Friday, October 7, 2011


A strange turn in this class I took was that I had one professor for the first half of the semester and another for the second half of the semester. The first professor delivered a baby halfway through, so they assigned someone else to teach after her baby was born. C'est la vie.

While Macroeconomics is more about a top-down look at the economies of countries across the world, Microeconomics is about the choices of individual companies and people. They are highly related, since government tariffs and quotas obviously affect the motivation of individuals to produce or cut production of affected products.

For example, Haiti used to be a rice-exporting nation. It was their main product. Their people have always been poor due to the policies of foreign governments, corruption of their own government, and frequent natural disasters. But they always had rice. At a macroeconomic level, you could look at the amount of rice they sold to other countries and the policies of various governments that facilitated that. In the 1980s, cheap (or sometimes even free) rice from the U.S., AKA Miami rice, flooded our island neighbor to the point where it was no longer profitable to grow rice. Macroeconomic conditions led to the overabundance of Miami rice. Microeconomic principles led to individual farmers halting production of Haitian rice.

An interesting topic they talk about in Microeconomics is one of monopolies. A monopoly, of course, is a situation where one company controls the supply of a particular product or service to the point that they can engage in unfair practices. They are often highly regulated to avoid problems. Or even more drastic action may be taken as was the case when our phone system a few decades back was split up into several smaller regional carriers.

Interestingly enough, the way the phone systems have evolved over the years since, several of those Baby Bells combined back together, and with the market changes due to mobile phones, we actually find a small number of companies controlling the market. They compete, yes, but to some extent they collude to keep prices high. Take text messaging, for example, which is disturbingly expensive relative to the actual costs. It actually costs more to track and bill text message usage than it does to deliver the messages, so when you pay for texting, you're really paying for them to bill you for texting, not for the delivery of the actual messages. This type of situation is called an oligopoly. Verizon, Sprint, AT&T, and T-Mobile can't make any huge moves to totally disrupt the market because of the market share of the other companies, but they don't want to either, because they're all sitting pretty if they can maintain the status quo. The potential buyout of T-Mobile by AT&T would actually serve to start tipping the monopoly scale if approved by regulators, so I don't think it's likely.