Thursday, October 28, 2010
Monday, November 03, 2008
Ch. 2 - Supply and Demand - Forest-dependent towns want more than ideas offered by premier, NDP
http://www.canada.com/vancouversun/news/business/story.html?id=84228b7e-9d60-4d3d-8004-9bce6bc14043
Summary
The article reports on Premier Gordon Campbell's and NDP leader Carol James' economic plan for the forestry industry in BC. The article reports several factors contributing the problems in the BC forestry sector, some say a crisis; decrease in global demand, softwood lumber agreement, and pine beetle infestation. James has a five-point plan, with a proposed curb on raw log exports being the most contentious. No details were provided as to the other four points. James received criticism from University of B.C. professor George Hoberg because the policy is too vague. It was reported that the main component of Campbell's plan is a 50% reduction in property/school taxes for all business.
Connections
The "crisis" in the forest industry is both a demand and supply problem. On the demand side, we have a global economy with countries either in a recession, or on the brink of a recession. The businesses demanding our wood products have recognized that their incomes have decreased or will decrease in the near future, thus a decrease in demand resulting in lower market prices and lower sales. On the supply side, the softwood lumber agreement has imposed restrictions on the supply of lumber exports to the US, which results in a decrease in supply resulting higher prices and lower sales. Complicating matters is the wide-spread damage of the pine beetle - the damage that the beetle is doing to trees is raising production costs and decreasing the actual inventory of harvestable trees - a decrease in supply results in higher prices and lower sales. It seems the forestry companies in BC are in a critical dilemma as it feels pressure to pass on the higher costs it is facing in face of decreasing demand.
Reflection
I don't know that I agree with either plan that James and Campbell have proposed. I especially don't agree with James plan. I believe that restrictions on raw log exports to force an increase in domestic production/manufacturing of wood products would be more damaging to the industry as other functions in the sector will face higher costs as well. The Campbell plan is meant to lower the costs, for all functions in the forestry sector. I feel that the timing is bad as this plan is cutting off revenue streams for the government at the wrong time. Will the tax cuts be enough of cost reduction to stimulate global demand? Personally, I feel money should be spent on diversification for the areas most affected by forestry. I realize that money spent directly on the forestry sector would be seen as a subsidy in the softwood lumber agreement and would probably start some reactionary measures. It is a very difficult situation...
Summary
The article reports on Premier Gordon Campbell's and NDP leader Carol James' economic plan for the forestry industry in BC. The article reports several factors contributing the problems in the BC forestry sector, some say a crisis; decrease in global demand, softwood lumber agreement, and pine beetle infestation. James has a five-point plan, with a proposed curb on raw log exports being the most contentious. No details were provided as to the other four points. James received criticism from University of B.C. professor George Hoberg because the policy is too vague. It was reported that the main component of Campbell's plan is a 50% reduction in property/school taxes for all business.
Connections
The "crisis" in the forest industry is both a demand and supply problem. On the demand side, we have a global economy with countries either in a recession, or on the brink of a recession. The businesses demanding our wood products have recognized that their incomes have decreased or will decrease in the near future, thus a decrease in demand resulting in lower market prices and lower sales. On the supply side, the softwood lumber agreement has imposed restrictions on the supply of lumber exports to the US, which results in a decrease in supply resulting higher prices and lower sales. Complicating matters is the wide-spread damage of the pine beetle - the damage that the beetle is doing to trees is raising production costs and decreasing the actual inventory of harvestable trees - a decrease in supply results in higher prices and lower sales. It seems the forestry companies in BC are in a critical dilemma as it feels pressure to pass on the higher costs it is facing in face of decreasing demand.
Reflection
I don't know that I agree with either plan that James and Campbell have proposed. I especially don't agree with James plan. I believe that restrictions on raw log exports to force an increase in domestic production/manufacturing of wood products would be more damaging to the industry as other functions in the sector will face higher costs as well. The Campbell plan is meant to lower the costs, for all functions in the forestry sector. I feel that the timing is bad as this plan is cutting off revenue streams for the government at the wrong time. Will the tax cuts be enough of cost reduction to stimulate global demand? Personally, I feel money should be spent on diversification for the areas most affected by forestry. I realize that money spent directly on the forestry sector would be seen as a subsidy in the softwood lumber agreement and would probably start some reactionary measures. It is a very difficult situation...
Wednesday, September 10, 2008
Chapter 1 - scarce resources and opportunity costs
The article: http://techdirt.com/articles/20070503/012939.shtml
Summary
The article I read is actually a blog from the CEO of a consulting firm called TechDirt. I found some of his ideas interesting, to say the least. The article is a summary of some of his past coments on how to redefine a market by providing resources for free. In the end, the market should actually expand. The industry discussed is the music idustry. The CEO, Mike Masnik suggests making a number of songs from artists free. By offering free music and actually promoting the distribution on free sharing sites (like Bit Torrent etc.), exposure will increase for the artist and in the end, the artist should realize an increase in demand for things that are more in their control, such as concerts and band meets.
Connections
For me, the obvious connection to concepts in our text is scarcity. The music industry realized tremendous profitablity in the past by keeping its resources scarce. Technology has changed that, and Masnik is suggesting that songs should be an abundant resource, like air, readily available and free. The resource isn't actually free in economic terms (production costs and opportunity costs need to be factored in), but is free in price. That removal of price moves songs closer to an abundant resource. The increased exposure should lead to increased demand in other products that the artist provides.
Reflection
It seems more and more artists are giving in to this philosophy. I remember Metallica fighting Napster over copyright infringement just a few years ago. Now bands like Radiohead are offering their whole albums for free. The idea of free distribution works well for the music industry where the product can be segmented fairly easy. Also, the product is intellectual property, and once the song is out in the public domain, it is more readily available for the public. How would this work for the automobile industry? I guess I don't have the vision to redefine the automobile industry.
Summary
The article I read is actually a blog from the CEO of a consulting firm called TechDirt. I found some of his ideas interesting, to say the least. The article is a summary of some of his past coments on how to redefine a market by providing resources for free. In the end, the market should actually expand. The industry discussed is the music idustry. The CEO, Mike Masnik suggests making a number of songs from artists free. By offering free music and actually promoting the distribution on free sharing sites (like Bit Torrent etc.), exposure will increase for the artist and in the end, the artist should realize an increase in demand for things that are more in their control, such as concerts and band meets.
Connections
For me, the obvious connection to concepts in our text is scarcity. The music industry realized tremendous profitablity in the past by keeping its resources scarce. Technology has changed that, and Masnik is suggesting that songs should be an abundant resource, like air, readily available and free. The resource isn't actually free in economic terms (production costs and opportunity costs need to be factored in), but is free in price. That removal of price moves songs closer to an abundant resource. The increased exposure should lead to increased demand in other products that the artist provides.
Reflection
It seems more and more artists are giving in to this philosophy. I remember Metallica fighting Napster over copyright infringement just a few years ago. Now bands like Radiohead are offering their whole albums for free. The idea of free distribution works well for the music industry where the product can be segmented fairly easy. Also, the product is intellectual property, and once the song is out in the public domain, it is more readily available for the public. How would this work for the automobile industry? I guess I don't have the vision to redefine the automobile industry.
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