The Pareto Optimality’s Efficiency Concept

                      

Pareto efficiency, or Pareto optimality, is a concept in economics. Named after Vilfredo Pareto, the term is used in engineering, game theory, and social sciences.

                       

Pareto used his theory in studies of economic efficiency and income distribution. He claimed that a change from one allocation to another could make one individual better off, without making another worse off. This is referred to as a Pareto improvement. The allocation is called Pareto

efficient or Pareto optimal.

                       

The 80/20 Efficiency concept, so often used in management, is his reasoning. For example, 20% of your sales force may contribute 80% of your sales.

                       

I bring it up because the political left would do well to reconsider some of their anti-business tirades when trying to create jobs, contemplating the Pareto principles. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Realistic Tax Cuts

                                      

Business psychology is not a political liberal’s strong suit. From time to time the Administration, for example, has offered tax cuts when under pressure. But only as temporary measures.

                       

Such temporary, half-hearted tax reductions have little effect because business people plan for years ahead. Temporary cuts are not only meaningless, they are traps.

                       

For instance, a cut in payroll taxes for a short time is another version of failed Keynesian economics. It adds some money to the economy for a time and sounds good because it appears it will add to consumer spending. But experience shows it has no business multiplier effect for producing jobs. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Student Apples and Oranges Mix

                      

Education marketers compare apples and oranges when making earnings comparisons about the financial advantage of attending formal college. That skews career choices of too many kids.

                       

Numbers thrown out by what I call college administration snake oil salesmen, are usually off-the-mark. They often include janitor jobs, in comparison with high tech. Their figures are prejudiced with regard to higher-paying, non- college trades, such as electricians, plumbers, or computer techies.

                       

You are successful because of your skills and enterprise. not a framed piece of paper from a college. Get a marketable ability. Whether it comes from a college or a technical school. Many technical school graduates earn far more than college grads. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Franchisers Ought to Provide Financing

                      

I am not an advocate of most franchising, both for a franchiser, and someone seeking to buy a franchise.

                       

The franchisee usually finds it difficult to get financing these days, so any help from a franchiser is welcome. But, I find it dangerous for a franchiser to offer financing to a franchisee unless there is firm collateral. Despite the rosy marketing and promotional material. A franchise is, after all, small business, and that entails risk.

                       

The only type of financing that makes sense is account receivables financing. It actually ties the franchisee more closely to the franchiser. Construction, real estate and general financing does nothing that applies equally to both parties. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Your Taxes Due to Regulation

                        

Over-regulation of the U.S. economy is estimated to total $2 trillion in extra costs that taxpayers will pay in one form or another. These costs come in varying disguises: Windmills, solar panels. battery operated cars.

All of which are worthy goals. But they belong in research labs where they can be studied more deeply before being made commercial, and not subsidized by taxpayers as they are today.

Any product that is commercially viable will be brought to market by an entrepreneur seeking profit. Only Big Government believes in the principle of losing money with taxpayer assistance.

                       

Also, in order to save taxpayer funds, do we need an Energy Department or Education Dept, when their functions are state and local matters? Do we need subsidies for sugar farmers and ethanol production? All are just ruses for more, larger government. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Confusing Bank Accounting

                        

I have been saying all along, going back to 2007, there was no reason to bail out banks. Credit guarantees, and/or takeovers, and in worst cases, conventional bankruptcies would have cleared up the financial mess without the lingering financial recession we now have.

                       

Just one example of pure idiocy in the past: Accounting rules relating to assets, including mortgage-backed securities, required that they be marked-to-market, if held

for trading, or held "available for sale." Most banks hold such assets in one of these two accounts. Mark-to- market rules unfortunately applied.

                       

Daily pricing of bank assets based on limited markets saw to it that bank net worth disappeared literally overnight. Short sellers legitimately took advantage of the fact and the downward market result became even more exaggerated.

                       

In short: Much of the banking problems we have had could have been avoided with clearer thinking by the “experts.”

                       

The financial meltdown that brought on this deep recession could have been self-corrected by simple market-place principles and no mark-to market accounting. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Bad School Grades Prevail

                      

My comments often criticize colleges and college student deficiencies. But never overlook the poor job of the

American public school system, and its poor kindergarten to 12th grade education record.

                       

Yet, dollars spent have more than doubled in the past forty years as teachers’ unions have gotten stronger. The number of teachers have increased by more than one third. Still, less than 40% of students who graduate are ready for college level. And, of course, do not measure up to international standards.

                       

A solution is possible, in the form of charter schools where union rules are somewhat relaxed and also use of school vouchers. Here funds allocated to public education are set aside for parents to use for private school tuition. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)