FT articles 2006

These are comments on FT articles archived from 2006 - see FT Articles for current series

January 2006

(1) "House prices expected to stay firm in the year ahead" FT Saturday December 31st / Sunday 1st January. This article in the New Years Eve edition of the FT is a good one to start the New Year on, the bland title is belied by the problems discussed in the article of forecasting supply and demand in this market, reinforced by the table comparing various forecasts of price/falls for 2005 with the actual outturn.

(2) "The scam of those who see the future in today" FT Tuesday January 3rd page 19. John Kay's article on the problem of forecasting future economic and technological trends is a nice companion piece to the house price article (above) of three days earlier.

(3) " A strong case for a tax on land values" FT Friday January 6th page 15. Land taxes or property taxes in various forms are recurring themes in economics because of inelasticity of supply, economic rent, immobility of factors, and the relationship between these issues. Martin Wolf adds further twists to this story. See also article for June 6th.

(4) "Sugar shortage sours Thailand amid price controls" FT Saturday 7th January page 5. A classic case of how trying to control a market (in this case its price) can be self defeating. Last words in the article from an analyst: "you can't beat the market, it's the law of supply and demand". Well, maybe sometimes you can influence the market to advantage, but not doing it this way.

(5) "Smuggling and fraud hamper bid to regulate caviar trade" FT Saturday January 7th page 6. The problems of lack of effective property rights and associated problems of smuggling and fraud impeding conservation efforts.

(6) "High-powered lobbying in prospect on greenhouse gas emissions" FT Tuesday January 10th page 4. Sets out the economic and political objectives of the one-year old EU carbon trading scheme and discusses how the market will/should work. See also articles for April 28th, May 3rd and May 9th.

(7) "Britain overlooks the human factor in productivity" FT Thursday January 12th page 19. Traditional market (neoclassical) theory versus modern behavioural economics in the role of work incentives and productivity.

(8) "The hippies were right all along about happiness" FT Thursday January 19th page 17. The nice (frustrating) thing about the new (empirically supported) studies of the economics of happiness is that they tend to (a) be consistent with common sense (b) confirm what I believed when I was a student but suppressed in order to pass my final examinations. OK, so we start all over again? See also article for May 1st.

February 2006

(9) "Europe's VAT regime is like a Swiss cheese" FT editorial Wednesday 1st February page 18. Why EC VAT loopholes are inefficient ways to help low income groups when they can be aided by more direct and efficient means.

(10) "The soft shoe shuffle of profitless protection" FT editorial Monday February 27th page 16. Why anti-dumping measures can be protectionism in disguise and why tariffs may be the least worst way of pursuing these policies - if you really must.

March 2006

(11) "Buffett's fourth law" FT editorial Tuesday March 7th page 16. The Sage of Omaha's Fourth Law - "returns decrease as motion increases" - argues that shareholders would be better off if their shares were not "churned" by greedy intermediaries. This touches on a paradox of capital market efficiency, that you can't beat the market but this reflects the actions of many individuals trying to do exactly that. Discuss.

(12) "Brazil prepares to grow the next world fuel" FT Thursday March 9th page 7. The article is interesting, not just about supply and demand in the sugar market, but for what it says about technological substitution (petrol/ethanol) on the consumption side (with implications for demand elasticity) and technological substitution (sugar/ethanal) on the production side (with implications for supply elasticity).

(13) "Survey reveals mobile phone revenue hurdle" FT Monday March 20th page 21. Suggests that demand for complementary services such as downloads from mobile users may not be sufficient to generate significant extra revenue, but may instead reduce "churning" (make the individual demand curve less elastic).

(14) "Taking a bite at Apple" FT editorial March 22nd page 16. Open standards or proprietary standards? Looking at this FT editorial just four months later it seems prescient with the announcement (FT August 29th front page) of the emergence of SpiralFrog as a potential threat to iTunes "walled garden" business model. Best read with articles 15th June and 29th August.

(15) "Beijing imposes windfall tax on oil groups" FT Tuesday March 28th page 8. What happens when you distort market prices; result - administrative headaches, subsidies, windfall taxes, and windfall compensation.

(16) "Why there can be only one winner in the battle of Blu-ray" FT Tuesday March 28th page 19. Article by John Kay on compatibility standards and competition in new product introduction. See also next article

April 2006

(17) "Coming soon, a format war in which everyone could end up a loser" FT Monday April 3rd page17. The economics of the introduction of a new technological format in the face of massive set up costs and network externalities. See also preceding article.

(18) "Beware of grand vision and foresight in business" FT Tuesday April 11th page 17. Again, complements the first two articles referred to here in 2006, John Kay's own (January 3rd) and the New Years Eve article on the problem of forecasting house prices. Not only is it difficult to see the future clearly as these first two articles note, this one points out that formulating the right strategic moves in the face of future uncertainty is even harder.

(19) "Storing up riches in heaven (and below)" FT editorial Saturday April 15th page 8. (Slightly) tongue in cheek editorial about competition, efficiency and opportunity cost in selecting the optimal religious policy ...

(20) "The commodities binge will lead to indigestion" FT Saturday, April 15th page 9. The role of short and long run supply and demand in commodity prices.

(21) "A real energy market" FT editorial Monday April 17th page 12. Three ways in which the price mechanism can increase energy security.

(22) "China's false alarms" FT Editorial Thursday April 20th page 16. Why rapidly increasing wages in China are a consequence of increases in competitiveness, rather than a threat to it.

(23) "Microsoft: no time to fight the last war" FT editorial Monday April 24th page18. Complementary products, bundling, monopoly, antitrust, and static versus dynamic efficiency in the PC world. See also Microsoft article July 13th.

(24) "The green bandwagon" FT editorial Wednesday, April 26, page 14. The puzzle of why green taxes have not caught on further. See also articles for May 22nd, July 19th, July 21st, August 9th, August 11th and August 16th.

(25) "Bush runs on empty". FT Editorial Thursday April 27, page 16. Why Bush's petrol price policy is flawed economics

(26) "Petrol-induced stupidity on wheels" FT Thursday April 27, page 17. How high oil prices would be the solution to this particular energy problem. Exactly.

(27) "Carbon trade on trial" FT editorial Friday April 28, page 14. Why supply should be less than demand for carbon permits if pollution is to be reduced. See also articles for January 10th and May 3rd. See also articles for January 10th, May 3rd and May 9th.

May 2006

(28) "What price happiness? Economics is learning to lighten up". FT Monday May 1st, page 13. How economics is beginning to look at core aspects of human behaviour and aspirations, and how it may be important for economics and policy making. See also article for January 9th above.

(29) "Brussels fails to halt slide in carbon dioxide permit prices" FT Wednesday May 3rd page 9. Shows how supply of permits is crucial in influencing price in this fledgling market. See also articles for January 10th, April 28th and May 9th.

(30) "Higher petrol prices hit new car sales / How rising fuel prices can help in the long run", both articles FT Saturday, May 6th, page 2. Shows how effect of rising fuel costs can vary in the short run and long run, implying corresponding differences in relevant demand elasticities.

(31) "Why the key to carbon trading is to keep it simple" FT Tuesday May 9th page 17. Sensible (i.e. economics-based) principles from John Kay on how to design a carbon trading scheme. See also articles for January 10th, April 28th and May 3rd.

(32) "Beware the free lunch" short FT editorial Saturday May 13th page 10 in what seems to be a new version of that perennial scam, the pyramid scheme where high returns are only payable out of (unsustainable) high growth of the fund itself.

(33) "Auditors need to escape the Prisoner's Dilemma", FT Tuesday May 16th, page 17. Article by John Kay in a parallel to regulatory capture (in this case in the auditing field), with a Prisoner's Dilemma analysis of how auditors can get too close to their clients.

(34) "Platinum demand to stay strong" FT Tuesday May 16th, page 43. Detailed analysis of the supply and demand forces (including speculation) dictating the price of this commodity.

(35) "EU finds carbon trade emission impossible" FT editorial Wednesday May 17th page 16. More on problems in deciding supply of permits in introducing carbon trading at EU level, complements the earlier articles on January 10th, April 28th, and May 3rd above.

(36) "Time to give road pricing the green light" FT editorial May 22nd page 20. The FT makes a clear case for what every right thinking person would agree with - make the polluter pay, save the environment, reduce congestion, stimulate economic competitiveness - so why is it only mostly economists who think that road pricing is a good idea? See also articles for April 26th, July 19th, July 21st, August 9th, August 11th and August 16th.

(37) "Speculation, greed and fears over supply turn price of copper red hot" FT Wednesday May 24th, page 7. The title of the article says it all, helps show how the foundations of economics are to be found in psychology

(38) "European wine reform spells pain for producers", FT Wednesday, May 31st. A nice example of the Law of Unintended Consequences swinging into action in the face of incentives for rational profit maximising behaviour by producers. A policy of buying up surplus wine to turn into fuel and industrial alcohol has encouraged low quality wine production on the part of farmers.

June 2006:

(39) "OPEC woos free riders", FT editorial, Friday June 2nd, page 14. As the article notes "one wonders why anyone would want to join the 11-country cartel" (or any cartel for that matter, when the opportunity and incentives to free ride are recognised).

(40) "Pawn, porn and prawns are the most popular retail neighbours" FT Monday 5th June page 3. Useful for illustrating positive externalities (clothing retailers often like to cluster with other clothing retailers in shopping locations to attract crowds) and negative externalities in general (no-one likes to be next to a wet fish shop, a sex shop, a brothel and - frequently - an off-licence), and in particular (perfume retailers often do not like to be located next to bakeries).

(41) "Land tax is something to build on" FT Friday June 9th page 17. Land taxes are something which frequently recur in economic debate. Here the arguments relate to taxing windfall gains and making the beneficiary contribute to the marginal costs of infrastructure provision. See also article for January 9th.

(42) "Conviction Insurance" FT editorial Saturday June 10th page10. The editorial is a nice one because it recognises the standard economic arguments but comes to a different conclusion (based on rational argument) from what would be expected from economics and common sense (they often coincide, contrary to popular opinion). An insurer is offering to pay some or all of subsequent travel costs for a year to British drivers who fear losing their licenses for speeding offences, in exchange for a modest yearly premium. The FT recognises the moral hazard and adverse selection arguments that this could both encourage and compensate illegal behaviour, but argues that anyone buying this premium would be expecting to commit the crime anyway, and that this is an example of the market working. Not sure all the argument would be bought by the public (and all economists) but does widen the debate.

(43) "Razors, blades and Apples walled garden" FT Editorial Thursday FT editorial Thursday June 15th page 16. Discusses the pricing of complementary products such as razors and blades and iPod and iTunes and where network externalities work - and where they don't. Best read with articles on Apple for March 2nd and August 30th.

July 2006

(44) "Microsoft closer to European truce" FT Thursday July 13th page 22. Article in Companies and Markets section on anti-trust investigations of Microsoft and the economic rationale behind them. See also Microsoft article April 24th.

(45) "Taxation can give the earth a chance" FT Wednesday July 19th page 19. Martin Wolf article about permits versus taxes and the role of marginal analysis in trying to find what to do about pollution. See also articles for April 26th, May 22nd, July 21st, August 9th, August 11th and August 16th.

(46) "Green taxes and posturing politicians" FT Friday July 21st page 13. Article by the "Underground Economist", Tim Harford on the role of green taxes in dealing with congestion and pollution. See also articles for April 26th, May 22nd July 19th, August 9th, August 11th and August 16th.

(47) "Bearers of bad news" FT Editorial Saturday July 22nd page 8. This is the kind of article that economists love because it helps separate economists from normal people. Most people think ticket touts are scum and parasites, the typical well-trained economist sees them as entrepreneurial market intermediaries making everyone better off than they would have been without their involvement in the market - that is, unless you are being offered a ticket at an extortionate price by one of these lowlifes to see Scotland take on England for the rugby Grand Slam.

August 2006

(48) "Transport secretary in driving seat on road-pricing proposals" FT Wednesday August 9th page 3. Article reviews how effective road pricing alternatives may be compared to fuel duty in internalising externalities such as congestion and pollution. See also articles for April 26th, May 22nd July 19th, July 21st, August 11th and August 16th. .

(49) "Why business must back congestion charging" FT Friday August 11th page 13. "There are few political debates in which the left supports a regressive tax on the poor, while the right opposes a free market policy of benefit to business and the rich. That, though, is the politics of congestion charging" - so starts the article. See also articles for April 26th, May 22nd July 19th, July 21st, August 9th and August 16th.

(50) "Coffee with a conscientious kick" FT Wednesday August 8th page 8. The role of certification (e.g. Fairtrade) in trying to change the market for coffee and the various social and environmental objectives that it targets.

(51) "A global warming fund could succeed where Kyoto failed" FT Wednesday August 16th page 13. Article by Bhagwati of Columbia University on efficiency and fairness and taxes on pollution - note the distinction it makes between stocks and flows of pollution and how this created problems for Kyoto. See also articles for April 26th, May 22nd July 19th, July 21st, August 9th and August 11th.

(52) "Ebay gets bad feedback from sellers" FT Wednesday August 16th page 12. Editorial about eBay being "near" natural monopoly and implications for it and its users.

(53) "Valuers sums are often very complicated" FT Monday August 21st page 18. Interesting analysis of how occupancy rates can influence DCF calculations of value of a commercial property.

(54) "Do not box yourself in when making decisions" FT Tuesday August 22nd page 13. John Kay article about rational choice in the face of risky alternatives (he promises a successful strategy for the problem he poses next week).

(55) "An airports debacle worsened by greed and neglect" FT Tuesday August 22nd page 13. Joe Stiglitz, Economics Nobel Prize winner showing how airport privatisation has created market failure with private incentives to maximise profit imperfectly aligned with the public interest.

(56) "Medicines and Markets" FT Editorial Thursday August 24th page 14. The role of compulsory licenses and incentives to innovate in the continuing problem of getting essential medicines to poor countries

(57) "The maths may be simple but intuition may be more use" FT Tuesday August 29th page 15. John Kay solves the two-box problem he introduced last week - and concludes that probability theory may not be all that useful for real life decisions.

(58) "The daily defaults with power to change lives" FT Wednesday August 30th page 13. Shows the power and influence of default options and how they may have major implications for consumer welfare, corporate profits and competition policy.

(59) "Apple losing its grip on digital music" FT Wednesday August 30th page 21. Looks at three different business models for music in the digital age and note Apples success with iPods may be challenged. Good read in conjunction with FT editorial for 22nd March,and editorial for June 15th.

September 2006

(60) "Colluding drugmakers" FT Monday September 4th page 14. Editorial. An unlikely alliance between the big drug companies and potential entrants (makers of generics) which is leading to major distortions of competition.

(61) "China's resources" FT Monday September 4th page 14. Editorial. China is still trying to control market forces in commodity markets, but as the editorial notes; "instead of swimming against the tide, Beijing should accept the laws of supply and demand".

(62) "Trading on fairness" FT Tuesday September 12th page 20. Editorial on how farm workers growing coffee for the Fairtrade certification scheme are being paid less than Peru's minimum wage. Show the infomation problems inherent in trying to effectively link supply chain to final demand.

(63) "Car buyers switch to hybrids as fuel costs rise" FT Friday September 15th page 6. The article looks at how price elasticity can be a more important element than environmental concerns for many consumers in their car purchases.

(64) "Brussels has got it wrong on roaming charges" FT Friday September 22nd page 17. A regulator, now acting as a cosultant for a firm facing regulatory intervention, argues the case against price regulation (on roaming charges for mobile phones.

(65) "Tax the gas guzzlers" FT editorial Friday September 22nd page 16. The wrong way and the right way to make the polluter pay.

(66) "Going up, going down" FT editorial Tuesday September 26th page 20. How lower oil prices could contribute to environmental problems.

(67) "Falling oil prices prove mixed blessing" FT Friday September 29th page 23. How falling oil prices can benefit some firms and not others and how hedging strategies can lock in high input prices.

October 2006

68) "Warning over cost benefits of emerging economies" FT Tuesday October 3rd Page 10. Usefully shows how cost competiveness not just about labour costs. For example, Mexican worker paid about one-tenth of US worker, but productivity about one-tenth as well. Rising wages costs in Eastern Europe and Asia noted in article - natural market response here would be responding to stimulus to increase productivity as labour becomes more expensive.

(69) "An inconvenient truth about falling oil prices" FT editorial Saturday October 7th September 29th page 23. The editorial notes that "the price of oil is closely related to demand ... in the short run". So the fall in the price over the past few weeks may reflect continued weakness in global demand, which may in turn signal an "upcoming slowdown in economic activity across the industrialised world". So the fall in price may not be all good news. Good example of the oil market as not just responding to signals, it may itself be a critical indicator or signal.