the alternative has been made illegal?

It is a combination of both: it is certainly true that London is unique, and a better place to put plush apartments or office buildings than Siberia, Kansas City, or even Paris. Rents are high, in part, for that reason. But another reason why property in London is expensive is because of the Green Belt. One effect is to keep London from sprawling out across the surrounding region—which many people think is a good idea. The other effect is to transfer a massive amount of money from London tenants to London landlords: the Green Belt keeps rents and house prices in London much higher than they would be, in exactly the same way as a ban on grassland farming keeps rents on meadow and scrub much higher than they would otherwise be.

This is not an argument against the Green Belt. There are lots of benefits in having London’s population capped at around six million people, instead of sixteen million or twenty-six million. But it is important that when we are weighing the pros and cons of legislation like the Green Belt, we understand that its effects are more than simply to preserve the environment. Office rents in London’s West End are higher than in Manhattan or central Tokyo—in fact, the West End is the most expensive place in the world to rent an office, and it also holds the world record for the most expensive home, at £70m (about 130 million dollars). The Green Belt has made property in London scarce relative to the people who want to use it, and of course, strength comes from scarcity.

Now it’s time for your first economics test. Why would improvements in the quality and price of the commuter train services that bring people into New York’s Penn Station from the surrounding suburbs please anyone who rents a property in Manhattan? And why might New York landlords be less enthusiastic about such improvements?

The answer is that improved public transportation increases the alternatives to renting a place in the city. When a two-hour commute becomes a one-hour commute, and people are able to get a seat on the train instead of standing, some decide they’d rather save money and move out of Manhattan. Vacant apartments then appear on the market. Scarcity lessens, and rents fall. Improving commuter services wouldn’t just affect commuters; it would affect everyone involved in New York’s property market.

Are we being ripped off?

One of the problems with being an undercover economist is that you start to see “green belts” of one kind or another all over the place. How can we tell the difference between things that are expensive because they are naturally scarce, and things that are expensive because of artificial means—legislation, regulation, or foul play?

Ricardo’s model can help here, too. We need to appreciate a hidden parallel between natural resources, like fields or busy locations, and companies. Fields are ways of turning stuff into different stuff: manure and seed into grain. Companies are the same. A car manufacturer turns steel, electricity, and other ingredients into cars. A gas station turns pumps, big tanks of fuel, and land into gasoline in your tank. A bank turns computers, advanced accounting systems, and cash into banking services. Without perpetrating too much intellectual violence, we can replace “rent” with “profit” throughout Ricardo’s model. Rent is the return landlords receive from their property; profit is the return company owners earn from their property.

Let’s use banking as an example. Imagine that one bank is very good at producing banking services—it has a fantastic corporate culture, strong brand, and has developed the best specialized banking software. Good people work there and other good people join just to learn from them. All this adds up to what economist John Kay (who explicitly invokes Ricardo’s model) calls a “sustainable competitive advantage,” meaning the sort of edge over the competition that will produce profits year in and year out.

Let’s call this uberbank Axel Banking Corporation. A second bank, Bob’s Credit and Debt, is not quite so competent: the brand is less trusted, the corporate culture is so-so. It’s not bad, but it’s not great either. A third bank, Cornelius’s Deposit Enterprises, is extremely inefficient: it has a terrible reputation, the tellers are rude to the customers, and control of expenses is nonexistent. Cornelius’s bank is less efficient than Bob’s outfit and grossly incompetent compared with Axel’s Banking Corporation. All this should remind us of the three types of land: meadowland, which is very efficient at producing grain; scrub, which is less efficient; and grassland, which is even less efficient.

Axel’s bank, Bob’s bank, and Cornelius’s bank compete to sell banking services by persuading people to open accounts or take out loans. But Axel’s bank is so effective that it can either produce banking services more cheaply or produce better quality services for the same cost. At the end of each year, Axel’s bank will earn large profits, and Bob’s bank, which serves its customers with less ease, will make something rather more modest, and Cornelius’s bank will just break even. If the banking market was tougher, Cornelius’s bank would go out of business. If the banking market started to get more attractive, Cornelius’s bank would start to make a profit, and a new bank, even less efficient than Cornelius’s, would enter the business. The new bank would be the marginal bank, just breaking even.

Without repeating every step of the analysis, we can remind ourselves that the rent on meadowland was set by comparison with the productivity of meadows to that of the marginal grassland. In the same way, Axel’s profits are set in comparison with Cornelius’s bank, the marginal bank, which we know should expect to make little or no profits: company profits, like rents, are determined by the alternatives. A company with stiff competition will be less profitable than a company with incompetent rivals.

You are probably thinking of a flaw in the analogy: the acreage of meadows is fixed, but companies can grow. But that’s only partly true; companies cannot grow overnight without diluting their reputation and the other capabilities that made them successful. On the other hand, while acreage cannot change, the distinctions between different types of land will shift over time as irrigation, pest control, or fertilizer technology develops. Ricardo’s model, which ignores these changes over time, will explain trends in agricultural prices over decades but not over centuries, while it will explain corporate profitability over years, but not decades. As with many economic models, the analysis will work well for a certain time scale—in this case, the short and medium term. For other time scales, different models are needed.

(Continues...)

 
 
 
 
 
BookDaily Top Five
  1. A Dance with Dragons: A Song of Ice and Fire: Book Five
  2. Heaven is for Real: A Little Boy's Astounding Story of ...
  3. In the Garden of Beasts: Love, Terror, and an American ...
  4. Incognito: The Secret Lives of the Brain
  5. The Girl Who Kicked the Hornet's Nest
 
 
Business & Investing Top Five
  1. Reckless Endangerment: How Outsized Ambition, Greed, and ...
  2. The 7 Habits of Highly Effective People
  3. The Intelligent Investor: The Definitive Book on Value ...
  4. The Social Animal: The Hidden Sources of Love, Character,...
  5. The Total Money Makeover: A Proven Plan for Financial ...
 

Manage Your Subscriptions

You are currently subscribed as dwyld.kwu.careers@blogger.com.
To unsubscribe from this newsletter, please notify us here.

BookDaily, ArcaMax Publishing, Inc., 729 Thimble Shoals Blvd., Suite 1-B, Newport News, VA 23606 | FAX (757) 596-9731
Copyright © 2010 ArcaMax Publishing, Inc. All Rights Reserved.

Contact Us | FAQ/Help | Privacy Notice

 
 

Nifty trading tip for tommorow ,01-08-2011

Trade to profit India is the leading name in the field of Indian stock market advisory services,It is one of the best companies ,which has a proven back track. 
Best part of our services are intraday packages in almost all the trading instruments. 
Our best intraday calls are filling pockets of our clients almost daily with big and consistant returns.It doesnt matter whether markets are bullish or bearish,we just sail in the direction of the blowing wind and fetch the best ouit of it.


If you are willing to get daily good returns from Indian stock markets than just try our services once and i am assured that you will forge3t the rest for ever. 
just visit : http://www.tradetoprofit.in 
or call +91-9990323428,9910664620 and our experts will guide you to choose the best services for you so as to make the maximum profit from your investments 
have a happy trading..........

Intelligent Decisions Among Others to Sponsor AFCEA Scholarships for U.S. Military

Intelligent Decisions Among Others to Sponsor AFCEA Scholarships for U.S. Military

Link to ExecutiveBiz

Intelligent Decisions Among Others to Sponsor AFCEA Scholarships for U.S. Military

Posted: 29 Jul 2011 01:06 PM PDT

Intelligent Decisions will serve as one of the key sponsors supporting the "2011 Armed Forces Communications and Electronics Association Pelican Chapter's Scholarship Tournament." The tournament, taking place in Tampa, Fla., raises funds for multiple scholarship recipients studying science field technology. "Intelligent Decisions is honored to sponsor the AFCEA Pelican Chapter's Golf Tournament, which supports the [...]

Molotov Cocktails at The Whiskey Bar

D.R. U.S. versionThe Daily Reckoning U.S. Edition Home . Archives . Unsubscribe
More Sense In One Issue Than A Month of CNBC
The Daily Reckoning | Saturday, July 30, 2011

-------------------------------------------------------

  • Advocating the active default on the US debt,
  • Cholesterol-eating nano-bots of the future,
  • Plus, all the rest of this week's reckonings, and your ringside ticket to this year's Whiskey Bar rough and tumble debate...
-------------------------------------------------------

Will This Secret "SAUDI TIMEBOMB" Shoot Oil to $300?

Get ready for the shocking Saudi event that could permanently explode gas and oil prices...starting as early as the end of this year!

If you think we're done with soaring gas prices, hear this warning:

Before the end of this year, a surprise Saudi event could explode the price of gas and oil. Click here to find out more.

Dots
Wrapping Up Another Brilliant Symposium
Joel Bowman
Joel Bowman
On the way to the U.K., checking in...

We're off to rainy Ol' Blighty this weekend, Fellow Reckoner, after a fantastic week here at the Agora Financial Investment Symposium in sunny Vancouver.

If you've been reading Jim Amrhein's daily dispatches, you'll know this year's conference, entitled Fight of Flight: Your Capital at Risk, was a big one. We heard from dozens of world-class speakers, all reckoning on one of the most important questions of our time. Doug Casey, Bill Bonner, Addison Wiggin and a ton of other luminaries gave us there various insights on everything from gold investing, entrepreneurial risk, opportunities in frontier markets and plenty more.

As always, one of the highlights of this year's event was the Whiskey Bar. Basically, we rally a panel of our most controversial speakers, give a few whiskeys and let them loose in an intellectual free-for-all. Jim wrote up some great boots-on-ground notes from his place, ringside. We've decided, in the interest of keeping it a bit lighter in the weekend edition, to make this piece our feature column. Please enjoy...

[P.S. Of course, if you want to hear the entire conference on CD or MP3, you can do so by placing your order here. The discounted rate expires on Tuesday (NOT Monday, as we mistakenly wrote yesterday.) Still, that doesn't give you a lot of time. Get your CD or MP3 set here and bring this year's conference, our biggest and best yet, home with you.]

Dots
The Daily Reckoning Presents
Molotov Cocktails at The Whiskey Bar
Guest Editor
Jim Amrhein
"Your life sucks!" Mauldin yelled...

That's a context-free highlight (one of the tamer ones) from the unhinged free-for-all event we've all come to know as the Whiskey Bar, which went down last night at the Fairmont's British Columbia Ballroom.

For 2011, this rogues gallery consisted of Agora Financial talents Chris Mayer, Byron King, and Patrick Cox and Eric Fry (as MC), Whiskey & Gunpowder's Gary Gibson, plus invited Symposium speakers John Mauldin, Barry Ritholtz – and the inimitable Whiskey Bar staple, Doug Casey.

As one of the charter Editors of W&G, this event holds special meaning for me – since I had the good fortune of sharing the stage with some of these same characters in 2007 and 2008.

And it's true, I found myself practically jumping out of my seat to interject at various points. I was dying to give Mr. Mauldin in particular both barrels about one thing he said. Who cares if he's rich, brilliant, and writes for the New York Times – I still think he's dead wrong about oil...

But I'm here to observe and report, not participate. Besides, Eric took care of it for me, though in a slightly less kinetic way than I would have.

What can I say? He has a rapier wit – mine's a Louisville Slugger.

It happened around 16 minutes into the event – which had warmed up with a lot of laughs as MC Fry asked everyone to share their favorite movie, philosopher, and cocktail (Byron took the laugh prize, with Patton, Patton, and Molotov)...

But then it got down to the nitty-gritty of issues and investment plays for the future. Mauldin was almost three minutes (I timed it) into a rambling monologue about the pace of technological change in the world, when he tossed in this grenade:

"Who cares about peak oil? We won't be using the stuff. The world is going to change so much faster than you can possibly..."

That's when Fry – in a priceless piece of comic timing – deftly interjected: "Byron, how are those next-generation solar Boeing planes coming along?"

Huge laughs.

Of course, Byron had a different take. The right one, if you ask me...

"It's going to take decades or generations, in my view, for these things to change. It took probably 75 years for the incandescent light bulb to become the world standard... It took 100 years for steam-powered electric generating turbines to become a standard feature around the..."

"WRONG!" Mauldin thundered.

His evidence: "Fourteen million i-Pads were sold this year. The adoption curve for technology is on such a ramp-up... You're going back to a model that was SO 1980s."

Hmmm. I know these guys are brilliant – and I'm just a gun-toting rube who eats too few vegetables...

But I'm having a hard time understanding how the widespread adoption of the computer interface equivalent of the touch-tone phone equates to a new world standard of energy that'll obsolete hydrocarbons...

That was just the beginning, though.

Thinking about gold?

Gary says you should buy nickels instead. "Give the bank $100, they give you back $120 in metal." A fringe benefit: "If you have $10,000 worth of nickels in your house, whoever breaks in won't get away with more than like forty bucks."

Priceless. I could never truly do this event justice in print – so I'm just going to hit you with some of the juicier sound bites from the discussion. I won't even attribute them. But if you're sharp and know the players here, you can probably guess:

"I don't want to give you a rant on fascism – it would offend too many Americans... The US is unquestionably a fascist state."

"I just want to know when my cholesterol-eating nano-bot will be here..."

"You're going to be able to take this technology, put it on a drone, and blow the crap out of people with turbans on their heads in Afghanistan."

"They already attached it to a Roomba, and weaponized the Roomba..."

"The most dangerous job in the world today is the #3 man in the Taliban... You'll notice whenever some senior guy in the Taliban is killed, it's always the #3 guy."

"The market's an idiot... The markets don't know Jack."

"All these Hitler-like dogs... all these sociopaths have very acceptable social veneers."

"Tuscany is not a country."

"All these damn countries cover the Earth like a skin disease."

"...You-know-who is going to sell off the whole Strategic Petroleum Reserve..."

"I advocate the active default on the US debt."

"The situation's hopeless – but it's not serious."

"Immortality may suck, and it's not worth it."

"People are going to die, because of these a**holes from Chicago."

"The average American is such is whipped dog... If the American people weren't such wussies, they'd storm into Washington and they'd replicate the execution of Mussolini on every lamppost..."
I think it was the best (and funniest) Whiskey Bar event I've ever seen. And like I said, I could never do it justice in print. That's why we've recorded the whole thing. Details below...

Regards,

Jim Amrhein
Roving Reporter for The Daily Reckoning

P.S. By the time you read this, it'll be mid-day or afternoon on Saturday...

And by midnight on Tuesday night – just two more business days – your chance to get the complete CD or MP3 recordings of the 2011 Agora Financial Investment Symposium at 33% OFF will be gone.

Once more, here are the specifics: For just $99, you'll get complete digital, downloadable MP3 files of every marquis speaker's presentation...

And for $149, you'll get them all on CDs, in a special, durable and portable box set...

OR YOU CAN GET THEM BOTH FOR THE SAME $149 PRICE.

(Click HERE to select your preferred media now.)

Dots
Obama's Burning Shame Revealed Here...

This is the unspoken, burning shame that could kill Obama's presidency...

It could spell the end of his short political career...

It's all revealed in this extremely urgent and controversial documentary report.

Dots
ALSO THIS WEEK in The Daily Reckoning...
Bankruptcy: From Greece to Rhode Island
By Frederick Sheehan


Central Falls, Rhode Island faces a plight that should be studied for its application elsewhere. It is nearly out of money. This is common news today, whether in Greece or California. The various parties are assumed to possess a means to carry on. This is assumed because it is generally so. The banks had the Fed; General Electric had the Fed and the FDIC; Greece has the ECB; California is prepared to launch a bridge loan.


Petroleum Permitorium
By Matt Insley
Baltimore, Maryland


Did you hear the news? This year's government budget included a new tax on oil producers. Bad timing, if you ask me. What, with oil prices sitting around $100 a barrel, the last thing I'd think the government would want to do is reduce incentive for oil producers. But hey, who am I to say? I'll let the numbers have the podium...


Is Gold Money?
By Charles Kadlec


That question, directed to Federal Reserve Chairman Ben Bernanke by Congressman Ron Paul in last week's hearings before the House Financial Services Committee, strikes terror in the heart of all central bankers. Bernanke looked stunned and then answered, "No: Gold is an asset." The rising price of gold reflects global uncertainties, he explained. "The reason that people hold gold is as a protection against what we call tail risks: really, really bad outcomes."


What Didn't Change When Nixon Cut the Gold Link
By Ben Traynor London, England


"Let me lay to rest the bugaboo of what is called devaluation," Richard Nixon told his fellow Americans on August 15, 1971. The 37th President had just announced the US would "temporarily" close the gold window – ending the convertibility of Dollars into gold that had been key to the postwar Bretton Woods system.


The Great Correction: 5 Years...and Still No Recovery in Sight
By Bill Bonner
Vancouver, British Columbia


I'm glad to be the last speaker. Nobody can come after me and tell you why I'm wrong about everything. Instead, I get to tell you why the other speakers were numbskulls. Besides, we all have a tendency to be most influenced by the last person we talk to. Or at least I do.


Do You Stay or Go?

That's the question we're asking at this year's Agora Financial Investment Symposium in Vancouver, Canada. And, after listening to the plethora of incredible presentations by the world-class line-up of speakers here, the answers we're hearing, may surprise you...

Of course, we understand that Vancouver isn't right around the corner for most of you. That's why we've decided to record the entire line-up of speakers and make them available to you on both MP3 and CD formats.

So even if you weren't able to join us at this year's event, you don't have to miss out on a single piece of advice or recommendation.

And right now, while the event is still going on, they're available at a nice discount. Click here to get yours now. But hurry, the price will go up shortly after the conference ends.

Weekly Endnote...

We met a great bunch of new people at this year's conference, both speakers and attendees. And, of course, we were able to catch up with old friends, too. We'd like to take this opportunity to thank everyone for another great event. Thanks to the Agora Financial crew who made it possible...and to each and every one of you who attended for making it special.

Hopefully we'll have the chance to see you all again next year.

Cheers,

Joel Bowman
Managing Editor
The Daily Reckoning

-------------------------------------------------------

Here at The Daily Reckoning, we value your questions and comments. If you would like to send us a few thoughts of your own, please address them to your managing editor at joel@dailyreckoning.com
Dots
The Bonner Diaries The Mogambo Guru The D.R. Extras!

The Great Correction: 4 Years…and Counting…Still No Recovery in Sight
Wherever we go we tend to pick up the accents…and attitudes… of the people who are around us. We all know, because we're all good contrarians, and this is something we can all agree on, that whenever everybody thinks the same thing, nobody is thinking.

The Stock Market Squares Off Against the Economy

More Debt for Your Money

China: Where Money Is Treated Best
I am sure that Mr. Pento is right because every country on the Face Of The Planet (FOTP) is desperately creating more and more money, and the money will eventually find its way to the place where it is treated best and/or has the best prospects, which is, in this case, Bob. Oops! I meant "China."

Buying Gold on the Price Inflation Guarantee

Awaiting the "Zero Hour" of Available Credit

China to Overtake India as World's Biggest Gold Consuming Nation
Much like how China has surpassed the US in so many manufacturing and economic milestones — and South Africa in gold production — the world's most populous country is now poised to topple India as nation with the strongest gold demand in the world. China has long been interested in amassing gold reserves...

2011 Halftime Report: The Cues for Copper

On US Credit, Rating Agencies are "Out of Their League"

Dots

The Daily Reckoning: Now in its 11th year, The Daily Reckoning is the flagship e-letter of Baltimore-based financial research firm and publishing group Agora Financial, a subsidiary of Agora Inc. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas. Published daily in six countries and three languages, each issue delivers a feature-length article by a senior member of our team and a guest essay from one of many leading thinkers and nationally acclaimed columnists.
Cast of Characters:
Bill Bonner
Founder
Addison Wiggin
Publisher
Eric Fry
Editorial Director

Joel Bowman
Managing Editor

The Mogambo Guru
Editor

Rocky Vega
Editor


Additional articles and commentary from The Daily Reckoning on:
Twitter Twitter faceBook Facebook iPhone APP DR iPhone APP

To end your Daily Reckoning e-mail subscription and associated external offers sent from Daily Reckoning, cancel your free subscription.

If you are you having trouble receiving your Daily Reckoning subscription, you can ensure its arrival in your mailbox by whitelisting the Daily Reckoning.

Agora Financial© 2010-2011 Agora Financial, LLC. All Rights Reserved. Protected by copyright laws of the United States and international treaties. This newsletter may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the World Wide Web), in whole or in part, is strictly prohibited without the express written permission of Agora Financial, LLC. 808 Saint Paul Street, Baltimore MD 21202. Nothing in this e-mail should be considered personalized investment advice. A lthough our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice.We expressly forbid our writers from having a financial interest in any security they personally recommend to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of a printed-only publication prior to following an initial recommendation.Any investments recommended in this letter should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Yashi

Chitika