Author: Bernie K.

I'm a nominally-retired 85-year-old economist. I'm interested in how economics shapes the world we live in. I'm especially interested in imperfect markets, in particular the health care market.

Surplus: Winners and Losers

~ Bernie K. ~ Leave a comment

the-weight-of-the-2032357_960_720In attempting to understand the consequences of the new technological and economic conditions, and the changes that covid-19 has brought along with it,we need to take a look at the list of products that were not available previously. The list on the previous blog post is a good starting point. Then try to imagine what life would be like without them. In some cases, like no Smartphones and no Interstates, it is even difficult to conceive of the possibility. There is no question that many of the changes have made almost everyone better off.

That is certainly true for anyone who has an adequate surplus, making it possible for them to purchase those products. Those who developed the new products and made them available deserve to be rewarded for their contribution. They benefit from the changes and have been pushed into the upper-end of the income distribution.

However, that is not true for everyone. Let us take a look at the effects on consumers  when companies charge prices in excess of the long run costs of production and distribution.

Consumers and other users benefit from the new products that become available. They also benefit when the lower costs that are the result of the new processes of production and distribution lead to lower prices. Clearly, the companies who provided those products benefit as well. So do their suppliers and distributors. In addition, the executives, managers, owners and employees of each of those firms experience an increase in their surplus.

Continue reading “Surplus: Winners and Losers” →

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Surplus: The Changes

~ Bernie K. ~ 1 Comment

Changes in technological and economic conditions is the primary underlying cause for the income redistribution. In 1945 at the end of World War II things were a lot different than they are now. TVs had just come on the market. Planes had propellers. There were no Jets. With the exception of Bakelite, there were no plastics. Nylon, the first of the synthetic fibers, had just come on the market. Microwave ovens had not arrived yet. Business machines used punchcards. The IBM machines, with 90% of the market, used cards with rectangular holes. Remington Rand’s, with the remaining 10%, had circular holes. We did have adding machines and desktop calculators, but no computers. They had not yet come into existence.

In 1952 I was an economist at the Federal Trade Commission. At the time there were five computers in the world. They were powered by cathode-ray tubes, not transistors, and each filled a large room. IBM, the National Bureau of Standards, MIT, the University of Illinois and the University of Pennsylvania each had one. The U of P computer was developed by Eckert and Mauchly. In order to get into the computer business Remington Rand acquired their company. Continue reading “Surplus: The Changes” →

Surplus: The Concept

~ Bernie K. ~ 1 Comment

Let’s talk about the concept of surplus. As adults each of us has the primary responsibility of taking care of ourselves, first and foremost. That involves providing the goods and services necessary to survive on a day-to-day, week-to-week, month-to-month basis — the air, water, food, sleep, clothing, shelter, etc. Over and above that it is necessary to use our limited time, energy, resources and funds (TERF) to fulfill any oblijohnny_automatic_bag_of_moneygations and commitments that we have taken on. Let’s call that our primary objectives. Either we produce the goods and services required to satisfy those objectives ourselves or we purchase them with the income received from the goods and services we provide to others.

Here is how an individual and the aggregation of individuals — what economists call the household — can decide to use its disposable TERF (the amount left over after satisfying the primary objectives). Some of it can be used in the following ways: to increase the consumption of goods and services; be put aside for future consumption — into saving; used to pay off previous loans; or assist other individuals and households that do not have sufficient disposable income to survive long-term. Some of the funds can be set aside to cover unexpected expenses. Or can be devoted to the attempt to develop new products or processes of production — innovations (some of which may be successful) or used to create works of art, or anything else the individual or household may decide to do with its remaining TERF.

Any income that we have left over after fulfilling the primary objectives is our disposable discretionary income — the surplus. The left over funds can be used for anything else we choose to do with them. How we choose to use the surplus is up to each of us. For those at the lower-end of the income distribution—almost all, all and sometimes, even more than all of their disposable income is used up just to survive. The more of our income that we are able to withhold from current consumption, the greater the surplus.

Continue reading “Surplus: The Concept” →

Unbelievable Opportunities

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IMG_0801Let me begin by telling you a story about Bill Daigle. Bill was raised on a farm in Minnesota. He was born in 1954, one of 14 siblings. Bill got his training in mechanical drawing. Initially that is how he made his living. He shifted jobs to become a salesman for a nonprofit life insurance company, working his way up the line into management. The company moved Bill from Minnesota to Arkansas and eventually to North Carolina, where he “retired” in 1989. Bill built himself a home with a studio where he lives with his second wife, Paula.

Every day, at 65, Bill does just what he always wanted to do, namely, work in wood. Bill calls himself “The Chairman”. Have a look at some pictures of Bill’s work.

On Saturdays you will find my friend, Bill at the Carrboro Farmers Market, where he displays and sells his work and watches the young children playing on a footstool or with a wooden plane or truck, sometimes under a parent‘s watchful eye. That’s where we met.

Bill is doing what he loves doing and uses his unique skills and expertise to produce products others like. If he elects to sell the work, he gets some bucks on the side. That’s not too bad. He can use the extra money to help take care of himself and his family, and to do the additional things they like doing.

Can you imagine yourself as a “retiree” and being in Bill’s position? That is, spending your days doing what you love doing and selling the work — the products and/or the services — to others who are willing to pay your asking price. As an aside, they are willing to give up that amount of money just to get your work.

Continue reading “Unbelievable Opportunities” →

Surplus: A New Series

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For a while now I have been working on this series of blog posts entitled “Surplus”. One’s primary responsibility is to take care of oneself and fulfill any obligations and commitments that we have taken on. The remaining discretionary time, energy, resources and funds is our disposable TERF  — our Surplus. Only you can decide what you want to do with it.

The current coronavirus — COVID-19 — provides an important example of why it is necessary to take our surplus into consideration when making our decisions. The virus brings on a new set of circumstances, along with the accompanying uncertainties. Those new conditions affect the appropriate decisions. For example, if your income declines and you do not have additional surplus set aside, adjusting to the virus is difficult. It is my hope that this blog series, “Surplus” will provide you with a better understanding of the nature and consequences of the concept, so that the choices you make will be better for you.

 

 

 

 

A New Way to Keep Track

~ Bernie K. ~ 1 Comment

If you are a regular reader of my blog, than you already know about my fondness for the island of St. John, where I lived for 18 years. You will also know about the relationships I developed on St. John with the native West Indians and my collection of baskets. If you don’t know this about me, then I’d welcome you to check out some of my previous blog posts, which will get you up to date.

When I arrived on St. John in 1987, I was looking for evidence of what the island was like before I got there. One of the things that was very helpful were the pictures taken by the internationally famous photographer, Fritz Henle. Fritz lived on St. Croix and visited St. John in the 1940s and 60s. He gave me copies of 67 of his photos to help understand what the life, lifestyle, livelihood and the people on St. John were like at the time.

In order to get a comprehensive understanding of what the Fritz Henle photo collection had to offer, I got some help from a media specialist and photographer named Grace Camblos. With her help, we put together a spreadsheet. It provided a way to identify the components of the collection along with images and information about them. A copy of the spreadsheet is attached. It was very helpful in making decisions of how to handle the collection, which is still in my possession and contains vital components of my basket collection.

I found the spreadsheet so useful that it occurred to me that it might also be useful for others. A spreadsheet that contains images and additional information can be helpful to fulfill many objectives. Here are some additional ways that I think that an artist or craftsperson would find this approach helpful:

Continue reading “A New Way to Keep Track” →

The Adjustments: Significant Changes

~ Bernie K. ~ 1 Comment

aloneLet me tell you about two recent experiences that have brought about significant changes in my life. They are, in fact, caused by important changes in the lives of two friends over which they had no control. The only thing I could do was to change my behavior and adapt to the new circumstances.

I met Wanda at a local craft show shortly after returning to Carrboro from the USVI’s. Typically Wanda and I would get together once a week. We’d hang out and have lunch together. Either I’d drive up to Hillsborough or she would come down to Carrboro. After I decided to stop driving, Wanda made the weekly trip to Carrboro and after lunch she would take me to Trader Joe’s to pick up the things I needed.

One day about a month ago, while she was driving in Hillsborough she passed out at the wheel and had an accident. Luckily no one was hurt. It is not clear what caused the problem. Wanda’s driver’s license was suspended for at least six months.

With me no longer driving that really changed things. Not only were we not able to get together on a weekly basis, I could no longer take advantage of the support she has provided. That has resulted in an important change in our socialization pattern and has required me to seek help elsewhere. Moreover, I could not drive to Hillsborough to give her a hand.

I have another friend, Sarah, whom I met at the Farmers Market. Sarah is a really fine, creative craftsperson. She is her family’s principal wage earner with a full-time job on the staff of Blue Cross-Blue Shield. She has three adult children, two of whom are married. They all live in the Portland, OR area. Two have medical issues. Last year when her son developed a life-threatening condition, Sarah went out to take care of him.

When he improved she came back to the area, only to learn that her ex-husband, who lived here on the property with her, developed medical issues as well. Amazingly, she has been able to perform her job and take care of all the problems as well. What she has had to put on the back burner was her passion — her art.

Before all this happened Sarah I hung out together at the Farmers Market every Saturday. We developed a really nice relationship. Not only do we have a common interest in art and craft, we have a special way of communicating with one another. From time to time we had lunch together. When Sarah invited me to her studio I’d jump into the MINI and off I’d go.

Understandably, Sarah has been overwhelmed by what has happened and I’ve barely seen her since. A couple of times we’ve been able to hang out briefly when we were both shopping at the Market.

With both Wanda and Sarah, the things that have happened in their lives have limited our time together. They were things that none of us had any control over. Our time together was and is very important to me. It is up to me to find ways to fill the gap that opens up when the help or services they provided are no longer available.

The new, current circumstances, over which I have no control, limit my independence, freedom and flexibility. They also make it more difficult for me to take care of myself. To accommodate to the new reality I am more reliant on others and have to make arrangements for their assistance. Some of my limited disposable time, energy, resources and funds (TERF) have to be used up to accommodate to the new conditions and to compensate those who provide assistance.

The thing that bothers me the most about these situations is that I can’t do what I really want to — namely, to jump into the MINI, hang out with my friends, and give them a hand. Not driving not only makes it harder for me to get the support and services I need, but makes it harder to me to support the people I care about. All I can do is adjust to the new circumstances as best I can. Which, trust me, is more difficult as we age.

Welcome to 2020

~ Bernie K. ~ Leave a comment

When I was growing up in the 1930s and 40s, 20/20 meant that you had perfect vision. We’ve just reached 2020 and I just turned 92 years young. Obviously, 2020 now has a different meaning. Trust me, I never expected to make it to this age! Moreover, my vision is not perfect! In order to help it along I havebernie and Grace five pairs of glasses and a large monitor in order to read the large print on the computer screen. Just as a reminder, we did not have computers, the Internet, smartphones or GPS at the time.

Over my 92 years I’ve gotten considerable experience. In spite of that, there are a very few things I can assure you of. I do know that sometime in the future I will die; that is a certainty. My extended experience does give me a somewhat different perspective on things, and that is what I enjoy sharing with you all in my blog. My sincere hope is that my posts will improve your understanding of the things that are important to you.

Welcome to 2020, the opening of a new decade. One filled with chaos and hostility. Let’s hope that at the beginning of the next one, 10 years from now, we have arrived at a very different position, like the one advocated by Wendell Wilkie when he ran for President sixty years ago. Namely, that we are all part of “One World”. Let’s make it a world filled with Peace and Love. I’m not sure whether I’ll be around to see it, but I’m committed to working towards building a world community based on reciprocal love and respect. Let’s work together to see if we can make it happen.

The Adjustments: Giving Up Driving

~ Bernie K. ~ 2 Comments

miniFrom the time my son, Paul, was a teenager his passion was cars. Eventually he set up a business repairing foreign cars. When I got back up to the States after being in the USVI’s, he suggested and arranged for me to get a 2006 British racing green MINI Cooper S. Boy, was he right on. The MINI fit my minimalist lifestyle perfectly. It is small, compact and comfortable and has the extra power and space when needed. All that at 33 miles per gallon on the road. How about that! The MINI was right there when I needed it. I jumped into the car and took off. The MINI supported my independence and flexibility. And, it is great to look at to boot.

However, I have a condition called Aging Macular Degeneration (AMD), and a little over a year ago I had a cataract operation on my right eye. I developed an inflamed retina. The inflamed retina did not respond to the initial treatment. At the doctor’s recommendation we followed through with the next step — an injection of the medication directly into the eyeball. Two days later a haze developed over my right eye. There was no clear explanation and eventually the haze went away and a mild version of the inflamed retina came back. Continue reading “The Adjustments: Giving Up Driving” →

The Adjustments: An Opportunity

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Change, especially unexpected change, brings along with it the question of “Where do I go from here?” Often along with it comes a sense of hesitation, anxiety and, perhaps, even fear. Adjusting to the new situation can certainly take up a considerable amount of one’s limited disposable time, energy, resources and funds (TERF). That is even more likely when it is a type of change one hasn’t experienced previously.

As I’ve gotten older, I experienced all kinds of changes. Some are difficult, like not being able to drive—which I will write about in an upcoming blog post; diminishing vision, and feeling more isolated. Some of the changeschange present new and unexpected opportunities. In this series of blog posts called “The Adjustments” I’ll tell you about some of the changes I am currently going through and how I am navigating them. I will also share with you some of the major changes I’ve experienced throughout my life and how the decisions I made during those times affected the course of my life. I want to begin by telling you a story where I experienced a major change that led to new, unexpected opportunities.

In December of 1986, a month after my mother died, I went to St. John, USVI to sort things out. My middle son, Paul was there with me. After a very productive couple of weeks, it was time to head back to the states. We were standing in the bow of the boat heading back from Cruz Bay to Red Hook on our way to catch the flight from St. Thomas back up to the States. I turned to Paul and the words out of his mouth were “Yes, I know Dad.” I was about to tell him that I had decided to move to St. John. Six months later I did just that. I lived there for 18 years with no intention of ever leaving. Continue reading “The Adjustments: An Opportunity” →