Sunday, July 5, 2009

The Competitive Market and Survival Economics

"Hunger can be a positive motivator" - MO State Representative Cynthia Davis

http://www.colbertnation.com/the-colbert-report-videos/232637/july-01-2009/tip-wag---cynthia-davis---fox-news

The First Welfare Theorem and most of economic theory relies on a presumption of property rights. Property rights however must be protected and enforced, and this protection and enforcement has a cost.


When an individual makes a decision whether or not to steal and violate property rights, the individual weighs his or her perception of the expected value of the attempt against the expected value of declining.


Since the expected value of an attempt includes consideration of the probability of success, a property owner can protect his or her property by manipulating these odds or the perception thereof. The property owner can build a safe or a fence or get a guard dog or hang a credible sign that such a dog may exist.


A civil society typically deters theft in a combination of three ways:

1. Patrol - reducing the odds of success

2. Investigation and prosecution - increasing the odds of capture and punishment

3. Punish - increase the negative incentive to steal


Considering that most attempts at theivery are often more "expensive" in the dangers involved than obeying the law, these methods are generally successful.


In the case of survival crime, for example, stealing to eat, these methods do not work effectively if at all.


An individual who believes that he or she must steal in order to survive will pursue theft against all but the most extreme odds and dangers. The cost of detering such an individual is extremely high as the resources spent on enforcement and punishment must be such that an individual will risk starvation rather than challenge the law.


A much more cost-effective solution (in a rich country) to prevent survival crimes is to feed the hungry. If individuals no longer believe that they will die if they do not steal, then the opportunity cost of crime is much greater.



In the case of school lunches and other school nutrition, there are further benefits from increased reception to education (which further increases the opportunity costs of crime).

Thursday, July 2, 2009

What happens when you print money

Continuing:
http://competitivemarket.blogspot.com/2009/06/inflation-as-boogeyman.html


If you were seriously concerned about inflation caused by the printing of money, you should be more concerned about this:

http://www.federalreserve.gov/releases/h3/hist/h3hist5.htm

In this report the Federal Reserve records the "Monetary Base", ie total money outstanding. In June 2008, this figure stood at about $.8 trillion. In June 2009, this number is approaching 1.8 trillion.

The Federal Reserve has more than doubled the money outstanding over the last year. It already happened. Stop worrying about what Obama's budget might do to the money supply 10 years from now.

Did you see the inflation?

http://www20.wolframalpha.com/input/?i=cpi