FT.com / Asia-Pacific / China – Beijing rejects North American pork

Here’s a follow up to the previous post about China’s attempt to keep inflation low by clamping down on rising prices through price controls. The main cause of the record inflation figures is the shortage of pork in the country. This headline’s irony was obvious, only a few articles below the one linked in the last post!

Here’s the thing; pig shortages have driven up the price of pork by around 60-70% in China. What’s one obvious solution to this problem? Import more pork from overseas to meet the excess demand. So, what’s the government doing about it? Playing politics with the US and blocking imports of American pork! Ha! Looks like their concern for the common Chinese may take a backseat to the retaliatory message sent to the US, which has recently threatened new tariffs on Chinese goods in the wake of concerns over product safety and frustration over the persistent trade imbalance between the two countries.

Beijing has rejected consignments of pork from the US and Canada because they contain a banned additive – in spite of a domestic shortage of China’s staple meat, which pushed inflation to a
10-year high in August.

Again, China’s meddling in the market economy seems to only make things worse for the Chinese people.

Chinese officials have said they expect the pork shortage to remain a problem into next year, but prices have already started to come down from their August high, Xinhua, the official news agency, reported at the weekend. Prices decreased by 11.3 per cent in early September from the levels in August because of an increase in supplies of pigs, Xinhua said.

The number of pigs ready for sale was up 9.9 per cent early this month compared with a year ago, said Sun Zhengcai, the agriculture minister.

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Semester 1 Microeconomics Podcast Assignment – Welker’s Wikinomics Page

Hello readers, I have some exciting news for the future of Welker’s Wikinomics Blog. This last weekend I attended, along with about 450 other teachers from all over Asia, the Learning 2.0 Educational Technology Conference here in Shanghai, at which I participated in several workshops aimed at furthering our integration of technology into learning environments. I also presented a workshop myself on the use of wikis to enhance student learning.

I was blown away by the enthusiasm of teachers from pre-K to grade 12 for the potential uses of wikis. Our own wiki, Welker’s Wikinomics, has grown rapidly this year and is now ranked 47 among Wetpaint’s 516,000+ wikis. My eager and hard working students deserve the credit for our class wiki’s success!

A couple of the workshops over the weekend focused on the use of podcasts in the classroom. This got me thinking about how we could harness the podcast in our economics class. After a few discussions with fellow teachers, I have designed a research project for AP Econ students through which they will create a podcast of a story connecting the content learned in class to current events selected from the news media. Details of this research assignment can be viewed here.

Students, you should follow the link above and read the assignment carefully. Once you’ve chosen a partner, you should sign up as soon as possible on the podcast assignment sign-up sheet. This project has replaced the article commentaries that last year’s AP students wrote and submitted during first semester.

Once stories have been submitted, they will be “podcasted” through this blog, on the wiki, and even through iTunes, where they will be available for download by anyone in the world to listen to and enjoyed. At the bottom of this post is an example of what your podcasts will look and sound like once they’re posted to the blog.

There are a few other exciting new features on the blog for students and readers to enjoy as well:

• Reader comments now include a short extract on the left toolbar. If a comment sounds interesting, you can click on the commenter’s name and read the whole thing.
• Social bookmarking buttons have been included with each post, so you can save and share the posts you find interesting through any number of social bookmarking services.
• An Amazon.com book list has been included on the left toolbar, with images of and links to some of my favorite economics books, as well as a few AP Econ study guides for you to consider as exams approach.
• Comments can now be made on posts using your voice! Yes, you can either type and submit your comment, or you can record your comment (must be 30 seconds or less) for others to listen to right on the blog. I encourage you to experiment with this cool feature!

I will continue to improve and expand Welker’s Wikinomics (both the wiki and the blog). In the meantime, we here in Shanghai are preparing for Typhoon Wipha, supposedly the biggest storm to hit the city in a decade. Around 3 am tomorrow they’re anticipating winds of up to 200km/hour to hit the city. School has been cancelled… hopefully that means more time for blogging!

Example of a Podcast from Mr. Welker [ 0:01 ] Play Now | Play in Popup | Download (1)

The price of sperm | Free exchange | Economist.com

What are sperm banks thinking? This reflective post from Free Exchange takes an economist’s look at the market for donated sperm, where only recently have sperm banks been charging interested mothers an additional fee for the sperm from PhD holding donors.

Here’s the thing, if mothers are willing to pay more for the higher quality DNA within a PhD’s sperm, wouldn’t they also be willing to pay for other qualities as well?

For example, should donors be compensated extra for every inch of height? Or for being fine featured? And what about athletic prowess? Surely some donors are more popular than others—and thus their sperm should exhibit greater scarcity and desirability. Why does the market not price that?

It’s a great question, and one that relates to the interaction of supply and demand in the marketplace. The fact is, sperm banks are not following the rules of supply and demand in the prices they charge mothers and their payments to donors.

…perhaps more accomplished donors would step forward if they were compensated more handsomely for their achievements. More aggressive bidding for sperm could raise the quality of donors, leading to more options for customers, and—who knows?—more talented children.

If prospective mothers really value certain qualities over others, why wouldn’t the market for sperm reflect those values? Perhaps sperm banks have something to learn about basic economics!

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Environmental Economics: Someone’s been drinking a little too much of the Kool-Aid

Professor Tim Haab of Ohio State University and author at Environmental Economics Blog made a post the other day titled “Someone’s been drinking a little too much of the Kool-Aid”. Apparently he thinks that what high school students in Shanghai drink for fun (do you?) because he was talking about us. Yes, here’s Professor Haab’s words:

“AP Economics students at the Shanghai American School are pointed to the Blogs of America’s Leading Economists.  The only reason I’m pointing this out is because we are listed before Greg Mankiw, Marginal Revolution and Freakonomics…cool. Click the thumbnail for proof–in case they decide to change the order once they realize their obvious oversight.”

Apparently the fine professor is flattered yet confused about the fact that on our Wiki’s student resource page, I have listed his blog ahead of that of Havard’s Professor Makiw and Steven Levitt of “Freakonomics” fame. This is no oversight, Professor Haab. Perhaps his preferred position is based on my own interest in environmental economics and the fact that his blog serves a very important role in raising awareness of the environmental implications of our rapidly growing global economy.

He shouldn’t be flattered, just aware that his words are being read and appreciated by young economists like yourselves, as is evidenced by the several posts on our own blog linking to Dr. Haab’s articles on the Environmental Economics blog.

Anyway, just as he’s flattered at his own position on our Resource Page, I’m equally flattered that he somehow found our wiki and commented on it on his own widely read blog! Thanks for the plug Professor Haab!

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Revenge of the Frosh-Seeking Robots — The American, A Magazine of Ideas

So this article jumped out at me for a couple of reasons. First, it makes this somewhat startling observation:

…elite schools are reporting that the number of economics majors is exploding. For the 2003–2004 academic year, the number of economics degrees granted by U.S. colleges and universities increased 40 percent from five years previously. Economics is seen by bright undergraduates as the path to a high-paying job on Wall Street or at a major corporation.

A 40% increase in the number of econ majors is incredible! I don’t know whether to be flattered that so many young people find the field interesting or frightened that in a few years there will be tens of thousands of fresh, eager economists out there on the job market, against whom I’m sure I’ll end up competing for jobs in economics education!

Besides the impact on the job market for economists, this article really focuses on the decline in numbers of computer science majors, and describes Microsoft’s plan to make the major more appealing to bright freshman once more.

The number of smart kids studying computer science peaked a few years ago and has dropped dramatically since. The number of new computer science majors today has fallen by half since 2000, according to the Higher Education Research Institute at UCLA.

Think of the market for computer scientists and the market for economists. What impact do the above data have on these two job markets? What do you think will happen to the wages paid to economists in the next four or five years? What about wages paid to computer scientists? In which market would you predict a shortage? A surplus?

In an attempt to make computer science more exciting for incoming freshman, the brains at Microsoft have piloted a program to give every freshman who studies comp sci their own pet robot:

Research formed a partnership with Bryn Mawr, the venerable liberal-arts women’s college near Philadelphia, and Georgia Tech, a traditional technical university. The three jump-started a $2 million pilot program called the Institute for Personal Robots in Education that is developing an easily programmable tabletop robotic device to introduce to first-year computer science students.

The prototype I saw in May looks like a miniature space-age chariot, with two wheels and a Bluetooth wireless receiver on top. The developers want to keep the cost under $200 and offer it in college bookstores with a first-year textbook.

Within the first weeks of a class, students will be able to write elementary code that prompts the robot to do simple tasks like drive forward or back. But even simple code-writing with immediate, physical results like this can have an impact that energizes students. Or so it is hoped. Eventually, students can write more complex code—programming their personal robots to emulate a moth.

Do you think this pet robot program will lead to more comp sci majors? What are you thinking of studying in college? Why might economics be a bad choice right now? (Did I just say that?!)

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From the Undercover Economist:

FT.com / Weekend columnists / Tim Harford – Dear Economist

Is there a relationship between a student’s decision of whether to have sex and his/her performance in school? Tim Harford finds there just might be.

There is little doubt that virgins achieve better grades. Yet is this because sex kills brain cells, or because kids who are already bored at school look harder for ways to amuse themselves?

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BBC.co.uk – News – Science/Nature – “Brits ‘adicted’ to cheap flights”

As we continue to learn economics, you’ll begin to realize more and more how important this field is to truly understanding how things in our everyday lives work. For example, how will people respond to the increase in a product’s price when the government places a new tax on the product?

Chapter 18 of our text discusses the implications of price elasticity of demand on governments’ decisions of what types of goods to place excise taxes on. Given an understanding of PED, we as economists understand that taxes will earn the most revenue for a government when placed on goods for which the PED coefficient is less than 1. In other words, revenue seeking governments should tax products for which demand is highly price inelastic, and avoid taxing products for which demand is highly price elastic. This just makes sense: when the price of an inelastic good goes up, consumers will respond very little, while an increase in the price of an elastic good will scare away a relatively large number of consumers, meaning a decrease in total revenue (tax revenue in this case).

In addition to elastic and inelastic price elasticity of demand, we also discussed today the theoretical existence of products for which PED is perfectly inelastic. In the article linked above, geographers from the University of Exeter in the UK share findings from a study that seem to indicate that PED for air travel in the UK is perfectly inelastic:

“The government raised air passenger duty in February, and the European Union is set to include aviation in its Emissions Trading Scheme (ETS), which could increase costs further.

But the Exeter research suggests price hikes would have a minimal impact.

‘We found that flying is quite embedded in peoples’ lifestyle choices,’ said Stewart Barr from the university’s Department of Geography.

‘And it’s not people on lower incomes taking these flights, it’s middle class people taking more flights to go on city breaks, and they can afford to pay higher prices.’”

According to the Exeter geographers, because “flying is quite embedded in peoples’ livestyle(s)…” the increase in price resulting from the new taxes should have “minimal” impact on air travel. When most people say “minimal”, what they are implying is “none”… in which case we as economists can translate the geographers’ statements as thus: “the price elasticity of demand for air travel in the UK is zero (or darn close to it!)”

Could this be true? Do you think air travel has a PED of zero? If so, what are the implications for airlines? What are the implications for travelers? Could the geographers be wrong? What about air travel makes demand for it so price inelastic? Discuss!!

Hat tip to Professor John Palmer at EclectEcon for the link to this article.

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Managing Globalization » Business Blog » International Herald Tribune » Blog Archive » China takes to the skies

and the full article: China hopes a homegrown regional jetliner can challenge Airbus and Boeing – International Herald Tribune

Here’s another great example of a market that is set to experience a serious change in the near future. The oligopolistic market for “regional jets”, long dominated by two firms, is set to see the entrance of a new manufacturer. From whence doth the new bird fly? From the far East, no less…

“After a couple of false starts, the Chinese commercial aircraft industry may finally be getting off the ground. Starting next year, the prosaically named China Aviation Industry Corporation 1 plans to offer a regional jet that will compete directly with the two dominant forces in the market, Canada’s Bombardier and Brazil’s Embraer.”

Without even reading the rest of this article, you should be able to picture what will happen in the market for regional jets once the Chinese planes start rolling off the assembly lines. This article will also prove relevant when we begin studying market structures. What are the effects of a more competitive market for regional jets?

“Consumers in the rest of the world could benefit, though. Moving from two companies to three in a growing market could bring aircraft prices down, and eventually airfares as well – especially if the Chinese company’s costs are lower.”

But what of the widespread concerns that have emerges of late about the quality of products coming out of China?

“…if China has to combat worries about product quality in areas like foods and toys, just imagine the hurdles it will face with a passenger plane. Those benefits could still be many years away, depending on how people perceive the new product. Would you fly on a Chinese-made airplane?”

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Mali’s Farmers Discover a Weed’s Potential Power – Sept 6, New York Times

Can it be possible that a new use for an old weed could change the economic health of a nation and at the same time defy the law of opportunity costs? In Mali, farmers are choosing to plant more of weed called jatropha becuase it can now be turned into biofuel. It is a unique plant in that it needs marginal soil and requires little fertilizer. In class we have talked about how discovering a new resource can cause economic growth, how this can shift the PPC curve. But, can a country actually get the benefits of using this new resource with out any opportunity cost? Is what is happening in Mali an example of economic development or economic growth in the first place? Is this a supply or a demand issue?

But now that a plant called jatropha is being hailed by scientists and policy makers as a potentially ideal source of biofuel, a plant that can grow in marginal soil or beside food crops, that does not require a lot of fertilizer and yields many times as much biofuel per acre planted as corn and many other potential biofuels. By planting a row of jatropha for every seven rows of regular crops, Mr. Banani could double his income on the field in the first year and lose none of his usual yield from his field.

You be the judge of why Mali is making the decision to produce more jatropha. Is this a case for demand or supply? Which curve would shift? Which determinant is causing this shift?

But here in Mali, one of the poorest nations on earth, a number of small-scale projects aimed at solving local problems — the lack of electricity and rural poverty — are blossoming across the country to use the existing supply of jatropha to fuel specially modified generators in villages far off the electrical grid.

“We are focused on solving our own energy problems and reducing poverty,” said Aboubacar Samaké, director of a government project aimed at promoting renewable energy. “If it helps the world, that is good, too.”

This is very interesting information for you to consider as you are wondering about environmental sustainability, a real life economic issue.

Jatropha’s proponents say it avoids the major pitfalls of other biofuels, which pose significant environmental and social risks. Places that struggle to feed their populations, like Mali and the rest of the arid Sahel region, can scarcely afford to give up cultivable land for growing biofuel crops. Other potential biofuels, like palm oil, have encountered resistance by environmentalists because plantations have encroached on rain forests and other natural habitats.

But jatropha can grow on virtually barren land with relatively little rainfall, so it can be planted in places where food does not grow well. It can also be planted beside other crops farmers grow here, like millet, peanuts and beans, without substantially reducing the yield of the fields; it may even help improve output of food crops by, among other things, preventing erosion and keeping animals out.

So try to apply what you have learned about opportunity costs, economic growth and development, as well as supply and demand and analyze these economic events in Mali. I look forward to your comments

Vindy.com – Ethanol affects price of pork, China’s staple

What does the biofuel we put in our cars have to do with the meat we eat with our noodles and rice? Economics has an answer to this question! This week in AP Economics we learned that market supply of a product is determined not only by the price of the product but also by several “non-price determinants of supply”. To help remember these we learned an acronym:

S- subsidies and taxes
T- technology
O- other related goods prices
R- resource costs
E- expected future prices
S- size of the market (# of firms)

The article above talks about the relationship between the demand for ethanol, which is a corn-based biofuel being manufactured in record quantities all over the world, and the price of China’s staple protein source, pork.

Read the article, and discuss which determinants of supply are being affected, and describe the impact on the pork market (think of the supply and demand curves and equilibrium price).

Discussion Questions:

1. As the price of pork goes up, what do you think is happening in the market for substitutes in consumption, such as chicken?
2. How will the rising pork prices affect demand for chicken?
3. Assuming that pork and chicken are also substitutes in production, how will the changes in the pork market affect the supply of chicken?
4. What can we expect to happen to the price of other related goods as pork prices continue to rise?

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