Liar, Liar, pants on fire! Well, not on fire, but they may be larger than they appear...

I KNEW IT!!  Not all pant sizes are created equal.  The graphic below shows the variations in ACTUAL size of select pants relative to the size stated on the label.  The label in the pants says "36 inches". However, when measured you can see the ACTUAL size of the pants is not as advertised.  The pants are considerably larger, in some cases.  Is this dishonest advertising OR do we WANT to be duped in this manner? Just to be safe, I am NOT going to measure MY pants...I am SURE they are really "38's" as labeled!
Are Your Pants Lying to You? An Investigation

POP! That is sound of the"bubble" about to burst in the market for Higher Education...Can colleges escape the laws of supply and demand? I think not...

There has been lots of talk about how to control over-spending in the housing and healthcare markets.  Major legislation has been passed and political capital has been expend to address these problems. How about the potential "bubble" in higher education? Is this issue important to college students?? Well, yes.  Has it been seriously addressed? Well, you decide for yourself as you write checks to pay for your college expenses...

The first graph pulls out the price of College Tuition  (Dark Red Line) over time and compares it to prices as a whole (CPI-Blue Line) and the price of housing ( Bright Red Line)

The second graph pulls out the price of College Textbooks (Blue Line) and compare it to prices as a whole (CPI-Dark Red Line) and the price of housing (Bright Red Line)

Graphs courtesy of Carpe Diem

Ok, the deep fried thing at the State Fair has gone one product too far....

I don't drink at all, so this does not affect me personally. The creativity and trial and error that stems from this innovation is what fascinates me.  The economics is interesting too: is this food item the result of demand-side or supply-side economics?  Did people demand this good and the entrepreneur then go about producing it, or did the entrepreneur anticipate that if he/she supplied it people would want it? Sorry, this is how I think about everything---the "economic way of thinking" controls my life!! :)

Texas State Fair's culinary contenders fry everything from Pop-Tarts to beer

""If Big Tex looks a little glassy-eyed this fall, blame it on the Fried Beer. Or the Deep Fried Frozen Margarita.
Booze is generating a buzz for the State Fair of Texas, as fried-alcohol dishes made the list of top new fair foods announced Wednesday.
Eight imaginative contenders are vying for the Sixth Annual Big Tex Choice Awards, with the winners getting plenty of publicity – and long lines of eager fairgoers willing to gobble up the fried goodness.
But have your ID handy for the Fried Beer and Deep Fried Frozen Margarita – you must be 21 or older to partake....Fried Beer is a beer-filled pretzel-like dough pocket that's shaped like ravioli. Take a bite and the beer pours out.""

Happy Capital Day!! Opps, I mean Labor Day...or do I?

On Labor Day we celebrate the contribution of the worker to the production of goods and services.  Good enough and well deserved.  However, why don't we have a day for what really allows workers to be more productive AND work less with their physical bodies and more with higher level thinking skills?...(HT: Division of Labour)

""Any good economist will tell you that as complementary factors of production, labor and capital are not only indispensable but hugely dependent upon each other as well.
Capital without labor means machines with no operators, or financial resources without the manpower to invest in. Labor without capital looks like Haiti or North Korea: plenty of people working but doing it with sticks instead of bulldozers, or starting a small enterprise with pocket change instead of a bank loan.
There may be no place in the world where there’s a shortage of labor but every inch of the planet is short of capital. There is no worker who couldn’t become more productive and better himself and society in the process if he had a more powerful labor-saving machine or a little more venture capital behind him. Capital can refer to either the tools of production or the funds that finance them. It ought to be abundantly clear that the vast improvement in standards of living over the past century is not explained by physical labor (we actually do less of that), but rather to the application of capital.
This is not class warfare. I’m not “taking sides” between labor and capital. I don’t see them as natural antagonists in spite of some people’s attempts to make them so. Don’t think of capital as something possessed and deployed only by bankers, the college-educated, the rich, or the elite. We workers of all income levels are “capital-ists” too—every time we save and invest, buy a share of stock, fix a machine, or start a business.
And yet, we have a “Labor Day” in America but not a “Capital Day.”
Like most Americans, I’ve traditionally celebrated labor on Labor Day weekend—not organized labor or compulsory labor unions, mind you, but the noble act of physical labor to produce the things we want and need. Nothing at all wrong about that! But I’m starting a new tradition this year that may never catch on and it doesn’t matter to me if it doesn’t. I’m doing it anyway: In odd-numbered years, I will celebrate Labor Day on the first Monday of September. In even-numbered years, I will celebrate what I’ll call Capital Day. This makes Monday, September 6, 2010 my first official Capital Day.
This weekend, I’ll be thinking about the remarkable achievements of inventors of labor-saving devices, the risk-taking venture capitalists who put their own money (not your tax money) on the line and the fact that nobody in America has to dig a ditch with a spoon or cut his lawn with a knife.
Happy Capital Day, America!""

Do the carpets in Vegas Casinos camoflage stains OR poker chips? I got to know!!

Apparently there is money to be made in carpets in Las Vegas...Are the carpets in casinos for covering up stains OR for camoflaging chips that have fallen from the possession of the gamblers? OR perhaps it is both!

HT: Marginal Revolution

Economics underpins ALL conflict---Food Inflation causes rioting--is this just the beginning?

    The subject of the article below is something we discussed in class today.  Increasing food prices, while a nuisance, are easily absorbed by rich countries but disproportionately effect poor people in poor countries in a negative way.  It emphasizes the point of my lecture:  If you look at the history of conflict/revolution/war and strip away all the rhetoric, you will find an economic problem as the root cause.  In this case, it is rising wheat prices.  Wheat is a vital input into making many basic food staples.  While rising food prices may not be an ultimate reason for over-throwing a government, it may certainly be the catalyst.
Seven die in Mozambique food rioting

""The first food riots since the 2007-08 crisis have left seven people dead and at least 280 injured in Maputo, the Mozambican government said on Thursday. The unrest in the country’s capital followed the government’s decision to raise bread prices by 30 per cent.  The riots have prompted concerns that food protests could spread across poor African countries that rely heavily on agricultural commodities imports. Discontent about rising prices for staples has already emerged in countries from Egypt to South Africa.
Further violence in Maputo was possible, he added""

Another graph showing world meat prices relative to food prices world-wide:

"Priming the Pump"---this ain't plumbing but we are trying to unclog the stagnant economy---see multipliers enclosed.

  A nice graphic  below showing the multiplier effects of various fiscal policies Congress could implement to move the economy forward.  In a recession, Congress would want to decrease taxes and/or increase direct government spending.  The goal is to increase the demand for goods and services so businesses will produce more goods and services. In turn businesses would need to hire additional workers to produce these goods and services (or at the minimum, not layoff people or close it doors).  This would serve to stabilize the economy until private demand returns and government could back off.   In theory and in practice (I say that with reservations), each dollar spent by the government yields MORE in terms of  goods/services purchased than a decrease in taxes because in the very first round of spending the government does not save a portion of the dollar and people tend to save a portion of the tax cut.  This is the foundation of John Maynard Keynes "Multiplier Effect" of a dollar spent by government versus by "people".  According to this theory, if you want to jump-start an economy, or as Keynes said "prime the pump", then government spending a dollar trumps people spending that same dollar.  The extent of the multiplier effect is STILL up for much debate in economics, but depending on the policy, it seems to bear out.  Judge for yourself...
Tax Cuts That Make a Difference

""...But the most effective tax cut for putting people back to work quickly is one that businesses and households get only if they spend money. Last year’s cash-for-clunkers program was an example. So was a recent bipartisan tax credit for businesses that hired workers who had been unemployed for months. Perhaps the broadest example is a temporary cut in the payroll tax for businesses, which reduces the cost of employing people.

Any of these steps would increase the budget deficit, obviously. But relative to the multitrillion-dollar, Medicare-driven, long-term deficit, a temporary tax cut costing a couple of hundred billion dollars isn’t significant. The more pressing problem today, by far, is the weak economy...""

 

Keep your externalities Positive---"Metering Out" benefits...

It is usually easier to find examples of negative externalities than positive ones.  Positive externalities are benefits accrued by society from a use of a good BUT the market does not provide enough of this good.  Government can play a role in promoting the production of this good by offering a subsidy to either produce it or for the consumer to purchase more of it (increase the quantity demanded and the quantity supplied will increase--it still induces production):

""More than 100,000 central Ohio households are on the leading edge of energy technology, having received high-tech electricity meters with the help of federal aid, a project an Obama administration official praised yesterday.As soon as October, the customers will be able to use an AEP website to track their electricity usage the previous day. Future versions of the meters might allow for real-time tracking.  Electric utilities eventually might use the technology to offer different prices for power, depending on the time of day, which would encourage customers to use less power during times of high demand. This kind of change to pricing would require approval by state regulators.  As Chu sees it, the meters' main asset is the way they provide information that can be used to cut power bills.  "First and foremost, it's about saving money," he said."" (Source: Environmental Economics)

How many versions of an IPOD do we need?? The market says more...listen to the market...

Creative Destruction at work---within the same company.  A miracle of market activity that can only take place where people toil in economic freedom and have profit as a motive. Why else would anyone do it?? The IPOD is successful, why the need to continue to go above and beyond?  Is the answer "Because Steve Jobs can?" Incremental improvements lead to better products now, and we never know what those improvements might morph into someday. Innovate or die.  Sounds harsh, but would we really want it any other way?  Look at your IPOD or I-Phone or Laptop or ???? before you answer.

The iPod's Amazing Evolution

""Wednesday, Apple will likely unveil new iPods at an event in San Francisco.
The latest rumored features: An iPod touch with two cameras for "FaceTime" video chats, and a tiny new iPod nano with touchscreen controls. (And maybe even 3G Internet access for the iPod touch.)
Yes, the iPod has come a long way since its launch in October, 2001. That's when Steve Jobs showed off a device that promised "1,000 songs in your pocket" for $400.
This week's new iPod touch could promise "an HD camcorder and 250,000 apps in your pocket" -- for half the price.
The iPod could arguably be the most important product in Apple's entire history. Over the last 9 years, Apple has made the iPod one of the biggest consumer electronics hits of all time, pushing out more than a dozen new models and selling hundreds of millions of units.""

Want to know why printing money in not the answer to our problems? Inflate your knowledge with this link...

Students---An EXCELLENT, concise lesson on why the US has to be careful about printing money to get us out of the recession...Please take the time to read it---it answers alot of questions...
“Why can’t the government just print more money?” – NOT such a silly question!

China's now infamous traffic jam---and why more will happen!!

China's 11-Day Traffic Jam Was Insane... But Here's Why More Will Happen...
Graph shows the growth in the number of cars (BLUE line) relative to the road infrastructure to handle that growth (RED line)...The math does not work...

Reinforcement for me on the recycling lecture I gave in class this week---Nice quote... :)

How timely!!!...A great quote today in the Wall Street Journal in regards to an economist they profiled.  It is from his wife and is quite apropos to my spiel on recycling I gave in my AP classes this week.  It sums up what I think about the application of recycling, as opposed to the philosophy (two different things, in my opinion):

""He refuses to recycle," Mrs. Boettke says. "Something about how it actually uses more resources." He's not exactly a handyman either. "If his 'opportunity cost' is too great, he'll hire someone.""

The emphasis in the quote is mine....The "economic way of thinking" requires you to sometimes express an opinion that is contrary to conventional wisdom.  Don't forget the lesson from Bastiat---consider the unseen as well as the seen---be a GOOD economist... :)

Another assertion of mine in class today: MOST conflicts/wars are caused by fights over resources or have an underlying economic cause---current example enclosed...

Today in class (in addition to the discussion on recycling), I also suggested that MOST conflicts/wars/revolutions in history are related to economics, specifically the fight to control a vital resource.  Today in the NY TIMES there is this article A Test of Wills Over a Patch of Desert: which relates a story from the MiddleEast on the fight over a relatively small plot of land:

""For years, the women — Naifa and Aali, the wives of the village elder, Sheik Sayah Abu Mudegem al-Tori — and about 300 other residents of Al Araqib, many of them children, lived in relative obscurity on these beige slopes, situated between the Bedouin town of Rahat and the southern Israeli city of Beersheba.
Then the bulldozers arrived at dawn on July 27, accompanied by more than 1,000 armed police officers carrying out a court order. They tore down about 40 unlicensed concrete-block homes, shacks and other structures and uprooted hundreds of trees.
Within hours, the villagers and volunteers put up flimsy tents and a few shacks, for shelter from the scorching sun and to stake the Bedouins’ claim to the land. In a test of wills, the Israelis have already been back to destroy the structures three more times.
The tug of war has suddenly turned Al Araqib into a symbol of a much larger land dispute between the Bedouins and the Israeli authorities that has been simmering since the foundation of the State of Israel in 1948.
“With God’s help, we will stay on our land,” said Sheik Sayah, wearing a tweed jacket over his cotton thobe, a white headdress and aviator sunglasses.
“Anyone who thinks of throwing us out will first have to throw the dead out of the cemetery,” he said, referring to the old Tori tribe graveyard next door to the encampment. The sheik was living in the cemetery because the courts had ordered him to stay away from Al Araqib for two weeks.

Had the recycling discussion in class today...Why do I even go there?? :)

In class today (3A) we had a rousing discussion on the merits of recycling. Specifically, I proposed that re-cycling paper may not  be advantageous and even harmful to the environment--is the intention to save trees (which are renewable) or is it to conserve all resources (it takes lots of other, non-renewable resources to recycle)...Regardless or your opinion, I found this comment this evening on the topic that offers additional food for thought:

""There is a simple test for determining whether something is a resource (something valuable) or just garbage (something you want to dispose of at the lowest possible cost, including costs to the environment). If someone will pay you for the item, it's a resource. Or, if you can use the item to make something else people want, and do it at lower price or higher quality than you could without that item, then the item is also a resource. But if you have to pay someone to take the item away, or if other things made with that item cost more or have lower quality, then the item is garbage. [...]
"Recycle, regardless of cost!" doesn't solve a problem; it creates one. Laws requiring recycling harm me, the environment, and everyone else. We have to take prices into account, because prices are telling us that we can't save resources by wasting resources.""

What do you think? Agree or disagree?

A Lie: US Manufacturing is in decline!! Why are we constantly told this? Let the truth set you free...

There has been alot in the news lately about the decline of American manufacturing, considered the backbone of our economy. In terms of jobs in manufacturing there has definitely been a decline in the numbers of people working in this sector. The first graph below shows this long term trend:

 Business Insider

Please note that this decline has occured in good times and bad (the bad are recessions marked by the gray bars).  This second graph below shows a more recent change in manufacturing output relative to jobs in manufacturing: 

Carpe Diem

What is going on?  Numerically we are absolutely producing more "stuff" (look at the BLUE line) BUT we are doing it with fewer workers (RED line).  How can that be? Are workers more efficient? Do they have access to,and employ more technology and labor saving devices/techniques than workers in the past?  The next graph seems to bear this out:

Cafe Hayek

Has there been a silent (silent or people not paying attention)  revolution in manufacturing, and technology has made many workers obsolete? It could be said, in terms of manufacturing jobs, the US is in decline, BUT in overall output of goods we are at historical highs, so US manufacturing is VERY healthy, right? Can't have it both ways.  You make the call...What do you think??