Notes From Russia

New book:

Notes From Russia, by Alexei Plutser-Samo. Picked up in the ever-cool Brooklyn (the bookstore is called Clovis Press), while wandering Williamsburg this afternoon.

The world of Russian public notices is fascinating, bizarre and saturated in tragic-comedy: “An old woman. Left home and has not returned. Small, hunchbacked. Wears: a blue dress, red wool cardigan, a white handkerchief with red flowers on her head, grey slippers on her feet. Does not have memory.”

The authors and readers of these usually handwritten notices are members of Russia’s underclass, made visible by these acts of public address which so often go unread. In this secret economy of exchange and communication, you can swap a voucher for an airplane or help to find a missing earring lost “during the fireworks on the Day of Cosmonauts.” All over Russia, all sorts of surfaces, stationary or mobile, have been papered over with such notices. The folklorist, lexicographer and contributor to the related publications Russian Criminal Tattoo Encyclopedia Volumes I and II, Alexei Plutser-Sarno, has been collecting these public notices from all over Russia for many years.

Notes From Russia features the highlights of Plutser-Sarno’s collection, which, combined with his commentaries, tells an alternative story of recent Russian culture. Designed as part of Fuel’s acclaimed Russian series of books, and printed on an unusual mix of white and brown craft paper, Notes From Russia is a moving and vital contribution to the documentation of vernacular graphics.

Do not be surprised if/when more scans of the book start showing up. It’s pretty bloody cool. For now:

United Airlines may ground up to 100 planes

United Airlines may ground up to 100 planes to save money on fuel expenses as other major carriers including American Airlines and Northwest Airlines also consider grounding aircraft.

This comes as two US senators asked aviation officials to look into a report that carriers may have cut back on fuel reserves to reduce expenses, possibly violating safety regulations. Carriers are scrambling to meet demand and maintain their profit momentum after a successful summer travel season amid pressure from high energy prices.

So it goes. Much like the fishmermen of Europe, if we envision a currently profitable airline:

Leaving out Average Total Cost – i.e. assuming (a) the industry is profitable, and (b) the market is perfectly competitive. The latter is off, obviously, for the likes of air travel – with few firms and significant barriers to entry. They are, however, reasonably competitive in the domestic market (I believe). The illustrations serve the purpose, at least.

Jack up fuel costs, and you increase the marginal costs of providing flights. Assuming P^* holds, fewer flights are supplied. Shift the MC curve and you shift the Supply curve (not shown, but, again, the same as for the fishmermen of Europe). Ceterus paribus, we get higher airfares and fewer bought and sold at equilibrium. Along the way, planes are grounded, mechanics are laid off (or their hours are cut), same for stewards/stewardesses, sales people, etc. Everyone, I would imagine, but the Executives.

John Howard and working women

This blog began with a post about the Prime Minister’s restructuring the labour and tax market against working women/mothers. Not much is changing, it seems:

Senior Liberal women expect Prime Minister John Howard to announce a paid maternity leave scheme at his campaign launch tomorrow.

The move would curry favour with all-important female and family voters and modernise the image of an “out of touch” Prime Minister.

Sources believe Mr Howard and Liberal strategists have formulated a scheme that targets women working in small- to medium-sized businesses. New mothers would receive the minimum wage from the Government for between 12 and 14 weeks.

I don’t see how this makes them appear less out of touch. Having bribed women out of the labour market, at a time when (a) the country is short of skilled labour, so that (b) women would, presumably, be at significant earnings potential, does the Prime Minister have a plan to make subsequent re-entry easier? Or, as is more likely, will he leave the tax structure as it stands: one in which women already faced a significant (to the degree of prohibitive) marginal cost to re-entry into the workforce – the moreso, now that he has increased the financial incentive to leave the workforce.

In terms of supply and demand, will this simply have the same effect as other incentives? Case in point: offer a grant to home-buyers; watch house prices increase, at the mean, by about the same amount. Will this only prompt demand-push inflation in prices for the child-raising basket of goods and services (including child care, which would be a failure of the policy, but would not surprise me). In such a case, does the Prime Minister have a contingency plan for families who don’t/cannot afford to leave the mother at home, but who are punished by said inflation?

Just a thought. When I go forwards, you go backwards; and somewhere we will meet.

Hardships increase in isolated Gaza

According to the United Nations, an average of 74 truckloads of goods a day entered Gaza in October, down from 253 truckloads a day in April. The consequences have meant a shrinking economy coupled with a severe increase in prices even for basic foodstuffs like flour, cooking oil and chicken.The average income of nonrefugees in Gaza has dropped 22 percent since June and 70 percent of them are now existing on less than $1.20 a day, compared with 55 percent in June, according to the World Food Program.Since June, wheat prices have increased 40 percent, bread prices 20 percent and rice 15 percent. But because of the inability to export, the prices of vegetables have fallen 30 percent or more, further undermining the agricultural sector.

This is not to suggest the state of Israel is inherently at fault (full disclosure: I used to ‘be’ a part of the Palestinian Solidarity Campaign – I lost interest after little of the plight of women made general discussions. I’m in favour of everyone going back to the 1967 Green Line – including returning Palestinian land and water to them. If anyone thinks the security ‘fence’ has any other purpose, they’re crazy). Hamas is a hostile presence. Perhaps legitimately, perhaps not. This is like saying the drug dealers/runners in urban slums have a legitimate complaint against the government – but they’re still working against the progress of their community, in the long run.

Ghassan Matar, 25, is a Fulbright scholar who has had to delay his studies in business information systems at Central Michigan University. “No such field of studies exists in Gaza,” he said. “My dream is to focus on outsourcing in software, so I can invest in Gaza’s human resources. Such a field can flourish even if the crossings are closed.”

But Matar, who was supposed to start school Aug. 27, is stuck in Gaza. The university, he said, has agreed to let him begin in January. “I’m afraid to lose this chance,” he said. “I’ve worked two years to get this scholarship.” He describes himself as apolitical. “I blame all the parties,” he said.

The issue of the students has embarrassed the Israeli government, which is facing lawsuits and bad publicity for denying ordinary Gazans the chance to study in the West.

His attitude is about correct. Water, land, religion – nothing can make people this irrational, for this long (to my mind, born and raised white in Australia – what would I know? I never even went hungry until I was a student, living on my own).

With closed borders, there is an interesting quirk to this inflation: there are no external markets for domestically-produced Palestinian goods, depreciating their prices; there are no domestically-produced substitutes for goods imported from/via Israel, inflating their prices considerably. Meanwhile, it seems Hamas isn’t so populist, after all:

… the problems of the students can seem minor compared to other restrictions. Marwan Sawafiri, 40, who runs the Sawafiri for Chicken shop in Gaza, said the price of chicken has risen about 40 percent since the end of Ramadan in mid-October, when Israel stopped allowing special shipments for the holiday.

Gazans raise chickens, he said. But the chickens are hatched from fertilized eggs imported from Israel and fed with Israeli chicken feed. “Now we get many fewer imports, so the prices go up,” he said.

Coca-Cola and packaged fruit juice have disappeared from shops, and a printer cartridge costs $60. Even the price of flour, considered a necessity by Israel, has gone up 40 percent, said Muhammad Hassouna, 30, who runs his family’s grocery.

Hamad Dahdar, 25, the chief butcher at a nearly empty meat shop, has been told that he can work only 20 days a month, to save other jobs. His income has gone down by a third, to $200 a month, “and you can see, we’re just standing around,” he said.

Stewing beef has gone up a third in price, “and people who once bought a kilo buy only a half,” he said. Beef and lamb are also imported through Israel and quantities are down. But taxes are not. The Hamas administration in Gaza, cut off by the Fatah-appointed government in Ramallah, is taxing imports, from cigarettes to beef. “Now we have two governments,” Dahdar said. “And both of them want to collect taxes.”

I would say that the problems of the students is, long-term, one of the greatest. Without advances in human capital, Palestine isn’t going anywhere. That said, yes – there needs to be a Palestine and Palestinians around, when they graduate. These days, it’s hard to see.

At issue is Government (big-G). Israel is not meeting its international obligations as a military occupier: the wall, the water, the Green Line, etc. This is their crime. However, even back through Arafat, our crime, as that “international”, has been to pretend that the Palestinian Authority had any sort of capability when it came to civil administration. I honestly believe Palestine will not improve in any real sense until a Kosovo-like solution is imposed.

Frankly, I wouldn’t even mind if the Israeli government moved in (I’d prefer peacekeepers and, again, whether or not I mind is hardly the point. I don’t pretend it should be), as long as they did it properly and according to civic obligations of any modern government to the people who either elected it or fell before it. Neither Hamas nor Fatah have ever met that obligation, either, and don’t look like doing so anytime soon.

Looking at Palestine as an economy, which (a) we should, but (b) I will, being an economist, the problem is textbook, in terms of the first principles for long-run economic growth: establishing stable civil administration (not, necessarily, government), establishing the rule of law and protection of private property (getting back to land, water and the wall), investing in human capital (health and education) and social capital (water, electricity, community) – none of these are being undertaken, but no economy moves without them.

If Fatah or Hamas cannot or will not do it, Israel should. If Israel cannot or will not, the rest of us should. Palestinian (and Israeli! Please do not think I’m incognisant of the two ways of this horrible street) people are just people: they want peace. They want their families, they want jobs and schools and for their children to do better in life than they did. They want no taxation without representation. I’m sure they’d prefer to be governed by their own people, but they probably want all those other things first, and they want them at least as much as we wanted them, back when we got them (more easily, I might add – we never had a sea of AK-47s making things hot).

The same goes for many other countries, all over the globe, and that’s the problem. We could do it, easily (although our performance as military occupiers might make one, rightly, hesitate). We’d just have to, probably, and certainly in the near-term, make do with less ourselves. And, then, what would our media and politicians make their money off?

“Calorie creep”

A friend sent me this story in the Guardian:

Fast food, fizzy drinks and larger portion sizes have all been blamed for rising levels of obesity. But figures obtained by the Guardian suggest changes to the recipes of many of our favourite foods could be to blame. Of a dozen leading brands for which we were able to compare nutritional information from a decade or more ago with today, nine showed an increase in calories, sugar or saturated fat.

Kellogg’s Rice Krispies contain 36 more calories per 100g than in 1983 – an increase of about 10% – while Kraft Dairylea Triangles contain 15 more calories per 100g than in 2001, a 7% rise. While cheese used to be their main ingredient, followed by skimmed milk, whey and butter, it now comes third and accounts for just 16%.

Häagen-Dazs Belgian Chocolate ice-cream – always marketed as a dangerous pleasure – contains 16% more calories than in 1994, and 26% more fat. Even products marketed as healthy options are not immune to this “calorie creep”. Jordans Original Crunchy bars have 16% more calories than in 1986, and more fat.

…

Sainsbury’s said that improved testing was the reason the amount of sugar in its sliced bread appeared to have increased by 400% in the past decade, to 4g in each 100g. “The sugar content hasn’t changed. The sugar that’s found as a part of the carbohydrate in the flour can be better identified now,” a spokeswoman said. Other companies also cited more rigorous and sophisticated tests as the reason for discrepancies.

A victory!

… Heinz baked beans, advertised even in 1983 as being free from artificial flavours and preservatives, now contain less sugar, fat and salt.

Heinz baked beans are the best, man.

In 1997 fewer than 10% of British primary schoolchildren were obese. Now the figure is nearly 17%. And figures from the UN Food and Agriculture Organisation show a striking rise in our calorie intake, to almost 3,500 a day – which means that unless we are exercising more, we should on average be putting on 7kg a year.

From the aforementioned correspondence:

Interestingly, this seems to be happening in a range of consumer products

I have it on good authority that this is now also standard MO for cleaning and personal care products (eg toothpaste etc)

Consumers are hooked onto a brand with active ingredients. Once the market share is there, the active ingredients are removed, leaving the shell of the brand, and the high price for you, dear consumer, to bask in.

Very interesting indeed. This makes some degree of sense – there is (as previously mentioned) very little in the way of barriers to entry in monopolistically competitive markets, which we tend to have here (toothpaste is, more or less, toothpaste – what we observe is toothpaste with slight product differentiation). The usual argument is that monopolistically competitive firms retain their market power (the brand loyalty with which they extract rents from consumers) by continuously re-differentiating their product. However (although that still happens in a cosmetic sense, packaging, etc.) what if (a) it became simpler just to compete according to price, trimming one’s product of more expensive goods (or replacing input ingredients with cheaper versions: high fructose corn syrup instead of sugar, for example), while (b) increasing the size?

Size inflation is a common thing seen here, in the US: rather than lower prices, sizes are increased (usually because you can increase size less – proportionately – than you would need to decrease prices to get the same effect), but increased by using more of the crap ingredients and fewer – again, proportionately – of the ingredients that secured the market share in the first place.

This has either driven or followed our demands. Americans are clearly used to sweet biscuits and pastries of inordinately large sizes: I defy other anglo countries to even manage to eat all of one. Partly this is size, partly it’s because they’re so damn rich and sweet that one can barely stand it. On the other hand, England has the God-awful Snickers Pie (no, I’m not kidding). Krispy Kreme also does fairly well down under. Perhaps I’m just skinny and sugar-averse and out of touch (I’d like to see how the caloric contents of such products differ, though, country-by-country. Krispy Kreme’s seem similar – although I suspect the fats in the American ones may be worse.).

I have, actually, noticed that toothpaste, here, has to be checked to ensure it has sodium flouride as its active ingredient. Usually it is the only active ingredient, even though the tube will make many other promises.

I have kind of a vegan’s advantage, here: we have to read the ingredients on everything. I discover previously vegan products ‘go’ non-vegan, every now and then (always annoying).

European politicians wrestle with high gasoline prices

From the International Herald Tribune:

“It’s a very difficult situation for governments,” said Colette Lewiner, an energy expert at Capgemini, a consultancy. “What governments should be doing is lowering the tax on the oil products, but that would mean lowering their own expenses and breaking spending promises, so governments are trapped.”

A big worry is that fuel price rises are contributing to an inflationary price spiral. Another is that past increases have triggered paralyzing national strikes. But European governments rely heavily on fuel taxes to balance their budgets, drastically reducing the scope for cuts.

In France, for example, taxes on unleaded gasoline represent 62 percent of the cost of a liter of fuel at the pump, while taxes on diesel represent 53 percent, according to the Union Française des Industries Pétrolières. Those taxes are the largest source of state revenues after value-added tax, income tax and business tax, said the industry association.

There is a picture painted of a government needing excise revenues; I would suggest the flip-side: that bowing to the pressure from fuel-intensive industries would only promote an expansion in the demand-side pressures on oil – precisely the cause of our environmental (and many of our economic) problems.

For example:

French fishermen, who already benefit from hefty fuel subsidies, have mounted the strongest protests so far over fuel costs.

This month, the fishermen – some of whom use several hundred of liters of diesel each day to power their boats – blocked fuel depots in Atlantic coastal regions to draw attention to costs that have climbed to about 50 euro cents a liter up from about 30 euro cents a liter. Only below 30 euro cents a liter can fishing be profitable, they say.

Amid reports that some gas stations in Brittany were running dry, the fishermen went back to sea Thursday, after President Nicolas Sarkozy of France visited the Atlantic coast and personally offered concessions Tuesday.

What? The demand for fuel by fisherman is not the demand for fuel: it is the derived demand for fuel, and it is a function of our actual demand for fish. That is to say, we, the consumers of fish, demand fuel such as it is needed to get us that fish – in given quantities, according to price.

Implications? Oil doesn’t have to be manufactured – via subsidisation or differential tax exemption – to be 30 Euro cents per litre so that fishing can be profitable. Fishing has to decline in accordance with the decrease in the quantity of fish demanded. Some fishing operations (those with lower costs) will stay in business; others will not:

The effect of the firms that shut down because they cannot achieve profitability will reduce market supply, thereby increasing the price. This is the law of demand: as oil prices appreciate, fish prices appreciate; as fish prices appreciate, the quantity of fish demanded decreases.

Alternatively, everyone stays in business, and charges a price higher than P^*, so that they keep making a profit. Rather than a leftward shift, the supply curve, above, shifts upwards – with the same effect. As oil prices appreciate, the costs of production (of fish) escalate. As the costs of production increase, the supply curve shifts backwards – but demand does not change. Therefore less fish is bought because people with the lower willingness-to-pay stop buying fish. For some firms, as in the first graph, this price increase will get back to where some intersection of MR and MC can be found – for some it may not. They either pack up and leave, or continue running (I didn’t bother with Average Variable Costs) and try to turn things around – by, say, picketing the government for lower excise duties on their fuel.

Basic economics. Cruel economics, perhaps, but basic economics. In this world, resources are scarce. This is the first principle of economics: resources are scarce, and allocating those resources is the defining problem of economics. Fisherman don’t get to remain fishermen because they’ve always been fishermen. They get to remain fishermen if we are prepared to pay the prices required for them to remain fishermen.

I realise we’re talking about already taxed fuel, here: at issue is not, simply, our willingness-to-pay for fish. That, too, however, was/is a consequence of a society-wide (political economy theory permitting) allocative decision-making process. If our opportunity cost of that tax revenue (or the environmental externalities of the fuel use) remains higher than the cost of losing jobs in the fishing industry, then jobs in the fishing industry have to go.

The article is quite good (to say the least). Further examples are (of course) agriculture and taxi-drivers. Agriculture becomes interesting because, like fish – but much moreso – national food security can become an issue (in which case we, as society/consumers, would be willing to pay what is required for that security. So far it would appear that, with regards to fish at least, either we aren’t, or we aren’t understanding the problem in those terms).