Why Economists (or econ teachers) are never invited to play boardgames...

Source: Economists do it with Models

The productivity of labor vs capital---Could you do ANY of these jobs for more than 10 minutes?? Look and see...

HT: (Cafe Hayek) Here are 3 very instructive videos that illustrate the productivity of labor relative to the productivity of physical capital.  While you watch think about the physical capital we in the developed world use to do these tasks that are performed by people in many/most parts of the developing world.  You certainly can employ alot of labor by not using machinery, but is it conducive to economic growth and the general welfare of a society??..These are VERY short (no more than 30 seconds each) and are REALLY amazing. The first one with the buckets ESPECIALLY!! The coordination to accomplish the job is something to behold. Could YOU do ANY of these????  Judge for yourself...

This is more like we do here---mostly capital, less labor---quite the difference, ehh???

HT: Carpe Diem

Personal Opinion enclosed---Republicans need to support extending Long-Term Unemployment Benefits NOW!

     Should the Republicans stop blocking the passage of a bill that will further extend unemployment benefits to the long term unemployed?  In all introductory economics textbooks, students learn is that if unemployment benefits are increased then people, especially, but not exclusively, at the lower-end of the pay scale, will respond to this incentive by taking more time to find another job. If you look at the differences in unemployment compensation offered by many European countries (which are relatively generous) compared to the US and Japan, you will see that the European countries experience persistently higher levels of unemployment.  Unemployment compensation is not the only cause of this, but it is certainly a contributing factor.  While the unemployment compensation, in general, does not 100% replace the working pay, it is enough to allow people to extend their search for a more "ideal" job. 
    Having said that, it is obvious we live in interesting times right now.  It appears that the bromide "a job is a job is a job" is no longer apropos (if it ever really was) and applying learned/current labor skills in lateral industries is increasingly difficult.   There is a continuing shake-out on the Aggregate Supply-side of the economy, as certain industries contract and the re-deployment of those resources (human, physical/financial capital, production capacity,etc) takes place.  Some of those resources are fluid and can go to other uses rather easily, and some are high static and not "fungible" and take more time, if ever, to find a new productive use. 
    Labor/skill specialization and advancements in production technology have converged to squeeze lot of people out of the pool of workers needed for current jobs.  This form of unemployment is called "structural unemployment", meaning a worker is no longer needed because his/her skill has been rendered obsolete by the adoption of technology. We can extend this definition to the advancement in processes that lead to efficiencies that allow for fewer workers to do a particular task. For example, the auto worker who operates a rivet gun is replaced by a robotic arm. The worker cannot move to another plant because the technology will be adopted industry-wide. Or a workplace design or innovation streamlines production.  He or she in either line of work is outta luck. 
    One could say, "Ah Ha! He/she can go to the businesses that makes the robotic arms and get a job!".  But does he/she have the necessary skills to make that transition? Where do they get training to do this and feed their families at the same time? What is the time lag between losing a job, training, and finding a comparable pay job? Hmmm...have to put yourself in their position.  The longer one stays unemployed the difficulty in finding gainful employment multiplies exponentially.
   If the economy is booming and jobs are plentiful, then a case can be made for REDUCING unemployment benefits because people can reasonably find a job and limited, if any, social damage would be inflicted on the least amount of people. However, when employment prospects are limited because: (1) the economy is simply not creating jobs  fast enough , if at all (2) there is a re-deployment of resources which is a slow process, (3) workers are structurally unemployed due to technological advances in production, then, I believe, the unemployment benefits have to be extended.  Having said THAT, there has to be a commitment by public policymakers and industry to facilitate training and/or re-training of workers AND a commitment from the unemployed to do so as well.   The social cost, which appears to be unseen to Republicans, of not doing so is too high.  Too much idle human resource creates lots of potential ancilliary social problems Not addressing it promotes uncertainity for those who still have a job and may feel "but for the grace of god there go I". That trepidation is not condusive to inspiring confidence, which, in addition to new jobs, is vital to economic recovery.
   My only question is, "What SERIOUS proposals are on the table to help the long term unemployed that complement the extension of unemployment benefits?"...Not a rhetorical question....
    So, Republicans, vote for this (sorry, it is on the Demand-side)! Democrats---work on this resource re-calculation problem (sorry, it is on the Supply-side).  Get out of your comfort zone and help my country, please and thank you!!

Teenagers are being crowded out of the job market by "old" people...Has this happened to you?? See enclosed graphs for proof!

WOW! Old people POWER! Or not...this is a trend that signifies three important demographic changes and their effects on the "youngs" in our economy...(1) Older workers are hanging onto jobs longer to make up for recent losses in retirement funds, (2) Recently retired workers are re-entering the job market because of recent losses in retirement funds or they simply cannot afford to retire, and (3) the coming baby boomer crunch that just numerically is going to swamp the number of young people just in terms of demographics...  For the first since the 50's, older workers outnumber teen workers in competition for the same jobs....read em' and weep, young people... 

Source for Graphs HERE

How a company can make more profits AND donate half their sales to charity...Great example of incentives!

This kind of research into consumer behavior and how people respond to incentives is interesting to me..The researcher, Ayelet Gneezy, conducted a study to see how a business could  maximize profits AND be a socially conscious company.  I would not have predicted this outcome but can see the possibilities.  I think you will  find the conclusions surprising too....(HT: Marginal Revolution).

""At a theme park, Gneezy conducted a massive study of over 113,000 people who had to choose whether to buy a photo of themselves on a roller coaster. They were given one of four pricing plans. Under the basic one, when they were asked to pay a flat fee of $12.95 for the photo, only 0.5% of them did so.
When they could pay what they wanted, sales skyrocketed and 8.4% took a photo, almost 17 times more than before. But on average, the tight-fisted customers paid a measly $0.92 for the photo, which barely covered the cost of printing and actively selling one. That’s not the best business model – the company proves itself to be generous, it’s products sell like (free) hot-cakes, but its profit margins take a big hit. You could argue that Radiohead experienced the same thing – their album was a hit but customers paid relatively little for it.  When Gneezy told customers that half of the $12.95 price tag would go to charity, only 0.57% riders bought a photo – a pathetic increase over the standard price plan. This is akin to the practices of “corporate social responsibility” that many companies practice, where they try to demonstrate a sense of social consciousness. But financially, this approach had minimal benefits. It led to more sales, but once you take away the amount given to charity, the sound of hollow coffers came ringing out. You see the same thing on eBay. If people say that 10% of their earnings go to charity, their items only sell for around 2% more.
But when customers could pay what they wanted in the knowledge that half of that would go to charity, sales and profits went through the roof. Around 4.5% of the customers asked for a photo (up 9 times from the standard price plan), and on average, each one paid $5.33 for the privilege. Even after taking away the charitable donations, that still left Gneezy with a decent profit.""

See the whole article here and see how RadioHead could have improved their profits AND helped their pet causes...

Financial Reform Bill doubles as a Lawyer/Lobbyist Full Employment Act--Let the Rent-Seeking Begin!

If you actually read some of the text of these bills (I have) you will notice the unbelievalbe increase in "lawyer-speak" over time and mind-numbing meaningless stock phrases.  You find yourself thinking, "didn't I just read that same thing a couple of pages (paragraphs) ago?"  This really is, as Professor Perry points out,  a full employment Act for lawyers and lobbyists.  They will be happy to interpret the meaning of these 2,300 pages for the respective Federal bureaurcracy.  English teachers will tell you less is more.  I guess law school professors tell students they get paid by the page....Law professors win!

From Carpe Diem: 2,319 Page Dodd-Frank Bill aka The “Lawyers’ and Consultants’ Full Employment Act of 2010"

Britian ranks first in end of life care for elderly---They have come a long way since the Middle Ages---Just ask Monty Python!

Quality of death:  A ranking of care for the dying by country
The Chart to the left shows a countries ranking by how it provides for end of life care to the elderly...Britain ranks first follwed closely by Australia.  I suppose they have come a long way from where they used to be...

Tax Revenues to the Federal Government increase at record pace... Smoke em' if you got em'

    Taxes increase on tobacco products and tax revenues to the government increase.  Makes sense and should always happen, right?

Reuters: U.S. pockets $20.6 bln in sin taxes in FY'09

""Americans armed themselves to the teeth and paid through the nose to have a smoke, according to a U.S. government report released on Wednesday. The U.S. federal government collected $20.6 billion in taxes on alcohol, tobacco, firearms and ammunition in fiscal year 2009, up 41 percent from the previous fiscal year, according to the annual report of the Alcohol and Tobacco Tax and Trade Bureau. Part of the U.S. Treasury Department, the TTB credited most of the $6 billion rise in revenues collected to the increased taxes on the tobacco industry as a result of the Children's Health Insurance Reauthorization Act passed in February 2009...""

    Well, that depends on elasticities. To fund part of the recently passed heathcare reform, the federal tax on cigarettes was increased by 62 cents to a total of $1.01. The tax on chewing tobacco was increased  from $0.195/lb. to $0.50/lb.  Because the price of cigarettes varies greatly for state to state, mainly because of individual state taxes levied on cigarettes, it is difficult to ascertain the percentage change in the price of cigarettes at the retail level.  However, we do know that the price elasticity of demand for cigarettes is relatively inelastic.  This means that the percentage decrease in quantity demanded for tobacco products is LESS than the percentage increase in the price of tobacco products (%chg in quantity demanded divided by %chg in price yeilds a number less than 1).  In other words, consumers of tobacco products are less sensitive, in regard to their quantity demanded,  to price increases for this particular good. 
     An easy way to see how the Federal governments tax revenue increased so dramatically, I am going to use the a modified Total Revenue Test for elasticity.  Lets call it the Total Tax Revenue Test.
     The tax before the increase was $.39 ($1.01 minus $.62) and let's assume, for simplicity sake, the quantity demanded for cigarettes in the marketplace was 100 packs.  The tax revenue would be 100 X $.39 = $39 to the Federal governement. Now the tax increase of $.62 is added to $.39 which makes the total tax move to $1.01 OR a percentage INCREASE of +159% ($1.01 minus $.39 then divide by $.39 then multiply the result by 100).  Now assume that 25 fewer packs of cigarettes will sold because some people, despite the addiction, will not buy because of the extra expense.  The percentage change in quantity demanded is -25% (100 minus 25 divided by 100 then mulitply by 100). 
   We have all the information we need to calculate total tax revenue.  AFTER the tax is imposed  the total tax collected, even though the quantity of cigarettes demanded decreases, is 75 packs X $1.01 = $76 (I rounded up).  Before the tax increase the govt received $39 and after the tax increase they received $76, or a percentage change in tax revenue of 95 % ($76 minus $39 divided by $39 then mulitply result by 100). 
   This appears to be a good deal for the Federal government and its attempt at providing a source of revenue to pay for the healtcare. However, can you think of any pitfalls that will throw a monkey wrench into this particular funding mechanism? 
    This example re-inforces the importance of taking elasticity into account when it comes to government (fed, state, local) policies on taxation.  Lesson: Tax the right thing, you increase revenues and get less of the good.  Tax the wrong thing,  you decrease revenues and get less of it...
     Now you know... :)

Looking for a Job? Here are some things to be aware of in your search and at your interview.

This is a serious issue.  Whether you mean to or not, you may be sending the wrong signal to an interviewer. If you are looking for a job these are some important things you should be aware of---in yourself and your surroundings.
WSJ: Big Blunders Job Hunters Make

Another sign lost in translation--I think I will pass on this flavor ice cream...

HT: KPC

Usane Bolt believes in Supply-Side Economics...

Higher tax rates discourage work---is this evidence of that?? (HT: Carpe Diem)

"Organizers of next month's Aviva London Grand Prix at Crystal Palace had hoped to stage the first 100 meters head-to-head of the season between Bolt, Tyson Gay and Asafa Powell but the triple Olympic champion is set to shun the meeting because it would expose him to a huge tax bill. Unless the tax rules are relaxed, athletics administrators fear British fans will be denied the chance to see the sport's biggest star in action again until he returns to the capital in two years' time to defend his Olympic titles. Since April, foreign sports stars competing in Britain are liable for a top rate of income tax of 50 percent but, controversially, the tax is charged not just on the money they earn in Britain but on a proportion of their worldwide sponsorship income."

Source: UK Telegraph

What do Pizza Boxes and your Security Screener at the airport have in common? More than you think..

The Department of Homeland Security is advertising for its open positions as AIRPORT SECURITY personnel on pizza boxes...Do they really have a hard time drawing a pool of qualified applicants for these security sensitive jobs that they need to spend tax money in this manner? Seems odd to me...Just askin'...(More Photos HERE)

LeBron is going to pay ALOT to rent a U-Haul to Florida---so is everyone else...See how much...

Sometimes it is more instructive to look for indicators of economic health in unusual places but they may yield the best, or at least interesting results...U-Haul Rental prices for do-it-yourself movers, for instance.  Below you see the prices to rent a truck to leave Ohio to select destinations in Florida, and vice-versa.  People leaving Ohio pay significantly more to move to Florida than people leaving Florida to go to Ohio. This is a nice example of Supply and Demand and how prices serve to "to clear" the market of surpluses and shortages. (HT: Carpe Diem)

One-way rental rates for a 26-foot U-Haul truck
Miami, FL to Cleveland, OH: $1,000
Cleveland, OH to Miami, FL: $1,457
Premium to leave Ohio: 45.7%

Orlando, FL to Cleveland, OH: $834
Cleveland, OH to Orlando, FL: $1,301
Premium to leave Ohio: 56%

Tampa, FL to Cleveland, OH: $917
Cleveland, OH to Tampa, FL: $,1379
Premium to leave Ohio: 50.4%

 
Linked from Carpe Diem

Two nice graphs--Rankings of States based on business climate and comparing Texas and California in detail...

The first graphic below shows results of a 2010 CEO poll of the best and worst states to do business. Interesting to see the top and bottom of the list.  The second graphic compares Texas and California in a number of business climate measures.  

Want to be a CEO? That road is paved with a degree in Economics...Just sayin'...

Below is the abstract from a research paper---access to the  paper is restricted, but this is an excellent summary stating that, statistically, being an economics major is a pathway to becoming a CEO...And it suggests women would benefit MORE with an economics degree...just sayin'...

""It is often suggested that Economics is a good major for individuals interested in becoming business leaders. Despite this widespread assertion, little research has been conducted on this topic. Using the Standard and Poor (S&P) 500 companies, this paper examines the validity of such a claim. We find evidence that Economics is a good choice of major for those aspiring to become a CEO. Economics ranked third with 9% of the CEOs of the S&P 500 companies in 2004 being undergraduate Economics majors, behind Business Administration and Engineering majors, each of which accounted for 20% of the CEOs. When adjusting for size of the pool of graduates, those with undergraduate degrees in Economics are shown to have had a greater likelihood of becoming an S&P 500 CEO than any other major. That is, the share of graduates who were Economics majors who were CEOs in 2004 was greater than that for any other major, including Business Administration and Engineering. The findings also show that a higher percentage of CEOs who were Economics majors subsequently completed a graduate degree - often an MBA - than did their counterparts with Business Administration and Engineering degrees. The paper demonstrates that while women now comprise over half of all bachelors and masters degrees awarded, they remain a minority in terms of undergraduate degrees awarded in Economics and in MBA degrees conferred. Economics programs may try to appeal to more women students as a stepping stone to becoming a CEO, especially as women continue to account for less than 2 percent of the S&P 500 CEOs.""