The Short Run and the Long Run in Economics

The Short Run and the Long Run in Economics In economics, its extremely important to understand the distinction between the short run and the long run. As it turns out, the definition of these terms depends on whether they are being used in a microeconomic or macroeconomic context. There are even different ways of thinking about the microeconomic distinction between the short run and the long run. Production Decisions The long run is defined as the time horizon needed for a producer to have flexibility over all relevant production decisions. Most businesses make decisions not only about how many workers to employ at any given point in time (i.e. the amount of labor)  but also about what scale of an operation (i.e. size of factory, office, etc.) to put together and what production processes to use. Therefore, the long run is defined as the time horizon necessary not only to change the number of workers but also to scale the size of the factory up or down and alter production processes as desired. In contrast, economists often  define the short run as the time horizon over which the scale of an operation is fixed and the only available business decision is the number of workers to employ. (Technically, the short run could also represent a situation where the amount of labor is fixed and the amount of capital is variable, but this is fairly uncommon.)  The logic is that even taking various labor laws as a given, its usually easier to hire and fire workers than it is to significantly change a major production process or move to a new factory or office. (One reason for this likely has to do with long-term leases and such.) As such, the short run and the long run with respect to production decisions can be summarized as follows:   Short run: Quantity of labor is variable but the quantity of capital and production processes are fixed (i.e. taken as a given).Long run: Quantity of labor, the quantity of capital, and production processes are all variable (i.e. changeable). Measuring Costs The long run is sometimes defined as the time horizon over which there are no sunk fixed costs. In general, fixed costs are those that dont change as production quantity changes. In addition, sunk costs are those that cant be recovered after they are paid. A lease on a corporate headquarters, for example, would be a sunk cost if the business has to sign a lease for the office space. Furthermore, it would be a fixed cost because, after the scale of the operation is decided on, its not as though the company will need some incremental additional unit of headquarters for each additional unit of output it produces. Obviously the company would need a larger headquarters if it decided to make a significant expansion, but this scenario refers to the long-run decision of choosing a scale of production. There are no truly fixed costs in the long run since the firm is free to choose the scale of operation that determines the level at which the costs are fixed. In addition, there are no sunk costs in the long run, since the company has the option of not doing business at all and incurring a cost of zero. In summary, the short run and the long run in terms of cost can be summarized as follows:   Short run: Fixed costs are already paid and are unrecoverable (i.e. sunk).Long run: Fixed costs have yet to be decided on and paid, and thus are not truly fixed. The two definitions of the short run and the long run are really just two ways of saying the same thing since a firm doesnt incur any fixed costs until it chooses a quantity of capital (i.e. scale of production) and a production process. Market Entry and Exit Economists differentiate between the short run and the long run with regard to market dynamics as follows: Short run: The number of firms in an industry is fixed (even though firms can shut down and produce a quantity of zero).Long run: The number of firms in an industry is variable since firms can enter and exit the marketplace. Microeconomic Implications The distinction between the short run and the long run has a number of implications for differences in market behavior, which can be summarized as follows: The Short Run: Firms will produce if the market price at least covers variable costs, since fixed costs have already been paid and, as such, dont enter the decision-making process.Firms profits can be positive, negative, or zero. The Long Run: Firms will enter a market if the market price is high enough to result in positive profit.Firms will exit a market if the market price is low enough to result in negative profit.If all firms have the same costs, firm profits will be zero in the long run in a competitive market. (Those firms that have lower costs can maintain positive profit even in the long run.) Macroeconomic Implications In macroeconomics, the short run is generally defined as the time horizon over which the wages and prices of other inputs to production are sticky, or inflexible, and the long run is defined as the period of time over which these input prices have time to adjust. The reasoning is that output prices (i.e. prices of products sold to consumers) are more flexible than input prices (i.e. prices of materials used to make more products) because the latter is more constrained by long-term contracts and social factors and such. In particular, wages are thought to be especially sticky in a downward direction since workers tend to get upset when an employer tries to reduce compensation, even when the economy overall is experiencing a downturn. The distinction between the short run and the long run in macroeconomics is important because many macroeconomic models conclude that the tools of monetary and fiscal policy have real effects on the economy (i.e. affect production and employment) only in the short run and, in the long run, only affect nominal variables such as prices and nominal interest rates and have no effect on real economic quantities.

Sports Ethics and Our Society

Sports Ethics and Our Society Sports ethics is that branch of the philosophy of sport addressing the specific ethical questions that arise during and around sports competitions. With the affirmation of professional sports in the past century as well as the rise of a voluminous entertainment industry related to it, sport ethics has come to be not only a fertile terrain for testing and developing philosophical notions and theories, but also a foremost point of contact between philosophy, civil institutions, and the society at large. Lessons of Respect, Justice, and Integrity Sports are based on the fair enforcement of rules. At a first approximation, this means that every contestant (being an individual player or a team) has the right to see the rules of the game applied in equal measure to each and every contestant while having the duty to try and respect the rules as best as possible. The educational importance of this aspect, not just for children and young adults but for everyone, can be hardly overstated. Sport is a critical tool to teach justice, the respect of rules for the benefit of a group (the contestants as well as the spectators), and honesty.And yet, as it happens outside a competition, one may wonder if - at times - players are justified in seeking an unequal treatment. For instance, when breaking the rule will offset some mistaken call that the referee has made earlier the game, or will partially make up for some economic, social, or political inequities that stand in between the contesting teams, it seems that a player may have some ju stifiable motives for breaking the rule. Isn’t it simply fair that a team who has had a valid touch down not counted in will be given some minor advantages over the next attack or defense situation?This is, of course, a delicate matter, which challenges our ideas circa justice, respect and honesty in a way that mirrors the key issues humans face in other spheres of living. Enhancement Another major area of confrontation regards human enhancement and, most notably, cases of doping. Considering how invasive the application of drugs and medical techniques is to the contemporary professional sport, it has become increasingly difficult to set an intelligent boundary between those performance enhancers that shall be tolerated and those that shall not be tolerated. Every professional athlete competing for a well-off team receives medical aids to enhance his or her performances in amounts that range from thousands of dollars to hundreds of thousands and, perhaps, millions. On one hand, this has contributed to spectacular results, which much add to the entertainment side of sport; on the other, however, wouldn’t it be simply more respectful for the athletes’ health and safety to set the bar for tolerance of enhancers as low as possible? In what ways enhancers have affected the relationship between body and soul among athletes? Money, Just Compensation  and the Good Life The increasingly high salaries of certain athletes and the disparity between the pay of the most visible ones as opposed to the pay of the least visible ones have also offered the opportunity to rethink the issue of just compensation that much attention had received in eighteen hundred philosophy, with authors such as Karl Marx. For instance, what is the just compensation for an NBA player? Should NBA salaries be capped? Should student athletes be granted a salary, in consideration of the business volume generated by NCAA competitions?The entertainment industry associated with sports also offers us, on a daily basis, the opportunity to ponder to what extent income can contribute to leading a good life, one of the central themes of ancient Greek philosophy. Some athletes are sex symbols too, generously rewarded for offering their body image (and sometimes their private lives) to the public attention. Is that really the life of a dream? Why or why not? Further Online Reading IAPS’s website, the International Association for the Philosophy of Sport, with links also to its official publication outlet, the Journal of the Philosophy of Sport.A resource guide to the Philosophy of Sport prepared by Dr. Leon Culbertson, Professor Mike McNamee, and Dr. Emily Ryall.A blog devoted to the philosophy of sport, with news and events.Recommended reading: Steven Connor, A Philosophy of Sport, Reaktion Books, 2011.Andrew Holowchack (ed.), Philosophy of Sport: Critical Readings, Crucial Issues, Prentice Hall, 2002.