The Calamity of Fame

I’ve been debating for a long time whether to write this post. The reason is a book I read recently. It produced so many emotions within me that I felt compelled to write about it immediately. But after thinking about it for a while I decided not to since what I had to say was not going to be very positive and I would fall into the same category as the person I would write about. But after talking it over with my friend Rob I decided to do it. The book is Anthony Bourdain’s latest and its title you may find somewhere in the internet. In this book the author goes on to trash a lot of people within the food industry. There are a lot to choose from but I will concentrate on two of them, Alice Waters and Guy Fieri. Miss Waters, for those who may not know her, is the chef/owner of Chez Panisse a prestigious and award winning restaurant in Berkeley, California. She has championed locally grown organic food for most of her career and has been a very visible advocate for her cause. In simple words, she wants people to eat healthier food. She believes, and is backed by evidence, that food grown locally, less processed and with less chemicals is better for people and as a result for society as a whole. Consuming locally grown products is a great way to support your local economy, reduce pollution related to its transportation and should also have lower costs because of the savings in transportation compared to a similar product brought in from somewhere else. Her belief that a healthier society is a better society is shared by many to say the least. He trashes her for approaching the Obama administration to make nutrition a priority in its agenda. He also has a problem with her being from Berkeley which is not necessarily her fault. The point here is that she’s trying and is doing something good and relevant considering the obesity epidemic that is taking over the United States which is directly related to poor eating habits and lack of affordability, making fast food one of very few options. This is something absolutely important, but Mr. Bourdain misses the point and makes it personal which seems to be a trend. Another person who he trashes which seems incredible to comprehend is Guy Fieri, that dude with the spiked blonde hair on the Food Network. Although his comments about him are brief compared to what he says about Ms. Waters they are completely objectionable considering the times we’re in. Guy Fieri is not only providing jobs through his businesses he is in essence promoting the US economy. In his show he goes to small family owned and some individually owned restaurants in towns across the country, not only big cities, and puts them and their food in his show. He is promoting these businesses at a national level which otherwise could not possibly get this kind of attention. As a result their sales will probably increase. Now consider what Mr. Bourdain is doing that is so saintly that he feels that he has the power to judge these people who are actually having a positive effect with their efforts. I can’t think of one thing. Mr. Bourdain survived a life of addiction and was able to come out of the dead end that his career had become. The risks of addiction to heroin and crack, among others, are countless. After this experience and having been given the opportunity at a bigger and better life I would expect someone with his influence to try to at least do something good with it and not the opposite. If not, simply leave the good ones alone, they are very few and far between.

Price Elasticity, Metamucil and Cigarettes

Price Elasticity, sounds like bubble gum, the only difference being that bubble gum is stringy, sticky and if you’re like me gets stuck to your hair when you fall asleep and you don’t notice until you get to work and a coworker points it out; not good. But we’re not talking about that. We’re talking about the concept of price elasticity which refers to how much demand for a product changes as price changes. For example how much would demand change for say, your favorite hamburger if the price went up $1.00 (Considering that lately you’re able to get burger for a dollar, a dollar increase is pretty steep). So if your favorite burger went up $1.00 would you still buy it or would you move to hotdogs or even veggie burgers or even grilled chicken breast wraps; good question. That’s what the concept of price elasticity tries to analyze. Historically the price elasticity of cigarettes has been very small, meaning demand pretty much did not change with the hikes in prices, people simply kept on smoking. And I was one of those people; yes I did smoke next to you in bars whenever I could. It did not come without its price. It’s almost hard to admit you were a smoker, let alone are one, considering the way smoking is looked upon these days. You almost feel the same way as if you have to admit that you play Dungeons and Dragons in your mid thirties, people look at you like you’re a freak. I know it is stupid because it can kill you in the long run, but if I smoke I only kill myself not you, I love the world but I hate myself, is that so hard to understand? I’m not an advocate for smoking but there are many decisions that can be really harmful to your health, like taking the advice of someone who does not really care about you or getting romantically involved with the wrong person, trust me, we got to look at all our decisions. But it has become harder and harder to be a smoker. The price of cigarettes keeps rising and there are fewer and fewer places where you can enjoy a smoke. The key word here is “enjoy”. For me smoking has never been about doing it at work, taking smoke breaks or outside in a parking lot between beers, it’s about doing it in an environment where you can enjoy it. But the tax increases that have led to price increases have had an effect on demand. Add to the mix the inability to find places to smoke and you get an even greater decrease in demand for smoking at least on my part. So yeah price elasticity does affect cigarettes and it really affects anything as long as the change in price is substantial. Now, thanks to this and my doctor’s advice, I’m a habitual Metamucil user; enough said.

Baconomic Indicator?

It looks like bacon has been making a comeback. Bacon lovers might say “What are you talking about? It never went away!” But it is making a comeback, and in honor of the theory that launched this site (check out the link “What is the Economics of Bacon?”), we’re going to talk about it. CNBC reports that the high prices of bacon could be a sign of the economy getting better. It is high season for bacon and pork belly production was held back due to the recession, so these things do account for high bacon prices. But I believe that people are buying bacon because it makes them feel better in these hard times; it makes people feel like “Things are bad but I can at least have this guilty pleasure”. The numbers don’t back up an economic recovery just yet, unemployment is still high, consumer confidence low and mortgage rates are still at an all-time low meaning people are buying very few houses. But people can at least enjoy bacon; it simply makes most things better, mashed potatoes, polenta, any pasta, any grilled cheese, any burger, chocolate cake or even ice cream. So people have to find new ways to find pleasure in these times where things don’t seem to change. Obviously the better the bacon the better the experience, research some brands, it might be worth it, it’ll make hard times even smoother. You could even make it yourself, it’s not as hard as you think and you could end up with a far superior product and an enlightening experience. This is an example where the numbers probably do not tell the whole story; people need to feel they can still enjoy the little things in life like a nice slice of bacon, perfectly cooked, as a snack with a cold frosty beer on a hot summer’s day. Now, if we start hearing that the sales of Tofurkey are starting to rise, then that is a real sign that the economy is heating up and people’s buying power is increasing because that really is a waste of money.

(Coffee) Buzz Kill: The Next Bubble

We’re going to take the liberty today here at The Economics of Bacon Headquarters to predict the next economic bubble. In economics a bubble may be referred to trade in assets with inflated prices. So when these prices are not sustainable anymore the bubble bursts, meaning the market for said product collapses. So here it is the next bubble, which has taken a long time to burst: Coffee Houses, specifically, your local green and white coffee shop. I must say, it is delicious and kind of cool to be there, you almost feel smart and good looking just by holding a white and green cup. My choice of drinks is not very sophisticated; I just get the tall regular coffee of the day which is what I’m going to concentrate on. Your local green and white coffee shop typically uses 2 tablespoons of coffee per 6 ounces of water, so for a tall coffee which has 12 ounces of coffee they use 4 tablespoons of ground coffee. Now a 1 pound coffee bag may cost you around $10. To figure out the how much coffee by weight is in a tablespoon we need to know the approximate density of ground coffee. This requires some mathematical calculations* but the result after taking into account the density of coffee is that there are .38 ounces by weight in each tablespoon of coffee. So if you use 2 tablespoons of coffee per six ounces of water it means you’re using .76 ounces by weight of coffee per six ounces of water. The one pound bag has 16 ounces of coffee, so with that bag you should be able to make 10.5 tall coffee cups (16 oz. /.38 oz. = 42 tablespoons/4= 10.5 Tall cups of coffee). That means that if you follow the measurements used by your local green and white coffee shop your cost per tall coffee if you make it at home is around $.95 per tall coffee. Considering that the range for a tall cup of coffee is from $1.65 to $2.00, or where I live where it is $2.65, making coffee at home makes sense considering the potential savings. Once people realize the savings they can have by looking into the numbers your local green and white coffee shop will be in trouble. I know it’s not the same; it’s not very cool to sit in your living room pretending to be at a coffee house, but hey, with every shift in demand there are new opportunities that come up. Here's something for all the entrepreneurs out there, how about coming up with the “Coffee House Kit”. That’s right, how to turn your living room into a cool and classy coffee house lounge, with nice earthy tones, some green to remind yourself of where you’re trying to be and some smooth jazz coming from the speakers. You may also have cardboard cutoffs of attractive intellectual looking members of the opposite sex as well as piles of books that you will never read, but may hold just to feel smart. Hey, during these hard times you got to get inventive when it comes to saving money. And you can have all this for just 19.95! That’s right, $19.95, less than the cost of 21 tall coffees made at home. Too good to be true? Relax. It’s all going to be made in China anyway.


*To obtain the bulk density of ground coffee we can take the average between coarse ground coffee (19 lb/cu ft) and that of fine ground coffee (25 lb/cu ft) resulting in an average bulk density of ground coffee to be 22 lb/cu ft.

We also know (from google) that there are 915 tablespoons = 1 cu. ft., then the number of ounces per tablespoon is of ground coffee is:

22lb/cu ft (16 ounces) (1 cu ft)
___________________
1 cu ft (1 lb) (915 Tbl) = 0.38 ounces/Tbls

References
http://coffeecraftsman.blogspot.com/2009/05/coffee-to-water-ratio.html

ivetz, M.; and Desrosier, N.W. 1979. Coffee
Technology. AVI Publ. Co., Westport,
Connecticut, USA.

SCAA website. http://members.scaa.org/train/certification/coffeebrewer/CoffeeBrewerCertDocs/Certification%20Standards.aspx

http://www.dccoffeeproducts.com/inc/Coffee_Brewing_Guide.pdf

Back to the Revolution

It’s been a while since I’ve written here, but that doesn’t mean that there’s nothing going on in the economic scene that interests me. There’ve been some interesting developments in China that are actually quite surprising. China’s labor force, specifically in manufacturing, is in the process of receiving wage increases. Some local governments are raising the minimum wage and companies are responding to an economy that has been picking up and to workers’ strikes that have reflected their awareness of their wages. But now, considering that China has been feeling the pressure to allow its currency to fluctuate in the foreign exchange market, a rise in production costs could mean higher prices on its exports. If the US economy were to pick up, its currency could appreciate which could offset the effect of a higher Chinese currency. But we keep getting mixed signals and mixed signals are usually a bad sign. With unemployment close to 10%, a rising deficit and wars that seem to have no end it is hard to say what direction the economy is going other than bad. The great recession that does not seem to end eroded much of the liquidity that existed in the economy. As people bought homes at record prices because banks allowed them to so they could turn over that loan for a profit, loans that had very little chance of being repaid were packaged as safe investments and a lot of money moved in their direction. When those traditionally-safe investments vanished so did the opportunity of many for a life. Now their investments were gone, their jobs were about to disappear and their homes had become worthless. The money that people had faithfully put into these investments is now in the hands of a very powerful few because that money did not disappear, it is somewhere. It moved from millions of bank and brokerage accounts to probably a few hundred. Now those people and institutions that hold that money are keeping it. And money that would normally be running through the economy creating jobs and spurring business is sitting on the sidelines because the house kept it and most lost. Traditionally, the American economy was built on solid products that were reliable and came from companies that wanted to compete and be here for years to come. Now what this recession is showing us is that it’s ok to be a hit and run economy in which we can create bubbles and whoever’s on top of it and controls the information keeps the money and wins the game. In the meantime, everybody that loses stays in the sideline until the next genius with an idea that’s equivalent to those sold for 19.99 on TV comes along cashes in and cashes out and crashes the market. With this pattern it’s going to be very hard to compete with an economy like China where they do have a desire to win. Now the rise in Chinese currency as well as the rise in labor costs in that country will ultimately hit the pockets of average consumers in the short run. If other economies take the opportunity in rising costs in China to try and become exporting powerhouses themselves then maybe there is a silver lining in this.

Got Money? Arizona is the Place for You!

Illegal immigration is priced into the economy. What that means is that businesses that benefit from immigrant labor are able to provide services at a lower price because their labor cost are not as high. So the current situation in Arizona after the passing of their new immigration law can have serious consequences to the price of services of many industries in that state. To name a few, restaurants, construction, landscaping, all benefit from the work of individuals who come to this country with the only purpose of working and making a living and saving and hopefully go back home with some cash. This new law will prevent these workers from feeling at ease; it will allow for harassment of “suspicious” individuals and will legalize deportation of individuals without the proper paperwork. Overall, it seems like this law will raise the price of everyday life for the people of Arizona and will incur huge expenses in the deportation and prosecution process of these workers. In my view the reason for the passing of this law is obviously not one that makes economic sense or is based on information. It is one that satisfies maybe a feeling of “cleaning up” the state and gentrifying an area that is becoming more and more mixed. Maybe. Maybe the people of Arizona and specifically the ones who backed this bill have enough money to cushion the new hit on prices that the exodus and lack of supply of cheap labor will have on their economy. If so, god bless. But this new slap in the face to the people who keep your economy going and have pretty much allowed for the incredible growth that this state has had is extremely hard to justify.

Goldman Sachs and Company

The recent charges levied by the SEC on Goldman Sachs bring to light a grim reality about the financial crisis. The crisis itself sent the world economy into recession and came close to being worse. Thanks to the level of globalization that exists in the world economy, as Joseph Stiglitz clearly points out, we can export any recession all the way to the other side of the world. The problem with this last recession is that it could have been prevented with a little more oversight. Now the crisis has passed and they know who’s to blame because they’ve known all along. It’s amazing that considering the disparity of wealth distribution that has been growing in the last quarter century this situation with Goldman Sachs was allowed to happen and clearly exemplifies why this disparity has grown. This was a clear cut example of how power and the manipulation of information by a few were used to enrich themselves and impoverish a large number of investors with dire consequences across the whole of the economy. It’s hard to fathom what a billion dollars can do but its effects are obviously huge for better or for worse. In this case it was for the better of Goldman and for the worse of investors who trusted their new product. Now the repercussions of this specific instance are hard to pin down, but this was an ongoing practice that led to very bad times for people who for the most part did not know why and what was going on and had nothing to do with it. There is nothing wrong with wealth and making money; it is one of the cornerstones of our system. There are just a lot of good things that can come from using this power to increase the wealth and wellbeing of the many.