American Consumption and the New Normal

American consumer attitudes about how we think about and spend our hard-earned dollars are undergoing the biggest change since the end of the Great Depression and World War II. As in the 1940s, we now find ourselves in a moment of turbulence, confusion, and new beginnings. Heading into a new year and a new decade, we're starting to get an idea of what our "new normal" may look like for consumers. At the end of... more, click here

All you need to know about economics

Here's a reprint of an article that summarizes all you need to know about economics in 10 easy steps. They come courtesy of the best-selling introductory economics textbook by Gregory Mankiw of Harvard University.

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Economics is the study of how society manages its scarce resources, where ''scarce'' means there are fewer resources than we'd like to be able to use.

The first four of Mankiw's 10 principles concern the way people make decisions, and the first is: people face trade-offs. That is, to get one thing we like we usually have to give up another thing we like. Economics is about the trade-offs people - and societies - have to make, and about helping people improve the trade-offs they're making. One common trade-off society faces is between efficiency and equity. Efficiency in the allocation of resources means society getting the most it can from its scarce resources. Equity means the benefits from those resources are distributed fairly among the members of society. Often, the things we could do to make the cake bigger (efficiency) make the slices of the cake more unequal (equity) and vice versa.

The second principle is: the cost of something is what you give up to get it. That is, its ''opportunity cost''. Economics is about comparing the costs and benefits of alternative courses of action. The benefits of doing something or buying something are usually pretty obvious, but they need to be weighed against the costs involved to see whether option A is superior to other options. The cost of going to university full time is not the cost of accommodation and food (because you'd face those even if you didn't go to uni), nor even just the cost of the uni fees and textbooks. The biggest cost is the income you lose by not being able to work full-time - a classic opportunity cost.

Third, rational people think at the margin. Marginal changes are incremental adjustments to a plan of action. Say you're running a short course for 10 students at a total cost of $10,000 - that is, an average cost of $1000 per student. Now say an extra student wants to join the course. How much should you charge him - $1000? No. The first question is: what's the marginal cost of adding an extra student? It's probably quite small - say, $50 for the extra set of course notes. This means that any price you charge above the marginal cost of $50 will leave you ahead on the deal. But if you name a price that's too high and the student decides not to pay it, you're worse off to the extent that the amount he would have been willing to pay (marginal revenue) exceeded $50.

Fourth, people respond to incentives. Because people are assumed to make decisions by comparing costs and benefits, their choices may change when the costs and benefits change. If so, they're responding to incentives. When Cyclone Larry caused the price of bananas to skyrocket in 2006, most people ate fewer bananas and more apples and pears. They were responding to changed incentives.

The next three principles concern the way people interact. The fifth is: trade can make everyone better off. Trade between Australia and China is not like a sporting contest where one side wins and the other loses. Rather, trade makes both sides better off (though not necessarily equally better off), which is why it happens. Trade between countries is merely an extension of all the trade that goes on within countries between businesses and households.

Sixth, markets are usually a good way to organize economic activity. A market economy is ''an economy that allocated resources through the decentralized decisions of many firms and households as they interact in markets for goods and services''. The other main way to organize economic activity is to have central planners make all the decisions about what goods and services are produced, how many are produced, who does the producing and who gets to buy what's produced. It doesn't work.

Seventh, governments can sometimes improve market outcomes. Government intervention in markets may be justified in cases of ''market failure'' - ''a situation in which a market, left on its own, fails to allocate resources efficiently''. One common cause of market failure is the existence of an ''externality'', where a transaction between a buyer and a seller affects - whether favorably or unfavorably - the well-being of third parties. Another cause is ''market power,'' where one or a small group of firms is able to substantially influence market prices (and thus make profits well in excess of the opportunity cost of the capital they have put up and the risks they are taking).

The last three principles concern how the economy as a whole works. The eighth is: a country's standard of living depends on its ability to produce goods and services. The value of a country's production of goods and services during a period is measured by gross domestic product. A simple measure of its material standard of living is its GDP divided by the size of its population. Income per person is very much higher in the developed countries than the developing countries. Why? Mainly because the rich countries have higher productivity - each hour of a worker's time produces more goods and services. Why? Because the rich countries' workers are better educated and trained (''human capital'') and have better equipment to work with (''physical capital'').

Ninth, prices rise when the government prints too much money. This proposition is usually true, but it doesn't apply when - as now in the United States and Britain - the demand for goods and services is falling far short of the available supply of goods and services.

Tenth, society faces a short-run trade-off between inflation and unemployment. Usually, the things governments do to reduce inflation have the effect of increasing unemployment and the things they do to reduce unemployment have the effect of increasing inflation. This relationship is known as the ''Phillips curve'' after the Kiwi who invented it, but in the long run the trade-off breaks down and if you push it too hard you can end up with high inflation and high unemployment. If you can get people's inflation expectations down, however, you can enjoy the best of both worlds.

If you've followed me this far you've passed the course. Your reward: look up the economics professor and stand-up comedian Yoram Bauman on YouTube and watch his send-up of these 10 principle

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Making Cents Word Cloud for 2009

Click on the word cloud below to enlarge.
Thank you for following Making Cents during 2009. Perhaps it was not the best year the Green Industry has ever seen, but it sure wasn't dull. Looking forward to sharing 2010 with you!

FYI -- try www.wordle.net to make your own word cloud -- a great marketing/navigational tool for your website.

Bio-Packaging Solutions for Horticulture

Whether or not you were able to attend the webinar, Easy Green: Bio-Packaging Solutions for Horticulture (sponsored by the Ball Horticultural Company and Summit Plastic Company), the presentation is available for you to view again or share with others. The link below will take you to the internet site where the recorded presentation will be accessible for the next 60 days.

https://www.livemeeting.com/cc/communique/view?id=J9PP68

Follow these steps to access the presentation:
* Clicking the link will bring you to the: “View Recording” screen
* Enter your name and click the view recording button. YOU DO NOT NEED TO ENTER RECORDING KEY
* On the next “View Recording” screen, enter your company and email address, click the view recording button.

You may choose either the high fidelity or standard version. If you have a slow internet connection, I recommend the standard version. Unfortunately, the standard version won’t allow you to view the embedded automation video. When the automation slide appears you will hear the audio but not see the video, please be patient and wait for the presentation to advance.

ANLA webinar now online

Click here to watch the recording of my latest webinar sponsored by ANLA. Here is the webinar description:

Got Recovery?

In the aftermath of arguably the worst downturn in recent economic history, the economic climate continues to feel sluggish. Though we are in the midst of what the media refers to as a “jobless recovery,” many green industry firms continue to struggle to survive. In this webinar, Dr. Charlie Hall will provide an overview of where do we stand in terms of today’s economy, how far down the path of recovery are we, what is the near-term economic outlook for 2010, and more importantly, what do we do NOW to position ourselves for spring and beyond?

Greenhouse crop production training course offered online

COLLEGE STATION – A self-directed online course is being offered for greenhouse employees nationwide, according to Dr. Charlie Hall, Texas A&M University Ellison Chair in International Floriculture.

The course provides introductory-level information about the greenhouse industry plus learning models on greenhouse crop production from beginning to end, controlling insects and diseases, and shipping and handling procedures, Hall noted.

"One of the unique features of this training is that it is offered in English and Spanish," Hall said. "With the increased number of Hispanic workers in the green industry, this training series provides a valuable service to the industry by providing employees who are new to the industry with an overview of what greenhouse production of floral crops is all about."

Videos are used throughout the course sections, and the instruction is available in both languages with transcripts available for downloading.

The course costs $55 and is available through eXtension, an online collaboration among the Cooperative Extension System which includes the Texas AgriLife Extension Service. People can enroll at any time and receive a “key” to the site which is valid for 90 days.

The course is located at http://campus.extension.org under the gardening and horticulture section. Registration for the course may be completed at http://agrilifevents.tamu.edu under "Online Courses."

"We are excited about our partnership with eXtension because it enables us to provide these materials nationwide, with support from over 70 land-grant institutions," Hall added.

"The eXtension website is a space where university content providers can gather and produce new educational and information resources on wide-ranging topics."