Saturday, February 28, 2009

Tough Economy Brings New Eye-Popping Business Venture

From CNN: In a sleepy Maine town of just 4,500 residents, tough economic times have led to a bold new business venture: a coffee shop where the servers--both male and female--are topless.

Hmmm . . . Wonder whether they serve a bottomless cup of coffee.

Worth Checking Out: An Adam Smith Expert

James Otteson is a professor of philosophy and economics at Yeshiva University in New York, currently serving as a visiting professor of government at Georgetown University. Dr. Otteson writes a blog that is always provocative, and worth checking out.

He is also an Adam Smith expert, and has written a wonderful book, Adam Smith's Marketplace of Life, that examines what is sometimes called the "Adam Smith Problem": that the fellow who wrote about the role of self-interest in the Wealth of Nations is the same gentleman who theorized about society's moral behavior in his Theory of Moral Sentiments.

Professor Otteson's book is certainly worth a read.

Friday, February 27, 2009

Better Steer Clear of the Beverage Cart: Talk of Pay Toilets in the Air

Irish discount air carrier Ryanair is considering charging its passengers to use the on-board toilet. You can read more, and see a video of chief Michael O'Leary explaining it all, here.

For many, this seems cruel--to charge airborne captives to use a service for which (at the time) demand is highly inelastic. "Highly inelastic demand" is a term economists use to describe a situation in which a consumer's buying decision is not very sensitive to changes in the price she faces. Examples of goods for which demand is highly inelastic include things like emergency medical care, insulin for diabetics, and cigarettes for smokers. In all of these cases, a consumer's purchase decision is affected only slightly by modest fluctuations in the price.

In the case of pay toilets, I imagine demand for some would be very price inelastic. After all, nobody with an urgent need to use the toilet wants to be forced to simply do without. And surely charging someone to use the toilet in such an instance isn't very nice.

But this raises an interesting economic question: If Ryanair wants more money, why wouldn't it simply raise the price of a ticket for everyone, and keep toilets "free"? The answer is fairly simple, and is covered well in Chapter 16 of Steven Landsburg's wonderful book, The Armchair Economist. By keeping ticket prices low for everyone, and levying an additional fee for using the toilet, Ryanair would be able to extract different sums of money from different kinds of customers. In this case, those of us who don't use toilets in flight continue to enjoy low-priced airfares. And those of us who do use toilets in flight will pay a bit more in order to enjoy a flight experience that includes toilet use.

Could this strategy backfire? If passengers begin ordering fewer $5.00 drinks from the beverage cart to avoid paying $1.00 to use the toilet, perhaps. It will be interesting to see what Ryanair decides to do.

By the way, I can't help but be reminded of the Tony-award-winning musical Urinetown.

Thursday, February 26, 2009

When the Rich Suffer, the Poor and Working-Class Sometimes Do, Too

The world-wide demand for many luxury goods has fallen off dramatically over the last six months. And often our populist instincts can lead us not to feel much sorrow for the rich. After all, do they really need more diamonds? Or another yacht?

But when the rich start buying less, employment in luxury-good industries suffers--and often it is the poor and working-class who suffer most. Consider the recent downturn in the global demand for diamonds. Luxury jeweler Tiffany, for example, reported that its same-store sales for the holiday season were off by 24 percent, compared to one year ago. But even more serious fallout is happening in Botswana, where four diamond mines have been shut down as a result of the drop in global demand. Two of the mines may reopen in April, but right now thousands of African workers have been laid off, and 580 jobs will be cut permanently at the two mines that will remain closed until at least 2010.

And things are not much better here in Holland, Michigan, where Tiara Yachts has announced that it is laying off three-fourths of its 400 employees. This announcement follows permanent cuts last year of 300 jobs at Tiara. Julia Bauer, a good friend of mine from church, filed this report.

Wednesday, February 25, 2009

Recession or Not, "Spidey: The Musical" Set to Open in 2010

Backers of the forthcoming Broadway musical based on Spiderman (yes, you read that correctly) believe that the current recession will come to a close in less than a year. The $40 million production will be staged in the Hilton Theatre--the only venue big enough to accommodate the web-slinger--and open in February 2010. Already on board: U2's Bono and the Edge, who will pen the score and lyrics. Will it be a hit? What does your spidey sense tell you?

Tuesday, February 24, 2009

Gourmet Buffalo Cheese Not Recession Proof

Apparently, gourmet buffalo cheese is a product that consumers substitute away from during tough economic times. Here in West Michigan, a water buffalo ranch is closed after just nine months of operation. So they are selling off their land so that others can explore more valuable uses.

Monday, February 23, 2009

Georgian Eurovision Entry Gets Dig at Putin

In case you haven't heard of it yet, Eurovision is an international music phenomenon. Each year, nations from across Europe compete in an international pop song contest. This year's entry from Georgia takes a swipe at Vladimir Putin.

Here's their entry ("We Don't Wanna Put In"):