Spirit airlines finally took the plunge, charging up to $45 per carry-on. Now I know, here it comes the OUTRAGE from passengers, but before you start picketing, Spirit said they lowered most fares about $40, so in reality they are charging an excise tax to prevent you from taking on your bag, which seasoned travelers will love. In addition, diaper bags, books or a small bag that can fit under your seat is exempt (you can calm down power users)

Excise taxes are great. Much like taxes on booze and cigarettes, they persuade you to use less of a product or service by making it more of a financial burden. If the risk of cancer wont make you quit, perhaps a shocking price tag will.

So what does this mean for air travel? I hope every airline does this. Lower the ticket price by the cost of the “tax” and force people to prioritize their needs and check that bag. Let’s keep those overhead bins wide open, and if I get the opportunity I will certainly fly Spirit airlines.

Yeah..Keep Stuffing. THAT will work.

Ben Scott, the policy director for Free Press stated” This decision destroys the F.C.C.’s authority to build broadband policy on the legal theory established by the Bush Administration,”

So… What’s that mean for us (I’m a Comcast user) – It means that ISPs now have even more control. Comcast could at anytime make a pyramid of net users, each with a different price, you like watching HULU? You might be paying more- god forbid you read a book over at Gutenberg.org – that free book just cost you money. With the highly intensive applications hitting the net; what’s a lowly consumer to do? In terms of economics, Comcast is thinking about the bottom line, what they are NOT thinking about is the consequence. Some enterprising company will make out due to this and start offering an “unlimited” plan for internet, then throw in a price war and ISPs are the new cell phone industry.

In somewhat positive news, Google and Microsoft are outraged, two giants I wouldn’t want to wake up, they claim that this action is limiting innovation. With Comcast being one of the biggest media companies around, it should be an interesting battle. Whatever the outcome, I just hope I don’t have to start searching for those free AOL cd’s to keep writing here.

You've Been Screwed!

The answer is not much.

It did not end the government-sanctioned monopoly that the health insurance industry enjoys (and the MLB, those bastards).  It did not take significant power away from insurance companies (it could be argued that this law actually BENEFITS the industry by forcing people to buy insurance).  It did not create a government run health care program, separate from the private sphere.

It DID “give” (make people buy) health insurance.  It DID impose new regulations on insurance companies that were viewed as “ruthless” (pre-existing conditions, age limits, etc.).  But these old practices, now outlawed, were just good business practices for a profit maximizer, but really really bad for the public in general.  That’s what the government’s regulatory role is: to reap the benefits of the free market, and outlaw the ugly tendencies of capitalism.  (It should be noted we DON’T know what the free market would do with these bad practices in this case, since this is a oligopolistic structure).  It should be noted that financial regulation is a great analog here:  if activity is lucrative AND legal, but harms the public at large, it will be widespread (re: financial meltdown).

Why is policymaking so impotent to solve major problems?

The United States Congress is overrun with lobbyists and special interests.  Health care was watered down significantly to pacify Congress’s corporate overlords, and financial reform is toothless.  Again, very simple:  the political system has evolved to require candidates to fundraise with the help of corporate sponsors.  With the new SCOTUS ruling (Citizens v United), corporate speech is more powerful than ever.  Political influence is a zero sum game, the more profit maximizers have, the less the general public has.  Politicians are supposed to be looking out for the public good, not maximizing profits….

steeeeerike.

Speak up...Congress Cant Hear You!

President Obama made a speech saying that the passing of this bill showed that government for the people, by the people still worked. Funny…no one EVER asked what I wanted.

the crazy holiday season in full swing time is a little tight. Dennis and I promise to get back on it

in the new year. We want to wish you and yours a happy holiday season and we will see you in the new

year!

has a clear cut opinion…maybe. This week the justice department made a huge announcement giving more

power to states in terms of medical marijuana dispensaries. The DOJ stated that as long as these

outlets were following state law, they would pretty much stay out.

With that news states like

California and Colorado have had a surge in interest in the legalization of the drug. These states

already allow marijuana for medical purposes and hundreds of dispensaries are popping up throughout

the states. A recent New York Times article detailed how the marijuana movement is starting

to gain some clout in the political circles. One group has obtained over 300,000 signatures

supporting a bill that would legalize marijuana.

Let’s take a look from an economic

perspective. Currently, the United States Federal government classifies marijuana as an illegal drug.

As with anything illegal, someone will provide it. Recently Mexican drug cartels have invaded our

nations national forecast, setting up huge grows deep in the woods. These is a major problem here in

Colorado, and imagine your surprise as on your Sunday hike you run into armed Mexican Mafioso- not

good. The government spends and estimated $17 billion annually on fighting the drug trade, with

marijuana being one of the more used drugs, one can assume the cost of this “war”

Now I know

what you’re thinking – yes its bad for your health, yes- driving under the influence is bad- but so

is alcohol and tobacco. Both of these vices provide substantial tax dollars. With a pack of

cigarettes pushing $10.00 in NYC, imagine the price people would pay for legal, pre packed marijuana

cigarettes! By legalizing the drug that nearly 45% of the population has used at least once, we could

eliminate the marijuana drug cartels and their profits would fall out of the market, increase tax

revenue, and save billions as the US marijuana drug trade ceases to exist.

Many are worried

about the effects, here in Denver, the city is allowing medical marijuana dispensaries. A recent

Denver Post article interviewed one owner. When posed with the accusation they would be “bad

neighbors” to the business district they stated they were installing all new lights, benches, fixing

the sidewalk and most immortally “paying a lot of taxes”

This debate will surely fire many up,

and be drawn out, but maybe its time to take a cost benefit analysis, spend our tax dollars on real

issues – and hey…maybe even relax a little bit.

seen by many as a milestone. It is good news…right?

Maybe. Big earning reports were due from a

few major banks. It was discovered that Goldman Sachs and JPMorgan Chase were doing quite well.

But, not by traditional banking ( e.g. like lending to people and businesses), but by taking risks in

trading securities and sophisticated market transactions. According to the New York Times, they

could take such risks because they had Bailout money buttressing them every step of the way. Banks,

like Bank of America, that do more consumer/business lending, reported bad numbers. This is a big uh

oh moment for the efficacy of the “Bailout.”

Finance, like any other business, is completely

self-interested. Using words like “greedy” are meaningless when describing corporations. Goldman et

al. have an incentive to do whatever brings in more profits…and if that’s shunning “good” lending

at the expense of society…well…so be it. This is no place to discuss the oxymoronic phrase

“business ethics,” but rather a time to remind ourselves what business (and finance) do…maximize

profits. period.

the recession is “over.” Even Bernanke cautiously stated that it was “very likely” over. But what

does “over” mean?

I assume this means economic expansion, rather than continued

retraction….which doesn’t mean much. Economists like Paul Krugman have said that recessions

caused by financial crises lead to long-lasting damage…the recovery from which may not let the

economy “break even” after cyclical swings. Analogically, it is like surviving a shark attack where

one of your limbs was bitten off. The doctors may declare that you are starting to “recover,” but

that doesn’t mean your getting your leg back…sorry dude.

Sciences today as the Nobel Prize for Economics was announced. Dr Elinor Ostrom, professor at Indiana

University was awarded the prize earlier this morning. Dr. Ostrom is the first woman to receive the

prize since its inception in 1968. Dr. Ostrom, along with her co-prize winner Oliver E. Williamson,

has done extensive research in the field of economics pertaining to the idea of the

commons.

The commons in economic terms refers generally to a shared resource that no one

entity can claim as their own property. An easy example is clean air. No entity owns the air, nor can

charge for using the resource. The commons often gets cited in referenced in terms of the tragedy of

the commons, where the resource is exploited due to its lack of ownership.

Dr Ostrom has

applied these theories to work in economic governance in relation to natural resources. Dr. Ostrom

has published multiple works on how humans interact with the natural world and have created

institutions to protect these common resources. Her work has changed the way private institutions and

governments look at their use of these common resources.

Razornomics would like to

congratulate Dr. Ostrom and Dr. Williamson on their extraordinary achievement.

style="text-align: center;">

target="_blank">More information on Dr. Ostrom

Oliver Williamson and Elinor Ostrom

until the following things are fixed/addressed:

1) Around this time last year (October 2008),

Paul Krugman started to warn about the dangers of the US falling into a Liquidity Trap. In short, a

Liquidity Trap occurs in an economic recession when a monetary policy maker is trying to patch things

up by cutting rates…and cutting rates…and cutting rates…until finally the rate is close to 0

and there is no where else to go! When this happens, the government has tied its hands monetarily

(for the most part). What then? Move to fiscal policy (aka government spending). If that doesn’t

work? Pray. This is basically the situation in the US right now. The official position of the Fed

as of today is rate will be “exceptionally low” for an “extended period of time” (NYT).

2) I

recently went to a presentation by the “Federalist Society” at law school. The speaker, a visiting

professor from Kansas, described the moral hazard of bad lending/ finance as “Heads I win, Tails

someone else gets stuck with the bill.” (meaning the US government). Under these chances, who

wouldn’t take unbelievable risks? THEY COULDN’T LOSE. When understood that way, its not that hard

to grasp. I like to call it the “Win-Whatever” problem.

3) Also attributable to that speaker

is the broken fractional reserve rate. Basically, this rate dictates how much a bank needs to have

on hand in relation to the loans it makes. I believe currently the rate is somewhere around 10%.

Maybe this rate needs to be raised to 25% or 50% to make banking less inherently risky…and tighter

regulations on securitization of loans (aka chopping up my loans into itsy bitsy pieces and selling

them) wouldn’t hurt either.

So…does this mean more regulation is the answer? No, not

necessarily. I am sure there are many ways to fix these problems that require cutting rather than

adding. Either way, the problems have yet to be seriously addressed.