Pencil 2

(cont'd from yesterday's post)

It's no small thing to trace the making of the common pencil. 

A child could tell you about its parts. But when you think about what it would take, no individual person could actually create a pencil or even knows how.

You'd have to find a cedar on the west coast of the U.S., take it down, transport it to the mill--using saws and rope and equipment and trucks--which would have to be created from hemp that you grew in a field and metal that you mined from underground.

A lot of people at the lumber mill manage cutting the logs until they're in 1/4" strips, which are kiln-dried and tinted and waxed which requires belts and motors which require heat and light and power which require the hydro-electric plant which required the men who poured the concrete . . . It's endless. 

No master mind organizes the creation of a pencil. But millions are created . . through the mutual cooperation of millions of workers . . who don't know the others in the process or where their product is going. 

Our economy is almost miraculously run by skilled and creative people acting freely for their own benefit.

Pencil

Who cares about a pencil? 

Back in 1958, every child in America needed a pencil for school work. It was common and under-appreciated. An economist that year used this totally overlooked item to wake Americans up to the wonder of their economic system.

He wanted them to think about their pencil's genealogy - how did this common, cheap thing actually come into existence?

Build things

"America won't exist if we don't build things." This author founded and runs a manufacturing startup, and he says we must restore our country's capacity to "build things," to manufacture. We must re-build our industrial base, in his theory, because every great power rose to prominence "by building the strongest industrial base of their time."

We could lose our strength. It could happen if we get too comfortable with our success and start to off-shore everything. 

Wait . . that sounds like the present day. As an example, we in the U.S. made five ships last year, while China made 1,000 ships. We lead the world in pharmaceutical R&D but we imported 88% of the active ingredients. "Submarine production has slowed drastically," a reflection of our lack of skilled workers (yesterday's post).

Jobs in the trades can yield a good living. Not everyone must go to college or university.

from The Free Press

Space econ

Space came back to the headlines in America when SpaceX started a new era.

Cost was the huge deterrent to exploration. When SpaceX began to produce rockets that could be re-used, the enormous cost of getting out of earth's atmosphere was cut spectacularly.  

Other space companies followed, and space was no longer un-reachable. What else could we do out there?  

Materials - including water - exist on the Moon and Mars and beyond. When we get there, we'll apply intellect and knowledge and turn some of those materials into resources for humanity. A Hillsboro professor explains:

Dinner cost 2024

(cont'd from yesterday's post)

That big 2022 spike in the cost of Thanksgiving dinner (yesterday's post) didn't continue, thankfully. Last year the cost declined a bit, and this year the cost declined a bit more. The Farm Bureau makes the point, however, that we're still paying more than we ever paid any time before 2022 (image).

 

How these average prices impact us has been figured out in a practical way by economist Gale Pooley. He compares average prices to average wages paid to workers at the time.

 

It's a good measure of what these prices actually mean to people at the time of the survey. He calls this measure of what it costs the "time price," meaning the amount of time an average worker would have to work to purchase this dinner.

Average wage in 1986 was $8.96 per hour, so a wage earner then paid for their 1986 dinner with about 3.2 hours of work. Today in 2024 the average wage is $30.48 per hour. So an average wage earner pays for that dinner today with about 1.9 hours of work.

In general terms, Americans are finding it more affordable to pay for that dinner than we did thirty-eight years ago. How did that happen? Innovation and improvement in agriculture, transport, manufacturing, all the businesses that touch our dinner in some way.

from Doomslayer

Dinner cost

American Farm Bureau surveys the cost of a typical Thanksgiving dinner prepared for ten guests every year. (Go here for the list of items; somehow they neglected green bean casserole.) Here is the history of that cost (image) since 2005:

These prices are not adjusted for inflation, so it's just the raw dollars' cost from each year's survey. You can see the inflation we all know has been happening since the pandemic started in 2020. Prices were almost flat from 2011 til 2020, a long time. The highest costs ever in the survey occurred two years ago.

But the survey was started long before 2005. When it began back in 1986, the raw cost of the dinner was $28.74. Since then the cost has risen to $58.08, a rise of 102% in 38 years.

What is the real impact on us? In tomorrow's post we'll see the way an economist has figured that out.

from Doomslayer

(cont'd tomorrow)

No turkey czar 2

Remember 2020? We were deep into the covid pandemic. Thanksgiving was different because we couldn't get together.

This re-post from four years ago is a good reminder that we easily obtain our holiday dinner turkey due to the "invisible hand" of the U.S. free market, not due to a bureaucratic Turkey Czar.

My niece invited the extended family to her apartment for Thanksgiving this year. She created a  Facebook event called "A Very 2020 Thanksgiving." Then she cancelled it because our governor's covid restrictions forbid multiple household gatherings. Yes, a very 2020 Thanksgiving.

My household had no turkey. But if you did, I think I know how you got it. You didn't order it special from a local shop or farm. You put it in your cart on a normal trip to the grocery store. You knew there would be plenty of reasonably priced turkeys for all who wanted one.

Thousands of people made that happen:

"Poultry farmers, of course, but also the feed distributors, and the truckers who brought it to the farm, not to mention the architect who designed the hatchery, the workmen who built it, and the technicians who keep it running. The bird had to be slaughtered and defeathered and inspected and transported and unloaded and wrapped and priced and displayed. The people who accomplished those tasks were supported in turn by armies of other people accomplishing other tasks — from refining the gasoline that fueled the trucks to manufacturing the plastic in which the meat was packaged."

There is no turkey czar with a master plan, issuing orders, forcing these workers to cooperate. But they do cooperate. They made thousands of smart decisions independently. Why? To create an income and take care of their loved ones. 

"Free human beings freely interact, and the result is an array of goods and services more immense than the human mind can comprehend. No dictator, no bureaucracy, no supercomputer plans it in advance." 

Adam Smith called it the "invisible hand" of the free marketplace.

from the Boston Globe

Why it works 2

Freedom to trade as you choose is one of those principles that helps our society flourish. When you freely engage with others, you and your neighbors will wind up more satisfied. Even a child can understand it.

Free trade 1

(cont'd from yesterday's post)

Yesterday's post says that even the poor get richer under free trade. But . . why? How does free trade increase the prosperity of everybody? Does that really work? Unless we can understand why, it can be hard to believe that free trade increases wealth.

Jay Richards explains with his own story. His elementary school teacher bought a cheap toy for each student in her class. Many, like Jay, did not feel wealthier. He got Barbie doll playing cards. The teacher had each child pick a number from one to ten describing how happy they were with their toy; she added up the numbers and placed the total on the blackboard.

Then she allowed them to trade toys, restricted only to other students in their row of desks. They again picked a number, the numbers were added up, and the total happiness number went up.

Then she allowed them to trade toys freely within the whole room. The happiness number went up again. The children had more "toy-wealth" in spite of the fact that no additional toys had been brought into the classroom.

"Rule of law" applied in the class: no stealing someone else's toy, no cheating, no hitting, all of which would have coerced other kids into a trade, which would have made it un-free.

When both trading parties make their own decisions based on their own needs, not coerced by the government, free trade makes them wealthier. That's how it works.

Why it works 1

Are the concepts of our own economic system in the U.S. (and generally in the West) still taught in our schools? That's a good question. 

Years ago, I realized that I had never been taught the foundations of economic freedom and didn't even know what "free enterprise" means. Going back to 2016, there are some posts that can fill in the gaps in our understanding. I'm going to re-post a few of them.

* * * * *

"Trade"

Trade enables us to enjoy better quality of life. If we couldn't trade with each other but had to make everything we need, we might starve to death. But if each of us is free to specialize, we all have a skill or product to trade (buy and sell) with people who have something we want.

That's really simplified, but true to the basic rationale behind trade.

What if you had to make your own, say, chicken sandwich from scratch? It would take much more than a couple of minutes at the fast food window. Here is one man's personal experience with this idea.



It's easy to forget the work and organizing behind a simple product.

(cont'd tomorrow)

The mother lode

Rare earths are essential for the manufacture of modern technology products. They're not common or abundantly found on earth. When you put together those two factors, essential and uncommon, it means that manufacturers will pay a high price to get them.

China is the main source of rare earths. That means China makes a lot of money from supplying them to manufacturers, and it means that they can manipulate this advantage for political goals.

photo

But all of this may change because the "mother lode" of rare earths, the largest deposit ever found, has been discovered--and it's not in China. It's in the US, in the state of Wyoming.

"If wisely exploited, this find—estimated to be the richest in the world—will give the U.S. an unparalleled economic and geopolitical edge against China and Russia for the foreseeable future."

from WSJ, "Wyoming Hits the Rare-Earth Mother Lode"

Dinner $ 2023

Dinner for ten on Thanksgiving this year will cost just a bit less than last year . . but much more than three years ago. 

Every year the Farm Bureau figures it out:

Farm Bureau image

Inflation cheapens the value of all our dollars.

Digital $

"Digital money" is our future, according to some. It's not in any way material, like a coin or paper currency, so you won't keep it in your wallet. It's "any means of payment that exists in a purely electronic form." Only online systems keep track of it. 

It's said that the move to digital currency is really going to happen, and it will be "disruptive." Eventually cash (material, tangible money) will not be accepted. "[T]he transformation of money will fundamentally rewrite how ordinary people live." 

In America, the Federal Reserve board is studying the question of why we should disrupt our financial system which works fine for us: "whether and how a CBDC [central banking digital currency] could improve on an already safe and efficient . . system."

But World Economic Forum (WEF) is working to make it a global reality. This author and professor wants it:

Blind to it 2

re-post

A young woman sits in a hipster coffee shop, puts her phone down, and looks around. She sees "people talking freely, working on their MacBooks, ordering food they get in an instant, seeing cars go by outside, and it dawned on me. We live in the most privileged time in the most prosperous nation and we’ve become blind to it."

Even the American poor can hardly compare to the the poor of the rest of the world. "Virtually no one in the United States is considered poor by global standards. Yet, in a time where we can order a product off Amazon with one click and have it at our doorstep the next day, we are unappreciative, unsatisfied, and ungrateful."

photo

A young politician claimed recently that her generation has never seen American prosperity.

"Never saw American prosperity. Let that sink in. When I first read that statement, I thought to myself, that was quite literally the most entitled and factually illiterate thing I’ve ever heard in my 26 years on this earth."

from "Thoughts from a Hipster Coffee Shop"

Tech layoffs 2

 Follow-up to this post

Technology companies were laying off lots of employees last fall. It seemed like a big wave. It included Twitter, of course, where new owner Elon Musk was getting headlines for doing it to his new company. But now there's an even bigger wave. Lots of tech company CEO's are cutting labor costs.

Amazon is going to lay off over 18,000 people. In addition to that news last Wednesday, it was reported that Microsoft too is cutting jobs to reduce their workforce by 10,000. These are big numbers.

Google is joining the club. They announced their intention to lay off 12,000 people. A memo from the CEO outlines generous severance packages. He says that we are in a different sort of economy than we had the last two years when they were hiring.

After two years of high inflation, individuals and businesses both are feeling the pain and there could be a recession on the way. 

image

Pipeline 1

On his first day in office, the current president stopped construction on an extension to the Keystone pipeline. According to his energy department's December report, that decision cost up to 59,000 two-year jobs. It would have moved 830,000 barrels of oil per day from Canada to Nebraska where it would have linked with other pipelines.

Environmentalist activists had helped him get elected, and that's what they wanted. The price of power is inflated today, probably due partially to reduced access and supply of oil.

Safety was the issue. Most of the accidents in Keystone's history (it started service in 2010) have been small-scale, but just last month the biggest one happened in the state of Kansas. About 14,000 barrels of oil leaked into a rural creek, soaking part of a family farm. At 42 gallons/barrel, that's over a half-million gallons.

(cont'd tomorrow)

Dutch farms 3

(cont'd from yesterday's post)

Looks like Dutch farmers are losing this conflict (protests started in 2019) with their government. Last summer the government of the Netherlands announced their plan to force 2000-3000 farmers to sell their farms.

"Climate Change" is the reason given. The government wants to cut nitrogen output in half by 2030. They claim that meat is the villain, and they're getting ready for that shortage which is  coming. A city west of Amsterdam has placed a ban on advertising meat in public places, to take effect in 2024. 

One agriculture expert thinks the campaign against meat is "shortsighted and misconceived." She says it's happening because "poor research and misconceptions blame meat for being a major contributor to climate change without understanding any of the nuances of that statement.”

According to another agriculture expert, Europe in general is taking steps similar to The Netherlands'. America, though, has a different approach. “The U.S. is saying they can reduce livestock emissions while producing more food and they’re going to do it through technology and innovation.” 

Sounds like a more reasonable approach.

from Beef Central

Dutch farms 2

(cont'd from yesterday's posts)

Maybe the farmers are right, in a way, about being disrespected. You'd think that food producers would have a "say" in national discussions about food. But it looks like the decision to reduce food production and the size of farms is a done deal. It's moving ahead.

Food production does create pollutants. But does it follow that the solution is to cut off food production? Isn't that awfully drastic? No, the politicians are just fine with that. "The end result is expected to be close to a one-third reduction in the numbers of pigs, cows and chickens in the country.

One of them says, “We have to move away from the low-cost model of food production.” So his plan for his country is that food will become more expensive and less accessible. 

There must be a better way to solve this than to force food insecurity on the people.

from FEE

(cont'd tomorrow)

Unintended 7

Results of the widespread lockdown during Covid are still being studied. Unintended consequences descended heavily on children, including mental health issues.

Learning progress declined when schools were shut down according to the National Assessment of Education Progress (NAEP) despite the Zoom alternative where kids could still watch virtual classes on their computers. 

A study has been completed by the Hoover Institution at Stanford University to assess how that loss of learning will affect both the students themselves and their states economically. Overall, for instance, the state of California will lose GDP of $1.7 trillion because it.

But persons who were in school during the pandemic lockdowns will feel it personally. When all factors are considered over their earning lifetime, the financial loss resulting from the learning loss could amount to $70,000 less (than what they would have made).

from Economic Loss of the Pandemic

Dinner cost 2022

Every year the Farm Bureau calculates the cost of a traditional Thanksgiving dinner for ten people. 

                         

Back in 2020, the calculated average cost was $46.90 for this dinner. So this year's cost has  increased 36% in just two years. A comparison to last year is on the image.

Inflation, the sinking value of our money, has hit this holiday hard in 2022. No one will be surprised.

from Farm Bureau

Burrito econ

If one of your favorite foods as a student was a bean burrito, you had lots of friends who shared your taste for this nutritious, convenient fast food. Historic innovations made it possible.

photo

Back in 1945, an engineer was testing a new vacuum tube (a magnetron) when he accidentally discovered its ability to heat food. He built a metal box around it to trap the magnetic energy field, and - voila - the microwave oven was invented. Then in 1956 someone else invented the frozen burrito. A new wave of college student cuisine was going to follow.

By 1979 you could buy a microwave at Sears for $399.85. An unskilled worker in 1979 was making an average of $3.69/hour, so it would have taken about 108 hours of work time for him to buy it. 

An unskilled worker today averages $14.50/hour, and a microwave at Walmart is $74.00. To purchase it would today would take about 5 hours of work time.

The "time price" fell off a cliff. From 1979 until now, manufacturing innovations made a microwave cheaper both to make and to purchase. New eating options opened up to college students and everyone else.

from Gale Pooley's blog