AboutWarren D. Miller, CFA, ASA, CMA, CPA Expertise My in-depth knowledge of economics is confined to three sub-disciplines: Austrian economics, industrial organization, and evolutionary economics. Other questions dealing with macroeconomics, the traditional neoclassical paradigm, labor economics, environmental economics, agricultural economics, health economics, and so on should go to those who have the appropriate expertise.
N.B.: I DO NOT ANSWER QUESTIONS MARKED 'PRIVATE' because I believe that knowledge should be shared, not hoarded. I also believe that such questions are likely to come those trying to cheat. Similarly, as one who was a full-time academic for half a decade, I can recognize test and homework questions several time zones away. Therefore, please do not demean yourself by submitting such questions to me. Those who do so are cheating, pure and simple, and I WILL call you out publicly if I believe you are doing so. I have a zero-tolerance policy where cheating and dishonesty are concerned.
In addition, please don't imitate the businessman who posted a request for help in August 2008. He expressly denied that he was seeking "investment advice" and said that his query was for, and I quote, "educational and informational purposes." Later, he allowed as how his questions related to the possible purchase of a $500K piece of equipment. I said I thought he had misrepresented himself. Bottom line: high-end business consulting is how I make my living. I am the sole support for my family. Please respect that fact and don't try to get for free what our clients pay for. If your company is big enough to have a sophisticated problem, it's big enough to pay for the kind of expert advice we provide. Beckmill Research, LLC, is a 95-octane firm. We're small, but we've been at this for nearly 18 years. We know what we're doing.
Finally, please DO NOT ask for investment advice. I am not licensed to provide such advice. If you want such advice, check with your financial planner or other financial adviser.
Experience I work with Austrian economics (which is different in major respects from the traditional neoclassical model), industrial organization (which is about industry structure, conduct, and performance), and evolutionary economics (almost, but not quite, the economic analog of its biological counterpart) everyday in my work. I appraise closely-held businesses, provide exit-planning services, and offer high-level strategic analysis, advice, and clients to CEOs and owners of mid-sized businesses. Understanding, applying, and writing about these disciplines is an essential part of how I have made my living since 1993.
Organizations CFA Institute, Strategic Management Society, American Society of Appraisers, Institute of Management Accountants, Academy of Management, Culver Legion
Publications CFA Magazine, Strategic Finance, Valuation Strategies, Value Examiner, Journal of Advanced Property Economics, Harvard Business Review, American Fly Fisher, CFA Digest, CPA Expert, and Business Valuation Review, among others
Education/Credentials MBA - Oklahoma State (1991)
BBA - U. of Oklahoma (1975)
Chartered Financial Analyst designation (2006)
Accredited Senior Appraiser (2006)
Certified Management Accountant (1992)
Certified Public Accountant (1992)
Question QUESTION: Hello Sir I am finding difficulty in this economics question, need some sort of help in understanding it and resolving it. Thanks!
1.The Conservative Reserve Program (CRP) specifies that the U.S government will pay farmers a certain amount per acre for each year that marginal land is taken out of production and used for wildlife habitat. How are payments made to farmers under this program?
a) The payments will be included as part of GDP because the land is increasing the wild life production
b) The payments will be included as part of GDP because the payments represents income to farmers
c) The payment won’t be included as part of GDP because the payments don’t represent purchases of final goods or services
ANSWER: Sonia, I don't answer questions marked "Private." If I did, I'd be pretty stupid and would be showing myself as a man who was clueless about economics. Think about it: By answering "Private" questions, I'd be setting myself up to answer the same question over and over and over, wouldn't I? That would take a lot of time. I'm not paid to do this, so, in essence, my family would be suffering because of all the time I spent answering the same question. Does that sound like the choices a guy holding himself out as an expert in econmics would make? I don't think so. That would be pretty dumb of me. Really, really dumb, in fact.
It is also my experience that those who ask questions like yours are usually trying to cheat. I'm not in the business of helping young people cheat. It sends them the wrong message and also encourages them to engage in behavior that may, one day, result in their being imprisoned.
I also don't answer test questions or homework questions. This appears to be one of those.
For me to help you, you must do two things:
1. You must change this from "Private" to "Public."
2. You must choose one of those answers and then EXPLAIN to me why you chose it.
Then, and only then, can I help you. If you believe I'm being difficult here, I am sorry. But I'm in the business of teaching people about economics and doing so in an efficient and honest way. The way you've set this up, I can't do that. That's why you have to make the changes I've requested. Otherwise, we're done.
Take care, and good luck. I hope we get a chance to continue this dialogue. But it's all up to you.
Best regards--
Warren Miller
---------- FOLLOW-UP ----------
QUESTION: Hello Sir,
Well I am new here... And indented to keep these answer to myself. Thanks for the advise, it surely look like i am cheating... keeping it private and giving options to choose between.
Well I have considered option C i.e it doesn't show any purchase of final goods and services. The wild life habitant is setting place for animal living, and GDP calculate the market value of all final goods and services produced within a country in a given time period. However I have doubts here and in others as well. This purchase is involving government, and GDP equation combined y = consumption + Investment + Government purchases +(-) net export NX
SO, this wild life habitant is sort of government purchase. And thats why giving me trouble to understand it.
Secondly I have doubt in the second option as well IF YOU LIKE TO HEAR, other wise ignore it and just explain the above option. The doubt is that question is asking about PAYMENT MADE TO FARMER, and in my text book stated that GDP basically measure all expenditures and income at once by measuring only one of them because every expense is some one's income (every transaction). And this drive my attention toward option 2 i.e b) The payments will be included as part of GDP because the payments represents income to farmers.
Thanks for your reply, I hope you will reply me again and clear the doubts. I am student, but i am little bit conservative, want to know each string attach to the topic.
Thanks!
Take care!
Answer Thank you, Sonia. I'll be glad to help you. And I do appreciate your effort to choose the right answer.
First, let's go to the definition of GDP: "the market value of all final goods and services produced domestically in a year." By definition, "final goods and services" are those that have been purchases for final use or those that will not be resold or used in production within the year.
Now, with that in mind, let's look at each possible answer:
(a) The land is not necessarily increasing wildlife production. What if there's a drought? So I think we can rule out this one.
(b) The fact that the payment represents income to farmers does NOT make it part of GDP. What have they PRODUCED for which they are being paid under the Conservation (not Conservative) Reserve Program? I don't think they've produced anything, have they? In fact, they've done just the opposite and gotten these payments. They have produced nothing. Therefore, if the payments are not to buy a good or service, the payment cannot be counted in GDP.
(c) So now we know that (c) MUST be the answer because (a) and (b) are not. But WHY is (c) the answer? Well, it is pretty simple, Sonia.
These payments to farmers are "transfer payments" (e.g., social security, welfare). Transfer payments simply transfer money from the government to recipients. Nothing is bought. If nothing is bought, then the payments do not fit the definition of GDP, do they? (c) is the correct answer, which is what you thought to start with, but then you tried to talk yourself out of it! DON'T DO THAT, Sonia. Have confidence in your reasoning skills. BELIEVE.
I do hope I've been helpful here. I know it was harder to do this way, but I also would bet a bunch of money that you LEARNED something, and that's what this service is all about. Teaching you. You don't learn anything if I just supply the answer. But if you wrestle with it for a while, you do learn something, and I'll bet you learned something here. Thank you for hanging in there with me on this.
Please do me a favor now. Please fill out the rate-the-expert email you'll receive right after you receive this from me. Your ratings and comments help me do a better job of helping folks like you who ask such interesting questions about economics.
