Financial Institutions and Economic Growth Essays

Financial Institutions and Economic Growth Essays Financial Institutions and Economic Growth Essay Financial Institutions and Economic Growth Essay 2000). Other things being equal, better-off and more dynamic societies have not only a larger amount of available resources out of which to save but also a higher propensity to do so. Throughout these years, the Scandinavian countries would appear to have been at an advantage in both respects relative to southern Europe. Before we analyse this relationship, however, we must deal with two potential distortions. The first concerns the probability that not all the financial resources considered in the preceding sections originated domestically. At a time of great international factor mobility, a poorer economy might well have a weaker domestic supply of savings to fuel its financial development, but be able to compensate this by attracting foreign-owned capital. On the other hand, more developed financial systems might reinforce their advantage by drawing in, additionally, large amounts of funds from abroad. Table 7 shows that at the end of our perio such net inflows were indeed contributing significantly to the growth of all financial systems but far more in the Scandinavian case. The latter’s superiority in attracting domestic resources was thus matched by a similar strength in the international sphere, a fact that has been noted before (Rousseau and Sylla, 2001). On the other hand, this did not alter much our previous ranking of these countries and still leaves to be explained the considerable gap between the two groups of countries in terms of financial liabilities per capita. table 7 about here] A second potential source of distortion was the effect of hoarding on financial activity. Given the alleged inclination of southern Europeans towards this form of storing wealth, as might befit traditional peasant societies, it seems fair to ask how much of the region’s weaker institutional savings performance was due to this. For the sake of argument, we suppose that Scandinav ian countries were too advanced, socially and culturally, to engage in such practices. We further assume that in southern Europe this concealed wealth would have taken the form mainly of gold coin silver would have been too bulky – and therefore the stock of this type of specie would have been its upper limit. In the late 19th century, this varied between ? 1. 4 and ? 2. 4 per capita, for Italy and Portugal respectively, with Spain somewhere in between (Zamagni, 1993; Reis, 1992; Tortella, 1974). Even if we admit that as much as half of this was hoarded, this would have entailed only a small correction of the figures in table 7, of about ? per capita, thus leaving its essential findings untouched. [15] Recent evidence based on more than seventy developed and less developed economies, between 1960 and 1995, have established a strong correlation between indicators of private savings and financial development. More importantly, they also provide us with regression estimates that quantify the positive influence of per capita GDP on the savings rate (Beck et al. , 2 000). The lack of any comparable evidence for earlier times prevents us from replicating this exercise here but we can follow another, less exact approach. This rests on the assumption of linearity in the relationship between the two variables, which is suggested by the behaviour of the underdeveloped economies that comprise this sample. Using the data in Prados (2000), we find that average differences, between Scandinavia and southern Europe, of income per capita were respectively 12 % in 1880 and 25% in 1913, and we shall presume that the gap between gross savings must have been similar. The differential in domestic per capita savings absorbed by the financial systems was, however, much greater, respectively of the order of 30 and 100%. This strongly suggests that besides the effect on financial development of levels of income and savings, other factors, mainly of an exogenous nature, must have played an important part too by causing economic agents to channel different shares of their spare resources to the financial systems of their respective countries. Three features of any financial system are bound to affect the inclination of savers to enter into lasting relationships with its institutions and markets and, in particular, to entrust them with funds. One is accessibility to users, another is suitability to their specific needs, a third is trust. In what follows we shall concentrate exclusively on the corporate financial sector because, in contrast, differences among countries in the development of their respective stock markets appear relatively minor. In the Scandinavian countries, the volume of private securities was considerably greater than that of state bonds, whereas in Spain, Portugal and Italy the opposite prevailed. Yet when we put all of these financial instruments together, the aggregate volume per capita is relatively uniform throughout the sample. Moreover, the information regarding national stock markets suggests that inter-country regulatory divergences were not substantial at this time and where they existed, this would not have made much difference to global outcomes (Fohlin, 2002). [16] Recent research on the post 1960 period has argued that cross country differences in legal and accounting systems help account for differences in financial development (Levine et al, 2000: 31) and similar claims have been made in a far broader historical perspective (Sandberg, 1978; Sylla, Tilly and Tortella, 1999). An overview of the legislation governing corporate financial activity does not suggest, however, that this was a major cause of the divergence we have been examining here. This is not to say that there was absolute regulatory uniformity within the sample or that the legal framework had no impact on other aspects of the financial history of these countries. Rather, there could and was an influence but the effect was not necessarily important in the present context. The Norwegian-Swedish comparison illustrates this. Regulation restricted the lending policies of savings banks in the latter country while it was quite liberal in the former. As a result, the Norwegian savings sector flourished and even took on the functions of commercial banks. In Sweden, on the other hand, it did only half as well and was overshadowed by the commercial sector, which in Norway was comparatively weak (Egge, 1983; Nordvik, 1993). Globally, however, the two countries achieved very similar results in terms of the assets gathered by the financial corporate sector as a whole, only through different structures. There are three ways in which the time-path of regulation could have influenced the evolution of commercial banking, yet in all of them a surprising degree of international uniformity is encountered. Barriers to entry is one of them. After a highly restrictive first half of the nineteenth century, which was dominated by specially chartered national privileged banks of issue created to deal with pressing monetary and fiscal problems, in the 1850s and 1860s it became relatively easy to found joint stock commercial banks with limited liability. This new ease of incorporation opened the system to competition, vastly increased the number of institutions and allowed them the freedom to open branches, which in some countries proliferated and in others not. The second area is that of the limits placed on the scope and type of business banks might undertake. Typically, rules defining lending policies were few and on the whole were quite liberal. In some cases, banks were simply governed by the general law on joint stock companies, while in others they were placed under a specific banking code (Grossman, 2001). Towards the end of the 19th century, however, and as a consequence of various crises, regulation was tightened in some countries, but it is unclear whether this entailed much change. The evidence is that the enforcement of bank legislation was on the whole lenient, in the spirit of Liberalism, and the institutions dealt with were often allowed to evade it when this was found expedient (Fritz, 1988). The ease with which Norwegian banks overcame the strictures of usury laws is an eloquent illustration of this (Knutsen, 2003). 17] Finally, a fully centralised note issuing regime does not appear to have produced results that were inferior, in terms of financial development, to those where multiple issue was in place. Despite the contemporary belief that commercial banks that had a right of issue enjoyed a business advantage over deposit banks, one finds instances of both regimes both in Scandinavia and southern Europe with no obvious impact on global financial performance. [18] Mortgage banking based on the issue of bonds, which was for profit in some countries, but not in others, displayed the most significant degree of regulatory variety. In Spain and Portugal, national monopolies were established from the start, while Italy experimented with regional ones and went over to a national one in 1890. They therefore tended all towards large loans and large denomination bonds. In Scandinavia, Sweden and Denmark were very liberal on this score, but Norway had a state mortgage bank. Table 5 reveals that in the long run, however, this mattered less to the respective shares of this sector than might be expected. In Denmark, mortgage bonds were very important but Sweden was on the level of the monopolistic countries, while Spain, with a similar set of rules, did frankly worse than all others, including Portugal,. When it comes to non-commercial, small scale, local and often cooperative banking, it is essential to remember first that this was a era in which two quite different types of saver supplied the resources of financial institutions and arguably constituted quite separate segments of the market (Verdier, 1996)[19]. The well-to-do deposited with or bought the shares of commercial banks, while middle and low income people prefered to entrust their savings to local savings banks, credit co-operatives and the like (Vittas, 1997). This being so, in societies where both kinds of institution had a significant presence, as happened in Scandinavia, the financial system was likely to collect a larger portion of savings. In Spain and Portugal, the weakness of the savings sector was such that it meant that a majority of the population in effect had little access to the system as a whole. Consequently, the volume of savings per capita gathered was smaller. Italy was able to do better than the Iberian peninsula because of a considerable and varied movement of thrift organisations prevalently in the northern half of the country that tapped, the savings of the humble and middle class people, whether rural or urban. It is far from evident, however, that national dissimilarities in legislative framework were responsible for this kind of institution to evolve to such contrasting extents. In all countries considered, thrift institutions were supported by local or national authorities in a variety of ways, with deposit guarantees and, perhaps most important of all, with tax exemptions. Arguably though, on the assumption that there was market segmentation, this would hardly have diverted funds from the commercial joint stock sector, which was the principal alternative. Until the 1880s, the general norm was absence of legislation, complete ease of entry, an enormous multiplicity of statutory arrangements and only slight restriction on the uses to which savings could be applied. Full and proper regulation had to await the 1880s 1875 in Sweden but, in the event, was of a very mild nature. [20] Supervision, accounting rules and some operating limits were introduced, against the solid resistance of the thrift institutions themselves, but by most accounts this barely influenced the sector’s level of activity (Bruck et al. , 1995; Hansen, 2001). One of the principal aims of regulation was to stimulate trust in the system by deterring irregularities and imposing transparency on its operations. As we have just seen, Scandinavias superiority in mobilising resources does not seem to have owed much to a better set of rules and regulations. From the publics point of view, a more reassuring indicator of trustworthiness was how a system performed, not its rules, and here stability of markets and institutions was doubtless the factor that would affect the inflow of savings. Whilst all countries were prone to turbulence and its savers and investors suffered losses as a result, between 1860 and the First World War, the southern European record seems to have been by far theworst. One instructive sign of this is the mortality of commercial banks. Complete data are only available for Spain, Italy and Denmark but are highly revealing. In Spain, aside from the earlier devastation wrought by the crisis of 1864-6, of the 117 banks founded after 1874, only 60 were still open in 1914 (Tortella, 1974). The losses to Italian commercial banking during three critical periods were similarly substantial: 42 out of the 143 in existence, in 1873-9; 21 out of the 161, in 1888-93; and 11 out of the 163, in 1902-4 (Mattia, 1967). In Denmark, of the 160 banks created between 1845 and 1914, only 20 failed. A second measure is the variance around the trend of a global systemic indicator such as total assets. Available information covers only the same three countries but the result, now comprehending all types of banks, fully confirms the earlier finding. [21] The stability of the Danish financial system was significantly greater than that of the Italian one, with the Spanish one a long way behind. If a stable financial environment meant anything to savers, then Scandinavia appears to have enjoyed a considerable from this point of view. Several factors can explain this contrast but two especially should command our attention. One is structure, the other is policy. As regards the first, Scandinavian economies enjoyed the benefit which, in southern Europe, Italy had over Portugal and Spain – of a relatively larger not-for-profit financial sector, which was less crisis prone than commercial banks. 22] This was due to several characteristics inherent in such institutions. They had better and cheaper information on the risks posed by clients, lower costs of administration and greater ease in enforcing repayments. Moreover they were less likely to suffer runs by depositors, who knew them well. In addition, they often enjoyed some form of group deposit-insurance, and normally enjoyed deposit guarantees from governments, local authorities or simply groups of local notables. Lastly, because unlike commercial banks they were not under pressure from shareholders to produce high dividends, they did not have to lend to projects with higher returns but also higher risks. Their image of conservatism more often than not was matched by reality even though they had to contend with the instability that is usually associated with a small scale. [23] Given how frequent and severe national bouts of financial instability could be, one has to ask whether domestic counter cyclical policies might not have influenced the attractiveness of these financial systems. As regards government intervention, the low priority given at the time to such policies rules out a significant role for this factor. On the other hand, national banks of issue were just beginning to play the part, informally, of money market regulators, something that would only be enshrined in their charters after the First World War. The timing of their assumption of lender of last resort status matches poorly the way in which these economies responded to financial shocks. In Denmark and Sweden, two highly stable systems, came to this early, between the 1860s and the 1870s, but so did in Portugal and Italy the Banca Nazionale, the Bank of Italy’s predecessor was already behaving as a bankers’ bank in the 1860s (Hansen, 1991; Lindgren and Sjogren, 2002; Reis, 1999; Polsi, 1996). On the other hand, Norway and Spain were both latecomers to this field, respectively in the late 1890s and just before the War and yet were at opposite ends of the league table for financial stability (Egge, 1983; Tortella, 1974). 24] While proto-central banking may not have been a major determinant of the closeness between savers and financial institutions, accessibility clearly was. The ease with which economic agents could approach the system mattered a great deal in establishing a relationship with it. One dimension was physical location, distance, ease of travel – and this was an important reason for the success of the Danish ‘parish savings ban ks’ (Guinnane and Henriksen, 1998). Another was the suitability for those involved of the institutions available to them. Savers would more readily supply an institution with funds if, other things being equal, they felt welcome, understood the procedures, knew the people they had to deal with and could easily satisfy burocratic requirements, e. g. minimum size of deposit. In other words, not all institutions and markets served equally well for everyone and this must have had an impact on the propensity to accept the liabilities offered by the system. As Table 8 shows, a considerable disparity existed during these years in the supply of outlets that each system offered. This is one more spect of the enormous distance that separated our two groups of countries, in this case the number of inhabitants per financial outlet, and also brings to light a ranking that matches exactly the ranking presented in table 1. In particular, Italy, which had a density five to eight times that of Portugal and Spain but was five times below the levels of Denmark, Norway or Sweden, had the financial system that managed to at tract the greatest volume of savings of southern Europe. Besides the number, the spatial distribution of these outlets also seems relevant. In Spain and Portugal, financial institutions were an urban phenomenon and were concentrated in the major centres. In Scandinavia, the opposite was the case. A large proportion of financial outlets was in small towns and hamlets. They were therefore close to country people, who were the majority of the country’s population. Thrift institutions were ‘local organizations, formed and run by local people to further what they saw as local goals’ (Guinnane and Henriksen, 1998: 52). . [table 8 about here] Altogether then, perhaps the most important factor in explaining differences in financial development lay in each society’s propensity to accept non-commercial banking in its midst. Scandinavia’s greater overall capacity to mobilise funds mainly derived from the strength of its thrift sector in all its forms, and this arose because so many people there were prepared to join these movements. Since this cannot be ascribed to major income dissimilarities, nor to diversity in regulation, nor even to the rise of central banking, only two explanations seem to remain available. Verdier’s (1996) standpoint is that it was political struggles that lay at the heart of the matter. In Denmark, Sweden and Norway, centrifugal political forces were important and prevented the state’s wish to centralize banking, thereby absorbing the resources of the periphery in order to finance central public expenditure. As a result decentralized thrift banking flourished. In the south of Europe, the opposite happened and consequently non-profit banking was suffocated by the pressure from a centralizing state intent on draining the financial resources of the periphery. There are two objections to this. The first is that what the state wanted these resources for was to finance the public debt, not central public expenditure, and here the contrast between the two regions could not have been greater. As we saw earlier, southern European countries were indeed voracious consumers in this respect. Secondly, we must also not ignore that in these countries finance for the public debt typically does not seem to have come from their peripheries, nor from provincial banks. Rather, it tended to be held personally and was accumulated at the centre, where saving propensities were apparently higher. This would explain why provincial commercial banking was able to expand in Portugal, Spain and Italy during this period, in spite of their huge public debt commitments (Reis, 2003). Perhaps a more fruitful enquiry should ask why, in the latter countries, except for a small group of wealthy and educated citizens, most of the provincial population appeared remote from institutional saving. For this we have to try and understand the roots of the stronger impulses in Denmark, Norway and Sweden to create small thrift organisations in terms of the stronger presence of certain social and cultural conditions in these countries (Guinnane, 1994; Galassi, 2000). A basic ingredient was trust, a form of social capital that involved a readiness to accept peer control and to enter into common ventures with other economic agents beyond one’s immediate social circle, which required that direct monitoring and control was left to others. Societies, like in Scandinavia, founded on a prosperous middle sized peasantry, that experienced successful agrarian reform at the end of the Ancien Regime, and where a more even distribution of income was present, seem to have provided an environment in which such attitudes could flourish. In contrast, apparently this was not the situation in Portugal and Spain, or Italy s south. In Italy, where in some regions only limited liability credit cooperatives (banche popolare) were common, by the 1880s clearly those in the south had much greater difficulty in attracting members’ and their deposits. As a result, they relied much more on share capital and rediscounts at large banks, and tended therefore to have to hide defaults in their accounts. This in turn exacerbated the problem of trust between members and management, the latter usually from a higher social stratum, and fostered a low-trust equilibrium (Ahearn, 2000). A second element in this approach emerges from the analysis of the early development of modern financial intermediaries, which appeared in Scandinavia already in the first half of the nineteenth century and which very much depended on the degree of human capital endowment present. Nilsson, Pettersen and Svensson (1999) have shown how literacy in the Swedish countryside before 1850 was associated with the rise in the use of sophisticated credit instruments and probably created a fertile seed-bed for the activity of localised credit institutions. Again, southern Europe was woefully behind in this field, with rates of illiteracy that were still 50 per cent or more in 1900 compared to negligible figures in their northern counterparts. A greater readiness on the part of Danes, Norwegians and Swedes to accept contract money, particularly in small denominations, may be another expression of this cultural dimension. 25] Finally, one should not neglect the influence of the strength of local sentiment in this matter. Its importance has been remarked upon a propos of Denmark (Hansen, 1982), as it has in the case of Italy, the only southern economy where local thrift organizations developed to a significant degree (Polsi, 1996). 5. Why Scandinavian systems recycled liabil ities better In comparing national differences in financial intermediation, the second major question of this paper has to do with the efficiency with which the funds gathered by each system were transformed into credits to the private sector. From this point of view, three circumstances help us understand the efficiency loss of about one half the measures the distance in this respect between the two groups of countries. Possibly the most important one was the more or less chronic difficulty associated with public finance in southern Europe, in contrast to its generally healthy condition in Scandinavia. For the former, this meant a crushing weight of Public Debt holdings and a scant application of these resources to growth inducing purposes. For the second group, not only was this burden far lighter but the resources thus absorbed were also used more effectively for investment. A further implication, of a more structural nature, was that the problem of an oversized public debt stimulated the emergence in Italy, Spain and Portugal of oversized national banks of issue, which dominated their respective commercial banking sectors, as we saw in section 3, and were the least efficient of all corporate institutions at recycling funds into credits. Why Italy, Spain and Portugal should have been consistently unable to break the grip of budget deficits and of a pyramiding Public Debt is an issue which plunges its roots deeply into the 19th century political, social and military histories of these countries. Unfortunately, it is impossible to do justice here to such a complex problem. One should note, however, that unstable political institutions, a weak public administration and an excessively powerful military were present in the region throughout the period, unlike what happened in the Scandinavian periphery. As a result, southern European governments found it hard to discipline expenditure, whilst the revenue-to-GDP elasticity tended to be very low as a result of the public administration’s incapacity to increase revenue sufficiently and diversify its sources. A strong military tended to embroil the country in occasional internal or external costly conflicts that had to be paid for mostly by means of fiscal and monetary unorthodoxy, and was an ever present factor of political instability. Public borrowing in itself was not the difficulty, since the Scandinavians engaged in it without harm. What was dammaging about it to the southern Europeans was its scale, which dwarfed other efforts at mobilising resources, and its use largely to pay off earlier borrowing and maintain a costly ineffective machinery of government. Negative structural effects on southern Europe were not confined to the politically motivated â€Å"excessive† development of their national banks of issue. The socio-cultural reasons that explained the greater prevalence in Scandinavian financial systems of thrift institutions can also be invoked here in explaining their higher global transformation ratios encountered in table 6 above. Less clear, on the other hand, is whether these factors also help explain the fact that, in every type of institution, this region unmistakably led southern Europe in terms of capacity to recycle its liabilities into credit. Two features of the financial environment appear more helpful in this respect. The first is the difference in the degree of risk that financial institutions had to face. This made it possible for the Scnadinavian ones to immobilise smaller proportions of total assets as reserves, or to avoid tying up resources in safe state bonds. The goals and the quality of management is the second circumstnace to account for differences in the proportion of idle assets in the portfolios of corporate financial institutions. Possibly, southern European managers were simply reacting reasonably to a riskier investment climate by allocating funds with greater prudence and conservatism than Scandinavian ones needed to. On the other hand, it has been hypothesized (Berthelemy and Varoudakis, 1996: 301) that ‘the technical efficiency of the financial sector is an increasing function of the collected volume of savings [and] that learning-by-doing effects also exist in intermediation activities’. Poor management has been claimed for both Portugal and Spain (Reis, n. d. ; Sudria, 1994) though comparisons with Scandinavia have yet to be carried out and the case therefore remains open. As regards Portugal in particular, it has been shown, following Hinderlitter and Rockoff (19.. ), that, after taking risk differences into account, the share of unused funds in the balance sheet of commercial banks was greater than could be justified by reference to practices in contemporary major financial centres. Finally, the high returns on government issued liabilities in southern European caused resources to be diverted away from private credit operations in contrast to Scandinavia where the yield of such holdings was comparatively less attractive and better alternative investment opportunities seem to have been more numerous. 6. Conclusion During the course of the long second half of the 19th century, the southern and the northern peripheries of Europe followed contrasting paths of financial development. This led to quite disparate results in the supply of credit to the non-state non-bank part of their economies and justifies perhaps speaking of a â€Å"Scandinavian†, as opposed to a â€Å"southern European† type of financial system. Having quantified these differences, this paper argues that the gap is large enough to justify the view that finance contributed to the divergence in economic growth between the two regions. To address the reasons for the substantial efficiency differential between southern European and Scandinavian financial systems, it was necessary to break this down into the two basic functions that financial systems carry out. One concerned the mobilization of savings as financial liabilities of these systems. The second revolved around the conversion of these liabilities into credits to the non-financial private sector. Southern European countries were losers in both instances. The analysis of the first of these brought to light that Scandinavian institutions were capable of mobilizing comparatively more resources than their southern counterparts, the exception being in state bonds, where the latter led by a clear margin. The second dimension of this study revealed that Scandinavian institutions were also capable, type by type but equally in toto, of extracting a larger quantity of credit from their laibilities in order to make them available to the productive sectors of the economy. To some extent these contrasts were caused by endogenous conditions. The simple fact is that Italy, Portugal and Spain were consistently poorer and were becoming increasingly so. This affected their volume of savings but also probably lessened the demand for the financial outlets that enabled savers to recycle these funds as institutional financial liabilities. On the other hand, exogenous factors probably also played an important part in helping to understand fully the process of financial development in these two regions. Essentially, three aspects are involved here. Regulatory conditions have loomed large in many analyses of this type but do not appear to have had a significant impact on the global outcomes picked up here, although they probably shaped some of the structural differences observed. A much stronger case can be made instead for the part of political, social and cultural factors in driving a wedge between the financial development paths that we have observed above. The last two were instrumental in leading to a greater development in Scandinavia of the non-commercial bank sector. This was responsible for diversifying the supply of financial outlets, attracting an much greater volume of savings per capita and then ensuring that a larger proportion of such funds became available for investment purposes. In all their complexity, political factors probably mattered most of all because they translated savings into a huge mass of state issued liabilities that stifled the expansion of the other parts of the system in the southern countries. At the same time, having helped to mobilize these funds, politics then became responsible for their sterilisation as financial instruments. When all is taken into account, it is this which perhaps explains the best part of the great financial divide between our two sets of countries. Of politics it can always be said that it might have been otherwise and this may seem a trivial conclusion. To claim this, however, would be to ignore the fact politics and institutions have long histories too and that path dependency is not solely the preserve of economic phenomena. References A’Hearn, B. (2000). Could southern Italians cooperate? Banche Popolari in the Mezzogiorno. Journal of Economic History 60, pp. 67-93. Aleotti, A. (1990). Borsa e Industria. 1869-1989: Cento Anni di Rapporti Difficili. : Edizioni di Comunita. Beck, T. , Levine, R. and Loayza, N. (2000). Finance and the sources of growth. Journal of Financial Economics 58, pp. 261-300. Berthelemy, J. C. and Varoudakis, A. (1996). Economic growth, convergence clubs and the role of financial development. Oxford Economic Papers 48, pp. 300-28. Broder, A. (1976). Les investissements etrangers en Espagne au XIXe siecle: methodologie et quantification. Revue d’Histoire Economique et Sociale 54, pp. 29-63. Bruck, C. (ed. ). (1995). Les Caisses dEpargne en Europe. Paris: Editions de l’Epargne, 2 vols. Calomiris, C. (1995). The Costs of Rejecting Universal Banking: American Finance in the German Mirror, 1870-1914 in N. Lamoureaux and D. M. Graff (eds), The Coordination of Activity within and between Firms (Chicago: University of Chicago Press). Cameron, R. (1967). Banking in the Early Stages of Industrialization. New York: Oxford University Press. Cameron, R. (ed. ). (1992). Fina

Third Party Rights Over Property Case Study Example | Topics and Well Written Essays - 1250 words

Third Party Rights Over Property - Case Study Example In the first instance Helen does not own the building outright as Kevin invested money into buying the shop and flats; Helen has taken out a mortgage on the building so Southern Counties Building Society would have a vested interest (the property was put up as collateral for the loan) and the second flat has been tenanted with Tom having a five year lease by deed of that flat. The amount of vested interest in the property owned by Kevin will depend on whether or not he and Helen had formed a partnership prior to buying the property, how long him and Helen had been living together in the first floor flat and what rights either of these situations (business partnership or de-facto relationship) might have on the ownership of the building. Because Helen raised the loan to buy the property it could be assumed that she might have a majority stake holding in the building and therefore could sell the business without involving Kevin. However, if Helen raised the mortgage so that her contribution to the building then equaled Kevin's then she has no right to sell the building without consulting Kevin first and the sale would be a joint decision. Kevin has another stake hold... Also any lease agreement he may have would have to be honored by the new buyer. The actual amount of impact Kevin would have on the sale of the building would depend on any agreement made between him and Helen, whether Kevin has any rights under de-facto law (which would be virtually nil in Britain as de-facto couples do not share the same rights as married couples) and whether or not Kevin is listed on the land title as co-owner. Helen would also have to pay off the mortgage owing amount on the building at the time of sale because the building is the collateral for the money loaned. Another problem that the new buyer would have to face is the lien on the property that prevented Helen from setting up a business that would act in competition to other businesses in the area. Any prospective buyer would have to be informed that the shop portion of the building could only be used as a newsagent shop. However, that covenant might not necessarily apply if the agreement was made personally between Helen and the person she purchased the shop from, as this covenant would only apply if it had been entered on the land title. If the land title had remained unregistered throughout the previous transactions then the situation for Kevin and Helen changes slightly. If Kevin does not have a legal partnership agreement with Helen then he would have difficulty proving his claim to any ownership of the building. He may be entitled to some duress under de-facto land ownership legislation, but that would be difficult to prove if he did not have something in writing that could prove the extent of his relationship with Helen (such as a Cohabitation Agreement) and the amount

Price Differences Associated with Quality Essay

Price Differences Associated with Quality - Essay Example This paper will critically analyze the price differences associated with quality by giving a specific focus on imperfect competition and price differences. Effects of grade quality on demand According to an observation, â€Å"grade quality is the distinguishing feature or grade of the product in appearance, performance, life, reliability, taste, odor, and maintainability etc; these are generally called as quality characteristics† (Charantimath, 1). The grade quality or quality characteristics can have a great influence on the demand of a product because quality and price are the major determinants of a product’s market demand. Economic theories state that a change in quality can make a shift in the demand curve. When two identical products with different quality levels are available in the market at the same price, consumers would buy the product having superior quality. To illustrate, demand for Giordano’s pizza is greater than that of Papa John’s at a gi ven price. It happens because consumers believe that Giordano’s pizza has higher quality and therefore it would better satisfy their needs than Papa John’s pizza would do. ... It is observed that modern people are able to determine their needs precisely; hence, they can accurately identify product quality characteristics that are necessary to serve those needs. It is obvious that improved quality characteristics may better serve an individual’s needs. In other words, a consumer would get greater level of utility from a product with higher grade quality. Generally, a consumer always tries to acquire increased utility with minimum amount of money. In short, it can be stated that a product with higher grade quality will have increased market demand or demand is positively affected by grade quality. Referring to the law of demand, it is clear that the price of a product is directly proportional to its market demand. As discussed earlier, a product with higher grade quality will have a high level of market demand which in turn leads to an increase in its price. Maintenance of quality-price relationship is necessary for stabilizing an economy. To illustra te, majority of the agricultural products have predetermined grade quality standards and hence their price considerably varies in accordance with grade quality changes. Agricultural yields with a lower quality are paid minimum prices while marketers are ready to pay higher for high quality agricultural yields (â€Å"Grain marketing plans for farmers†). However, the law of diminishing marginal utility is also applicable to quality-price relationship. The law states that utility derived from the consumption of a product diminishes with each unit of the same product additionally consumed. Hence, a product’s price will not be increased beyond a certain level if a person continuously consumes a

Marketing Profile Analysis On Pandora Internet Radio Media Essay

Marketing Profile Analysis On Pandora Internet Radio Media Essay For our Group project we will be doing a marketing profile analysis on Pandora Internet Radio. First, we will explain what the company does. Next, an in depth analysis including the site navigation, the Pandora business model, brand interactivity, the brand look, brand personality, their competitors, Pandoras metrics, what kind of consumers use Pandora, how consumers behave, and where Pandora could use room for improvement will follow. In the business model we will look at how Pandora makes their revenue through the different services they offer. Site navigation will describe where each click will take you and how to get from page to page. Brand interactivity explains how not only user can interact with Pandora, but how Pandora can interact with its users. Further, we will see how the brand looks across different formats from computer screens to mobile phones in brand look. Next, in brand personality, we will discuss what kind personalities are embedded in the brand. Also, while looking at competitors we will see how Pandora fares against their top competitors and what they do differently. Pandoras metrics will include the sites traffic, how long a consumer stays connected to a site, and its reach. Finally, when we look at consumers, we will look at how the Net gen is the majority of Pandora users, and how consumers move through the behavior model of acquisition, consumption, and disposition. What is Pandora? Pandora is a Internet radio service created by the Music Genome Project. They started up in 2000 and according to their website its the most comprehensive analysis of music ever undertaken. Users can enter a song or artist and Pandora will play music that you entered, but also music that is stylistically and auditorily similar. They have more than 50 music analyist that study and listen to the music one song at a time, collecting details on every song based on close to 400 attributes that include melody, harmony, instrumentation, rhythm, vocals, and lyrics. According to their website, the typical analyst working on the Music Genome Project has a four-year degree in music theory, composition or performance, has passed through a selective screening process, and has completed intensive training in the Music Genomes rigorous and precise methodology. Pandora never uses any bots or machines to extract data from any of the songs. The songs are always being updated and new songs are continually added to their ever expanding catalogue of titles. Site navigation Pandoras website is very easy to access. The address is http://www.pandora.com/. When the page loads, there are 3 places you can click at the top half of the page. You can register a new account, log-in with a preexisting account, or type in an artist, or song, and immediately begin listening to music. Clicking on the register hyperlink takes you to the registration page and is completely free. The only information needed is an email address, a password, the persons birth year, their US zip code, and their gender. There is a opt-out check box for personalized recommendations and tips. Once everything is complete you can click register for free of cancel. Registering for a Pandora account allows you to save you stations and access them from anywhere. If sign -in is chosen, all that is need is an email address and password. This takes you to all of your saved stations and also allows you to type in a new station or artist. Typing in an artist or song starts playing the music. The bottom half of the page is newer. There is a space where you can click to see the information about the music you are playing, view a mini feed of your profile, select music by genre, learn about how to get Pandora radio on your mobile phone and in your home, and see whats happening in the Pandora video series. Below this feed, you can view concert listings, gift a station where you can make a station and give it to another Pandora user, look at bookmarked songs, and again, go to the video series page. Business model The business model for Pandora is mostly ad driven. Consumers can register for free and begin listening to music immediately. Users are never required to pay anything because it is payed for by the advertisements. However, they have two more aspects to the business model. Once free Pandora accounts reach the 40 hour mark of listening per month, the music stops and you are required to pay 99 cents for unlimited listening for the rest of the month. You can also just come back the next month for another 40 free hours. Each month has the same choice on the limit and they never bill you after the fact of charge you. The final part of the business model is a paid Pandora One subscription account. This offers unlimited listening hours each month, plus no advertisements. It comes with a high stream quality, desktop application, extended interaction timeout, and a mini player. This can be purchased for a subscription for 36 dollars per year. Pandora also has a box through HP that you can purchase to stream music anywhere in your home. It has built in speakers and Wi-Fi connectivity. Aside from music, you can now view the Pandora vise series and look up concerts coming to areas near your town. Pandora is branching out to video and live music avenues. They also work with mobile companies through advertising and putting mobile applications on phones so you can listen to Pandora anywhere instead of just a computer or home device. Pandora allows for users to expand their musical knowledge based on their own personal preferences without requiring the user to purchase songs on a whim. The seemingly archaic days of buy before you try have ended partly because of services like Pandora. Pandora gives users the option to purchase each song multiple ways in a variety of digital formats. One of these methods is to buy a song via iTunes. While the iTunes service itself allows for the sampling of a given song, it does not give users the ability to stream the entire song prior to purchase.    Brand Interactivity Pandora is becoming more that just an internet radio player. Consumers can create a profile much like social networking sites and add friends to communicate with. Users can leave comments on other users profiles, share radio stations, and even find other Pandora listeners. With Pandora mobile applications, users can access this information where ever they are and listen to music straight from their mobile phones. Not only can you search to find song, or artist, you can also take a look at the Pandora video series, which is a video blog that contains videos about music, how the music is made, and where to hear it. Pandora also has a written blog where users can interact and comment on posts. The final point of interactivity is users can see a schedule of local live shows in their area. The list is based on your bookmarks list, thumb up and you station seeds, so the concerts that they show you are going to be based off of what your profile says you listen to and what you like. For each event, you can click on the ticket info button which takes you to the event website, to view the event and get tickets. This can also all be accessed from the mobile phone application. Brand look across formats Pandoras brand look is, for the most part, uniform across its various mediums. The page is identical no matter what browser you chose to view it on. This is extremely important for a service like Pandora. This is because a user might choose to view this content on a computer loaded with a browser that is different from the browser that they usually use Pandora on. An example of this would be a user who usually uses their windows-based computer loaded with Internet Explorer to access Pandora being forced for some reason to use a mac-based computer loaded with Safari. Because of Pandoras uniformity across platforms, this user will be able to use their Pandora on the mac-based computer without the initial learning curve often associated with using new web based services. Pandora is also able to be accessed on various broadband enabled mobile devices. Pandora has taken steps to make their service as uniform and consistent as possible across the mobile devices that might be used to access Pandora. For instance, Pandora accessed on a users Apple iPhone 3G looks almost identical to Pandora accessed on another users Motorola MOTORAZR V3. Furthermore, the page layout on both devices mirrors that of Pandora accessed on the users personal computers. This is another step Pandora has taken in order to reduce any additional learning curve that might be associated with accessing Pandora service on a users mobile device. Brand Personality Pandoras brand personality includes both a mechanical passion for music as well as a passion for connecting users with music that they otherwise might not have had or wanted access to. This mechanical passion for music is made evident by Pandoras Music Genome Project. Because of this mechanical passion, Pandoras brand gives off a scientific vibe. Pandora is also very diverse because no one persons musical taste is exactly like the next person. Musical taste is something that is very unique and Pandora is trying to cater to each persons uniqueness. They know each person is different, which what makes them different from other internet radio stations. Pandora is kind of like the guy that no one really cared about, but then everyone wants to know him because they realized how cool he really is. Major Competitors While Pandora brings many new and unique features to free internet radio, it is hardly the only game in town. Last.fm, Imeem, and Grooveshark are just a few internet radio alternatives to Pandora. Each of these services offers their own take on Internet radio. Lately, Last.fm has taken the position of Pandoras primary competitor. Like Pandora, Last.fm offers users the ability to stream custom playlists based on a users personal preference. While both services share this feature, they have unique and independent ways of doing so. Last.fm employs a technique called Scrobbling to determine which songs rise or fall in popularity. This is accomplished by the user downloading software on their personal computers and ranking their streaming music. With millions of users doing this on a daily basis, this is a great way to crowdsource popularity. Pandora on the other hand is based on The Music Genome Project. This is essentially a database of artist-defined analysis of each song. This analysis is primarily based on the songs musical attributes as well as unique qualities associated with the each song. So one on hand, you have millions of laymen ratings helping to improve the listeners streaming experience, and on the other hand you have a selected group of well trained ears pouring over individual songs to produce unique playlists for the user. Which is better is left up to the individual user. Recently, one of Pandoras competitors, Imeem, has stolen a substantial amount of traffic away from Pandora. Imeem is part social networking site, part internet media service. With Imeem, users interact with each other by streaming, uploading, and sharing music and videos. Imeem also allows users to build and share custom playlists with others directly on Imeems website or via an imbedded Imeem player through external sites such as Facebook and Myspace. Other online music services such as Grooveshark compete with Pandora. Grooveshark allows users to upload, stream, and vote on content similar to Imeem. Grooveshark also incorporates a Pandora-like system for recommending content based on the users personal song choices. With all these great features, why is Groovesharks traffic almost stagnant next to Pandoras mammoth annual growth of close to three million users? Grooveshark users have provided criticism that Grooveshark does not indemnify its users against any unlicensed uploaded content. Essentially, this means that Grooveshark is not responsible for the content that they host. Pandora Site Metrics According to Alexa.com, a website that specializes in web traffic metrics, Pandora is ranked 82nd for United States website traffic. This sandwiches Pandora between Newegg.com, arguably the internets largest electronic retailer, and the United States Postal Service for internet traffic. There are many metrics with which to compare a websites e-traffic and ultimately said websites/services success. The first of these metrics and arguably the most important is a websites daily traffic rank trend. This metric compares Pandoras daily traffic against other websites accessed. According to this metric, daily Pandora traffic has fluctuated over the past year. Currently, Pandora is ranked 371. Another metric with which to compare Pandora to its competitors is the time the average user stays connected to the given website. Currently, the average Pandora user stays connected eleven minutes. In relation to Pandoras previously discussed competitors, Pandora has the longest user retention rate. This compares to Last.fm and Imeems five minute and Groovesharks seven minute user retention rate. The last metric used is Reach. Reach refers to the percentage of global internet users who visit Pandora. According to Alexa, 97.7% of Pandoras users access Pandora from within the United States. This metric shows that Pandora has a strong national user base but should look into expanding their international user base. This is not necessarily the case for Pandoras competitors. Imeem, for example, has an extremely strong user base in Thailand, having a national user base of only 42.8% United States users. Last.fm has a United States user base of 35.2% with the remaining 65% consisting of international users. Ultimately, Pandora will need to begin increasing their international traffic if they plan on sustaining their growth. Customer Profile The types of people we see using Pandora, more frequently, and more often are the Net Generation. They were typically born from 1980-2000 and are anywhere from 10-30 years old. The reason that the Netgeners use Pandora more is because Pandora is a digital product and the Netgeners are growing up in a digital world. They are different from other generation in that their lives are surrounded by digital media. (Tapscott) 73% of youths between the ages of 12 and 17 use the Internet. For most teenagers it is a way of life. So, it is only natural that we see this age demographic using Pandora services. The characteristics of these consumers are as follows according to Tapscott. They have fierce independence because they create online identities and acquire knowledge to make their own decisions. They have and Intellectual and emotional openness and view the world in a global context. They have very free expression and have strong views. They are also very innovative and have a strong desire to be more mature than their predecessors. They investigate things out of curiosity, demands real time and fast processing, are very sensitive to corporate interest, and are very trusting online. Consumer Behavior Acquisition How the consumer gets content from Pandora is that they find it. This is accomplished by typing in an artist name, or song name, and Pandora streams then the content. They also get to choose more or less what they listen too. Also creating a profile helps in the acquisition process. They also get to create stations so that they can the content that suits them best. Consumption The customer consumes content by listening to the music, reading the blogs, or watching Pandoras video series. They can also consume content by getting gift stations from other users and communicating with them through a simple messaging service. Disposition In the disposition process, consumers can bookmark and save songs to remember them later and even use the information so that they can personally own the song. The content never really goes away though. They can listen, watch, or read the duration of the content, but its always there for the consumer to go back and listen, watch, or read it again. Ideas for Growth   Ã‚              The first idea for growth, which I think will also target a larger market, is somehow incorporating their service into automobiles a little better.   Currently, Pandora can only be heard through computers and cell phone with broadband data plans. If Pandora can create a way for people to get internet radio in cars with services, they could reach a larger audience for people that either dont listen to music on their computers or dont have expensive smart phones. A way of implementing Pandora into an already well respected device would be to implement Pandora functionality into satellite radios. It would also be a safer alternative to have something compatible with a car that being distracted by a mobile device.   Ã‚           Next, Pandora needs to begin expanding into the international market. Currently, Pandora has blocked access to users outside of the United States. This clearly explains why Pandoras user base is comprised of 97.7% United States users. Pandora founder Tim Westergren spoke directly on the topic saying: As it stands now, there is still no affordable license for a webcaster to stream legally (ie. abiding by all standing copyright law and properly compensating performers and composers) anywhere outside the US. However, Pandora has publicly stated their commitment to finding a way to provide Pandora service to international users, leaving new potential users with only keep the faithà ¢Ã¢â€š ¬Ã‚ ¦ Finally, Pandora should look to advertise their paid services more. Even if they dont in publications or Ads, they need to at least start pushing it on their website more. The guess would be that they dont want to seem like they are moving to a paid service, but if they want to stay in this business, more money is what it is going to take and they need to start pushing people to subscribe, or buy products from them. Channel Mix Plan The Channel mix plan for Pandora is Internet. It is the one channel that can reach the maximum number of clients for their business model. They also use a phone application as a channel through mobile Internet service providers. The messaging with customer through both channels is all opt-in only. You will only receive emails if you check a box and any information is only sent or retrievable of you want, or ask for it. Conclusion In conclusion, we have discussed Pandoras business model in detail. It seems that once Pandora can monetize their service appropriately, they will be an extremely, financially, successful digital media venture. Furthermore, Pandora has a great deal of legitimate future growth considering they have yet to expand their service outside of the United States. Ultimately, Pandora has an extremely bright future in the internet radio market.

The Worst Words :: Breast Cancer Dying Essays

The Worst Words The sun was shining through the open windows of the crowded, Twinkie-colored bus. The wind was blowing my hair into my face, and I could not wait to see my mommy. There were children yelling because it was Friday and school was out for the week. The excitement of the weekend was on all of the children’s minds. The bus slowed, turned into my mobile home park, and screeched to a stop. I got off the bus and ran into the arms of my mother. I remember her hair smelled like Pert Plus, and she was wearing her favorite perfume, White Shoulders. She would greet me off the bus every day. I loved to see her immediately after a long day of fifth grade. To me this was a normal day. However, to my mother, it was a scary, heartbreaking day. When we got home, she sat me down, looked at me, and said, â€Å"I need to tell you something. I don’t know if you will understand this, but, I have cancer.† Those words stick in my mind like a fly to flypaper. I remember not knowing exactly what she meant but I thought it was bad. I can still see her tears start to stream from her emerald green eyes. I have cancer. Why did my mommy have to have cancer? Whatever it was I knew I did not like it. It made her cry and made me want to fix what God had done to her. A few weeks passed by, full of testing and doctors’ visits. She had to go into the hospital for surgery one day. My dad told me that they were giving her a mastectomy. She was never going to feel adequate ever again. Only one breast will make any woman feel inadequate. I was scared and still did not fully understand what was going on. All I knew was that my mommy was not going to be home for a couple of days. It hurt not having her with me, because she had been there my whole life. My mother went in for a checkup a year after her breast cancer surgery and I went with her and my Grandma. My mother and Grandma were in the office for a couple of hours. I was scared. I read every magazine in the waiting room, waiting for them. The Worst Words :: Breast Cancer Dying Essays The Worst Words The sun was shining through the open windows of the crowded, Twinkie-colored bus. The wind was blowing my hair into my face, and I could not wait to see my mommy. There were children yelling because it was Friday and school was out for the week. The excitement of the weekend was on all of the children’s minds. The bus slowed, turned into my mobile home park, and screeched to a stop. I got off the bus and ran into the arms of my mother. I remember her hair smelled like Pert Plus, and she was wearing her favorite perfume, White Shoulders. She would greet me off the bus every day. I loved to see her immediately after a long day of fifth grade. To me this was a normal day. However, to my mother, it was a scary, heartbreaking day. When we got home, she sat me down, looked at me, and said, â€Å"I need to tell you something. I don’t know if you will understand this, but, I have cancer.† Those words stick in my mind like a fly to flypaper. I remember not knowing exactly what she meant but I thought it was bad. I can still see her tears start to stream from her emerald green eyes. I have cancer. Why did my mommy have to have cancer? Whatever it was I knew I did not like it. It made her cry and made me want to fix what God had done to her. A few weeks passed by, full of testing and doctors’ visits. She had to go into the hospital for surgery one day. My dad told me that they were giving her a mastectomy. She was never going to feel adequate ever again. Only one breast will make any woman feel inadequate. I was scared and still did not fully understand what was going on. All I knew was that my mommy was not going to be home for a couple of days. It hurt not having her with me, because she had been there my whole life. My mother went in for a checkup a year after her breast cancer surgery and I went with her and my Grandma. My mother and Grandma were in the office for a couple of hours. I was scared. I read every magazine in the waiting room, waiting for them.

Character Change in “The Jewelry” Essay

There have been many times in literature where writers will change the attitudes or beliefs of the main character of their story. Writers can do this a number of ways. They use things like tragic events or a change in setting to be the reason why a character changes. In Guy de Maupassant’s â€Å"The Jewelry,† the main character’s attitudes change multiple times throughout the story. The story begins with the narrator describing how the main character, M. Lantin, fell in love and married the girl of his dreams. He adores her so much that it is written that, â€Å"six years he married her, he loved her even more than he did the first day† (69). In fact, Lantin almost finds his wife to be flawless. The only faults that he finds in her are her love for the theatre and her passion for false jewelry. Lantin never understands his wife’s fondness towards fake jewelry. They cannot afford real jewelry and it seems as though Lantin wants to save her the embarrassment of parading around with fake jewelry. He tells her that she is better off wearing no jewelry so that she can show off her natural beauty and elegance. However, she does not listen to him and continues to wear her fake jewelry. At this point in the story, M. Lantin seems to be a stress-free man who is enjoying life with the girl of his dreams. He is not a rich man by any means, but, the love he shares with his wife fulfills his every need. Then, tragedy strikes. Lantin’s wife catches pneumonia one night after the Opera and dies eight days later. After the death of his wife, Lantin’s character changes from a careless man to a soul in despair. The narrator describes his anguish by saying, â€Å"His despair was so frightful that in one single month his hair turned white. He wept from morning till night, feeling his heart torn by inexpressible suffering-ever haunted by the memory of her, by the smile, by the voice, by all the charm of the dead woman† (70-71). hair has turned white in a single month. Lantin suffers day and night and is haunted by the mere memory of his wife. He keeps his wife’s bedroom exactly the same and as time goes by, his memory of her remains strong. Lantin ends up getting into debt and losing all his money. The first thing that comes to his mind is to sell his wife’s jewelry. The jewelry; which he does not think will bring him much money, has become an object of loathing and distant memories of his late wife. After rummaging  through most of her items, Latin finds his wife’s pearl necklace that he thinks might be only worth a few francs. He goes into a jewelry store to sell it. There, he finds out that it is real, and that it is worth a substantial amount of money. He goes into another jewelry store to receive a second opinion. To Lantin’s astonishment, not only is the necklace real, but the second store that he entered was the exact store where his wife bought the necklace for a substantial amount of money. It is here where Lantin’s character changes from being a sad and sorrowful man to a puzzled fellow searching for answers. This is evidenced in the text when Lantin is pondering to himself how his wife came across the money to buy such an expensive piece of jewelry. Maupassant describes Lantin’s puzzled mind by writing â€Å"He tried to reason, to understand. His wife could never have bought so valuable an object as that. Certainly not. But then, it must have been a present! A present from whom? What for?† (72-73) Lantin is so bewildered by these events that he barely makes it home for the night. The next morning, he goes out and realizes he has no money to get anything to eat. Lantin then remembered the substantial amount of money that the jeweler had offered him for the pearl necklace. He then returns to the jewelry store to tell the jeweler the necklace. While at the jewelry store, Lantin remembers that his wife had lots of other jewelry that might be worth a lot of money as well. He collects her other jewelry and sells it all to the jeweler. Lantin receives 196,000 francs for all of his late wife’s jewelry. At this point, Lantin’s mood changes again. He completely forgets his sorrows and no longer questions where his wife got the money for such expensive jewelry. The only emotions that Lantin is experiencing are ecstasy and sheer excitement. The text describes how Lantin’s desire was to â€Å"yell out to the passers-by ‘I am rich, too-I am! I have 200,000 francs!’ (74).† Lantin quits his job and dines at the finest restaurant. The story ends with Maupassant describing Lantin’s final mood change. Lantin marries a woman six months later with a terrible temper. The story ends by saying that Lantin’s new wife, â€Å"made his life very miserable. (75)† Guy de Maupassant changed Lantin’s mood multiple times in a short amount of time. From the happiness of his first marriage; to the sorrow after her tragic death; to the bewilderment that he experienced when he discovered that his late wife’s jewelry was real and how much it was worth; to the delight in the riches he acquired from selling it  all, and finally to the final misery he lives through because of his new wife. It was brilliant stories by Maupassant because it showed his character go through so many emotions in such a short amount of time. Maupassant’s readers are bound to relate to at least of these emotions that Lantin experiences. This helps make the story more appealing and relatable. It is the reason why most writers use character change in their stories. Work Cited Maupassant, Guy de. â€Å"The Jewelry.† In The Norton Introduction to Literature. 10th ed. Alison Booth and Kelly J. Mays. W.W. Norton and Company, Inc. 2011. 69, 70-71, 72-73, 74, 75.

How Honeybees Turn Nectar Into Honey

The sweet, viscous honey we take for granted as a sweetener or cooking ingredient is the product of industrious honeybees working as a highly organized colony, collecting flower nectar and converting it into a high-sugar food store. The production of honey by bees involves several chemical processes, including digestion, regurgitation, enzyme activity, and evaporation. Bees create honey as a highly efficient food source to sustain themselves year-round, including the dormant months of winter—human beings are just along for the ride. In the commercial honey-gathering  industry, the excess honey in the hive is what is harvested for packaging and sale, with enough honey left in the hive to sustain the bee population until it becomes active again the following spring.   The Honeybee Colony A honeybee colony generally consists of one queen bee—the only fertile female; a few thousand drone bees, which are fertile males; and tens of thousands of worker bees, which are sterile females.  In the production of honey, these worker bees take on specialized roles as  foragers  and  house bees. Gathering and Processing Flower Nectar The actual process of transforming the flower nectar into honey requires teamwork. First,  older forager  worker bees  fly out from the hive in search of nectar-rich flowers. Using its straw-like proboscis, a forager bee drinks the liquid nectar from a flower and stores it in a special organ called the honey stomach. The bee continues to forage until its honey stomach is full, visiting 50 to 100  flowers per trip from the hive. At the moment the nectars reach the honey stomach, enzymes begin to break down the complex sugars of the nectar into simpler sugars that are less prone to crystallization. This process is called inversion. Handing Off the Nectar With a full belly, the forager  bee heads back to the hive and regurgitates the already modified nectar directly to  a younger house bee. The house bee ingests the sugary offering from the forager bee, and its own enzymes further break down the sugars. Within the hive, house bees pass the nectar from individual to individual until the water content is reduced to about 20 percent. At this point, the last house bee regurgitates the fully inverted nectar into a cell of the honeycomb.   Next, the hive bees beat their wings furiously, fanning the nectar to evaporate its remaining water content; evaporation is also helped by the temperature inside a hive being a constant 93 to 95 F. As the water evaporates, the sugars thicken into a substance recognizable as honey. When an individual cell is full of honey, the house bee caps the beeswax cell, sealing the honey into the honeycomb for later consumption. The beeswax is produced by glands on the bees abdomen. Collecting Pollen While most foraging bees are dedicated to collecting nectar for the production of honey, about 15 to 30 percent of the foragers are collecting pollen on their flights out from the hive.  The pollen is used to make beebread, the bees main source of dietary protein. The pollen also provides bees with fats, vitamins, and minerals. To keep pollen from spoiling, the bees add enzymes and acids to it  from salivary gland secretions. How Much Honey Is Produced? A single worker bee lives only a few weeks and in that time produces only about 1/12th of a teaspoon of honey.  But working cooperatively, a hives thousands of worker bees can produce more than  200 pounds of honey for the colony within a year. Of this amount, a beekeeper can harvest 30 to 60 pounds of honey without compromising the colonys ability to survive the winter.   The Food Value of Honey A tablespoon of honey contains 60 calories, 16 grams of sugar, and 17 grams of carbs. For humans, its a less bad sweetener than refined sugar, because honey contains antioxidants and enzymes. Honey can vary in color, flavor, and antioxidant level, depending on where it is produced because it can be made from so many different trees and flowers. For example, eucalyptus honey may seem to have a hint of menthol flavor. Honey made from nectar from fruit bushes may have more fruity undertones than honey  made from nectars of flowering plants. Honey produced and sold locally is often much more unique in taste than honey manufactured on a huge scale and appearing on grocery store shelves, because these widely distributed products are highly refined and pasteurized, and they may be blends of honey  from many different regions.   Honey can be purchased in several different forms. It is available as a traditional viscous liquid in glass or plastic bottles, or it can be purchased as slabs of honeycomb with honey still packed in the cells. You can also buy honey in granulated form or whipped or creamed to make it easier to spread.   Bee Species All honey consumed by people is produced by only seven different species of  honeybees. Other types of bees, and a few other insects, also make honey, but these types are not used for commercial production and human consumption. Bumblebees, for example, make a similar honey-like substance to store their nectar, but its not the sweet delicacy that honeybees make.  Neither is it made in the same quantity because, in  a bumblebee colony, only the queen hibernates for the winter. About Nectar   Honey is not possible at all without nectar from flowering plants. Nectar is a sweet, liquidy substance produced by glands within plant flowers. Nectar is an  evolutionary adaptation that attracts insects to the flowers by offering them nutrition. In return, the insects help fertilize the flowers by transmitting pollen particles clinging to their bodies from flower to flower during their foraging activities. In this synergetic relationship, both parties benefit: Bees and other insects gain food while simultaneously transmitting the pollen necessary to fertilization and seed production in the flowering plants. In its natural state, nectar contains about 80 percent  water, along with complex sugars. Left unattended, nectar eventually ferments and is useless as a food source for bees. It cannot be stored for any length of time by the insects. But by transforming the nectar into honey, the bees create an efficient and usable carbohydrate that is only 14 to 18 percent water and one that can be stored almost indefinitely without fermenting or spoiling. Pound for pound, honey provides bees with a much more concentrated energy source that can sustain them through cold winter months.