Archive for Economics
Free trade can be a wonderful thing. Two parties, engaging in free trade with one another, both wind up richer.
The idea behind free trade is that tariffs/duties are reduced to zero. Countries import and export without restriction.
Free trade works because of something known as comparative advantage. A country enjoys a comparative advantage in something if it can produce it at a lower opportunity cost over another country. Look at Japan. This is a country which has built up its economy by mimicking and improving on the innovations of others. Japan, if it so chose, could produce high quality textiles as well as cars and other high tech. But its opportunity cost in producing cheaper textiles is high; for every resource the country devotes to textiles, it will have less to produce cars and other higher value tech equipment. So Japan chooses to channel most of its resources into the higher value stuff and import the cheaper textiles from lower wage countries like India and Bangladesh.
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Way back in 2003, while walking along a semi-deserted beach with some rustic resorts outside Cancun (Mexico), my brother remarked that in the future, travelers would be willing to pay a hefty premium to stay in simpler places.
Sounds strange to say that. Usually, it works in reverse. At first, primitive bungalows are setup in a tranquil deserted locale, probably not even with 24/7 electricity. Frugal and/or adventurous backpackers take the plunge. As the serene area becomes better known, more affluent people journey in and new entrepreneurs establish more comfortable and pricier accommodation. Eventually, the resorts move in with their swimming pools, jacuzzis, and luxurious restaurants and charge premium prices.
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In Part I of this article, I articulated how the good old days are overly romanticized as being cheaper than they were. The illusion of cheapness comes from noting the prices as they were listed back in the so-called “good old days.” Once inflation and purchasing power are introduced into the equation, bargain basement list prices like 5¢ bottles of Coca Cola and $3 cases of beer can actually be more expensive than similar products today. Only cigarettes, with higher taxes levied on them since 1968; movie tickets, which are increasingly less relevant since we consume more high definition entertainment at home; and a child’s Disneyland admittance, an occasion most of us would rarely indulge in were cheaper in the past.
n point of fact, most of the items which count, the ones we define as life’s labor saving conveniences and pleasures, are cheaper now than they were in the past. In 2001, a state-of-the-art Sony VAIO PCG-SRX99 laptop computer with its 10″ screen cost $1,500 ($2,000 in 2014 dollars). That ‘powerhouse’ came with an 850 Mhz Pentium III-M processor, 256 MB of RAM, 20 GB of hard drive storage, and one USB port. Today’s finest smart phones are more powerful than this Sony laptop and at less than a third of the real price in terms of purchasing power.
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Who among us hasn’t ever heard a grandparent recount what is was like in the “good old days”? Things were simpler, better, and much, much cheaper.Didn’t you hear from your grandparents how it only cost US$0.05 for a bottle of Coke back in the day?
It’s difficult to debate what “better” means, as that amorphous word can take on a different meaning for every person. I’ll attempt to tackle that as objectively as I can in part two of this article. For now, let’s focus on something inherently more objective. Were the good old days really that much cheaper?
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Imagine you’re privy to a special deal most people don’t know about or have access to — say a coupon to dine at an elite restaurant for a group discount. The cost of a set menu, purchased on the premises as a walk-in, is $100/person. The special deal entitles the buyer to purchase tickets, in advance, for two set menus at a total cost of $200 and get two others in to dine for free.
We’ll say this restaurant is well known and highly regarded. Even at normal prices, you’d have no problem whatsoever asking three friends or acquaintances along and getting them to accept. That is to say, you know for a fact most anyone is willing to pay the $100 set menu asking price.
We’ll leave you with two options. The first: you tell the other three about your special deal of buy two, get two free. Everyone does the math and divides in four the $200 expenditure. You collect the $50 from the other three, add $50 of your own, and pick up the four tickets in advance. In this scenario, you reap the same rewards as everyone else in your dining party, which is the $50 savings. Perhaps you get some nods of approval from the other three, perhaps not.
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Donating to charity is a lot like exercising: everyone says it’s a good thing, though few people do it.
All the major religions endorse charitable giving. The Muslims practice zakat. Jews have a concept called tzedakah. The concept of tithing – giving away 10% of your wealth (however you define that) – comes from the Old Testament, but the New Testament, which Christians hold dear, has plenty to say about charity. Jesus supposedly said, “Give to the one who asks you, and do not turn away from the one who wants to borrow from you.” After the United States ended state support of churches in the early nineteenth century, passing the charitable plate around during Sunday worship became a morning ritual. Hinduism features ten niyamas, practices that every Hindu should ideally follow. The third is called dana or giving generously without thought of reward. Buddhism encourages the giving of something without expecting anything in return.
So the idea of donating to a charitable cause is ingrained into nearly all of us. We’re taught from a very early age that charity is good, almost an obligation.
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This must be one of the oldest questions in the book. If you had to choose between being famous or wealthy, which would it be?
Before you blurt out your answer, let me qualify what I mean by “famous” and “wealthy.” There are degrees of both. You might be a well known radio host in your local county, thus qualifying as famous, yet move 90 minutes outside that zone, few have ever heard of you. Being locally famous for this discussion does not count as famous. Famous for these purposes means that 20% or more of the people you’re ever likely to run into at random in your own country will recognize you and know who you are. Wealth needs to be quantified, too. Having enough cash in hand to buy a condo and rent it out doesn’t count as wealthy. Without trying to declare some fixed financial number, such as $4.7m, which others could debate really isn’t wealthy by their standards, let’s define wealthy as having enough money to take care of all your needs and physical desires within reason and without ever having to work again. Let’s not go to extremes with either. At the point of answering my question, you’re not so famous that nine out of ten passersby would stop you on the street nor so wealthy that Forbes is writing cover stories about you.
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You ever hear the story about the housewife who, every Thanksgiving, trimmed sizeable edges off the sides of the turkey before putting it in the oven to bake? One Thanksgiving her young daughter asked her why she was cutting away so much of the juicy meat, and all the housewife could say was that this was the way her own mother always did it to get a wonderful tasting turkey. So the young girl, not satisfied, asked her grandmother the very same question and got the very same response. Finally, the girl went right to the source and queried her great-grandmother. The greater grandmother’s answer: “Our oven back then wasn’t large enough for a whole turkey to fit.”
Recently, the Global Times in China printed an article about the copycat culture dragging down China’s IT revolution. Zhang Yaqin, corporate vice president of Microsoft, said that there wasn’t enough innovation going on. Only twenty percent were doing anything innovative, as the other eighty percent copied that twenty percent.
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[Read part one first to learn all about the basics of hotel mismanagement]
Hee Kyong and I walked to the police station around the corner to launch an official complaint. A Muslim Malay policewoman with a headscarf came with us to the hotel to see the security camera footage and hear out all the stories. Mgr and his Indian technical staff sidekick, known here as Indosafe, were willing to accept the staff’s inconsistent stories because the logs downloaded from our safe showed no entry between 10:06 and 10:11, the five minutes when Enjoymalay was in our room as we were at breakfast. Indosafe showed me the downloaded logs on a palm pilot. The night we checked in, there were a series of entries written as so:
18 December 2010 21:30:05 PIN Number set
18 December 2010 21:30:45 Safe closed
18 December 2010 21:31:08 Safe opened
18 December 2010 21:31:45 Safe closed
On the morning we were robbed there was only one entry:
19 December 2010 10:46:05 PIN code reset
I suggested the safe logs prior to 10:46:05 had been erased. Where were the records of us opening the safe before we went to breakfast? Indosafe and Mgr insisted that erasing the logs was impossible. You needed some master PIN, access to some server, blah blah blah. I went onto the internet as the police lady conducted her “investigation” to see if I could dig up any solid technical evidence about safe deposit log deletions but came up with nothing. Hee Kyong called her director of engineering in Thailand, but he couldn’t understand her request. Eventually, Hee Kyong brought one relevant matter to everyone’s attention, so simple I wondered why I hadn’t thought of it.
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My girlfriend Hee Kyong is a hotelier and currently works as a revenue manager for a five-star hotel in Thailand with an internationally renowned brand name. Before working in Thailand, she worked in Malaysia for another five-star hotel with an internationally renowned brand name. And before that, in Korea for one other five-star hotel with an internationally renowned brand name. I am not a hotelier, but I did attend a university that has an internationally renowned brand name and a hotel management program. Last week, I unexpectedly had a chance to be forcibly enrolled in a hotel mismanagement course in Malaysia at a three-star hotel with an internationally unrenowned brand name.
A few months back, Hee Kyong and I planned a 7-night vacation in Malaysia. Ever the boutique hotel bargain hunter, she sourced us a decent deal on three nights in the Cameron Highlands, a former British hill station; three nights in the Southeast Asian trading entrepot of Melaka; and one final night in the capital, Kuala Lumpur.
Our flight from Thailand to Malaysia arrived an hour later than expected. After enduring an hour-long queue sending Hee Kyong’s son an ongoing flight to Korea, we spent yet another hour traveling from the Kuala Lumpur airport by train to the impromptu bus station in Bukit Jalil now functioning as Kuala Lumpur’s key bus terminus until the ever delayed renovations are complete at Puduraya. The last scheduled bus to the Highlands at 3:30 PM had been cancelled. We caught a different one to Tapah on the recommendation of an Australian tourist and shared a harrowing taxi with her and an Indian local the final two hours to Tanah Rata, the main town of the Cameron Highlands. We didn’t check into our hotel, the Century Pines Resort, until after 8 PM.
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