Oprah

So apparently today was Oprah’s last show. In 2010, Forbes estimated that Oprah was worth $2.4 billion. Surely this is a lot of money but has she honestly improved the standard of living like Bill Gates of Steve Jobs? I am sure people that watched her show said they were enriched by her but did they pay for it? I have more respect for the entrepreneurs that created products millions of people bought and made society better off than Oprah.

One valid argument one could make is that Oprah created awareness for issues. True, people may not have had a lot of information about personal finance, health issues, child predators, etc however didn’t the internet fix this? Oprah’s ratings in 1991 were around 12.6 million people per episode, but by 2009 ratings fell to 6.2 million people. It is important to point out that ratings only decreased since 1991. With the rise of the information age of the 1990s it would seem as if more people could substitute the internet for Oprah in order to get their information or awareness. Instead of waiting to see what facts or news Oprah could bring people can now within a few seconds find out information on a wide variety of subjects.

I personally think it is great that Oprah has her money and gives to charity. What I guess I am curious about is how she made so much money informing people. The way she really made her money was because so many people watched her show and since advertisers pay based on how many people are watching it would increase the value of the show. Since there seems to be a high demand for her I would think they would start selling episodes (over 4,000 of them) on ITunes for 99 cents and let even more money flow in. Even though I don’t think people like Thomas Sowell or Walter E. Williams agree with her views I think they might agree that an African American coming from nothing and becoming a billionaire is nothing to sneeze at. The great thing about America is unlike other nations just because you start out your life a certain way doesn’t mean you will end your life that way.

Sowellism

I have a feeling Thomas Sowell’s writing only is gets better with age. He truly is a modern wordsmith/philosopher.

“Most Americans living below the official poverty line own a car or truck-- and government entitlement programs seldom provide cars and trucks. Most people living below the official poverty line also have air conditioning, color television and a microwave oven--and these too are not usually handed out by government entitlement programs. Cell phones and other electronic devices are by no means unheard of in low-income neighborhoods, where children would supposedly go hungry if there were no school lunch programs. In reality, low-income people are overweight even more often than other Americans”

“The desperately poor elderly conjured up in political and media rhetoric are-- in the world of reality-- the wealthiest segment of the American population. The average wealth of older households is nearly three times the wealth of households headed by people in the 35 to 44-year-old bracket, and more than 15 times the wealth of households headed by someone under 35 years of age”

Link
http://townhall.com/columnists/thomassowell/2011/05/24/dependency_and_votes/page/1

Gas Prices and Hypocrisy

Epstein on Obama at University of Chicago

Richard Epstein hits the nail on the head about President Obama.

Alternative Energy Nonsense

When I hear about anything alternative I tend to cringe. Alternative music, alternative energy, alternative medicine, and alternative investments all have something in common…they are not the best. President Obama wants to try to use more alternative energy to get to make the United States less dependent on foreign oil. The President and environment whackos want lower emissions and “clean energy”. Greedy companies are not stupid. Companies would only invest in these alternatives if they made economic sense (which they don’t…well only if you include tax credits).

One big argument from environmental whackos is that we have to worry about polluting the air. Let’s look at some data before we make any decisions. From the period of 1988-2002 toxic emissions declined 51 percent. Smog since 1970 has decreased by 1/3 even as the number of cars doubled. Acid rain has declined 67 percent even though we burn double the coal. Airborne lead is down 97 percent. All of these things occurred despite an increase in population growth. People tend to argue to argue after this data “Well see the EPA is doing a great job”. What people don’t consider is what emissions were before the EPA was ever created, how much regulations from the EPA costs, and how much of taxpayer money is spent to fund the EPA. For example, the number of car accidents per highway miles driven was much less even before the National Safety and Highway Traffic Safety Administration was ever created. Along the subject of cars and the environment I think of how unnecessary CAFÉ (corporate average fuel economy) laws are. By 2020 the government wants car companies to produce 35 mpg cars. One way to increase MPG is to make the car lighter which also makes the person in more likely to die in an accident given less cushion. Also car companies with the regulation will increase the cost and pass it along to consumers.

On the current energy problem however, the President should let companies drill within the United States. If the President wants to lower other energy costs he could further deregulate electricity markets to allow for lower prices. Natural gas is very low and companies might find even more useful ways to use it in the future .However, the idea that we should use solar, wind, water, and anything else under the face of the sun is utter nonsense. Lee Raymond former CEO of Exxon once explained that you would have to have solar panels covering the city of Los Angeles in order to equal the same amount of energy in one gas station. Over time technology and the economics of alternative energy might change. However, right now oil is the most cost efficient resource we have and for the government to pick what should work and what shouldn’t is just a bunch of hot air.

Total Wages Have Increased

Despite what people say it looks as if productivity and wages have been increasing together and wages have not declined if you include worker's benefits. Productivity rose 110% since 1968-2008 while total compensation (wages + benefits) increased 103%.

Koch Giving

Charles Koch has been in the news recently for trying to fund two professorships for Florida State’s economics department. $1.5 million was pledged from the Charles B. Koch Charitable Foundation to the school. Koch wanted to be involved in the process however. In reviewing potential candidates for the professorships Koch rejected nearly 60% of the faculty’s recommendations. One thing people really don’t realize is that deans and any department chair’s real job is fundraising. Often times a dean of any school has to figure out how to get donations from individual donors, alumni, and corporations. Clearly, this is no easy task and requires connections, charisma, and knowing how to work parties.

What I don’t quite understand is why people are upset about how people to choose to use their money. People don’t seem to realize that even people that donate money are to some degree self interested. These people want to see the money go for a good cause, something that can benefit society, or whatever reason they can rationalize. This Koch case would make a great ethics case for business school. One thing to keep in mind is that these schools never have to accept the money. There are cases were schools do reject money even when billionaire Alfred Mann wanted to try to give $162 million to fund a bioengineering institute to UCLA they declined because he wanted too much control. The point is colleges never have to accept the money if they choose not to. Colleges also have reputations to maintain. If a college is known for accepting money to let students in, allow wealthy donors to cherry pick professors, or to have control of athletic teams it will be known.

Koch’s net worth in 2010 was $22 billion. He and his brother have given away more than $196 million already. The man should be free to choose what he does with his money or what organizations, charities, or schools he gives it to. One large benefactor of Koch’s charitable giving has been George Mason University. Over the past 20 years Koch has given $30 million to George Mason University. The school established the Mercatus Center which is a free market think tank. George Mason now has a top rate economics department.

I think even if someone wants to donate money to liberal causes they should be allowed to do so. I think it’s interesting that people believe they should decide how other people use and spend their money. Donation is voluntary and is a two way street.

Speculative Nonsense

With high recent oil prices there has been a lot of talk about what is causing high oil prices. Oil companies are being called into Congress to explain their record profits and an investigation is underway to investigate speculators for “fixing” prices. I wonder Congress never seems to investigate oil companies when prices are low. Federal taxes on gasoline are above 18 cents per gallon. This does not include state taxes on gas which can range from 8 cents to 32 cents per gallon. Of course state and federal governments are never greedy.

First, we have to understand that prices are never set they are signals of information to suppliers and buyers. High prices induce consumers to cut back while inducing producers to try to create more. OPEC has a large role in determining how much oil can be produced which in a way acts like a cartel. OPEC looks at proven reserves in order to see how much a country can produce which doesn’t seem to make any sense. Countries should be free to produce as much oil as they want and sell it on the open market.

Congress also has a large say in the supply of oil. What is ironic however is if Congress allowed companies to drill within the United States futures prices would start falling since the future price reflects current and future conditions. In 2008, it was estimated in ANWR (Alaska National Wildlife Refuge) had over 4 billion barrels of oil. Even the United States interior department estimated there was around 134 billion barrels of undiscovered but recoverable oil.

Allowing companies to also build refineries wouldn’t hurt either. Even if Congress allowed companies to build refineries it would take at least 10 years to build in the United States considering all the permits required. In an odd way oil companies could not be in favor of drilling or allowing refineries since it acts as a barrier to entry for anyone that wants to get into the industry. If you could keep competitors out and restrict the supply it would be easy for a company to maintain not only their competitive advantage but their profits as well.

Despite what people think speculators are providing a valuable function by informing people what futures prices are going to do. If this were true why aren’t people quitting their day jobs in order to become oil speculators? By definition, this is a zero sum game. In a futures contract someone who thinks oil is going up and someone who thinks oil is going down. People make it seem as if anyone could speculate and make money. People complain about people speculating up the price of oil, however they should blame the people that believe the price is going down because otherwise a futures contract could never exist! Speculators put their own capital at risk and can lose a lot of money (especially if they are leveraged). These speculators are reducing the price volatility of oil not increasing it as some would speculate.

I tend to think people often look at outcomes instead of the inputs that lead to those outcomes. If people went a step beyond and thought about the actual causes of why prices are high it could do wonders for critical thinking skills.

Richard Epstein: Let The Rich Get Richer

Richard Epstein has the rare ability from a lawyer's perspective to understand and explain economics to others.


http://ricochet.com/main-feed/Let-the-Rich-Get-Richer

$5,000 In An Hour

Apparently Nobel winner Gary Becker is charging for his time now. For $5,000 you can get you one hour with one of the best economists. All you get for this money is a video chat and not even an actual meeting. Although, I think $5,000 is somewhat high time will tell if people are really willing to pay this kind of price. Other people like economists Steven Levitt and Harvard professor Jeffrey Miron are also joining (charging $3,000 and $400 an hour respectively). Jeffrey Miron also ended his blog this week which poses some interesting timing. The company Expert Insight takes a 30% commission so the people get to keep 70% which still isn’t bad. I wonder what people get for this kind of money. Can someone really get a couple hundred or a couple thousand dollars of value in one hour? Celebrities, authors, sports stars often charge money for speaking fees. These fees can be anywhere from a couple thousand dollars to over $10,000. Economist Milton Friedman use to charge $30,000 but he would actually show up! In 2008, the top lawyers were charging over $1,200 per hour. One could argue lawyers are more valuable since they could save a company millions or billions in liability and damage. I am skeptical of whether or not people will actually use this service but as a free market guy I am all for new ideas.