Category Archives: Business

Where Is The Pencil Czar?

George Will has more on economic ignorance:

The indignant student, who had first gone to Home Depot for a flashlight, says it “didn’t try to rip us off.” It was, however, out of flashlights. Ruth suggests that the reason Big Box had flashlights was that its prices were high. If prices were left at regular levels, the people who would have got the flashlights would have been those who got to the store first. With the higher prices, “someone who had candles at home decided to do without the flashlight and left it there for you on the shelf.” Neither Home Depot nor the student who was angry at Big Box had benefited from Home Depot’s price restraint.

Capitalism, Ruth reminds him, is a profit and loss system.Corfam–Du Pont’s fake leather that made awful shoes in the 1960s–and the Edsel quickly vanished. But, Ruth notes, “the post office and ethanol subsidies and agricultural price supports and mediocre public schools live forever.” They are insulated from market forces; they are created, in defiance of those forces, by government, which can disregard prices, which means disregarding the rational allocation of resources. To disrupt markets is to tamper with the unseen source of the harmony that is all around us.

The spontaneous emergence of social cooperation–the emergence of a system vastly more complex, responsive and efficient than any government could organize–is not universally acknowledged or appreciated. It discomforts a certain political sensibility, the one that exaggerates the importance of government and the competence of the political class.

Yes, an exaggeration that is reinforced by the propaganda inculcated into people by government schools.

Economic Ignorami

George Bush’s announcement this morning that the administration was concerned about “gouging” reminded me of why I wish that we’d had better options in the last two elections (and still do). I expect that kind of nonsense from Democrats, but you’d think that someone who was supposedly a businessman would know better. Or perhaps he does, and is just pandering. I’m not sure which is worse.

Every time we have a natural disaster like this, this idiotic topic comes up, and we once again have to explain Econ 101 to the products of our public school system, probably in futility. This time, it’s Rich Hailey’s turn.

Here’s what I wrote about it a three years ago, in the wake of Katrina.

[Update late morning]

Jeez, I thought that David Asman was smarter than that. Now he’s telling Fox viewers to take pictures of stations with high gas prices so that they can be reported to authorities. It’s hard for me to believe that Neal Cavuto would do that.

[Another update a minute or so later]

You know, I think that this is an explanation for socialism and collectivism’s continuing grip on the public mind, despite its long history of unending failure. There’s just something in human psychology to which it naturally appeals, and rationality just can’t break through. It just “feels” unfair for prices to go up in an emergency, regardless of the demonstrably bad consequences of attempting to legislate them.

[Late afternoon update]

Shannon Love explains how the gas station business works:

I’ll say it one more time for those who can’t be bothered to actually ask someone who owns a gas station. Gas stations set prices for the gas they sell today based on the wholesale price of the gas they will have to buy to replace it. Get it? The price you pay for a gallon today is the cost of the gallon the station will have buy to replace the one you just bought.

Gas stations sell gas at or near cost, so if they did not use replacement pricing any sudden spike in gas prices would shut them down and you couldn’t get any gas. I simply do not know why our public and private talking heads cannot understand and communicate this simple fact.

Because either they don’t know it, or they think that people don’t want to hear it. They operate on razor-thin margins, and can’t afford to hand out subsidized gas as charity, even if that wouldn’t screw up the market. And note, for those who say it’s “big oil” that is “maximizing profits” in the face of a national emergency, even if that were true (it’s not) “big oil” isn’t threatened with jail for “gouging.” It’s the gas station owner, who has no control over his wholesale gas costs. So people who demand that we crack down on gougers are essentially demanding that the station operators either operate at a loss, or pay fines, or go to jail. I don’t know why anyone would want to be in that business in the face of so much public ignorance about it.

Who Is Overpaid?

Not engineers.

Engineer’s salaries, taking into consideration education and responsibilities, the stress of accelerated delivery schedules and their direct impact on corporate profits and overall success of the company, seem absolutely inadequate.

Well, I’ve known a few who were. But no, not in general.

In many of these overpaid professions, there’s some kind of government-induced market failure going on (e.g., longshoremen), but in a lot of cases, it’s just the occasional irrationality of the market place.

Congratulations To Armadillo

But it sounds like a business setback for XCOR:

If the demonstrations in Oshkosh and Burns Flat were meant as a fly-off, the Armadillo team – led by millionaire video-game programmer John Carmack – came away as the winner.

“The Armadillo engine is going to be the primary engine for the Rocket Racing League,” Whitelaw told me. He said five more planes will be built using Armadillo’s propulsion system, which is a spin-off from Carmack’s years-long quest to win the $2 million, NASA-backed Northrop Grumman Lunar Lander Challenge.

It sounds like the Armadillo engine has more thrust, though it’s not clear how the T/W compares.

I wonder to what degree XCOR was constrained by a potential desire to maintain some legacy toward the Lynx engine? If they were building an engine purely for the RRL, would it have been a different design and fuel type?

Presumably, the business plan with which they raised their recent institutional investment considered this as a contingency. I’m sure they would have liked continuing business from RRL, though Whitelaw doesn’t seem to rule it out for the future.

Batten Down The Hatches In Creole Country

Gustav is looking like it’s going to be bad news for the upper Gulf Coast:

As long as Gustav is over water, it will intensify. Gustav is currently under moderate wind shear (15 knots) . This shear is expected to remain in the low to moderate range (0-15 knots) for the remainder of the week. Gustav is over the highest heat content waters in the Atlantic. Given these two factors, intensification is likely whenever the storm is over water, at least 50 miles from land. Expect the high mountains of Hispaniola to take a toll on Gustav. Recall in 2006 that Hurricane Ernesto hit the southwest tip of Haiti as a Category 1 hurricane with 75 mph winds. Haiti’s mountains knocked Ernesto down to a tropical storm with 50 mph winds, which decreased further to 40 mph when the storm crossed over into Cuba. Expect at least a 25 mph decrease in Gustav’s winds by Wednesday, after it encounters Haiti. Further weakening is likely if the storm passes close to or over Cuba. By Wednesday, Gustav will be underneath an upper-level anticyclone. These upper atmosphere high pressure systems can greatly intensify a tropical storm, since the clockwise flow of air at the top of the storm acts to efficiently vent away air pulled aloft by the storm’s heavy thunderstorms. With high oceanic heat content also present in the waters off western Cuba, the potential for rapid intensification exists should the center stay more than 50 miles from the Cuban coast. Once in the Gulf of Mexico, Gustav is likely to intensify into a major Category 3 or higher storm. I give a 60% chance that Gustav will cause significant disruption to the oil and gas industry in the Gulf.

This will roil the energy markets (it may be doing so already). It may also be a test, and an opportunity, for Governor Jindal to show that the people of Louisiana were wise to replace his predecessor with him after her Katrina fiasco, which was largely overlooked by the media in their lust to bash George Bush.

Sandwich Artists

Lileks explains why I rarely go to Subway.

I’d won a free 6″ sub. This was timely, since I was planning to buy one for my wife. We finished our meal; I went back to the place where the Sandwich Artists labor in various degrees of surly disinterest, and presented the coupon. The Artist began to craft the meal out the chopped and processed carbclay arrayed before him – and that’s when the manager walked over.

“For future reference,” she said, “those are for the next visit.”

I pointed to the small print on the back of the ticket. “Actually, it says for your next order.”

“Well, it means visit. It’s how we keep track of them in the back.” She jerked a thumb towards the back of the store, where the Something wet and spiny sat in a crate, swallowing souls and dreams and crapping out rules and procedure.

If there are two things I don’t like, it’s someone who tells me that fine print doesn’t mean what it says, and alludes to some company process that makes things simpler not for me, or for the employees, but some theoretical person on whose behalf the system was set in place years ago by a team of consultants who have already moved on to rejiggering something else that worked perfectly fine. On the other hand, after years of dealing with restaurant employees who couldn’t give a fig about the job, it’s difficult to carp when you find someone who does – unless, of course, that person has decided to make a point about a free sandwich for future reference.

Also, a trip to the museum.