'German companies are at home in Alabama'

Luxury in Alabama?

What do BASF AG, Degussa AG or Mercedes-Benz all have in common? Firstly, they are all German brands, and secondly, they are all produced in Alabama.
Recently, another luxury automotive brand, ThyssenKrupp AG, has decided to shift production facilities to the U.S. by building a $3.7 billion steel plant near the gulf of mexico. Already, the state of Alabama boasts 50 German industries that employs more than 12,000 workers in industry. So what is so great about AL in the first place?
"We see many similarities between Alabama and Germany," spokesman Christian Koenig said. "Generally speaking, both Germany and Alabama are great places to do business. More specifically, both have a well-trained work force and a strong work ethic." The same spokesperson also mentioned how the strong German prescence in the state helps to draw more companies there. "It becomes a quality-of-life issue, Germans are respected (in Alabama). You can feel it."

Before reading this article, I really had no idea Mercedes (or other German luxury cars) were being manufactured right here in the U.S. Even though a spokesperson commented on how AL was "a great place to do business" I still don't understand what could draw so many foreign car companies into the state. According to the article, Mercedes was the first German company to do so, and perphaps the company's success has drawn in more foreign companies over the years. Also, it is reasonable to assume that producing cars in AL is substantially cheaper than in Germany. What other factors could possibly attribute?

women, speak up!

"One reason for pay gap: Women don't speak up"

TAKEN FROM: http://www.msnbc.msn.com/id/18418454/

Why is the pay gap between men and women still prevalent within today's society?
This editorial article reveals several reasons as to why the gap has been so persistent, namely due to men typically being more assertive in wage issues with employers than women. For example, a recent women's business magazine found that half of 2,400 women surveyed did not ask for either a raise, additional benefits, or a promotion within the last 12 months. When one major aspect of negotiation is being able to promote oneself, here is where the majority of women end up.

John McKee, business author claims, “There is no doubt, women are less inclined to self-promote, and they’re more likely to accept what they’re offered." So why is this passiveness on women's part occuring in the first place? “Our society teaches women not to negotiate. We get these messages from the time that they are born. We tell girls to wait for things to be offered and not to rock the boat. We teach boys to go out there and be aggressive, to go after what they want., says Carnegie Babcock, author of " Women Don't Ask: Gender and the Negotiation Dividie.”

According to a report by the American Association of University Women Educational Foundation, women earn 80% compared to male colleagues after one year of graduation and 69% ten years or after graduating.

After reading this article, I wasn't surprised men's and women's level of financial assertiveness can be taken into account dealing with the gap in gender payrolls. Generally speaking, women who are assertive in the workplace tend to be better payed and have greater job satisfaction in their careers. Therefore, it makes sense why men in this case would be payed slightly higher as compared to women (not saying this is necessarily right). The article mentions ways in which this payroll disparity can be solved, mainly by making workplaces more family friendly and combating sex discrimination issues. Although this would greaten equality, will the differences in men's and women's incomes ever fully be solved? Or will women merely need to enhance their assertiveness in the workplace in order for change to occur?

oh yeah, it's still on...

"Russia Challenges the U.S. Monopoly on Satellite Navigation"

TAKEN FROM: New York Times, http://www.nytimes.com/2007/04/04/business/worldbusiness/04gps.html?ex=1333339200&en=d9fb675674c894aa&ei=5088&partner=rssnyt&emc=rss

Even though the Cold War can be considered "officially" over, Russia and the United States are still competing over "space supremacy" and satellite navigation technology. With the great demand in the last decade for GPS technology, Russia, along with China and the European Union are competing with the U.S. for rights of navigation technology. By the end of the year, Russia hopes to rival the U.S.'s current system by launching eight navigation satellites that would complete "Glonass," Russia's first Global Navigation Satellite System (GNSS).

Currently, the U.S. has a natural monopoly over satellite navigation as the technology is controlled and operated by the U.S. military. Russia is able to send signals by using their own satellites, but work only in stages and are not as effective as an operational system would be in the long-run.

So why the need to break the monopoly in the first place? For starters, GPS's beneficial uses are ever-increasing and should be controlled by more than one political entity. GPS today is able to assist in agriculture and banking operations, military efforts, as well as a host of other operational uses. Andrei Ionin fom the Russian defense ministry proved the need for navigation technology by stating, "In a few years, business without navigation signal will become inconceivable. Everything that moves will use a signal-airplanes, trains, people, rockets, valuable animals and favorite pets."

Although the U.S. is not technically discouraging entry into the market (Ronald Regan during the Korean Air flight wanted to make GPS available to the average civilian throughout the world), what statement are we making by being the only country controlling this technology? We are by far not the only country benefiting from GPS, so why are we the only ones controlling it? If the U.S. really wanted to, couldn't the military just switch or alter navigation signals in a time of crisis? Interesting thing to think about...

Girl, your marginal benefit is far greater than your marginal cost

TAKEN FROM: http://www.infernalramblings.com/articles/Economics/143/

Okay, so I was looking for econ articles online a few weeks ago and came across this "Econ love song" I guess you could call it. I don't know why I find it so funny, maybe because I'm a nerd. Just read first and then look below...


Girl, being with you has always been so tough
With each passing minute, your marginal cost goes up
But my love is inelastic and it all belongs to you
I’m the only love producer, and my good is for you to consume

Because girl your marginal benefit far outweighs your marginal cost
Without our equilibrium baby, you know I’d be lost
Trapped inside this market I need you, to buy my love
Girl without your complementing goods, I’m not enough

Now you say that I’m producing, below my ATC
But I’m optimizing quantity baby, why can’t you see?
We could share this surplus, each and every day
If you would just buy my love, I’ll make my fixed costs go away
Baby I want to keep you for the long run, Oh yeah
I think our supply and demand, will become one…

Because girl your marginal benefit far outweighs your marginal cost
Without our equilibrium baby, you know I’d be lost
Long run equilibrium is no place for me
I need the profits of our love, to grow exponentially.


Pretty creative, eh? The site I linked isn't from the actual writer of the song, but there is another person giving an analysis of the inaccuracies of the lyrics (there's quite a few). For example, the analysist points out that love cannot technically have a marginal benefit or marginal cost due to the fact it can't be considered a "good."
Another funny point he brought up was how the love betweeen the couple can't be considered an actual free market with equilibrium because there is only one producer (boyfriend) and one consumer (girlfriend), technically making their relationship a monolpolistic, with the singer needing his girlfriend to buy his love rather than wanting it.

Can anyone figure out what's wrong with the line "Now you say I'm producing below my ATC, but I'm optimizing quantity, baby, why can't you see?" The answer is on the site if you can't figure it out.

Caribbean accepts Banana Tariff

TAKEN FROM:
http://www.bbc.co.uk/caribbean/news/story/2006/11/061109_bananatariff.shtml

A tariff imposed on Latin American bananans to the Caribbean and European Union seems to be doing its job after being implemented one year ago. A group from the EU and African Caribbean Pacific group is currently meeting to review a new tariff structure that will charge $225 U.S. dollars/tonne for Latin American bananas. EU officials claim that the newly implemented tariff system had increased banana imports into Europe and "had ensured a regular supply from ACP countries." Latin American producers are still opposed to the $225 U.S. dollar duty they must pay on exported bananans, but are in current negotiations with the EU to reduce the price.

"I think the tariff is just about adequate, because both the MFN (most favored nations) countries and the ACP varying degrees have been able to increase their exports to the market. So that suggest that the balance is probably just about right..." said Bernard Cornibert, banana official and head of the Windward Islands Banana Development and Exporting Company. Prior to the tarrif one year ago, Caribbean states were actually arguing for an even higher tariff, as they claimed imported Latin American bananas were diminishing their market share.

For Caribbean states, the implemented tariff actually strenghtens their economy because domestic producers are no longer competing against foreign producers (latin american). Bananas are also a vital part to the Caribbean economy, and the tariff keeps small family operations in business as well. The same situation could apply to any domestic producer facing foreign competition. Most often, these groups will be the ones to push for higher tariffs and quotas due to the fact both of these raise the domestic price and are good for business. After reading this article, it made me wonder if we had the same situation for imported bananas in the U.S.. Granted, the state of Hawaii does not produce enough bananas to support the U.S. population, but what would happen if Latin America and the caribbean had severe crop losses (from a hurricane let's say)? Would the U.S. be forced to import bananas from the ACP African nations?

Valentine's Day Economics

What it Costs to Say ‘Be Mine’

Taken from:
http://www.msnbc.msn.com/id/17075025/

This article, taken from MSNBC attempts to explain the economics of the ever-so-popular holiday taking place in a matter of days; no other than Valentine's Day. Consumers this year are expected to spend an average of $120 this year on Valentine's, up from a substantial amount last year when the average was a cool $101. Men, overall will spend an average of $154, while women will spend only an average of $85. If these figures surprise you, it is shocking to think that in the U.S. alone we spend $16.9 billion on the holiday annually. V-day is a huge business for companies such as 1-800-Flowers, Hershey's, Tiffany's, and Hallmark, that make a large percentage of their profits in the month of February. An increase in consumer spending by young adults ages 18-24 can be a contributor to the recent trends in the last several years. Phil Rist, a strategist at BIGresearch claims this is due in part to the children of baby boomers who are now at the age of marriage consideration, and also the recent trend of couples spending Valentine's evenings out, instead of merely getting a gift for one another (all in all, this tends to be a more expensive option).
The whole holiday of Valentine's Day has a lot to do with supply and demand. For example, as Rist mentioned the number of young adults has increased, this has led to an increase in the number of consumers on the market, thus increasing demand for Valentine's Day products. Also, since the holiday is celebrated on the same day worldwide (considering world population is continually rising), this also increases demand. Taking the increasing number of consumers along with the other determinants of demand, it is no wonder why floral companies raise their prices close to February 14. It is not because they are necessarily trying to rip you off (although it is possible there could be a few of these sketchy operations around), but rather it's simple supply and demand. Too many people wanting too much of the same service or good at the same time. On the supply and demand graph, the area below equilibrium occurs if there are shortages, and in turn this causes businessses to increase price in order to gain profit due to resource scarcity.

Is anyone shocked by the fact that the average American spends $120 on Valentine's Day? I realize this is a pretty big holiday to a lot of people, but still, this estimate seems a little high. I thought that overall, people are having a decreasing amount of dispensable income due to increasing health care costs, but I suppose Valentine's Day doesn't really concern the elderly for the most part. Happy Valentine's.

"GM, Ford Post U.S. Sales Drops on Cut in Rental Sales"

From:
February 1, 2007

Article from Bloomberg:
http://www.bloomberg.com/apps/news?pid=20601103&sid=axcJdEYNcsY8&refer=us

In January GM and Ford sales plummeted, Ford falling 19% and GM 17% in a single month alone. The outrageous decrease in sales has led both companies to once again cut North American production once, for a combined total of 28 plant closings between GM and Ford. One strategy of both companies is cutting back sales to rental companies, such as Hertz and Avis to try and diminish the number of used cars being sold after the cars have been used for several years. Automotive analysist John Casesa claimed "...these are low margin sales. Those cars go to Hertz and Avis, then come back and wind up as used cars, undermining the selling of new cars." Which leads to the question, what are GM and Ford to do? First off, GM is cutting rental company sales 40% from 90,000 cars/year to 56,000 cars/year, and Ford is folllowing suit by cutting the sale 175,000 cars.
With a continually shrinking consumer demand, it is not enough for GM and Ford to benefit from limiting their sales to rental companies. To me, this is a dire situation that can only lead to both companies limiting their output and closing plants and laying off workers. When they do, it will only increase the demand for foreign vehicles (such as in the past ten years) until U.S. car companies are deemed unprofitable. This article reminded me a lot of one of the sample problems when we were studying comparitive advantage between countries. Which leads to the question, if no one wants to buy U.S. cars, why are we producing them still? and why is our country so bent on preserving the historical integrity of these companies when there's no profit to be made in producing them?