Friday, December 25, 2009

The Feel Good Story of the Year!! Watch the baby squirrel scale a wall!!

Thanks Amanda Petty!!!!

Thank you very much for the extension of credit...

On Christmas Eve, Congress  increased the legal debt limit by $290 Billion.  In other words, they have reached the credit limit $12.1 Trillion) they set for themselves and have granted themselves an increase.  This will keep the Federal Government going through the end of January.  This means that every man, woman and child in the US (Pop. approx 310 million people) share of that increase (209 Billion/310 Million) is approx. $1,000 (a little interest factored in)...They thank you in advance for the loan...

Are Zombie Movies the NEXT "Bubble" To Bring Down the Economy???

I am out of my league in discussing Zombie movies,  but those of you who love them may be interested this information....I got this from this blog. The writer is suggesting there may be a "bubble" forming in the genre and it is reaching critical mass.
From the beginning of the zombie movie in 1932 through 2002, there were an average of 3.23 zombie movies per year. From 2003 through 2010, there were an average of 103.88 zombie movies per year. I think much of this growth was driven by the success of 2002's 28 Days Later, which grossed over $82 million, with a budget of only £5 million. Next, 2004 brought us a re-make of Dawn of the Dead, which grossed $102 million with a budget of $28 million. After that, the market was flush with zombie-dollars ready to fund the next 28 Days Later or Dawn of the Dead. Unfortunately, for every 28 Days Later, there were dozens more like Diary of the Dead (2008), which had a budget of $2 million and grossed $5 million, despite being directed by George Romero, who had 39 years of zombie movie experience.

I don't know much about this but I do like graphs and I am always interested in what they say about a particular time especially when there is a tremendous spike in one period of time like this one.

 I am STILL haunted by this movie I saw when I was about 8.

"I Love What You Do For Me...Toyota!" mean...HUGO!

Headline in Wall Street Journal: "Venezuela Threatens to Expropriate Toyota Plant"

Quote from Hugo Chavez, President of Venezuela:
"The left is back, and it's the only path we have to get out of the spot to which the right has sunken us. Socialism builds and capitalism destroys"--Hugo Chavez

Hmmm...I am just a dumb ol' high school teacher, but I believe Capitalism built that factory with profits from selling dependable cars that people want at prices they can afford to pay.  This is a real-life example of how Capitalism produces cars.

These are examples of cars produced by Socialist means:

I will let YOU decide and not decide FOR you...:)

The Gross State Product of Texas = Gross Domestic Product of Brazil!!!

This is an updated version of the map I show in class when we cover GDP.  To give you a perspective on how large our GDP is relative to the rest of the world, this graph compares EACH states Gross State Product (when you add all states GSP's together you get National GDP) to the closest GDP of  another country.  Texas used to be Canada, but now it is Brazil. There has been a shuffling of the deck, so to speak, as the nature of trade and "Creative Destruction" re-allocates resouces around the world.   HERE is a link to the list of nominal GDP's for all counrties. HERE is a link to the GDP's converted at Purchasing Power Parity (more on this later)...

(referenced from Carpe Diem)

Update:  On a related note, China is poised to pass Japan in terms of Gross Domestic Product to become the world's second largest economy (at PPP it already is)..The beat(down) goes on....

My Family Knew What I Wanted For Christmas!!!!

Thursday, December 24, 2009

Students are Lazier Than Ever...or are MORE Ambitous than ever??? Hmmmm....

This article contains observations from a college professor about the work habits of college students, domestic (read that "American") and foreign.  Her observations are certainly generalized and are not absolute, but admittedly as a teacher I can see some truth in them.  However, could we not say these things about every prior generation? Or is the difference that in previous generations even the idleness had some merit (physical play, deep (or even shallow thought) whereas today the idle mind is occupied by passive activities that do not engage the intellect actively? Or do I have "good old day" syndrome where every generation thinks they are superior to the current one? 

I have this conversation with students from time to time.  From my perspective as an AP Economics  teacher, students have access to more infomation AND they are expected to synthsize far more information than my generation (I am 49 yrs old) every was required to.  I, and daresay, my peers, never took a class in High School as difficult as AP Econ (I will let other AP teachers defend their disciplines).  This dovetails with what students seem to wholeheartedly agee on: "Kids Today" are less committed to doing things that they simply dont feel like doing or feel are necessary.  I like this charitable description because many social critics would say students today are lazy, shiftless, unmotivated, have a sense of entitlement, etc.  I, however, do not go THAT far.  I believe some of this can be put on the historic notion, starting after the advent of the industrial revolution, parents wanted their children to have it easier than they had it.  All the posturing by social critics for the past 100 years as to what this might wrought, well, this is what it has wrought.  Reading the cited article for me is like looking "Back to the Future".  She talks about how the Chinese, Brazilian, Indian, Thai,  students are hardworkers and taskmasters.  Seems this an apt description of what the educational elite in  the US, post-industrial revolution to the 1960's, looked like.  Or is that easy for her to say because the students from those mentioned countries are selected from an elite pool of students.  In other words, she has the privilidge of seeing only the best and brightest and not the "average student" from those countries.
Bottom line for me: Students (from top to bottom) are technically brighter and have more potential than previous generations BUT are not as quite as ambitious and hardworking (you might be the exception, I am looking at the rule)...Am I right, wrong, or I have no clue as to what I am talking about?

Wednesday, December 23, 2009

To Tax Tans or Not to Tax Tans, THAT is the Question!!

The issue of whether to tax elective cosmetic surgeries or tanning sessions raises the question of which one is more effective at (1) raising tax revenue, (2) inflicting the least amount of harm on the industry which ultimately may affect employment in that industry.  In Micoreconomics we look at something called elasticities. In this analysis we will examine the Elasticity of Demand for a good or service.  Elasticity in layman's terms is if a change in the price of a good/service changes quantity demanded of the good/service significantly then its demand is said to be relatively elastic. If the change is quantity demanded is less significant when the price changes then the demand is said to be relatively inelastic.  In other words, if quanitity demanded is very sensitive to changes in price then it is elastic. If quantity demanded is not very sensitive to changes in price then it is inelastic. GOT THAT?? I am going to intentionally avoid the math associated with this concept, for your sake.  Elasticities are actually very important when discussing tax policy.  I am going to use the Tan Tax as an example, but we can apply the same analysis if the tax was levied on the comestic surgery industry.

An economics lesson would not be complete unless you had a graph to go with it.  Below you will find a graph of the Market for Tans.  We have a market price of $20 and a market equilibrium of 100 Tans (I am using very simplified numbers, but the concept will bear out regardless of the numbers).  This indicates that the quantity demanded EQUALS quantity supplied in this market m.  We are in equilibrium.  Our market supply curve is vertical at 100 Tans. This suggests the market (in the short run) has the capacity to provide 100 Tans REGARDLESS of the price (just take this as a given right now).

Notice the Demand curve (D*) is downward sloping and relatively flat. This represents a demand curve that is relatively elastic--small changes in price lead to large changes in quantity demanded. At a price of $20 and a market quantity of 100 the Total Revenue in the industry is $2,000.  

The government now imposes a tax on Tans of 10%. Instead of costing $20 per tan it now costs $22. Lets see what this looks like on the graph.

At a price of $22 the Quantity Demanded is now 40 Tans ("B") and the quantity supplied is still 100 Tans ("C").  In the market we now have a SURPLUS of 60 Tans (unused tanning beds).  Our market is in disequilibrium.  The Total Revenue now is $880 ($22 X 40 Tans, but $80 of that is Tax Revenue). One of two things could happen.

The market supply curve could shift LEFT to 40 Tans.  There would be 60 less tans which means that the business would (1) reduce employees because of reduced demand, and/or (2) some will go out of business as the ripple effect would close some businesses "at the margin".  Either way, the employment in the industry going to DECREASE.  Tax revenue to the government would total $80 ($2 Tax X 40 Tans). 

Lets assume that instead of decreasing the market supply, the tanning salons collectively keep the price at $20 and the business absords the $2 tax.

The price the industry receives AFTER paying the tax is $18.  The total revenue is $1,800 ($18 X 100). This would maximixe the tax revenues for the government.  HOWEVER,  because each salon is now receiving $18 per tan instead of $20 then the question still becomes, how will the salons react to this lower revenue?  Some will have to layoff workers and some, again "at the margin" will go out of business and employment will DECREASE.  The market supply curve will shift to the left in the second scenario, but by how much? The bottom line in both scenarios we know the supply curve will shift left and that workers will lose jobs and entrepreneurs will lose financial capital.  The brightside (forgive the pun) of this is that there are now fewer artificial tans and statistically there will be fewer cases of skin problems or out right cancers. Essentially what the government has done is reduce what it has deemed a "negative externality" by imposing a tax to reduce the market quantity of a good/service that imposes costs on a third party--the healthcare system and insurance that the rest of us pay for.

Now lets look at this from a diferent perspective.  Lets assume the in the market for tans people are not so responsive to changes in price.  GOTTA have that glow!  If a change in price does not significantly change the the quantity demanded then demand is said to be INELASTIC.  If demand is inelastic the demand curve is going to have a steeper slope compared to the previous example.

Assume the same 10% tax on tans raises the price of tans to $22.

 At $22 the quantity demanded is 80 tans and the quantity supplied is 100 Tans. We now have a SURPLUS of 20 Tans.  The same scenario will play out as in the first example.  The supply curve could shift to the left by 20 Tans OR the industry could absorb the tax and recieve $18 instead of $20 per tan.  In either case, the market quantity shrinks.

In sum:  How does this compare to the surplus when demand was relatively MORE elastic ?(60 tans vs. 20 tans). The tax revenue now is now $160 ($2 X 80 Tans). How does this compare to the tax revenue when demand was relatively MORE elastic? ($80 vs. $160)  How does employment compare when demand was relatively MORE elastic? (Intuition tells me more people are unemployed in the first case as opposed to the second)

Bottom line: If government is going to tax an industry, it appears that in order to raise the most tax revenue AND minimize the employment losses to an industry they should tax the one that is the MOST inelastic compared to another....This begs:

Questions to ask:
(1) Is the demand for tans elastic or inelastic?
(2) Is the demand for elective cosmetic surgery elastic or inelastic?
(3) Comparing across the two industries, which industry's demand curve is MORE inelastic?
(4) After determining that, which industry would you tax, if you were going to impose a tax?
(5) And most important---Which industry has the most/best lobbyists? (somewhat facetious question, this is the non-economic aspect of politics)
Note:  You could assume there are some negative externalities with cosmetic surgery and that government could deem it undesirable---who is going to pay for it, botched surgeries and is it a social vanity that is bad for society---:)

Wake up!!! It is time to go to Hayward's 1st Period Class!!!

Kim Peek, The Real "Rainman" dies...Interesting video of him here...

Kim Peek (I did not know his name before) has died.  He is the person who Dustin Hoffman used as his role-model in "Rainman" with Tom Cruise...I never saw him before I saw this video. It is worth the time to view it. The mind is an interesting thing...

Tuesday, December 22, 2009

This chart (click to enlarge) has SO MUCH information I dont even know where to start in analyzing it.  The over-arching theme that emerges is the market capitalization of the Top 25 is less than it was 10 years ago, which suggests (1) the overall market capitalization (or value of all companies) for world industry collectively is LESS than it was 10 years ago relative to the whole "pie", because  mid-sized to smaller companies have a bigger share of capitalizaton (it has been a "zero-sum game") or (2) there is "devolution" going on in industry toward less concentration at the top and more dispersed capitalization ("demorcatization of capital?) across industry (the pie is not bigger, but more evenly shared), or (3) Economic growth is occuring overall so the pie is gettng bigger but the "top dogs" are getting less of it as a share. I dont know if this is overall a satisfactory answer...Also, the compostion and international nature of industry has changed as well.  Note the emergence of China, Brazil, Australia, The Netherland and India.  Creative Destruction has played a big part in shifting resources to alternative uses.  Some for the better (energy) and perhaps TOO MUCH to the detriment (finance/banking).. Note at the bottom the companies that have fallen out of the top.  Some have disappeard altoghter!! I am interested in any other comments/analysis of the plethora of information provided here.

How much do the items in "The Twelve Days of Christmas" cost?

If you have kids (or you are a "kid" yourself) they (you) will enjoy this two minute video on the prices and the change in prices of the items in the "Twelve Days of Christmas"...Don't forget to click on the links below the video screen, there is more info kids would enjoy...I know I did!! :)

I voted for it before I voted against it..

From the New York Times: A US Senator from California has put the kibosh on a large scale solar plant in the Mojave desert.
"Senator Dianne Feinstein introduced legislation in Congress on Monday to protect a million acres of the Mojave Desert in California by scuttling some 13 big solar plants and wind farms planned for the region."
This is symptomatic of the NIMBY syndrome---Not In My Back Yard.  How are we to take steps to energy independence and and reduce carbon emissions if we dont actually take a stand and physically do something about it.
"Her intervention in the Mojave means it will be more difficult for California utilities to achieve a goal, set by the state, of obtaining a third of their electricity from renewable sources by 2020; projects in the monument area could have supplied a substantial portion of that power. "
 Entreprenuers want to be a part of the solution, but when a single Senator can squash a project at the behest of a small interest group (relative to the whole who would benefit) then, well, that says something about our system of representation.
Developers of the projects have already postponed several proposals or abandoned them entirely.
An interesting aside is this comment by a Kennedy:
"This is arguably the best solar land in the world, and Senator Feinstein shouldn’t be allowed to take this land off the table without a proper and scientific environmental review,” said Robert F. Kennedy Jr., the environmentalist and a partner with a venture capital firm that invested in a solar developer called BrightSource Energy. In September, BrightSource canceled a large project in the monument area."
Please see this link for another lesson on NIMBY related to this statement by RFK Jr.

(Got idea for this post (and many others from Division of Labour...I have to get better at citing sources for entries)

Monday, December 21, 2009

Attention, English, teachers, commas, are, IMPORTANT...,

Here is a real-life story that will make English teachers smile.  A comma (yes, the punctuation mark) gave delegates at the Copenhagen summit fits.  I suppose it would be a great article to show classes the importance and power of simple punctuation...

Scrooge should had NOT listened to the 3 Ghosts!!! They were not engaging in the "Economic Way of Thinking"...

I just saw the Jim Carrey version of "A Christmas Carol" this week. Very dark and not really suitable for young children. The animation was quite incredible. However, I always felt Scrooge was getting a bad rap but could not place my finger on why. This column reminds me why...Worth a read if you like to see things from a differnt angle than most people.

Sunday, December 20, 2009

Taxes, Taxes, I dont need no stinkin' taxes...

A comparison of FEDERAL TAX RATES.  These  do not include other taxes we pay, as I mentioned in class, such as sales tax, school tax, county tax, city tax, Tarrant County Community College District, Tarrant County Hospital District, gas tax (State and Federal), tariffs embedded in products/food you buy, etc...You can easily see how these would get you up to the $40,000 to $50,000 range in taxes you pay on $100,000.  Keep in mind, some of these taxes you can deduct from your Federal Taxes  (property taxes) IF you itemize your deductions (gets complicated, doesnt it??)...In the US, your employer "contributes" (not optional) the same amount, dollar for dollar, you do in Social Security taxes AND Medicare taxes.  I am not sure this is included in the calculations for the graph.

World Hunger Drops Significantly Since 1970...Is this GOOD NEWS???

World hunger has dropped significantly since 1970.  From what I understand in reading comments from the Economist site I got this from, a significant portion of the drop came in India AND the data may actually support an increase in malnutrition rather than hunger.  I suppose that makes sense since it is ground zero for the "green revolution" in agriculture.  The dramatic increase starting in 2004-05 is a curiosity.  I believe there was a convergence of things that caused this.  The price of food increased dramatically during this period, not as a result in decreased supply (the usual suspect), but because of increased demand from emerging economies (China et al) for better quality food items, and the mandates for ethanol production from the Congress (and European countries too) to add to the nations fuel supply to make it cleaner.  I am open to other ideas as to why hunger/malnutrition decrease so dramatically during this period....:)

Gas Taxes High in the US? Relative to what/who?

A gallon of gasoline in Texas has State and Federal Gasoline Taxes already embedded in the price of gas at the pump.  The State tax is $.20 and the Federal tax is $.184 (read that as "18.4 cents").  The retailer of gas adds a half  cent so we get that funky ".9" for every gallon.  So the total tax burden is $.389 cents per gallon.  The accompanying chart shows the tax rates on gasoline (petrol, as they call it) in Europe.  They price it in Euro cents so let me do an example.  Look at France (it is almost on the 60 Euro Cents line).  There are 3.78 litres in a gallon so at a tax of 60 Euro Cents per litre, the tax in Euros is 2.27.  At todays (12/20/09) exchange rate that would be $3.25!!.  Remember, that is just the tax, not including the price of the gas.  They do not necessarily pay more for the wholesale price of gasoline that US retailers pay, but the retail price you might pay at the pump is going to be MUCH higher than you pay.  This is an example of using taxes as a way to change economic behavior.  The Europeans use this as a way to discourage gasoline consumption, hence as a way to reduce carbon consumption.  I referred to this tax as a Pigovian Tax in a previous post. A tax designed to reduce/eliminate a "negative externality" (a "bad" that is not desirable by society).  Do you think we should levy a large tax on gasoline at the pump in order to change our consumption behavior towards this carbon-based fuel?

Saturday, December 19, 2009

This Health Insurer Denies MORE Claims Than Any Other Insurer by FAR! Must be bad, Right??

There is a health insurance entity that denies claims at nearly twice the average rate of all other insurers...It is called Medicare.
"According to the American Medical Association’s National Health Insurer Report Card for 2008, the government’s health plan, Medicare, denied medical claims at nearly double the average for private insurers: Medicare denied 6.85% of claims. The highest private insurance denier was Aetna @ 6.8%, followed by Anthem Blue Cross @ 3.44, with an average denial rate of medical claims by private insurers of 3.88%"
There has been some improvement by Medicare, but it still trails behind the private providers denial rate...

"In its 2009 National Health Insurer Report Card, the AMA reports that Medicare denied only 4% of claims—a big improvement, but outpaced better still by the private insurers. The prior year’s high private denier, Aetna, reduced denials to 1.81%—an astounding 75% improvement—with similar declines by all other private insurers, to average only 2.79%.:
My question is simple, why can't politicians fix what they are already responsible for before tackling a whole industry? If they could reform just ONE major social program (Medicare?) and get some credibility then perhaps they could get the trust of the American people to press for more reforms. Too much to ask for?

Cap and Trade---Easy illustration of how it works....

Here is a very short, simple explanation of the "Cap and Trade" solution to carbon emissions. If you are taking Microeconomics this is something we will look at in detail. Cap and Trade seeks to put a numerical quantity of allowable carbon emissions by industry. It is different from the other solution to reducing carbon emmissions, which is a direct tax on the consumption of carbon based fuel (i.e. tax on gasoline). This type of tax is also called a "Pigovian Tax". BOTH solutions will raise the cost of fossil fuel based energy for people/businesses. One (Cap and Trade)is more subtle than the other (Pigovian Tax).
  Bottom line: Cap and Trade identifies a QUANTITY of allowable carbon emissions and the Pigovian Tax puts a PRICE on carbon emissions...

Friday, December 18, 2009

How Did Your Favorite Movie Do At The Box Office???

A list of the Highest Grossing movies of all time in 2009 dollars (adjusting for inflation over time). I find the estimated production costs (in 2009 dollars also) very interesting as well....

How Long Would You Work For A Big Mac???

In minutes, how long does it take to buy a Big Mac in different parts of the world.  This is a different take on the "Big Mac Index" we learn about in AP Macroeconomics.  It is measure of productivity and the purchasing power of your earnings. The Big Mac is used because it is relatively uniform in its finished form across the world, with some modifications for local tastes...

Bottled Water vs. Tap Water??? Read this before you make up your mind...

The use of bottled water vs tap water has been a topic of discussion, formally and informally, in school lately.  This article in the the NYTIMES  "That Tap Water Is Legal but May Be Unhealthy" may give us a reason to pause (not to raise any alarm as to the safety of our water here).  This article is instructive in that it shines light on the ability, or inability, of a Federal bureaucratic agency to adapt to changing situations as it relates to Federal legislation.  In this case, it is the EPA applying a law passed 35 years ago (The Safe Drinking Water Act of 1974) to current conditions.  Many chemicals that did not exist when the law was passed are now found in drinking water in different parts of the country.  The inertia of the bureaucracy and industry pressure seem to prohibit the inclusion of many of these contaminants.  The article is informative AND gives a perspective on the efficacy of federal enforcement/regulation in an important part of our everyday life.

Unemployment by various demographic characteristics...

Informative interactive graphic  in the NYTIMES on how various groups organized by different demographics are doing in terms of unemployment. Lots of ways to view the data...

Thursday, December 17, 2009

Christmas is Economically Inefficient...

Have you ever recieved a gift for Christmas that you would have never bought for yourself, even if you had the money and inclination to do so?  If I buy you something for $100 and it is something that you would have never paid more than $50, is this an efficient outcome for you AND society?   The only way it would be so is if the gift value, or sentimental value ,you received from the gift-giver is equal to the $50 you would be willing to pay for that gift PLUS $50 in sentiment you recieve from recieving the gift. You have to factor out the value lost to society if you do not use the gift to its maximum value.  If you dont use it, or under-utilize it, then there is a loss to society in terms of the multitude of resources used to produce the gift.  We have a mis-match in what the giver pays for a gift (the cost in societal resources) and how much the recipient values the gift (societal cost in resources PLUS sentiment).  Do I really do you a favor, or show you sentiment, if I buy you a gift that you dont value and will not use? Have I really done society a disservice by spending money and sending a market signal that the particular gift is useful and/or desirable?  Give this a thought on Christmas morining as you are opening your gifts...Hope I did not ruin the holiday for you, but this is what knowledge of economics will do to you...:)

Tuesday, December 15, 2009

Can you hear me NOW???

In a recent post I suggested that Congress reached a new low by injecting itself into BCS Bowl bruhaha.  Seems like they have better things to do, however they have exceeded my low expectations by tackling the apparently serious problem of TO LOUD T.V. COMMERCIALS! I did not realize this was a problem that Congress needed to address with Federal legislation.  Some Congressional representatives have nothing else to do on the taxpayers dime...

Sunday, December 13, 2009

The "Stuff" Revolution Started in 1985!

Here are two graphs that support my "rant" on stuff (similar to George Carlin's(language warning!!) and emprically confirms my thoughts about the decade of your birth (late 1980's/1990's) as a period in history that will be studied for its economic advancement.  They show that 1985 is a seminal year.  In that time the size of houses AND garages started to grow rapidly.  I am not sure what came first, however, the increase in the size of houses or the explosion of the production of "stuff" to put in them.  Regardless, it is evidence that life changed in the US in 1985.  Now I need to find a graph of the construction of min-storage facilities to go with these and I will have visual evidence to go with my lecture on why we are dependent on the production of "stuff" in the global economy...

Saturday, December 12, 2009

The Sun rises in the East, the Sky is Blue and....

Congress is going to raise the statutory national debt limit by 1.8 Trillion dollars to a new limit of approx. 14 Trillion dollars...This is roughly the current National debt (red numbers below).  As I suggested in class, it will be embedded in a Pentagon funding bill that few will vote against.  Republicans will fuss about it and grandstand, but they know it will pass AND they will get their pet projects inserted in the latest spending bill which is the reson they need to raise the debt limit this much in the first place.  Disgusted with both parties...What is an American who wants responsible, limited government to do?

The national debt is divided into two major categories, Pubic Debt and Private Debt.  Public debt is the amout of debt the Federal Govt essentially owes to ITSELF, in the form of Bonds ("IOU's) that are in public various trusts fund, i.e. Social Security trust fund ($2.244 trillion), Federal Emplyees Trust Fund ($738 billion), Military Retirement Fund ($249 billion), etc.  Basically these are funds owed to government trust funds that have money in them because of taxes collected today from the future beneficiaries of these funds.  The total owed to these funds is approx.  $7.109 trillion.  The Private Debt is debt owed to individuals (domestic and foreign), private investments funds, and other governments.  Of the total amount of the debt owed to the pubic approx. 50% is held by foreigners (counties and individuals), which amounts to about $4.280 trillion. Of this amount China owns 25% and Japan 23%, so roughly half of debt owed to foreigners is owed to two countries (OPEC countries are not too far behind).

Thursday, December 10, 2009

This is a Painful Issue..

This week myself and 3 JWAC members (Alex Baker, Ben Martin, Haley Bupp) went to view a documentary called "The Greatest Silence: Rape in the Congo".  I know, it sounds like a peculiar thing.  I had NO IDEA what a problem this was.  Rape is being used by the Congo military AND "rebels" from within the Congo and from surrounding countries (Rwanda, Uganda, etc).  The conflict is mainly in the Easterm part of the Congo where it is commodity rich---oil, gold, diamonds, and  mineral called Coltan (80% of the world's supply is in this area) which is used in the circuit board of the cell phone you are using.  The central government is weak and cannot stop the rebels, and even their OWN military, from raiding these areas to gain access to these commodities and sell them on the world market.  These groups terrorize the local villages to force them to leave.  When they enter a village they pillage and brutally rape and torture women and children in front of the husbands, then kill the husbands.  It is a horrendous situation.  Coincidently, there is an article in today's New York Times that reminds us that unspeakable violence is STILL taking place in our world today.  We made an excellent contact at the documentary viewing and JWAC will try to bring them to campus to further inform us on this human rights issue...PLEASE JOIN US!! Help create awareness of these types of issues!!

Forget 2012---THIS is the sign of the coming Apoclypse!!

China passes the US in the purchase of New Cars. This is actually a good sign for the US.  The Chinese have been notorious savers and there are signs that consumption spending is increasing as the emerging middle class flexes its economic muscle.  As incomes rise they will buy not only more Chinese goods and services but more imports (perhaps even from US businesses!).  In addition, with a depreciated dollar there is an incentive to buy US goods/services.  Gee, maybe even our cars! 

Sunday, December 6, 2009

Helping the Developing World One Village at a Time...

Women taking control in an area that traditionally leaves them with out social/economic power to be independent.  This is one reason why we are in Afganistan (at least how I rationalize it in my mind) and why we need to "finish the job". If we don't then these women, will lose any hope of living a "free" life and to progress in society.  We all know the horror stories of the Taliban rule.  It seems safe to assume that life will return to the way it was for women in the area.  Why do "feminists" seem reluctant to speak out against this? I mean really speak out and take action.  We need to support efforts like this, not with mis-guided aid that benefits contractors and foriegn suppliers, to build a confident and self-sufficient Afganistan.  I know these micro-economic activities are taking root ALL over the world in developing countries.  Why dont we hear more about them? Numerous organizations, from CARE to non-profit entrepreneurs like are making life better one village at a time.  I actually hope governments DO NOT get involved in this. Best left to people who REALLY care about genuine development....

Walmart Practices blatant discrimination...

Example of 1st Degree Price Discrimination in Microeconomics...Walmart is trying to capture as much Consumer Surplus as possible!!

Saturday, December 5, 2009

Is Economic Recovery Just Around the Corner????

Are we at the bottom of the fall in employment?  Hard to say for sure but a net loss of "only" 11,000 jobs is significant given the situation for the last 9 months or so.  We are still going to behind the 8-ball for a long time, however.  It is estimated that the US economy must created at least 125,000 rto 150,000 net NEW jobs EVERY month to keep up with population increases (immigrants/birth rate) AND new entrants into the job market (yes, that is you graduating high school student and/or graduating college student!).  So when we start the economic recovery we will still be behind, technically, by 1 to 2 million jobs. There are a couple of charts in the WSJ today that are informational.  This one...

has a couple of interesting points. The number of temporary workers hired helped stem an increase in the unemployment rate.  Businesses are hesitant to hire permanent workers right now for a couple of reasons.  One, the spike in GDP (demand for new goods and services) is encouraging to businesses, but there is uncertainty as to the sustainability of that demand.  Statistically, few businesses are going to add to their workforce if they are unsure that new orders for their products/services are going to be demanded longer-term.  What they will tend to do is hire temporary workers, if needed, to fill in labor gap they may be experiencing in production.  Second, perhaps along with, or before, hiring temporary workers, businesses will give "extra" hours to workers who had their hours cut because of lack of demand for their good/service.  As you can see from the chart, the average work week increased slightly.  There is still under-utilized capacity in most businesses so, the prudent business owner is going to try to get the most out of the trimmed down workforce as possible (and the workers may be greatful for the increased hours/overtime) before realizing it will be more cost effective to hire additional workers as they reach/surpass capacity.  Only then will "new" (NOT jobs that were lost then the SAME job re-filled --that is NOT job creation!!)  jobs be actually created. 
The second chart shows where the jobs were lost and where gained...

We know 7,000 of the "new" jobs were created in the public sector and most (I assume) of the Education AND  probably a good portion of the healthcare jobs (approx half of all healthcare spending originates from government, Fed/State).  These jobs are ALL taxpayer financed and are made possible by revenues from individuals, business, or borrowing (since revenues are falling and these plans are not already budgeted, I am guessing they are paid for with borrowed money).  I am sure a good number are residuals of the fiscal stimulus that makes its way through the bureaucracy and necessitates the hiring of people to oversee the vast sums of money going to designated "shovel-ready" projects.  My question is, will these jobs disappear when the stimulus money runs out or are they going to be so embedded that they will be impossible to eliminate?  Does this lead to a permanently enlarged public sector?  Is this good? Bad? or will the economic growth resulting from it be so significant that these jobs will eventually pay for themselves?  Whaddaya think???

Wednesday, December 2, 2009

America as Texas vs. California

How does Texas stack up against California as a place to do business?? Texas gets criticized for being "stingy" in the area of social services and the environment, and it is an area for improvement.  However, there is something to be said for not being over-extended in fiscal obligations, when in good economic times are relatively easy to fund, but when there is a down-turn in the business cycle those same programs that people come to rely on get funding cuts and people "suffer".  For better or worse, we tend to be on an even keel in terms of the size of state government and what we promise in future financial obligations.

Sunday, November 29, 2009

Past Recessions Explained---GREAT interactive graphic

Click HERE for an excellent graphic and short 2 minute explanations of recessions since 1960...Highly recommended!!

Food Stamp Usage Across the Country

Automatic Stablizer at work...Food stamps(Link to NYTimes article) are a Non-Discretionary Fiscal Policy that "kicks in" whenever the state of the economy demands it...Govt spending will INCREASE to meet the need...

Supply is GREATER than Demand---Should we SUBSIDIZE Apple Growers???

Becaue of a bumper crop of apples (for story click HERE), the price that apples growers are getting in the market are at their lowest levels in a long time.  In fact it is a money losing propostion to even pick the apples off the tree (lots of wasted apples).  What is the opportunity cost of picking the apples? Of NOT picking the apples?  Because this may cause some growers to go out of busines, should the Federal Govt offer subsidies to the farmers so they can stay in business and assure a future supply of apples? (Link courtesy of Mankiw)

Saturday, November 28, 2009

@###%#%%*&#^^^#%^^+# BLASTED ETHANOL!!!!!!!!

More fall-out from Ethanol Mandates..URGGGHHH!!!

What If Buying Food was JUST LIKE The Way We Buy HealthCare in the US...See Video!!!

As a student you are probably dont know how we actually purchase Healthcare in the US. It is a system violates one of the basic tenets of Economics---Lack of CLEAR PRICES!!  Click HERE for a 45 second video that pretty well sums up how we price health insurance here...

Thursday, November 26, 2009

Ummmm...Happy Thanksgiving???

Children Age 12 Have To Use A Booster Seat While in a Car....

Well, sort of...Part of a chapter in the new book by Levitt and Dubner "SuperFreakonomics" is about child seats and how the data show that if a child is over 2 years of age their is no significant safety advantages of a car seat versus just wearing a regular seat belt (for Levitt's research, click HERE)...This is a link they provided to a BBC article reporting that in 2006 the British government passed a law requiring children up to 12 (yes, 12!!) years old, or UNDER  4' 5" to be in a booster seat...Can you imagine telling your 12 year old son/daughter/brother/sister to get into the booster seat?  Also, why the height requirement?  Why, if they are concerned about safety, does this not apply to adults who happen to be shorter than 4' 5"??  Seems excessive to me...What do you think?

US Share of GDP Constant Over Last 40 Years---MUST Be A Bad Thing...RIGHT???

 No, not necessarily...I analyzed the graph wrong (yes, I can make a mistake)...I looked at it as GDP growth as opposed to SHARE of World GDP...A fellow AP Economics teacher Jason Welker, set me straight.  His explanation below clarifies what this graph REALLY says....

"I'm not sure we should be so troubled by the flat trend lines for Latin America and Africa. Keep in mind, this is not GDP, this is share of world's GDP. Unlike total output, which is NOT a zero sum concept, share of total output IS a zero-sum concept. A gain made by one part of the world is only possible by a loss made in another part of the world. The decline of the EU 15's share of world GDP does not mean that the EU 15 experienced a decline in output. In fact, the EU 15 have grown steadily over the last 40 years. Their downward sloping curve indicates that they have grown more slowly than the rest of the world, that's all. So the flat lines for Africa and Latin America in fact indicate that those two regions have grown more rapidly than Europe. Although it doesn't look like it on this graph, the "poor south" is actually catching up with the "rich north" as average growth in Europe lags behind that in the south.
It's a bit misleading to interpret the graph in this way, but the gains in Asia have in a way come at the expense of gains in Europe, but only in that they now have a larger share of a MUCH larger pie! All regions have grown, and Latin America and Africa have grown AS quickly as the US, and MORE quickly than Europe. Good news!"

Wednesday, November 25, 2009

Bar Graph of Pres. Adiministrations and Cabinet Member experience in the Private Sector...

Is having private sector experience important for Cabinet Members to have?  Many times Members who do are too close to the industry they perhaps have to regulate/make rules, creating potential moral hazzards.  On the flip-side, if one is going to regulate/make rules for an industry, should they have some experience with the industry itself??

The Natural Rate of Unemployment---Europe vs. US

Here is Labour peer and happiness economist Lord Layard on the cause of long-term unemployment in Europe:

"Europe has a notorious unemployment problem. But if you break down unemployment into short-term (under a year) and long-term, you find that short-term unemployment is almost the same in Europe as in the U.S. – around 4% of the workforce. But in Europe there are another 4% who have been out of work for over a year, compared with almost none in the United States. The most obvious explanation for this is that in the U.S. unemployment benefits run out after 6 months, while in most of Europe they continue for many years or indefinitely."

Hat tip to the Tim Worstall at the Adam Smith Institute.

Seeing is Believing (in the free market)

"Everywhere we look it seems that health care is more expensive: prescription drug prices are increasing, costs to visit the doctor are up, the price of health insurance is rising. But look closer, even closer, closer still. Don’t see it yet? Perhaps you should have your eyes corrected at a Lasik vision center.
Laser eye surgery has the highest patient satisfaction ratings of any surgery, it has been performed more than 3 million times in the past decade, it is new, it is high-tech, it has gotten better over time and… laser eye surgery has fallen in price. In 1998 the average price of laser eye surgery was about $2200 per eye. Today the average price is $1350, that’s a decline of 38 percent in nominal terms and slightly more than that after taking into account inflation.
Why the price decline in this market and not others? Could it have something to do with the fact that laser eye surgery is not covered by insurance, not covered by Medicaid or Medicare, and not heavily regulated? Laser eye surgery is one of the few health procedures sold in a free market with price advertising, competition and consumer driven purchases. I’m seeing things more clearly already."

Tire inflation: tariffs, demand push up prices

UPDATE: As a result of tariffs imposed on tires imported from China the following has resulted:

1. The domestic price of tires (mainly low to mid-range price) has INCREASED because of the tariff (cash off the top going to the Federal coffers)
2. The domestic supply of tires has DECREASE because of fewer tires are imported to the US from China which INCREASES the price of tires
3. Chinese manufacturers of tires are quickly moving production of tires to other countries to avoid the tariffs imposed on them.
4. Domestic (US) manufacturers of tires are NOT ramping up production because, (1) they are a minor player in the US market for inexpensive tires, and (2) if they are in the market they know that the supply will INCREASE in the near future when the production from countries other than China makes it ways to our shores. They will simply take advantage of the higher prices and not expand production in a meaningful way and will NOT add employees in a meaningful way either.
5. NO permanent jobs will be created by this tariff, however jobs will be lost (perhaps only temporarily) by (1)people who work in at the disembarkation point of the tires,(2) truckers who move the tires around the country, (3) employees at tire retailers (epecially ones who specialize in the inexpensive tire business) because the higher prices will reduce demand for the tires.
6. People who can least afford the tires will be disproportionally hurt---the tariff along with seasonal increase in demand puts upward pressure on the price of tires.

My question (because I have been SO negative): Who WINS in this situation?? Please post your answer...I know some of the winners but believe I can learn from you!! :)

If you want to read an excellent book on trade and tariffs that is written in the form of a fictional narrative, please check out "THE CHOICE"...

Brain Teaser---See if you can figure it out!!! :)

Brainteaser...Try to work it out then go HERE for the solution... Be honest and post in the comment section if you got it rght or not....:)
Jack is looking at Anne, but Anne is looking at George. Jack is married, but George is not. Is a married person looking at an unmarried person?

(a) Yes
(b) No
(c) Can not be determined

Tuesday, November 24, 2009

SuperFreakonomics---Uncomfortable to Read and discuss in mixed company...

I am reading SuperFreakonomics right now...There are sections of the book that are uncomfortable to talk about in mixed company or with students. andI will not be discussing several of the premises with students (you will have to read it to find out).  Many "Professional" Economists are panning this book for a variety of reasons.  They consider it to be "economics lite".  I am enjoying most of it, though.   It raises many questions about generally accepted "facts" or circumstances and just asks people to look at problems through a different lense.  This is what I find attractive about studying economics---it truely is a discipline that asks you to question everything. 

Something I did not know before reading SuperFreakonomics:
 "Today, when you admire old New York brownstones and their elegant stoops, rising from street level to the second-story parlor, keep in mind this was a design necessity, allowing a homeowner to rise above the sea of horse manure"
Small, I know, but it is something I always wonder about when I watch Law and Order and othe shows/movies filmed in New York City.

The Values Question...What Choice Would You Make???

A most excellent opinion piece today in the New York Times by David Brooks.  It makes no judgements about the merits or demerits of healthcare reform but it's inevitable impact on the future of the US economy/society.  I especially like his use of a basic economic concept we learn in class the first day---Trade-offs that result in opportunity costs.  This paragraph strikes me as illustrative of this important concept:
"Reform would make us a more decent society, but also a less vibrant one. It would ease the anxiety of millions at the cost of future growth. It would heal a wound in the social fabric while piling another expensive and untouchable promise on top of the many such promises we’ve already made. America would be a less youthful, ragged and unforgiving nation, and a more middle-aged, civilized and sedate one.We all have to decide what we want at this moment in history, vitality or security..."

What choice would you make?

Monday, November 23, 2009

Watch Unemployment Increase Before Your Eyes...

Thanks to Mario Garza for this link...Nice Adobe Flash graphic that shows couty by county the change in the Unemployment Rate in the US.  It only goes to September when the rate was "only 8.5%.  SCARRY but worth a look...

Advice From Grandma

Excellent article by Thomas Friedman.  I dont always agree with him and I am uncomfortable with his apparent fascination with authoritarian power as a tool to get major policies implemented.  Perhaps I am misreading him in that respect.  Regardless, this column hits on many of the things I think and include in my lectures.  The final paragraph sums it up for me:
"The standard answer is that we need better leaders. The real answer is that we need better citizens. We need citizens who will convey to their leaders that they are ready to sacrifice, even pay, yes, higher taxes, and will not punish politicians who ask them to do the hard things. Otherwise, folks, we’re in trouble. A great power that can only produce suboptimal responses to its biggest challenges will, in time, fade from being a great power — no matter how much imagination it generates."
I would not be adverse to paying more in taxes IF I thought for a minute that 30% to 50% (I am not alone) of it would not be wasted as I believe it is right now.  I want a politician that will show ME some restraint BEFORE they ask me to pay more taxes.  Is that asking too much?

"Man Bites Dog" Front Page Story in New York Times...FINALLY!!

An EXCELLENT front page article in todays New York Times on the National Debt and the potential financial ticking time bomb it is.  If you have taken AP Macroeconomics or are taking it now, the MOST of the discussion will be familar to you.  This issue is not, in my opinion, taken seriously enough by the public.  Both political parties are party to this problem so there is enough blame to go around.  We will not be able to grow our way out of the debt, at least not in the next 5 to 10 years. I believe we will have tepid economic growth because we have reached the end of your last significant Aggregate Supply shock (1990's to early 2000's).  This is the last time we had a increase in our productive capacity due to the leaps in technology, communication, transportation, fiber optic cable,, etc that vastly increased our productivity.  We seem to have milked that for all it is worth.  We will have marginal increases in productive capacity but not enough to sustain the increase in population and the need to create 150,000 plus jobs a month to keep up with new entrants into the job market.  WHERE IS THAT NEW POSITIVE AGGREGATE SUPPLY SHOCK GOING TO COME FROM?  Opinions???

The Lexus and the Olive Tree...

A picture is worth a thousand words!  A woman taking a break from very labor intensive work to talk on her cell phone.  Who is she talking to?  Friends, family, checking the latest world market price for the good they are harvesting, or all of these?  It reminds me of Thomas Friedman's book "The Lexus and the Olive Tree" and the emergence of technology and how it clashes (or complements(?) ) with traditional economies as they exist today.   Is this good for developing countries or does it theaten the "ways" of traditional societies that sociologists/anthropoligists decry? Would substituting Capital for Labor improve their lives/culture/way of life or make it worse?  Are we qualified to even ponder the question because we look at it through the prism of our "Western-orientated" lense? 

Sunday, November 22, 2009

Economic explaination of the Tuition "Crisis" in California---Complete with Supply and Demand Graph Illustration---Life is GOOD!!!

Click on the Title above to go to article...

The National Debt is NOT a big issue and should have no influence on Stimulus Debate...

Paul Krugman suggests that the US National Debt is not excessive (not desirable, but not excessive) relative to other countries and should not be the over-riding consideration in considering a NEW fiscal stimulus bill...Perhaps he is correct considering the experience of other countries who have a MUCH higher Debt-to-GDP ratio...

Which Industries Spend More as a Percentage of Sales on Reseach and Development?

The healthcare industry, as a whole, puts a larger percentage (in terms of total sales) of capital back into research and development than just about every other major industry.  This is an area where the U.S. still maintains a Comparative Advantage (and HERE) relative to the rest of the world.  Are we (politicians/policy-makers/industry) doing enough to make sure it stays this way?... 

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