Tuesday, July 31, 2012

Xtreme Cartooning

Do you want to bring cartooning into your classroom, but need guidance?  Jim Allen has a wonderful site that includes, of course, lesson plans.  Cartooning is linked to the Iowa Core too.  Click here.

I especially like "Cartoons in the Classroom."

Dr. Allen is also an author of three books that teach teachers how to implement cartooning into their classroom.


Sunday, July 29, 2012

Paradox of Thrift

The St. Louis Fed publishes an economic newsletter that is excellent for teaching.  The Paradox of Thrift is discussed intelligently here.  And shown graphically on the Wallnut Economics Blog.


The Regional Economist

The St. Louis Federal Reserve Bank has released its annual report.
This year’s annual report includes an essay on the debt crisis facing many countries around the world. Written by Research Director Christopher J. Waller and Senior Economist Fernando Martin, “Sovereign Debt: A Modern Greek Tragedy” explains in simple terms the roots of the current crisis in Greece and other parts of Europe. In his column, St. Louis Fed President and CEO James Bullard also addresses the crisis, calling it a wake-up call for the U.S. Other features of the report are a message from our new chairman of the board, Ward Klein; lists of other board members, advisers and top managers; and highlights of our work in 2011 and the people who did that work.
A ten-minute video explaining the debt crisis in Europe and Greece accompanies the annual report.

The report is also available in Spanish.


Saturday, July 28, 2012

Supply and Demand for Corn in a Drought

The Midwest is being hammered by a drought.  Why aren't corn prices going through the roof?

One reason is that cattle eat corn.  Many farmers are selling the cattle for slaughter so they don't have to feed them.  So there's a leftward shift of the demand curve for corn.  So leftward shift of the supply curve is offset by a leftward shift of the demand curve.

In this article, the USDA disagrees with me.

Supply and demand analysis is a complex tool.  The tool requires all knowledge to be imputed into the curves.

The Law of Supply is explained here in this 7-minute podcast.

Chartporn has a graph on the drought through the ages.

Wednesday, July 25, 2012

Cramer on Inelastic Demand for Panera Products

A short video in which stock guru Jim Cramer talks about the inelastic demand for Panera Bread can be found here.

When my wife an I go to Panera, it is very expensive.  We only eat there because our kids want to eat there.   We think that the quality is high, but over priced.  I gotta believe that we eat less when the price of a bagel is high.
Behavioral economist, Dan Ariely, writes about how we lie. This excerpt is from Amazon:
The New York Times bestselling author of Predictably Irrational and The Upside of Irrationality returns with thought-provoking work to challenge our preconceptions about dishonesty and urge us to take an honest look at ourselves. Does the chance of getting caught affect how likely we are to cheat? How do companies pave the way for dishonesty? Does collaboration make us more honest or less so? Does religion improve our honesty?

Tuesday, July 24, 2012

Monday, July 23, 2012

Lecture Notes -- Welker's Wikinomics

Mr. Welker has an outstanding series of lecture notes here.  For a small cost, teachers can guarantee that their students will pass the AP exam.  A sample of his work is here.  This work is outstanding.

Worksheets to accompany Mr. Welker's lecture notes are here.

I purchased the lecture notes this morning and they are excellent.  I know my test scores will improve.

Sunday, July 22, 2012

Rice in Thailand

The Economist has an article here that explains how Thai government intervention is distorting the market for rice in Thailand.  An explanation of the article can been given using Figure 6-1, Wheat Floor.

In this model, D is the equilibrium price and L is the equilibrium quantity.  When the government puts a floor on the commodity of A, C is produced but only B is demanded.  C-B is a surplus that the government must dispose of either to foreign markets or give to residents at a subsidized price.

The Thai producers make ABKI from the sale of wheat in the market, and BCMK from the sale of wheat to the Thai government.  Adding these rectangles together is a lot more revenue than the area of DELI that the free market produces.


Technology and the PPF

Pictured at the left is Keurig coffee maker.  What this coffee maker represents to me is a movement from a point on the production possibilities curve to an unattainable point outside the curve.

When I visit my mom, my wife and I are always in a hurry since time is scarce.  We always say we would like to try Dunkin' Donuts Coffee, but we don't want to stop.  To us, stopping to drink coffee would ruin our schedule which is timed to the minute.

Now, with the Keurig Coffee Maker we can sample the coffee at home when time is less constrained.  Technology has allowed me to consume outside of my PPF.  Technology also has brought books to me on my Kindle so that I don't have to visit a bookstore, movies to my laptop through Netflix, and information to me as fast as my fingers can type.  I believe that technology shifts the PPF to the right.


Thursday, July 19, 2012

Marginal Decision Making

An excellent article is here.

Every person has an implicit hourly rate of value they create, in business and beyond. Determining that number is tough, but if you don't have an estimate—you don't have a framework within which to make decisions. SeatGeek founder Jack Groetzinger explains.

Much of the article assumes that you know how to discount the future value of a dollar.  Lately, I've been wondering why people don't change their behavior to take into account this discount.  For example, there's a place where employees go out for lunch everyday.  Lunch is very expensive.  This employees could save a lot of time and energy by bringing a lunch.  Yet, every morning they value their time now when the costs come later.  Some will pay as much as $10 for a lunch every day rather than make their lunch in the morning.  The point is, they don't change their behavior.  Economics assumes that rational people will weight the costs and benefits and make the choice that minimizes cost.  My experience implies otherwise.

Wednesday, July 18, 2012

Rehabilitating Capitalism

From the Economist:

Capitalism’s core defence, Mr Meltzer argues, is that it is the only system that leads to freedom and economic growth. It is less good at ensuring virtue or stability; failure is an inherent part. Indeed the author’s observation that “capitalism without failure is like religion without sin. It doesn’t work well,” has already been widely circulated. However, the sins attributed to capitalism—corruption, fraud and greed, to name but three—are not only pervasive in systems where the state controls production, but far more damaging and far less likely to be rectified.
The main problem, he argues, is that even nominally capitalist systems have, for better and worse, elements of state control. These often begin with defence and the police, and go on to national transport systems, which leads, in America’s case, to an ever-expanding network of bureaus and agencies. Much of bureaucracy is adopted under the rationale of enhancing “fairness”. But, as Mr Meltzer notes, fairness often means providing present benefits using debt that must be repaid by taxpayers in the future (which is hardly fair) or through regulations and subsidies created by people in government who then go on to exploit them in private-sector jobs (which is also unfair).

CEO Salaries and Layoffs

This table is supposed to show that the CEO of major corporations could save jobs by taking a salary cut.  That might be true, but should they?

Many of the layoffs probably contain productive employees who care about their jobs.  How do you separate these employees from the ones who do nothing to further their skills so that the company becomes more productive?  I think massive layoffs are like cast a wide net.  You are going to catch some fish who don't belong.

I look at the corporations mentioned in the graphic above and wonder how the structure of the company has forced the layoffs.  For example, Walt Disney might have seen a change in demand for their products.  I think structural unemployment has played a role in the layoffs and not corporate greed.

I think John Q. Public becomes enraged when they see CEO salaries because they think that the costs of running a business is distributed equally.  Everyone has different skills and should be paid accordingly.  No one wants to see a person lose their job.  But if you work in the private sector you should know that it's a possibility.  Yet, how many of these people go to college at night to reduce their chances of layoffs?  Most roll the dice and do nothing to improve their human capital.  In a world where change is inevitable, why would anyone take a chance that their job is protected?


Tuesday, July 17, 2012

Dan Pink on Motivation

Many teachers say that economics is about incentives.  Mr. Pink explains motivation in this TED video.


Monday, July 16, 2012

USA Economy -- Prediction by Economist

In a special edition of The Economist, THE WORLD IN 2012, page 115, GDP was expected to grow at 1.3% with an inflation rate of 2.1%, and a GDP per head of $49,340.

Amosweb.com has GDP growing at 1.9% and inflation at 1.7%.

I think the economy in North America grows on the availability of gas.  When gas is cheap consumers spend more.


What Happens When Wealth is Concentrated

This cartoon is part of the Coffee Party Movement.  This quote is from a party member:

"Government of, by, and for the economic elite... has been the most successful method of government in the United States, and around the world. But is it the only way? And, is it the best way forward TODAY — when centuries-old economic and political theories are being challenged by new innovations of the Age of Network Intelligence." —Jessica English

More info including radio show on the subject hosted by Jessica English: http://bit.ly/P8dplQ

I love cartoons.  Our constitution was written so that power would  not be concentrated among an elite, yet our market seems to concentrate wealth.  I'm going to rant now.  I work a 12-hour day every day either painting or teaching.  Sometimes I turn on the television set and see thousands of people paying $100 to watch a baseball game.  I see people watching a parade, playing around going to parties and video games.  I never see people seriously studying to get ahead.  Yet, the people who play the most want the wealth distributed equally.  It's not easy to overcome economic obstacles and wealth gives advantages to those who have it.  But to throw your money away on entertainment at the expense of education is something else.

The cartoon above was taken from a post by Jeff Tallman who has been an influence in my life since I was in 8th grade.  I tell my wife that you keep running into the same people over and over again in life.  Is that because we keep doing the same things over and over?  If we keep repeating things over and over, is it any wonder that the wealth is unequal?

Best and Worst Paying Jobs

MSN.com had a link to the best jobs by pay and the worst jobs by pay.  You can access the slide show here.  I recommend that you read, "The Adventures of Johnny Bunko", a career guide before you decide to be an orthodontist, oral surgeon, or major in anesthesiology.  

Sunday, July 15, 2012

How Trade Makes Everyone Better Off

When the media was upset that the USA Olympic Teams uniform was made in China, I think that the media, as always, is just trying to upset the public.  Both countries gain.  If the  media is right about where and whom should make the uniforms, why don't we just make everything starting with oil.

Cuba

The world fact book has all of the information here.  You could also look at Wikipedia.  I've often heard people say that Cuba is stuck in the 50's.  I have had friends visit Cuba and extend extensive capital goods to the agricultural community so their economy could grow.  The Cubans do not want the technology as they say it will cause unemployment.  I think they are right unless the Cubans learn new skills.  Learning new skills is hard and often unrewarding.  Cuba's economy would benefit greatly from new equipment and they would grow quickly, but the Cubans say they are happy as things are.  Is there a lesson to be learned from them?

Saturday, July 14, 2012

Who Caused The Housing Bubble?

A former student has been working on a documentary film with several noted economists.  The trailer for the film is here.  This is an excerpt from the website:

Coming in Fall 2012, The Bubble asks the experts who predicted the current recession, “What happened and why?” Diving deep into the true causes of the financial crisis, renowned economists, investors and business leaders explain what America is facing if we don't learn from our past mistakes. The film poses the question: “Is the economy really improving or are we just blowing up another Bubble?”

Mr. Jim Morrison is featured on this page.  Thanks Jim for making a difference.

Corn and Bean Prices

I'm painting a barn in southeast Iowa during one of the hottest times in 20 years.  Many of the farmers around me have harvested their corn early to have feed for the cattle.  Drought conditions are likely to continue decreasing the supply of corn and beans in the area.  This morning, a biker told me that the line of semis waiting to sell their corn and beans at the elevator was a half a mile long.  Some of the sales are futures contracts slated for July delivery.  Some of the sales are traders taking advantage of the +7.41 spot price.  In any event, the drought in Iowa will affect commodity prices here and around the nation.  Bloomsberg writes about the impact of the drought here.

How hot has it been?  Many days the heat index was over 100.  When I go outside my glasses fog up.  Yesterday we had a thunderstorm in which the rain evaporated when it touched the ground.  These temperatures are predicted to continue in the Midwest.  My question is, why are the profit takers selling now?  They should follow the rule of demand we teach in class.  Wait until the prices are higher.

Thursday, July 12, 2012

Math of Magic

I'm thinking of buying this book:
This is from the book description:
Magical Mathematics reveals the secrets of amazing, fun-to-perform card tricks--and the profound mathematical ideas behind them--that will astound even the most accomplished magician. Persi Diaconis and Ron Graham provide easy, step-by-step instructions for each trick, explaining how to set up the effect and offering tips on what to say and do while performing it. Each card trick introduces a new mathematical idea, and varying the tricks in turn takes readers to the very threshold of today's mathematical knowledge. For example, the Gilbreath Principle--a fantastic effect where the cards remain in control despite being shuffled--is found to share an intimate connection with the Mandelbrot set. Other card tricks link to the mathematical secrets of combinatorics, graph theory, number theory, topology, the Riemann hypothesis, and even Fermat's last theorem.

Wednesday, July 11, 2012

Consumers Are Fooled When Shopping

This article in the Atlantic lists 11 ways shoppers are fooled into making a poor buying decision.  Here's an excerpt:

You walk into a Starbucks and see two deals for a cup of coffee. The first deal offers 33% extra coffee. The second takes 33% off the regular price. What's the better deal?
In the book, Fooling Houdini, Alex Stone talks about how perception is easily fooled.   This is from a review:

More than just describing magic tricks, however, Stone also writes about how the human brain/psychology works and can be manipulated. We see how con games are so successful and why people are fascinated by magic. Additionally, Stone's writing style is excellent - the book is perfectly paced and the personal stories are woven in wonderfully with the history and technical descriptions. Highly recommended for just about anybody.

When economists say that consumers are rational, what do they mean?

Monday, July 09, 2012

Perverse Incentives

I'm reading, Fooling Houdini, by Alex Stone.  This book is outstanding.  In the book, the following fact is asserted:

On average, a single citation will drive up your premiums by $900 over the course of three years.  According to one estimate, auto insurers accrue an extra $37 billion annually from speeding tickets.  No wonder Geico used to donate radar guns to police departments.




Sunday, July 08, 2012

Khan Academy

The Khan Academy is an outstanding source of videos for economics.

Next semester, this will be part of my curriculum.  Muscatine Schools now has a one-to-one computer program so all students will have access to the material.  The reading can be assigned at Amosweb.com.


Same Old Rhetoric


What Is The Difference of a Penny?

Many times when I show the profit maximizing position, I tell students that economics assumes that a firm will maximize profits even if the average total costs decrease by a penny.  Usually, someone will question this assertion.  Let's say that HNI Corporation makes one million units at a per unit cost of $10.  If costs decrease by a penny, there's a cost savings of $10,000.  This is significant.

Saturday, July 07, 2012

Changes in Supply and Price

I drew this cartoon to show how exogenous changes in the price of a resource has changes in the price of consumer goods.  There are other changes too.  How does the price change affect all of her consumption choices?  There are income and substitution effects on the consumer side and changes in the labor market on the supply side.

Friday, July 06, 2012

Photographs and Memories

I spent the day emptying an apartment for my dear mother in law who has been moved to Hospice care.  All of the photographs, souvenirs, knickknacks, and furniture moved in an hour.  A lifetime moved into storage to be sold to the highest bidder at an estate sale.  Many times during the moving, I would look at an item and wonder how much was originally paid for it and how much it would be sold for.  All items were in pristine shape, clean, and ornate.  There was an Avon egg with a beautiful bluebird painted on it.  Plates with Christmas scenes hand painted and framed.  Yet, these items which meant something to my mother in law, will mean nothing to the person buying it except for what can be gained in arbitrage.

I know that my mother in law typed envelopes for 2.5 cents each to pay for college.  Maybe the worth of these items to her was based on the power that comes from wealth to make consumption choices that those without money cannot make.  But, it was clear to me that the value of the items all came from the buyer.  It is the value that bothers me the most.  How much is anything worth?

My mother in law only bought one couch that matched the decor in her apartment.  This tastefully maintained and decorated couch is still new, yet we will be only able to sell it for pennies on the dollar.  Wikipedia states that the value of an item has many different data points.

An economic value is the worth of a good or service as determined by the market.[1]
The economic value of a good or service has puzzled economists since the beginning of the discipline. First, economists tried to estimate the value of a good to an individual alone, and extend that definition to goods which can be exchanged. From this analysis came the concepts value in use and value in exchange.
Wealth maximization predicts that a person will choose to obtain the good or service in the place where it is cheapest, where the amount given up is the least.
Value is linked to price through the mechanism of exchange. When an economist observes an exchange, two important value functions are revealed: those of the buyer and seller. Just as the buyer reveals what he is willing to pay for a certain amount of a good, so too does the seller reveal what it costs him to give up the good.
Additional information about value is obtained by the rate at which transactions occur, telling observers the extent to which the purchase of the good has value over time.
Said another way, value is how much a desired object or condition is worth relative to other objects or conditions. Economic values are expressed as "how much" of one desirable condition or commodity will, or would be given up in exchange for some other desired condition or commodity. Among the competing schools of economic theory there are differing metrics for value assessment and the metrics are the subject of a "Theory of Value." Value theories are a large part of the differences and disagreements between the various schools of economic theory.

It just seems impoverished to me that the value of a life can be reduced to a few dollars.  My mother in law influenced lives.  I get poetic at times like these.  My mother in law told me that time had slowed for her.  I imagined that Time was stopping turning the pages in a big scrape book looking for a place for her.  

Unemployment Numbers by Category

This table is taken from the BLS.gov website.


I was wondering if the alternative measures of unemployment were changing, but the official rate, U3, was staying the same.  It appears that all of the rate move together.  I was motivated to look at this data after reading the NYT article "Jobs Numbers Could Influence November Vote".  Yet, the article makes it clear that voters vote along lines closer to public sentiment.

Studies also show that voters make their decisions based less on their personal experiences than a general sentiment — meaning news articles about the national economy this summer might be more influential than each voter’s experience, or a neighbor’s business, or a cousin’s or child’s trouble getting a job.

I will predict that Mr. Obama will be reelected simply because his rhetoric is stronger.  People like his smooth articulation and elocution of delivery.  But neither candidate can change the social forces that shape the economy.   

Thursday, July 05, 2012

Brent Crude Oil

The price of gas closely follows Brent Crude Oil Futures.  The national gas price has fallen 13% over the last two months. What factors explain this fall?

According to the Economist, there's been a change in the demand for fuel since the global recession began.  In addition, a Canadian supplier has found a way to reroute their supplies to a cheaper refinery.

As consumer confidence wans, the election wants the president to do something to fix the economy.  Gas prices are independent of presidential action.  Isn't everything?

Wednesday, July 04, 2012

Policy Lags

Amosweb.com is the best online textbook a search engine can find.  Here is an except about policy lags.

POLICY LAGS:
Time lags that occur between the onset of an economic problem and the full impact of the policy intended to correct the problem. Policy lags come in two broad categories--inside lag (getting the policy activated) and outside lag (the subsequent impact of the policy). The three specific inside lags are recognition lag, decision lag, and implementation lag. The one specific outside lag is termed impact lag. Policy lags can reduce the effectiveness of business-cycle stabilization policies and can even destabilize the economy. Policy lags, especially inside lags, are often different for monetary policy than for fiscal policy.
 There are many lags including recognition, implementation, and decision lags.  Fiscal policy suffers from the fact that it takes legislative action to begin combating a recession or a inflation gap.  There's also the chance that after implementation the policy action will be counter cyclical and make the problem worse.  In this watercolor, I painted a turtle as a metaphor for policy.

Policy lags are on my mind as the election nears.  After the stimulus package in 2009, the Obama team will say that their policies are now taking effect.  If that's true, then anyone could be president and just use fiscal policy.  The economy is more complicated than that.

A Complete Video Series on Economics

A comprehensive and intelligent video series complied by Indiana State University can be found here.  You'll need to install Silverlight to watch the videos.  Silverlight is the same software used on Netflix.

As all content becomes available on the web for free, it's no wonder schools refuse to buy textbooks.  In 20 years I suppose you will see retro images of kids reading from a book at their desk and laugh, but I still need to have a book in hand to actually study.

If you want a supplemental video series to complement your textbook, the above link is very good.  My textbooks, were bought almost 10 years ago.  Monies that used to buy books now are used else where.  It's no wonder that educational reformers want to return to basics.  The average kid reads two paragraphs before clicking off the site.

I'm rambling.

Tuesday, July 03, 2012

Obama Care

Using a Flip Cam in Class

Techsmith.com recommends having the students hear the lecture at home, then do the homework in class.  In this model, the teacher prepares a 5 minute lecture using a Flipcam that the students watch at home.  Class time is used to teach.  Since all students at Muscatine will have a computer, this might be a strategy.  A pdf is here.


A Flipcam is easy to use. Just shoot the video and plug the Flipcam into your USB port. The Flipcam is about the size of an index card and fits neatly into your pocket. Of course, newer computers and digital phones now have a camera for recording.

Monday, July 02, 2012

Financial Literacy Website

Here is a fantastic website for those teaching financial literacy.

The topics include: income, credit cards and debt, money management, savings and investment, critical consumer, risk, and community responsibility.  Also included are 21 videos produced for the Wisconsin Public Television, and lesson plans that meet national standards.

Education is one way to help our students make sound financial decisions.  This site goes a long way to making a teacher's job easier.


Sunday, July 01, 2012

The New Prison Currency

From the Web:

You know how in movies and TV shows about prison, inmates use cigarettes as currency? That's apparently not the case in Florida. The preferred jailhouse currency across the Floridapenal system is Mrs. Freshley's Grand Honey Buns.
I think smoking must be illegal in prison so something had to replace cigarettes as a currency.  Students often don't understand that money is fiat.  This article shows that a currency would develop in the absence of government.
In Eat The Rich, writer PJ O'Rouke writes about the infrastructure in Africa as being a barrier for growtih.  This cartoon affirms his observation.  Travel in Africa is often compounded by the fact that border guards have to be bribed in order to pass.  In America we take travel for granted.