Ian Blyth – It's Just a Thought

My thoughts and opinions

Archive for the ‘Supply and Demand’ Category

Cheap v Expensive

Posted by Ian Blyth on 6 February 2010

I heard that “Cheap is more expensive in the long run” and “You will remember the quality long after you have forgotten the price”. I particularly like the last one and found it to be true many times. I try and remember it when I am buying a product that seems very expensive.

I have come across this recently which I like as well.

It’s unwise to pay too much, but it is worse to pay too little.

When you pay too much, you lose a little money — that is all.

When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do.

The common law of business balance prohibits paying a little and getting a lot — it can’t be done.

If you deal with the lowest bidder, it is well to add something for the risk you run. And if you do that, you will have enough to pay for something better.

– English economist John Ruskin, 1819-1900

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Tax the Rich – Again

Posted by Ian Blyth on 24 November 2008

The Chancellor, Alistair Darling, did his mini budget. No doubt with a lot of “help” behind the scenes from Gordon Brown.

VAT (Sales Tax if you are from the US) is down from 17.5% to 15% for 13 months. Hardly going to inspire people to shop, shop, shop given that some high street stores were having 25% and 50% sales this weekend. But there are plenty of other measures to make sure the government don’t lose too much such as putting up tax on alcohol and tobacco. Also there is no VAT on food and only 5% on fuel. SO the two mainstays of any household (eat and keep warm) will not be affected.

The sad thing is that it is back to taxing the rich but only if they win the next election as the previous election promise was not to put up those taxes. It is the old Robin Hood ploy again. Take from the rich to give to the poor. As there are more voters in the poor side it appeals to them but as many countries have found increasing taxes on the rich doesn’t bring in extra money as it makes it more worthwhile to find tax loopholes. Countries were they have low single rate tax found that their tax income went up. When will these politicians ever learn?

I watched a documentary about the US debt and they were making a big point about how US has the biggest trade deficit in the world but what was shocking was that the UK were 2nd last. And we are only a fraction of the US.

Importing more is great as long as you can afford it. But we are funding it through credit and not real money. The bubble just had to burst.

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Incentives

Posted by Ian Blyth on 29 May 2008

What drives people to do what they do? A vision? Goals? Or just plain old fashioned incentives?

Take estate agents, Please! (Old joke).

They make their money from the commission they get selling your house. So you would think the more it sells for the better for them. But they also have targets to reach each month. If they charge 2% and the house sells for £300K then they make £6,000. If they sell it for £310K then they only make another £200 which is not a great deal considering the company will take a chunk so the individual agent may not seen anything like that.

So why would they hold out for another month to make less than £200 if there is an offer on the table now and they have their months target to make. For you it is better to wait a month for a buyer who will pay the higher price as you get an extra £9,800. For the estate agent though it is better to take the quick sure sale and get the money in the bank and move onto more houses next month. So it is likely that they will try and persuade you to take the offer and say that that is all the market will bear, not many buyers etc.

If it is a slow month then estate agents will do what other shops do and cut prices to attract sales. The thing about a supermarket is that they have bought those goods already and so will cut their profit. The estate agents do not own the house – you do. So it costs them nothing to reduce the price and even though they make less money per sale if they get sales then that is all money for them and it is better for them to get sales rather than not get sales. So their selling effort is focused on getting you to reduce the price rather than sell the merits of the house to the buyer.

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Roundabouts Don’t Work

Posted by Ian Blyth on 15 January 2008

I am sure when roundabouts were first introduced they may well have helped traffic flow. But since then traffic levels have increased enormously and it seems that people’s road manners have degraded significantly.

As part of my current journey I go through a number of roundabouts. There is a big one that has 4 major exits. The trouble is in the morning only 2 of them are used and as they are next to each other the junction on the right has priority and it seems like a never ending supply of cars. So the junction I am on backs up both lanes for some distance and only a couple of cars can get onto the roundabout every few minutes. Roundabouts were meant to help regulate the flow but I have found that only happens if the traffic is light or if all the junctions are used equally.

I suppose that is why we see more and more traffic lights on roundabouts. After all if roundabouts were supposed to control the flow then you would not need traffic lights as well. The trouble with traffic lights is that they can not see the traffic build up like an old fashion policeman could when controlling traffic. If they get the controls right then all is well otherwise some junctions are clear while other junctions get backed up. So to put a system that may not always work at controlling traffic on top of another system that may not always work – well it is hardly a recipe for success.

An example of this is a roundabout at a motorway junction that I use to get home. My journey usually takes about 40 minutes but one night it took 1 hour 40 minutes all due to this one roundabout which is meant to help the flow of traffic.

In the morning I am on the motorway and exit at this roundabout and filter to the left for the first exit so that works OK. In the evening I have to go around the roundabout 270 degrees to get to the right exit. In between me and the exit is 4 sets of traffic lights. And it is a nightmare. The main traffic seems to be coming out of a major town and wants to turn right onto the motorway also so they have to do 270 around the traffic lights as well. This seems to be OK when traffic is light but as soon as traffic picks up it is horrendous as people try and switch lanes to get into the right one as they go around.

I think that the major problem though is with people. Hence my comment about road manners. There are yellow box zones which means that you do not enter them unless your exit is clear. Nobody takes any notice of these as that may mean they lose a few seconds or, god forbid, someone will get in front of them! So they go into the grids and stop. So when the traffic lights change the people that need to cross the grid can not and have to stop and the people going around should stay where they are but know if they do that the others will fill up the grid again when the lights change and so they will be stuck there. It is a vicious circle. I wish I had an answer but following the highway code and being polite seems to me to be the best answer.

When I was in Canada and going to cross a road a solitary car stopped for me to cross even though the roads were clear and as soon as he passed I could cross without bother. I was amazed. That would never happen in the UK. In the States they have junctions that everyone has to stop at and take turns in entering the crossroads. It seems to work really well as each junction gets a fair share and if one junction is clear of traffic then that speeds up the other three. You do not get these frustrating queues like at roundabouts due to the cars on the right having right of way. Unfortunately I do not see them working in the UK as people would have to have self restraint and manners. What a sad indictment of the country I live in.

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Cannibis Farms

Posted by Ian Blyth on 13 March 2007

On the news today they were saying that the police are raiding 3 cannibis farms a day. That UK production is up from 10% to 60% and most seem to be run by Vietnamese gangs.

 I am always wary of police (government) statistics but even still, it is a massive increase in UK production. And a lot easier for criminals than trying to smuggle it in.

 But as always if you attack the supply without trying to reduce the demand you are on a loser. Cannibis rating was lowered – a clear signal from the government that it was not as serious a drug as thought. This must increase demand. And if you you take away supply then that drives up the price which makes it more attractive for criminals as the profit margin is higher. So the police closing them down is just making it more attractive for criminal gangs as they have the resources to do it.

Does one hand know what the other is doing?

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Spam? What spam?

Posted by Ian Blyth on 22 February 2007

I hear a lot about spam and what a problem it is but I don’t seem to have much of a problem with it. I have 4 main e-mail accounts – Google, Hotmail, BT Internet and work. And I rarely get a spam message into the inbox of any of them. There is spam coming through but it goes into my spam folder which I check every now and then to make sure a real message has not been trapped by the filter. so why is there so much noise about the problem of spam?

If your e-mail provider does not have a good spam filter complain or change providers. If you do not want to change providers then there are many spam filters for mail clients. I understand if it is a dial up and each spam costs money but more and more people are on broadband and it is unlikely to push them over the limit. It would be good if there was a method to make spammers pay for each e-mail. Then they would have to do an ROI to see whether the response they got and therefore sales matched the cost of sending. Which is what companies who post out letters have to do today. If it is not cost effective then they will stop. The law of supply and demand will kick in.

Posted in IT, Supply and Demand | Leave a Comment »

Government wanted to fund training

Posted by Ian Blyth on 17 January 2007

Sir Digby Jones thinks that the government should do more for education.

 http://news.bbc.co.uk/1/hi/business/6269559.stm

Well if a business thinks that their people need trained and it improves the business then they should send their people on training courses. Usually most business do not work out the ROI on training so it becomes more of a soft “perk” and so gets cut. But a sensible business will fund training that helps the business. And if there is a demand for a particular skill then the wages should go up and people will train for it themselves to get the higher wages.

 His main argument though appears to be that the levels of basic education are too low. Hold on isn’t that the schools job (which are compulsory until 16) and the Labour government made a big play out of that 10 years ago when it came to power. Apart from taxing us to levels way above what the UK have seen for years what real improvements has there been in education?

And as the Adam Smith Institute point out as well as being the top of the tax pile it is driving business away which then reduces taxes collected. A self defeating policy made all the more idiotic as the government haven’t improved education and the NHS as they “promised”.  I know, how much value can you put on a politician’s promise?

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Paradox of Choice video

Posted by Ian Blyth on 25 November 2006

This is an interesting presentation about why we want choice but why sometimes choice is not good for us. It is about an hour long but you can pause it. He talks about it really well. Worth a watch if you have the time. No IT stuff in it all although he is talking to an IT audience. Shame you are not allowed to see the cartoons he uses.
Paradox of Choice by Barry Schwartz
http://video.google.com/videoplay?docid=6127548813950043200&q=paradox+of+choice

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Lessons of Supply and Demand

Posted by Ian Blyth on 17 October 2006

Governments generally get this wrong especially as their ideologies tend to make them favour one approach over the other. The left wants everyone to be workers whereas the right wants everyone to be consumers.

Most governments tend to deal with things that they do not want (like drugs) by restricting the supply and trying to stop it or destroy it. That just inflates the price as demand is still the same. Which means it becomes even more profitable for criminals and so creates openings for people to create more supply.

Look at two approaches to dealing with similar issues – fur and ivory. The ivory trade goes on although there are laws against poaching but a single “catch” for a poacher can feed his family for a month. A big incentive especially if the chance of getting caught is slim. So the result is that poaching continues, elephants are killed for their tusks and ivory goods are still made and sold.

The anti-fur trade took a totally different stand. Instead of going after the supply they targeted the demand. With spectacular results. The advert showing a model on a catwalk draped with a fur coat and leaving a trail of blood behind shocked most people. But the message got across and if you wore a fur you were cruel and insensitive. When I was a boy my mother, grandmother and practically all female relatives had a fur coat that was their best and that they were proud of. And we were not a well off family. It was just what every woman had to have. Now you do not see people wearing fur at all. Demand was taken away and so the supply dried up of its own accord. If there is no money in it why do it.

Governments, even with this classical example that everyone quotes, have not learned from this and they still go after supply. Will they ever learn?

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UK Police Crack Down on Cannabis Farms

Posted by Ian Blyth on 25 September 2006

A news item today says that the police will be cracking down on cannabis farms. Apparently the amount if home grown cannabis has risen from 10% to 60%. How do they know this? Since it is illegal and not taxed how do they track that figure? If they know, then they have been allowing it to grow and not taken action. So why now? Otherwise they are just making up the figures.

 

If it is true then surely that is good for the economy. Less imports and more jobs.

 

The trouble with attacking the source and destroying the farms is that they do not reduce the demand they just reduce the supply which puts up the price and makes importing it more lucrative.

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