Occupy the internet!

It is that time of year again and so much to my wife’s chagrin I have just shaved and will spend the next month growing and tending a brand new moustache! Its all in aid of mens health charities and you can visit my “mospace” (http://mobro.co/jonswarbrick) and donate or just keep an eye on the progress.

Whilst perhaps not famed for their ethical approach to business, the catalogue and online retailer Littlewoods have shown a truly distasteful side with their christmas marketing campaign.  Here is the TV advert:

The initial striking feature is an awfully cringe-worthy song but there are darker elements to the advert.  Targeting families with limited income, Littlewoods promises “to make what’s new affordable right now”.

Tugging at the heartstrings of “mummy” in an already glutinous materialistic culture, Littlewoods are striving to generate that feeling that only the latest x-box or smart phone will do for Christmas.  Pursuing this and offering such easy access to cheap credit is deeply irresponsible.  

They send the message “if you love me mummy you will buy me an x-box for Christmas, if you do not have the money do not worry, Littlewoods provide an easy way into debt!”

Shame on you Littlewoods.

Wilderthorn do Radionhead/Reckoner!

As protesters rally for Occupy Wall Street for the fourth week it is just another sign that we are living through a time of significant transition.  The world is always in flux but there is a strong sense that global society is shifting more than has been seen in many years.

From the contagious uprising in the Arab world, riots and protests in southern Europe to the looting and riots on our own streets in Blightly people are reacting with the ubiquitous words of Zack de la Rocha “if we don’t take action now, we’ll settle for nothing later”.

It occurs to me that we are at a cross roads.  What we take action on or settle for now will affect the state of the nations in the years to come.  There are competing forces at work and it is a great opportunity to be seized.

People are protesting in Wall Street and other centres of money and power because they are angry.  They are angry because of the growing inequality between the rich and the majority, there is massive unemployment particularly amongst young people and there is a feeling that politicians do not represent them but serve the needs of the wealthy.  And they blame the avarice of Wall Street and all it represents.

There is a wide spectrum of protesters of different hues and persuasions. Most people do not want communism or anarchy and to overthrow the White House but are just sick of our greedy form of capitalism, they want the things that really matter such as the environment, jobs and opportunities and equality to shape governance more than the interests of the rich.

Inequality is becoming starker.  In America the top 1% takes home 25% of the total income, and look after 40% of all wealth. Just 25 years ago the top 12% took home 33% of all income.  Despite the bigger pie argument the median income has fallen and all the growth in the last 25 years has lined the pockets of the rich.

In the UK, a recent report by the IFS (Institute of Fiscal Studies) has forecasted that middle incomes will fall by 7% by 2013 with the number of children living in absolute poverty rising to 23% (3.1 million).

For all the problems our government face with stagnant growth and the deficit there is a broader opportunity to create a new kind of society, a fairer banking system that serves the people and sustainable approach to how we live and do business.  In the US there are different problems but similar opportunities.  I just hope we can take up the challenge – I for one am going to be part of it!

Wednesday 5 October 2011

(Source: felixsalmon)

My hero Joseph Stiglitz at Occupy Wall Street…

The concept of Supply and Demand can show how a products price and the supply and demand quantities are all related.

It is easy to see that lower prices can lead to higher demand and lower supply. But elasticity tells by how much. It turns this qualitative information into quantitative data.

Elasticity of Demand

If a product has a low elasticity it is said to be inelastic. A good example is eggs which has an elasticity of around 0.1. If the price increases by 10%, the quantity demanded decreases by only 1% as there are not many ‘substitute’ products.

Coca-cola is an example of an elastic product with an elasticity of about 3.8.  If the price increases by 10%, the quantity demanded will decrease by 38%.  This is likely to be because people will just choose an alternative soft drink.

Elasticity of Supply

Similarly, the elasticity of supply tells how much changes in price affect the quantity supplied.  If petrol has a supply elasticity of 1.5 then a 10% increase in the price will lead to a 15% increase in supply.

If the supply and demand elasticities can be modelled, the effects of changes to price, demand or supply can be understood.  This allows manufacturers, retailers, farmers, oil producers and governments to set their policies.

In some cases increases in price can lead to falls in revenue due to the decrease in demand, whilst in other case the revenue might increase with an insignificant shift in demand.  The elasticity tells us how much the demand will change.

For some manufacturers, increases in productivity can lead to falls in revenue. This is because the increased supply will lower the price when the demand is inelastic.

It is therefore very important to understand the elasticities of supply and demand and the effects changing factors can have.

Other Elasticities

Elasticity also gives us information such as how much consumption increases as income rises. Or how the quantity demanded of one product is affected by changed in price of a different product.

One final thing to add is that time plays a crucial role in understanding elasticity. Demand of a product might change by 1% in a week following a 10% rise in price. Over a year the drop in demand might end up being 20%.

Over time people can change their behaviours. Petrol is a good example of this as in the short-term demand might not alter significantly following a price increase.  Over a longer period people can change their habits by moving closer to work or buying a fuel efficient car.

I should begin by saying that my church community has never been very regular about it’s Sunday meetings but has recently pushed the boat out and begun meeting nearly every week.  And I think it’s a great thing.  There are a lot of people that appreciate meeting regularly, people who lead busy lives and want to hear someone of wisdom, learning and experience who has considered a topic share some ideas.  Some people love singing together and experience and express their relationship with God in this way.  People enjoy having this connecting point on the Sunday, and are energised for the rest of the week.

I think it is also recognised that the focus of faith is not on the Sunday but how it lives and breathes during the week.  So I should say that my frustrations are not caused by my church community where the Sunday meetings are but one aspect of a rich spectrum.  Although I think it is always important to be aware of the risks…

When I consider what church is I think of my life of faith worked out in a community.  I think of meals shared, pints in the pub, meeting to pray, to discuss and to think.  I think of the ways we serve our community and how we grow as people, become more generous and more understanding and in all these things hope that we are part of embodying the Kingdom of God.

Very far down my list of what church is would I put Sunday meetings.  So I find it strange and frustrating that if you ask almost anybody what church is they will either talk about a building or a service.

A church can pay lip service to ‘community’ and ‘lifestyle’ but much like a city and urbanisation, Sunday meetings can often begin to drag in all the life, the people, the money and the opportunities.

What I find intriguing is that the shape of church is usually understood in light of Paul’s letters and the story in Acts.  These are cracking books, they are engaging and speak wisdom into communities rather clumsily living out this life of faith.  They tell a story of real people in real places.  But I sometimes wonder if we take the (perhaps limited) understanding of Paul and the early church and apply it too simply as a filter over our Sunday meetings.

For me the picture the bible paints of church has to be the life of Christ - we are his body after all.  Jesus had it right; Paul did not have it all right; the early church did not have it all figured out.  Paul understood more than most and had a tough job trying to teach people how to live together and pursue God and we need to all continue to learn from his ideas.

But the full revelation of God was not Paul nor was it the early church.  It was the man that spent time with people, reasoned, discussed, served people, got angry with the religious leaders, loved well, brought children to the centre, prioritised people on the edge and was prepared to let go of everything.  Jesus did not control, manipulate, restrict but gave life, taught freedom and brought energy.

And so I hope we continue to seek this model of church that seeks to know Him better, to serve our community and be the body of Jesus.  And to not try to fit all these things into a meeting on Sunday.

The theory of Supply and Demand runs through the core of market economics. An idea so pervasive that its is described as the ‘Law of Supply and Demand”, it determines the prices such as to allocate an economy’s scarce resources.

If you buy a t-shirt, you are adding to the demand of t-shirts. If you look for a job you are adding to the supply of labour; or you sell a sofa on ebay, you add to the supply of sofas.  This law sets prices so that the supply will equal the demand.

Supply vs Demand

Quite simply, all other things being equal, if the price of a product is low, the profit to be made is small; there is little incentive to sell and so the quantity supplied is low. If the price is high, there is much profit to be made and so the supply is high.

On the other hand, if the price is low, people are more likely to purchase the product and so the quantity demanded is high. A high price of course leads to reduced demand.

This can be plotted on a single graph with one line representing the ‘supply curve’ and the other the ‘demand curve’. The point where the lines intersect is the equilibrium point. This is the price at which the product must be sold at so that the quantity supplied can equal the quantity demanded. The behaviour of buyers and sellers push markets to this equilibrium.

A lower (or higher) price will cause excess demand (or supply) which will cause the price to change until it reaches the equilibrium point.  For instance, if all of a sudden a lot of people want to buy gold (or the swiss franc), the quantity demanded will be greater than that supplied - there is an excess demand.  People selling the gold will realise that they can charge more for gold and the price will increase.  

This change in demand or supply would be represented by a shift in the curve to the left for a decrease in quantity demanded/supplied or the right for an increase.  There are a number of factors that can cause one or both curves to shift.  For instance factors that might cause the demand curve to shift include:

Income

As a person has more expendable money, the demand for some products would increase - the curve would shift to the right.

Prices of related goods

As the price of bananas rises, the demand for apples might increase - the curve would shift right

Other factors might include the weather; hot sunny weather might lead to reduced demand for umbrellas.  In this case the curve would shift to the left.

Factors that might cause the supply curve to shift include:

Input prices

A rise in the cost of cheese might lead to lower supply of pizza as it becomes less profitable. This would shift the curve left.

Technology

Supply might increase with new technologies reducing the cost of production. This would shift the curve to the right.

Supply and demand really hold in a competitive market.  This is where there are many buyers and sellers such that individuals have little or no influence on the market price.  On the other hand a monopoly is when there are parties that are so large that they are able to determine the price.

These principles are the basics to understanding the concept of supply and demand.  It must be stressed that this can be applied to virtually everything.  It determines the cost of your house or a haircut, the price of apples and books, how much you get paid and the value of a currency just to name a few.