Thursday, June 28, 2012

Recession Holds On Tight

Sometimes I draw a stupid picture then try to make a connection with economics.  At the time I drew this cartoon, unemployment is 8.3% and income is as low as levels in the 1990s.  Forces tend to allow growth slowly.  When growth comes too fast, such as the housing bubble, the market over corrects itself.  I believe that marginal gains in the economy can be sustained.  For example, if you have every tired to learn a new skill, the skill takes persistence and constant practice where many mistakes are made.  The BEA just released GDP statistics that showed economy wide growth of less than 2%.  I think you'll continue to see constant but small growth for the next three years.

Lipstick Effect

If college aged women are "primed" with news of bad economic, they may increase their purchases of beauty products to enhance their chances of finding a mate.  This is my conclusion from an article by by Sarah Hill.

Which brings us to lipstick and designer jeans, high-heeled boots and perfume. Would recession cues increase women’s desire to buy these products?
Four separate experiments, along with real-world data, all say yes. Our findings consistently supported the lipstick effect, as college-age women, when primed with news of economic instability, reported an increased desire to buy attractiveness-enhancing goods, along with a decreased desire to purchase goods that do not enhance one’s physical appearance. Our experiments also found that this increased desire for beauty products, clothing and accessories was fully mediated by a heightened preference for mates with resources. 
I think both men and women actively try to look attractive to each other because looking attractive has many benefits besides attracting a mate.  For one, a clean and attractive person signals many employable traits.  Both men and women want to look as good as they can to improve their chances in any economic time.  I think it's time to kiss this topic good-bye.

Wednesday, June 27, 2012

Textbook Monopoly

A recent patent to halt students from sharing books, reinforces the monopoly that textbook publishers have on their intellectual property.  Wikipedia has all of the arguments for and against copyrights here.

The patent requires an access code for all digitized content.  So once I purchase a textbook online, as required by the class, only I can use the book.  This prevents sharing and the resale of used books.  I can understand that an author would want to sell as many copies as possible.  I can understand that a publisher will maximize profits where marginal revenue equals marginal cost.  I don't understand why students would not want to keep their textbooks after the class is finished.  The end user, the students, must not derive enough utility from the book to merit keeping it so why protect it?

Tuesday, June 26, 2012

Income Inequality

This is a strong image.  To me, the image shows the advantages that come with wealth.  It's hard for me to say that wealth causes success, but there seems to be a strong correlation.  I noted that 90% of our class valedictorians come from families at the 5% income level.  I've noticed that teams that win state championships come from school districts where there is a high income per family.  The wealthy have fewer health problems, fewer daily problems, and more access to resources.  There's a old saying that goes, "the first million is the hardest".  Wealth seems to build on wealth sustaining the advantages that ride along with it.

Sunday, June 24, 2012

How A Parrot Can Be An Economist

An old joke among economists goes: "all you have to do to teach a parrot  to be an economist is to teach him how to say supply and demand."

There's a lot of truth to that joke.  I think it's the interpretation of the forces that move a market into equilibrium that makes economics rigorous.  Economics is the study of how people behave under conditions of scarcity.  The joke assumes that all there is to economics is the static equilibrium and not the marginal changes.

Saturday, June 23, 2012

Wilton Caboose

Here's a picture of a caboose that I'm helping to paint.  My employer is meticulous about preparation and wants all of the rust removed before painting.  I've been grinding the paint, labels, and layers of paint off this week.  It is physically exhausting.

We started scraping the paint with a wire brush and metal scrapers and substituted mechanical electric grinders.  This is a clear substitution of capital for labor.  I think we could have saved a lot of time by just using a chemical to neutralize the rust, then paint over it.  This brings me to this post.

When is it feasible to use labor in place of capital?

Here is a picture of the caboose painted by another crew eight years ago.

To paint this structure, one would need a lot of planning, knowledge of product selection, tools, and sun protection.  I think a better term for these words would be entrepreneurial ability.  There seems to be a balance and trade-off between using capital and labor.  I believe that ultimately, capital will replace labor in most occupations.  I believe that you will see the natural rate of unemployment stay constant at 8.3% and gradually increase in your lifetime.

Perceptions, Stereotypes, and Choice

Jen Jen Reyonolds posted this picture on Google+.

I have been thinking about how stereotypes influence our free choice.  If we hold false assumptions about other people or institutions, then our choices will not be rational.  The only way to eliminate bad information is spend a lot of time learning about the person you are judging.  This might come at a high cost of time and alternative activities.  When one is in the market, the market moves too fast for the kind of analysis needed to make rational decisions especially when the number of actors are large.  Therefore, there will always be market failure.

Our perceptions of other people and the stereotypes we form, must be a defense mechanism of evolution.  Some of our choices are based on an evolutionary response rather than rational choice.

Given the huge amounts of market transactions, the market equilibrium establishes a mean. I am also prone to conform with the crowd's choices.  So how accurate is economics in predicting micro behavior?

Wednesday, June 20, 2012

The Price of Unequality

The book Description:
A forceful argument against America's vicious circle of growing inequality by the Nobel Prize–winning economist. The top 1 percent of Americans control 40 percent of the nation’s wealth. And, as Joseph E. Stiglitz explains, while those at the top enjoy the best health care, education, and benefits of wealth, they fail to realize that “their fate is bound up with how the other 99 percent live.” Stiglitz draws on his deep understanding of economics to show that growing inequality is not inevitable: moneyed interests compound their wealth by stifling true, dynamic capitalism. They have made America the most unequal advanced industrial country while crippling growth, trampling on the rule of law, and undermining democracy. The result: a divided society that cannot tackle its most pressing problems. With characteristic insight, Stiglitz examines our current state, then teases out its implications for democracy, for monetary and budgetary policy, and for globalization. He closes with a plan for a more just and prosperous future.
A strong argument can be made that nothing is equally distributed. I will advance the argument that even if it were possible to make everything equal, the equality would not last.

Tuesday, June 19, 2012

Who Owes The Debt?

I love this argument. Since the deficit spending went to protect the elderly, didn't they incur the debt. If you believe this, then the elderly are passing the debt on to their children...Both the young and the old benefited from the debt. Both should pay.

Paul Solman Interviews Paul Krugman

In this interview, PBS correspondent, Paul Solman, interviews Nobel Laureate economist, Paul Krugman on the use of Fiscal Policy.  Mr. Krugman wants more spending on government services and a higher inflation rate of 4%, even when the deficit is mounting.

Monday, June 18, 2012

Kapital Substitution

In this cartoon I suggest that there are reasons why employers retain labor other than productivity.  I have seen Blue Tooth technology replace receptionists and cashiers around town.  I was wondering when the same technology would replace my wife at her work.  (This cartoon is not intended to be anything more than a cartooning.)

My wife has to collect money when clients leave.  This task uses tact and personality.  These traits are lacking in computers.  All of the human traits that make people do business are what completes a trade.

Sunday, June 17, 2012

Housing Trap

Bankruptcy statistics as complied by the US Government are here.  It appears from the data that bankruptcy filings are down by 13%.

The Huffington Post reports that approximately 22% of homeowners are underwater.

Some of the housing trap is the misguided dream of owning a home.  I still say it's smarter to rent.  You can make your own choice by looking at ChartPorn.

Younger couples discount the future more and are more prone to buying a new car, having children, and buying a home.

Still, some of the predatory lending created by a moral hazard contributes to some of the housing trap.

I think people overvalue their worth too and buy a big house because of their false valuation of themselves.  Most couples sign a 30-year mortgage.

Free Exchange -- The Economist

When a product is standardized, the product should sell for the same price around the world.  The theory is that sharp business people would take advantage of arbitrage until the prices converged.  In a brilliant articleMssrs Ashenfelter and Jurajda explore the wage gaps among nations.  

Between 2000 and 2007 America’s McWage rose by 13% while the Big Mac price jumped by 21%, resulting in a net tumble in the BMPH real wage of 7% (see chart, right panel). Meanwhile, the BRICs advanced as McWages grew faster than Big Mac prices. The BMPH jumped by 53% in India, 60% in China and 152% in a Russian economy recovering from financial crisis in 1998. The going has been slower since then. Russia and China managed gains from 2007 to 2011. Most others did not, as food prices rose faster than McWages. Data gathered this summer for the 2012 calculations may show a further slowdown. Bad news for an emerging world still hungry for better living standards.

I think the article should look at the marginal productivity of labor. Also, I think that the data shows how the world economy is working toward equalizing productive factors with wages around the world for a standardized product. Finally, I think the article proves Robert Solow's growth model where mature economies slow while emerging economies catch up.

Wednesday, June 13, 2012

Income Levels Sink

My favorite cartoonist, Jimmy Marguiles, drew this commentary after the FED released data showing that household wealth dropped to 1990's level.

Most households buy a house has an investment.  When housing prices skyrocketed, their net worth increased.  After the housing bust in 2008, the median family saw their investment, and thus net worth, shrink.  I feel for those investors, but I have two comments to make--both unintelligent.

1.  The value of a home is how much the buyer thinks the home is worth.  To think that this value is fundamental is misguided.  A home has to have a good location and many other values that are often personal.  I don't think the market value of the home should be listed on the balance sheet.  I think the price that the home was purchased at should be listed.  2.  War destroys value.  The US is fighting so many wars and uncertainty is so high that it's no wonder why homes are now approaching their true value.

Addendum:  Foreclosures are up by 9% despite record low mortgage rates.  Here's a link to with an interactive graph.

Tuesday, June 12, 2012

Greece Is The Word

I was wondering how the Greece fallout would affect Jolly Old England.  I listed my thoughts on the right.  My deep thought is on the left.

In econ we always talk about how interrelated we have become.  If we have become so connected that one country can bring down the entire EU, to what extent should we become interrelated?

Monday, June 11, 2012

China's Exports

China's export led growth is a thing of the past.  The Economist in its special report on China, showed the net exports haven't driven China's economy since 2007 (The Economist, May 26, 2012, page 4).

It's time to quit telling lies about how undervalued the Yuan is.  Is this lie ignorance or propaganda?

How To Assign Grades

A friend passed this along to me.  Scroll down to find Economics.

Department Of Statistics:
All grades are plotted along the normal bell curve.
Department Of Psychology:
Students are asked to blot ink in their exam books, close them and turn them in. The professor opens the books and assigns the first grade that comes to mind.

Department Of History:
All students get the same grade they got last year.

Department Of Religion:
Grade is determined by God.

Department Of Philosophy:
What is a grade?

English Department:
Your final exam will be scored by totaling the weight of all the books you read this semester:

  • 40+ pounds – A
  • 30 pounds – B
  • 20 pounds – C
  • 10 pounds – D
  • under 10 pounds – F
Law School:
Students are asked to defend their position of why they should receive an A.

Department Of Mathematics:
Grades are variable.

Department Of Physics:
Grades are relative. but…
All theoretical physics is really mathematics. See Above.

Department Of Chemistry:
All theoretical chemistry is really physics. See Above.

Department Of Biology:
All theoretical biology is really chemistry. See Above.

Department Of Logic:
If and only if the student is present for the final and the student has accumulated a passing grade then the student will receive an A else the student will not receive an A.

Department Of Marxist Studies:
The history of all hitherto existing society is the history of class struggles. Therefore, everyone will now get the same grade!

Department Of Economics:
All of your grades, as a collection, will reach the level where your marginal product (MP) of labor for each individual grade is equal.

Department Of Operations & Logistics Management:
Grades will be posted at 12:00 Noon.
NOT 11:59. NOT 12:01. 12:00 NOON.

Department Of Computer Science:
Random number generator determines grade, but… YOUR grade is an object in a class of its own.

Department of Music:
Each student must figure out his grade by listening to the instructor play the corresponding note (+ and – would be sharp and flat respectively).

Sunday, June 10, 2012

Initial Jobless claims

From the WSJ.

The number of Americans filing new claims for unemployment benefits fell by 12,000 to a seasonally adjusted 377,000 last week. While claims dropped, the average for the past four weeks — a less-volatile measure — actually rose slightly to 377,750. The labor market remains weaker than it was earlier this year, putting pressure on policy makers to consider action.
 My interpretation is that for the last four weeks, the number of jobless claims have been increasing but for the three-month period the number has fallen.  I think that the WSJ is committing the fallacy of composition.  Even though these are seasonally adjusted, the slight bump can hardly be generalized. Put simply, an increase in jobless claims means that jobs are harder to find.

An excellent definition is here and repeated here.  "An "initial jobless claim" is when somebody applies for unemployment benefits for the first time."  Given this definition, it might show that more and more people are losing their jobs for the first time.   

How Much Profit Does An Airline Make On A Flight?

The WSJ has a brilliant article here.

According to the WSJ, the amount of net income made on one flight is approximately $164.  This assumes that the flight has 100 passengers.  This is as close to being perfectly competitive as you can get.  This site, lists "Many" airlines.

Fuel costs make up the bulk of costs for the airlines as does salaries, taxes, and maintenance.

I've always wondered.  Why would someone enter a perfectly competitive industry?

Fiscal or Monetary Policy?

What policy bests controls the economy?  The answer might be it depends.

The following analysis is taken from

Evaluation: Problems with the use of active "demand-management" policies
(1) The measurement of output: Where are we in the cycle? Where are we going? How fast? Will we know when we get there? Inaccuracies in estimating the possible trade-offs in macroeconomic policy
(2) Time lags in the policy process: measurement, decision, execution and then effectiveness of policy changes
(3) What kind of fiscal policy? Spending (on what?) or tax cuts (for whom?)
(4) Will spending (fiscal policy) ‘crowd-out’ other spending, either directly or indirectly?
(5) Will changes in fiscal or monetary policy affect other economic objectives - such as the exchange rate, the trade balance and the provision of public services?
(6) Fiscal policy is weak (ineffective) when investment is very sensitive to interest rates and when consumers pierce the veil and attempt to offset the actions of the government (e.g. saving a tax cut, or increasing their saving when higher government spending leads to expectations of higher taxes in the future)
(7) Monetary policy is weak (ineffective) when consumers are willing to hold large quantities of money rather than spend them even when interest rates are very low
I think this analysis is complete.  I have been making random drawing then trying to related an isolated economic concept to it.  I think this cartoon would be effective if I couldn't just Google the answer.  Drawing the picture took 20 minutes.  There was not much learned on my part.  In the end, public education will lose the battle if all students can just Google the answers.

In drawing this cartoon, I tried to find a way to use the Internet as a complement to instruction but move to the top of Bloom's taxonomy.  I don't think this happened here.  I could be that students without Internet access might have the advantage of the actual learning process.

Friday, June 08, 2012

Jobless Recovery

I started drawing goofy people then tried to make an economic idea in a dialog box.  This is the result.  At the current time, GDP is growing at 2.2% while the unemployment sticks at 8.2%.  How can the economy be growing when the unemployment rate is 3% higher than the natural rate.  There must be capital being substituted for labor.

Government Waist

This cartoon is intended to show that government spending is decreasing, but they still have a long ways to go.  The government "waist" is huge.  By the way, a hot dog is still pork.

I drew this toon with a mechanical pencil on a piece of scratch paper in 40 minutes.    One can tell.

I don't think this is the end of the story.  How has spending changed since 2000?  A look at FRED data series, FGEXPAND, and you will see that spending under Mr. Bush was two times that under Mr. Obama.

This is interesting since Mr. Obama spent $800 billion as a one time stimulus.  Although spending as increased by $600 billion under Obama's administration, it is no where near spent under Mr. Bush.  For more, click here.

As I used to say to wrestlers trying to cut weight:  it wasn't put on overnight.  It cannot be taken off overnight.  The debt is here to stay for a very long time and will be pass on to future generations.

Thursday, June 07, 2012

Unemployment Cartoon

I drew this cartoon for an EconEdLink Lesson I'm writing.  I copped out on the hand lettering.  The cartoon shows a long line of applicants for a job at the Unemployment Office.  Readers of this blog know that I don't believe that Fiscal Policy works and this isn't Mr. Obama's job.

For students finding this cartoon from EconEdLink, here is a link to 503 unemployment cartoons on Slate.

Wednesday, June 06, 2012

How Long Should I Hold The Door Open?

Economists like to weigh the benefits and costs of an activity to find the optimal amount of time that should be spent on it.  While entering the Community Y this morning, I held the door open for a man entering behind me.  I wondered if I would have held the door open if the man would have been farther behind me.  I calculated my utility function as a constant 2 utils, and my cost function as .5X^3.  I immediately plotted the the two and derived the graph you see.  As you can see, I won't wait long.

I wrote this post as a way for my students to see marginal decision making.  I want them to make something like it to make their learning relevant.

Some other ideas are how long should you study, workout, watch television, and write a blog post.

KAL's Cartoon

This cartoon is from The Economist.  This cartoon at the present time has had 59 comments.  Cartoons spark debate in ways that print media cannot.  Why not use cartoons in the classroom as a discussion starter?

One problem with cartoons is that they only show one aspect of the problem.  In this case, the cartoonist calls Mr. Assad a butcher and infers that China and Russia are somehow behind the bloody violence in Syria.

The cartoon also makes the point that there's nothing the world can do about the violence in Syria except object to it.  Let's turn to the comments left by readers and summarize their points.

One comment makes the point that rebels might be a worse regime than the current.  Another makes the point that their might be religious cleansing.  The Usual Suspect makes the point that Russia has much to gain by backing Syria.  Syria does not have a huge impact on the world market for crude oil, thus, the West is not protecting it.

I think that Syria has different values and beliefs that the West doesn't understand.  If the West intervenes in the unrest, then the West will destabilize the region just like it did in Iraq, Afghanistan, and Vietnam.  I wish the violence would end.  It's easy to see what happens when one dictator gets too much power and will stop at nothing to get it.  But I don't think using violence to end violence is the answer either.  I wish I knew what the answer was.  On CNN I see children mutilated, civilians innocently killed, homes ruined, and hate flaunted in colors in a holy land.

Tuesday, June 05, 2012

Tan Tax

Tanning Tax

High  tax  rates are followed by attempts of ingenious men to beat them as surely as snow is followed by little boys on sledsArthur Okun, economist, 1928-1980         

A suntanned body is usually taken as a sign of a healthy individual.  A sun tan shows an active, outdoors, on-the-go individual.  But is the tan really healthy? 

In July, 2009, the International Agency for Research on Cancer released a report that categorized tanning beds as “carcinogenic to humans”. The study comes after an analysis of more than 20 epidemiological studies indicating that people who begin using tanning devices before age 30 are 75% more likely to develop melanoma.[1]  In response to a growing concern that indoor tanning beds can cause Melanoma, a 10% tax on indoor tanning services was imposed nationally in 2010.  The tax was to work like a “sin” tax placed on the consumption of tanning under ultraviolet lights indoors.  Economists call this tax a Pigouvian tax used to correct a negative externality. 

A negative externality is an example of market failure—a good that is over produced that has spillover effects on people who are neither buyers nor sellers of the good.  Some examples are air pollution and loud noises.

The tan tax had unintended consequences.  A majority of tanning spa owners reported no decline in business and some businesses would share the tax with clients.  As laws are meant to protect, what went wrong with the tax?

Law makers thought that the demand curve for indoor tanning was downward sloping and the supply curve was perfectly elastic so a tax so a 10% tax would reduce the quantity demanded by a large amount which was desirable and all of the cost placed on the consumer, Figure 1.

With no tax, a quantity of 3 billion tanning sessions are demanded and supplied, point 1.  If a tax is imposed on the seller to collect from the consumer, the price of tans raise to $1.10 and 2 billion are demanded and supplied, point 2.  Tax revenue would b e $200 million and the quantity of tans demand and supplied would be one billion less.  Law makers looked at the supply of tans as perfectly elastic in the sense that once the equipment was purchased, spas could supply all of the tans they wanted at no extra marginal cost.  Law makers believed the industry was easy to enter as many video stores often gave away tanning sessions with the purchase of a video rental.  Given these characteristics, lawmakers grossly overestimated the size of the indoor tanning market.

As Figure 2 shows, an excise tax of $0.10 places some of the burden of the tax on the producer who is not the target of the tax.  Figure 2 explains how $0.03 of the tax is placed on the seller while $0.07 is paid the buyer.  The Figure also shows just how much the government misjudged the size of the market.  Placing a tax of $0.10 on the sale of tanning placed some of the tax where it was unintended.
If a Pigouvian tax doesn’t correct the overproduction of tanning, what are some other ways to internalize the costs of tanning?

Since tanning appears to be socially healthy, require tanning providers to purchase a license like other health care providers.  Other alternatives include, rising the age that consumers can tan, increasing the paper work to complete before tanning, limit the number of tanning sessions per month, and increase awareness of melanoma among users.

Opportunity cost involves choices rational consumers make.  Many conservatives believe that government intervention in private markets comes at the cost of diminished individual freedoms.  Milton Friedman, for example, believed that governments should be dispersed and decentralized.[2]  Others, such as Paul A. Samuelson, believe that government intervention in private markets actually makes society freer by creating order and cooperation.  Tanning laws would relieve the individual of health costs freeing up both time and money for other productive activities.

Taxing tanners will generate income that can be used to promote the social good.  In the end, the tax might be unhealthy for the economy.


[1]  WHO International Agency for Research on Cancer Monograph Working Group (August 2009). "A Review of Human Carcinogens—Part D:Radiation". The Lancet Oncology 10 (8): 751–2. DOI:10.1016/S1470-2045(09)70213-X. PMID 19655431.
[2] Milton Friedman, Capitalism and Freedom (Chicago: The University of Chicago Press, 1962), p. 2.

Monday, June 04, 2012

Flawed Leadership Led to Factory and Job Losses

Mr. Tom Gibson has a nice post on about comparative advantage.  His thinking goes like this:  When the US specializes and trades for the things that it cannot produce at a cheaper cost domestically, foreign countries enact trade barriers, give export subsidies so that their goods are relatively cheaper, increase domestic saving so that investment is high, America loses its competitiveness, and more US industries move off shore.

I'm not sure, but I think Mr. Gibson's commentary is directed at China.  I think he's right about some of the behavior of foreign countries, but I don't think his commentary is correctly placed.  I think that most of our trade deficit is from the middle east in the form of crude oil imports.

This quote is from Kimberly Amadeo,

America's dependence on foreign oil drives the trade deficit. In 2011, the U.S. imported $332 billion in petroleum-related products, compared to $252 billion in 2010. The number of barrels imported was slightly lower, but oil prices jumped from an average of $99.78/barrel to $74.67/barrel. Petroleum-related products include crude oil, natural gas, fuel oil and other petroleum-based distillates such as kerosene. (Source: U.S. Census, U.S. Oil Imports)
Also from her article,

The U.S. trade deficit is when the total goods and services the U.S.imports is greater than the total it exports. In 2011, the total U.S. trade deficit was $559.956 billion. This was $2.1 trillion in exports minus $2.67 trillion in imports. This shows the economy is strengthening, since it is more than the $500 billion trade deficit in 2010. Still, it's much less than the record $753 billion trade deficit in 2006. (Source: U.S. Census, Most Recent Annual Trade Data. For more recent monthly data, see U.S. Trade)
It's clear that much of our trade imbalance is the result of our dependence on foreign oil.

Now I'm going to rant.  What Mr. Gibson wants is someone to protect him.  Kind of like a big brother.  Why can't America become competitive again by raising standards in school?  A recent Economist article shows that China's trade balance is zero.  I think the US should concentrate on nuclear power to eliminate reliance on foreign oil.  We would then have the comparative advantage in energy.

business Inventories

Business inventories increased 6.6% from a year ago to $1,580.2 billion.  

Remember it is the change in business inventories that are counted in GDP since the change would represent current production.  An increase in business inventories might signal to producers that they need to cut back on production by hiring less workers.  Indeed, the unemployment rate increased to 8.2% from 8.1% from March.  Real GDP for the year is growing at 1.7%.  These indicators point to a nagging and stubborn continuation of the recession.

AP teachers will note that the data fits the AD-AS model we teach.  During a recession, inventories fall.

The graph is taken from the FRED data base.

Inventories could be increasing because the productivity has increased.  The BLS has all of the productivity measures on their website.  From the BLS, "Productivity declined 0.5 percent in the nonfarm business sector in the first quarter 2012; unit labor costs rose 2.0 percent (seasonally adjusted annual rates)."

This author interprets the increase in business inventories to be a negative indicator for the direction of the economy.

Saturday, June 02, 2012

Unemployment Numbers

This brilliant cartoon is taken from  Humor can take many forms including using an idiom out of context.  The dark mood of this cartoon is shown with the use of ink to shade all of the elements.

According to the Bureau of Labor statistics, the economy added a mere 69,000 last month.  What are some of the reasons people think for the anemic growth?

Some blame businesses who move their company over seas in what economists call foreign direct investment.  Some call for all investments to be held in the US so foreign countries can't use our investment to create jobs in their country then compete with the US.  Some blame bad data collection techniques.  Some say that the unemployed are not distributed evenly across the US.  Some blame government regulations.  Let's blame teachers for not preparing our students for the 21st Century when most of them only care about what's on their phone.

The solution to unemployment will be a new killer technology that requires a lot of design, manufacture, and logistics channels.

Friday, June 01, 2012

Soda Size

Why should the government get involved in the soda market?

As the cartoon suggests, enforcement of the law would drain vital resources and come at a high cost.  Therefore, the law should not be put in place.

Are there ways to internalize the costs of super-sized drinks?  I think one way to get parents to conform to the law is to raise their health insurance premiums if their children consume these drinks.  The dentists I know, all say they can tell when a patient consumes large amounts of soda.

Another way to stop the slurping of sugar drinks is to tax it like cigarettes.  Taxes usually distort incentives and open black markets.  All drinks could come with a warning label that outlines how much weight can be gained by drinking these drinks in a year.

In the end, it comes down to the role that society wants the government to play.  Do you really want a government that tries to regulate everything you put into your mouth?

People Vote With Their Dollars

This cartoon is from Wondermark.  A thanks for the pointer goes to MV=PQ.

Why are the characters dressed in Old Fashioned, 1890s, clothes?  Does the speech show the characters true feeling?

Economics is about how people behavior.   This artist believes that a person's actions will eventually manifest their preferences.  From a moral perspective, is it okay to tell a white lie?  Finally, why does cartoons say the things that words cannot?

China's GDP

This graph is from The Economist.  For years, I've been teaching the expenditures model of calculating GDP.

The expenditures model says that GDP = Consumption + Investment + Government spending + Net eXports.  I have been teaching that China's Yuan is cheap relative to the dollar so exports fuel China's growth.

If this graph is correct, Investment, not exports are responsible for GDP growth.  I'm not sure if Government spending isn't included in Investment.  China's growth is over 8%.  In the US, the growth is about 2.5%.