Dirty Politics and Name calling have NO place in Politics!! Really? Someone should have told John Adams and Thomas Jefferson in the Election of 1800...See the vidoe HERE!

This video is GREAT! The more things change, the more they stay the same...It uses quotes from Jefferson and Adams campaigns in the election of 1800.  Worth a look.  The actual sources for the quotes are below as well...(Source: The Agitator)

For those interested, here are some of our sources for the statements made in "Attack Ads, Circa 1800."


John Adams is a blind, bald crippled toothless man
http://books.google.com/books?id=GHMnz8G0GTcC&pg=PA500&lpg=PA500&dq=adams+blind,+bald+crippled+toothless&source=bl&ots=9lbKRZPRGk&sig=G8iF_6jamjrAWBg5_f9aRsW093U&hl=en&ei=FuvJTLTTCYOglAel07SnAQ&sa=X&oi=book_result&ct=result&resnum=2&ved=0CBcQ6AEwAQ#v=onepage&q=adams%20blind%2C%20bald%20crippled%20toothless&f=false

who secretly wants to start a war with France.
http://www.signonsandiego.com/news/2010/sep/19/going-negative-is-in-the-dna-of-our-democracy/

While he’s not busy importing mistresses from Europe
http://www.digitalhistory.uh.edu/historyonline/scandal.cfm

he’s trying to marry one of his sons to a daughter of King George III.
http://millercenter.org/academic/americanpresident/adams/essays/biography/3

John Adams is a hideous hermaphroditical character with neither the force and firmness of a man, nor the gentleness and sensibility of a woman.
http://articles.cnn.com/2008-08-22/living/mf.campaign.slurs.slogans_1_jefferson-family-sally-hemings-vice-president-jefferson?_s=PM:LIVING

Murder, robbery, rape, adultery and incest will be openly taught and practiced, the air will be rent with the cries of the distressed, the soil will be soaked with blood and the nation black with crimes.
http://millercenter.org/academic/americanpresident/jefferson/essays/biography/3

Are you prepared to see your dwellings in flames? Female chastity violated? Children writhing on the pike?
http://books.google.com/books?id=YOWX0jLPbkwC&pg=PA188&lpg=PA188&dq=%22female+chastity+violated%22+%22children&source=bl&ots=4JW5TDUjnX&sig=G6_8ik8es-6hkf-SB2Edx_-E-Zo&hl=en&ei=X-7JTKelNMWblgfxufj6Cg&sa=X&oi=book_result&ct=result&resnum=4&ved=0CCcQ6AEwAw#v=onepage&q=%22female%20chastity%20violated%22%20%22children&f=false

Jefferson is the son of a half-breed Indian squaw raised on hoe-cakes
http://en.wikipedia.org/wiki/Black_People_and_Their_Place_in_History
http://www.post-gazette.com/pg/08036/854713-51.stm

Hamilton is a Creole bastard brat of a Scotch pedlar.
http://www.freerepublic.com/focus/f-news/1071513/posts

Another nice graph of Actual RGDP relative to Potential RGDP...Impress your High School (guess that is me) or College Econ teacher with this knowledge

Another nice graphic illustrating the output gap, which is the difference between what we actually produce and the output potential of our economy, as measured  by Real GDP:

In common graphical form that we have come to know so well in AP Macroeconomics, we can illustrate the output gap in both the Production Possibilities Frontier and the Aggregate Demand/Aggregate Supply Model of the Economy:

The PPF shows our productive capacity in terms of raw production of capital and consumer goods.  The Long Run Aggregate Supply Curve (LRAS) is this raw production converted to inflation-adjusted GDP.   We know we are not always at our potential in the PPF. Sometimes we are outside it and sometimes we are inside it.  We can certainly say our economy today is under-producing/under-utilizing resources, mainly people (9.6% unemployment rate, well over the Natural Rate of Unemployment). 

Point "B" represents the under-employing of resources relative to our potential Point "A". When we convert the raw production at Point "B" to inflation-adjusted prices, we get a Real GDP to the left of our FE RGP. This is represented as movement along our Short-Run Aggregate Supply curve to Point "B" on the  AD/AS Model. 

How soon do we close the gap between Actual RGDP and Potential RGDP? The first graph gives two Real GDP growth rate examples. One is the growth rate from the end of last severe recession we experienced, 1983-84. The second is a tepid growth that seems to be the consensus growth rate we will actually have (again, this is a best guesstimate scenario). Recovery back to full-employment is not going to be quick, UNLESS we get a HUGE positive Aggregate Supply Shock, such as the one in the 1990's.  Don't see that is going to happen, but as mentioned in class, I WISH it would come in the alternative energy sector--significantly reduce energy costs in a clean way,  which will significantly reduce the cost of production across the board. In turn, this may open up new possibilities in a broad range of industries.  Any other suggestions as to what you would like see contribute to a "Positive Supply Shock"??? Let me know--I am always willing to learn new things!

What comes first to increase college tuition for all---increasing costs or increasing subsidies?

This graph shows the rise in cost of attending college, public and private, since 1980.  It is in the form of an price index where the year 1980 is 100. and currently we are at 359, which means there has been a 259% increase in the cost of college tuition to a public university.  Notice as we reach the 2000's the slope of the graph increases considerably, indicating the cost of college is increasing at an increasing rate. Why? Lots or reasons, but subsidies to students have grown considerably.

WSJ...""But the federal government gave out $28.2 billion in Pell grants to students in the 2009-10 school year, almost $10 billion more than the previous year. Pell grant numbers for the current school year are not yet available, but are expected to rise.
Federal grants, including Pell and veteran's benefits, accounted for 44% of the $94 billion in total grant money awarded to students in the 2009-10 school year, compared with 34% the previous year, according to the data. Ten years ago, federal grants represented 29% of the total. The other major sources of grants are colleges and universities, and employers...""

The writer quoted below is commenting on an excerpt from THIS WSJ article about rising college tuition. It reminds me of the chicken and egg conundrum of what comes first.

""From The Enterprise Blog: ""College tuition and fees climbed once again this year, but the burden was tempered for some students and their families by a big jump in federal aid…""

Correct me if I’m wrong, but couldn’t it just as easily have been written:

""Federal aid for college climbed once again this year, but the help was tempered for some students and their families by a big jump in college tuition and fees…""

Hypothetical: I have my own college and I call it "Hayward University" or as it is better known, "Hay, YOU!" (look at the photo above--yes, we are all about the athletics!).  In the short run, there are a fixed number of seats available for college students at my university to meet existing demand.  I currently have 5,000 seats and no plans to expand.  The Supply curve for the seats is vertical at 5000 seats. No matter what the tuition is, I ONLY have 5,000 seats to offer.  I am a captive of the Demand curve!

The Demand curve for those seats is downward sloping to reflect the inverse relationship between price and quantity demanded. The Demand curve intersects the Supply curve at $10,000 per year tuition for each of my 5,000 seats. See graph below that illustrates this equilbrium:

Assume my students become aware they are now eligible for additional student aid in the form of a $1,000 subsidy (Pell Grant et al). So, now instead of paying $10,000 tuition, each student now only has to pay $9,000.  At $9,000 the quantity demand for seats to my school is 6,000 (Point "B").  So, now my quantity demanded (6,000) exceeds my quantity supplied (5,000).  The lower the tuition, the more students want to come to my campus.  I am out of equilibrium.  As shown below, I NOW have a shortage of seats relative to the quantity demanded (Point "B").  How do market forces take care of this? 

The price will increase along the demand curve (as price increases, the quantity demanded decreases) from Point "B" back to Point "A".  Right where we started:

BUT, that is not the end of the story. We cannot forget about the $1,000 subsidy.  Well, I GET THAT TOO!  The market tuition returns to $10,000 PLUS the subsidy---$11,000 to attend my school:

What is true at $10,000 tuition and quantity supplied of 5,000 seats is going to be true at every tuition price and quantity demanded of seats RELATIVE to the original Demand curve. We find that the Demand curve shifts to the RIGHT:

Bottomline? Tuition in the end does not DECREASE and likely INCREASES,  nor do more students necessarily get additional access to college. Nice for me. I will start tuition rates NEXT year at $11,000 for subsidized students and non-subsidized students.

This comment from the article will not be to the liking of college administrators "like me"...

""But Patrick Callan, president of the National Center for Public Policy and Higher Education, said colleges and universities need to get tuition under control. He likened the trends in costs and federal aid to a treadmill, where prices rise, federal money gets pumped in, and costs increase again.
"Unless governors and legislatures stiffen their spines and not allow schools to pass so much of the cost on to families, we are never going to make a dent in access and affordability," said Mr. Callan, whose research group tracks higher-education issues. ""

A more elegant and nuanced view (in video) of my provocative statement in class that "Donating to UNIFEF leads to more starving people, not less"---This will be 10 minutes well spent if our discussion interested you at all...

Also, here is a link (HERE) to an article that somewhat refutes MY argument.  I can agree with many of his points, however, the writer does not address AT ALL governments (i.e. Sudanese, Etheopian, Zimbabwean, North Korean, etc) role in humanitarian disasters concerning food security.  This is the elephant in the room that no one addresses on a meaningful level...

The Cheese Cake did not make me gain weight, my credit card did? Huh? Yes, it is true...find out why here

I know when I pay with a credit card, or even my debit card, I tend to eat at places where the final bill will be much higher than if I forgot my credit card at home.  EVEN if I have enough cash in pocket to eat at the more expensive place, I find myself "down-dining" when I am going to pay with cash. Why do I do this? I have to pay for the meal either way, so why do I spend more when it is charged to a card as opposed to paying cash?  Is this YOUR experience too? Please say yes, so I don't feel lonely...Read the article at the link or just the part I have below...I tend to believe in the "pain" theory of spending cash....


WSJ: Buying Junk Food With Plastic

When we pay in plastic, credit or debit, we’re more likely to buy unhealthy food, according to  research in the forthcoming Journal of Consumer Research by professors Manoj Thomas of Cornell University, Kalpesh Kaushik Desai of State University of New York, Binghamton and doctoral candidate Satheeshkumar Seenivasan of SUNY, Buffalo.

In recent years, the use of credit and debit cards has ballooned. So have American waistlines. The average American carries 4.4 cards in her wallet and a third of U.S. adults are obese these days, up from 23% in 1988.


But does the mode of payment make a difference when it comes to buying unhealthy food? According to these researchers, the answer is yes.

“If you like cheesecake, that craving activates neurons and takes over part of your thought processes,” Prof. Thomas says. “When you use cash, you’re trying to curb the momentum of the cheesecake.”

Purchases like cookies are impulsive in nature, whereas purchase for low-fat yogurt and oatmeal tend to be contemplative. For that reason, using cash will have less of an impact on buying more virtuous foods because they were contemplated purchases to begin with. “People feel a physical pain when they spend cash,” Prof. Thomas says. With plastic, however, people feel less pain when they spend.

Capacity Utilization, Aggregate Supply and The Production Possiblities Frontier---Your future is contained within these Graphs--How is the view?

     I believe one of the most important connections I try to make with students is the link between our economy's productive capacity and students future careers and aspirations.  A mantra familiar to my students: "If politicians, policy-makers, and business leaders are NOT working TODAY to make the necessary investments to ensure future increased productive capacity, then students will find their career prospects limited when that future arrives.  Your job is not created when you are ready to go to work. The preparation for that career/job to exist (or not) is, taking place TODAY".  Keep this in mind as I illustrate how productive capacity affects the economy in the short and long run.
      We need to link three familiar AP Macro concepts together: Capacity Utilization, The Production Possibilities Frontier, and the Aggregate Demand/Aggregate Supply Model of the Economy.  First, lets look at Capacity Utilization:

""Capacity utilization is a concept in economics which refers to the extent to which an enterprise or a nation actually uses its installed productive capacity. Thus, it refers to the relationship between actual output that 'is' produced with the installed equipment and the potential output which 'could' be produced with it, if capacity was fully used.""

     In other words, it is a measure of how efficiently and effectively (aka "productive efficiency") we employ our societal resources (Land, Labor, Capital, Entrepreneurship) to produce goods and services.  It is impossible to fully employ all of our resources and it is not necessarily desirable to do so.  It seems it would be a prudent policy to conserve resources for future use by subsequent generations.  There will always be some amount of resources that are not employed at any given time.  The consensus in the economics community is that if an economy can achieve approx. 83% of Capacity Utilization (resource employment) then it is theoretically at "Full-Employment". I repeat,  this does not mean 100% resource employment but if you reach 83% of capacity then that should be the best you can expect to do in the long run. 
     The two graphs below show the economy at full-employment in two different ways, but each are linked.  The first is the PPF, which shows the potential production of goods an economy can achieve if it is fully employing all of its resources in the least costly way ("Productive Efficiency").  More simply, it is the measure of raw production of capital goods and consumer goods.  The second graph on the right shows the dollar value, denoted by "FE RGDP" (Read that "Full-Employment Real GDP"), of that raw production of consumer and capital goods.  When Aggregate Demand (AD) intersects our short-run ability (SRAS) to produce goods AND our long-run ability (LRAS) to produce goods, then we are said to be at "Long-Run Equilibrium".  Point "A" on both graphs represents this nirvana.  Presidents easily get re-elected and the TEA Party's and MoveOn.org's of the world go away. 



     Where are we today in terms of Capacity Utilization? This graph shows capacity utilization for an extended time period.  Note the ebbs and flows from the full-employment baseline of 83%---anything below is under-utilizing capacity and anything over is producing beyond our capacity.  The blue vertical bars represent recessions.  You can see there is always a dip during recessions and a rise during periods of recovery.

     The last bar to the right represents the most recent recession.  Notice how capacity utilization has recovered somewhat from its nadir in 2009, however it is still near its lowest point in 40 years. How do we relate this situation to the PPF and the AD/AS Model of the Economy?  See the next two graphs below:

     We are obviously under-utilizing resources in our economy. We see it everywhere--closed stores, friends or family members losing jobs.  The actual unemployment rate is close to 10%, which is double the Natural Rate of Unemployment, roughly 5%.  Other resources, land, capital, entrepreneurship, are standing idle as well.  Currently our capacity utilization is at 75%.  This can be represented by point "B" in the PPF graph and in the AD/AS Model of the Economy.  We know we COULD be producing at point "A" but currently we are not.  Why?

     One explanation is that there is not enough demand for those under-utilized resources.  As the financial crisis took hold in early 2007, people started losing their jobs.  Unemployed people don't buy as much as they did before; businesses don't sell as much as they did before and either lay people off or close stores altogether; manufacturers produce less because retailers don't reorder, so they lay people off or close factories... Do you see the idle capacity being created before your eyes as the situation ripples across the economy!! The productive capacity STILL exists (store-fronts, factories, skilled workers, etc, have not gone away), but the demand for them is not currently there.  This is shown in the graph above on the right.  Aggregate Demand for goods and services DECREASES and shifts to the left (Point "B").  We have high unemployment and potential deflation, both not desirable to have in an economy. 

     What happens, if and when, the economy recovers and Aggregate Demand picks up? Hopefully we get back to the situation in the very first set of graphs---Full-employment at a stable price level.  However, there is potential for Aggregate Demand to shoot past FE RGDP and into inflation territory. Why? Because we will start to use that under-utilized capacity and IF the recovery in Aggregate Demand is so strong that is uses up all that under-utilized capacity and then demands MORE, we hit a new problem--Inflation!  This is illustrated in these two graphs below:

    



     Capacity utilization moves above 83% and our productive capacity becomes over-employed and stresses start to appear.  Factories operate at a level they were not designed for and employees are working overtime and/or extra shifts.  Something has to give!! We are wearing out existing productive capacity! During the downturn businesses may not have  replaced capital equipment, purchased new capital or technology, or built new facilities and the productive capacity is not there to meet the new demand.  The ability to supply goods lags behind the demand for those goods---Too few goods are being produced relative to the money flowing though the economy from (1) fiscal stimulus and (2) Federal Reserve monetary policies. This is the classical definition of inflation.   Now Congress, the President and the Federal Reserve have a new problem on their hands!
   So, during a downturn do the powers-that-be focus just on the demand-side to get the economy moving forward (Aggregate Demand shifting to the Right) to absorb excess/under-utilized capacity (mainly people) and put them back to productive work making goods, or do they focus on the supply-side, so when the inevitable(?) pick-up in the economy occurs the productive capacity (SRAS and LRAS) has increased sufficiently to absorb the new demand without igniting inflation? Hmmm...Feed demand, starve supply OR Feed Supply, starve demand? What would YOU do??  I am glad I have no additional responsibility other than to write this blog entry...Not sure I could take the pressure of answering the question....

Excellent defense of the Keynesian point of view on how to "prime the pump" of the economy..

This is an excellent defense of the Keynesian point of view on how to deal with an economy at less than full-employment. Notice it has MANY of the elements of Fiscal Policy we have covered recently in class and a couple we will cover this week, i.e. "the crowding out effect" of government borrowing.  It also provides an nice seque into Monetary Policy, which we will start in Week 11.  The script of the textbook is playing out on the stage of life so we can observe it, applaud it, or pan it...A bad time for the economy, but a good time for critical observers like me---and YOU! :)
 
NYTIMES: Now is not the time to cut the budget deficit by Christine Romer (former Obama Admin Chief Economist)

""THE clamor to cut the budget deficit is deafening.... Make no mistake: persistent large budget deficits are a significant problem. Government borrowing in good times crowds out private investment and lowers long-run growth.... So the question is not whether we need to reduce our deficit. Of course we do. The question is when.

Now is not the time. Unemployment is still near 10 percent.... Tax cuts and spending increases stimulate demand and raise output and employment; tax increases and spending cuts have the opposite effect. This is a basic message of macroeconomics and a central feature of public- and private-sector forecasting models. Immediate moves to lower the deficit substantially would likely result in a 1937-like “double dip” as we struggle to recover from the Great Recession.


Some advocates of austerity argue that, contrary to the conventional view, fiscal tightening now would lower long-term interest rates and improve confidence so much that the impact could be positive. But an ambitious new study in the World Economic Outlook of the International Monetary Fund confirms that fiscal consolidations — that is, deliberate deficit reductions — typically reduce growth.... The recent experience of countries already carrying out austerity measures is consistent with the central finding of the I.M.F. study. Ireland, Greece and Spain have all had rising unemployment after moving to cut deficits....


But once the economy has substantially recovered, the Federal Reserve will be ready to raise interest rates. At that point, the Fed could help maintain growth by instead continuing very low rates as the deficit is reduced. Waiting for conventional monetary policy to be back on line is like waiting for the anesthesiologist to arrive before doing surgery.

True believers might say we should never wait, because a slow-growing tumor could turn virulent. But we need to think about actual risks. Today, markets are willing to lend to the American government at the lowest 20-year interest rate since 1958. In the crisis of 2008 and 2009, money flowed to the United States because it was seen as the safest spot in the storm. There is no evidence that we have to act immediately.


Countries that enjoy the markets’ confidence have another reason to wait. Greece and other troubled nations on the periphery of the euro zone can no longer borrow at affordable rates. They must immediately cut expenditures and raise taxes, despite the terrible toll on employment and output. Countries like the United States, Germany and France can play an essential role as sources of growth and demand for the world economy. Strengthening our economies will help keep the world from slipping into another recession, and allow for continued healing of vulnerable financial markets here and abroad....


The best thing would be for Congress to pass a plan now that will reduce deficits when the economy is back to normal.... History shows that well-designed backloaded plans are credible. For example, changes to Social Security eligibility and taxes have been passed years, if not decades, before they took effect. And in an environment like today’s, when Congress has again agreed to pay-as-you-go rules, deviating from planned reforms forces countervailing actions. Such backloaded deficit reduction would not hurt growth in the short run — and could raise it. If uncertainty about future budget policy is harming confidence, as some business leaders suggest, spelling out future spending and tax changes could be helpful...""

HT: Grasping Reality with Both Hands

Does it matter if a bird is killed by oil or by a wind turbine? The question may be more political than you realize...

I am not being facetious when I ask for a logical counter-response to this passage (I suggest you read the whole article), specifically as it relates to the bird kill numbers, but you don't have to confine it to only that. I can think of at least one, but will save it to see if anyone addresses it. THANKS! (HT: Carpe Diem)

"Affect heuristic'" is a fancy name for a pretty obvious concept, namely that we discount the drawbacks of things we are emotionally in favor of. For example, the Deepwater Horizon oil spill certainly killed about 1,300 birds, maybe a few more. Wind turbines in America kill between 75,000 and 275,000 birds every year, generally of rarer species, such as eagles. Yet wind companies receive neither the enforcement, nor the opprobrium, that oil companies do."" from Matt Ridley in WSJ

This is what you COULD BE doing with your college degree---don't look if you really don't want to know...

What 17 Million Americans Got from a College Degree

""Over 317,000 waiters and waitresses have college degrees (over 8,000 of them have doctoral or professional degrees), along with over 80,000 bartenders, and over 18,000 parking lot attendants. All told, some 17,000,000 Americans with college degrees are doing jobs that the BLS says require less than the skill levels associated with a bachelor’s degree.

That's from this piece in the Chronicle of Higher Education, via Jon Bischke on Twitter. More:


Putting issues of student abilities aside, the growing disconnect between labor market realities and the propaganda of higher-education apologists is causing more and more people to graduate and take menial jobs or no job at all. This is even true at the doctoral and professional level—there are 5,057 janitors in the U.S. with Ph.D.’s, other doctorates, or professional degrees.


For hundreds of thousands of Americans, spending four years and untold amounts of money (and debt?) gets you a job as a waiter, parking lot attendant, or janitor. Yet everyone from Barack Obama to Bill Gates keep pushing a college education as the way to secure one's economic future. That is a view that should be heavily qualified.""

Gas prices getting you down? It could be worse---imagine filling your Hummer in Paris or Rome. And I don't mean those cities in Texas...

US gasoline prices relative to European gasoline prices.  Big difference, eh?  What accounts for a majority of the difference? Gas taxes across Europe are MUCH higher than the US. In Texas the state tax per gallon a is $.20 and the Federal tax per gallon  is $.194 (19.4 cents) for a total of $.39.4 cents assessed on each gallon you purchase.  Gas taxes in Europe range between $5.00 and $7.00.  The ACTUAL price per gallon is about the same, but taxes create the chasm.  Why do European countries assess such high taxes on gasoline?  Extra credit on the next test for good responses...


Source HERE

trgwertger



The underbelly, but stark reality, of aid to starving people...What to do???

Human Rights Watch issued this very aggressive report on the state of donor aid to Ethiopia.  It is sad that this creates a Catch-22 situation for humanitarian aid.  If you give aid some people will be helped but you contribute to the consolidation of an oppressive regime. If you don't give you starve the regime of a tool for repression  but you also starve the people of needed food aid....

""This 105-page report documents the ways in which the Ethiopian government uses donor-supported resources and aid as a tool to consolidate the power of the ruling Ethiopian People’s Revolutionary Democratic Front (EPRDF).


Ethiopia is one of the world’s largest recipients of development aid, more than US$3 billion in 2008 alone. The World Bank and donor nations provide direct support to district governments in Ethiopia for basic services such as health, education, agriculture, and water, and support a “food for work” program for some of the country’s poorest people. The European Union, the United States, the United Kingdom, and Germany are the largest bilateral donors.""

Ethiopia: Donor Aid Supports Repression

Quotes from the Report

"There are micro-loans, which everybody goes to take out, but it is very difficult for us, [opposition] members. They say, ‘This is not from your government, it is from the government you hate. Why do you expect something from the government that you hate?'"
- A farmer from southern Ethiopia


"Yesterday in fact the kebele [village] chairman said to me, ‘You are suffering so many problems, why don't you write a letter of regret and join the ruling party?'"
- A farmer with a starving child from southern Ethiopia, denied participation in the safety net food-for-work program


"The safety net is used to buy loyalty to the ruling party. That is money that comes from abroad. Democracy is being compromised by money that comes from abroad. Do those people who send the money know what it is being used for? Let them know that it is being used against democracy."
- A farmer from Amhara region


"It is clear that our money is being moved into political brainwashing."
- Consultant to a major donor, Addis Ababa


"Intimidation is all over, in every area. There is politicization of housing, business, education, agriculture. Many of the people are forced or compromised to join the party because of safety net and so on, many do not have a choice - it is imposed."
- Western donor official, Addis Ababa


"Every tool at their disposal - fertilizer, loans, safety net - is being used to crush the opposition. We know this."
- Senior Western donor official, Addis Ababa


"Which state are we building and how? It could be that we are building the capacity of the state to control and repress."
- World Bank staff member, Addis Ababa

The signs are not good...No, really, the signs are NOT good...Can't you see that??

ALL CAPS? Not OK on road signs, federal government says

In a nod to the fading eyesight of the nation's growing number of aging Baby Boomers, the federal government is requiring communities around the USA to change street name signs from all capital letters to a combination of capital and lowercase letters. The government says that makes them easier to read.


Cash-starved localities also will have to dig deep for new, more reflective traffic signs to make them easier to see at night, especially by older drivers.

Under Federal Highway Administration (FHWA) regulations, communities have until 2015 to improve the nighttime visibility of roadside signs — such as stop, yield and railroad crossing signs. The issue is how well a sign redirects light from an automobile's headlights back toward the vehicle. Signs that fail to meet minimum standards must be replaced. Communities will be allowed to change the street name signs as they wear out.

The changes are called for in the Manual on Uniform Traffic Control Devices, an 816-page (plus appendixes) behemoth that sets standards for traffic control devices — signs, signals and pavement markings.

Are the conditions ripe for Stagflation? The latest breaking news on "rare earth" minerals is dog piling on the cost of producing...

     Have we moved one step closer to Stagflation?  Stagflation a term used to describe the twin problems of stagnant GDP (hence increasing/high unemployment) and inflation.  We already have the high unemployment...This is the WORST thing that can happen to an economy in the short run because it is extremely difficult to get out of.  Traditional Aggregate Demand policies tend to exaccerbate the problem. 

     In the last week I have blogged about rising grain prices which affect many parts of the food supply, the depreciating dollar which increases the prices of globally traded commodities (oil, metals, minerals, agricultural products, etc) , and now this breaking news from China:

""China, which has been blocking shipments of crucial minerals to Japan for the last month, has now quietly halted shipments of those materials to the United States and Europe, three industry officials said on Tuesday.

 ""China mines 95 percent of the world’s rare earth elements, which have broad commercial and military applications, and are vital to the manufacture of products as diverse as cellphones, large wind turbines and guided missiles. Any curtailment of Chinese supplies of rare earths is likely to be greeted with alarm in Western capitals, particularly because Western companies are believed to keep much smaller stockpiles of rare earths than Japanese companies. ""

This will only serve to increase the price of these minerals for the producers of the goods that use these "rare earth minerals".   All these things mentioned above increase the cost of producing a wide variety of goods.  This tends to shift the short-run Aggregate Supply curve to the left, decreasing GDP, increasing unemployment and increasing the average price level of goods---Stagflation...This is what the textbook says may happen.  I certainly hope it does not, but...

I-Pad price in selected countries...Useful in comparing retail price differences across borders

The price of an I-Pad in various countries.  It is also a good illustration on the differences in sales taxes in said countries as well. The price is across the top on the graph in increments of $100.  I am a little curious as to why it is so costly in China.  The Big Mac Index shows we can get a hamburger for less dollars, why not the I-Pad. I honestly don't know the answer...Any ideas???

The Economist

From The Economist: ""IF YOU fly from Hong Kong to Frankfurt or Paris and look suspiciously like a gadget lover, chances are that you will be searched by customs officers: an iPad with Wi-Fi and 16 gigabytes of memory costs $200 less in the former British colony than in Germany and France. Given the risk of having to pay extra duty (and the price of the flight), potential iPad buyers in both countries ought to consider a trip to nearby Luxembourg, where Apple's popular device is $35 cheaper. The sales tax is only one reason for such differences in price. Consumers in Hong Kong also get a better deal because iPads are assembled in mainland China. Buyers in Switzerland have to pay more because there is less competition between retailers. In China and Mexico, the device may be cheaper because people are poorer. Incidentally, if income is taken into account, consumers in Luxembourg get the best deal: they only have to spend about 0.8% of the city-state's GDP per person on an iPad.""

What do the following have in common: The i-Pad, Kids with Special Needs, Frederic Bastiat, and Adam Smith--More than you would think!

As a parent of a special needs child AND an economics teacher, this story from the WSJ: Using the iPad to Connect really inspired me.  The i-Pad is conferring "unseen" benefits on special needs children that even Steve Jobs admits he never saw coming:

""The rise of mainstream tablet computers is proving to have unforeseen benefits for children with speech and communication problems—and such use has the potential to disrupt a business where specialized devices can cost thousands of dollars.


Apple Chief Executive Steve Jobs said in an interview that he hopes the easy-to-use design of the iPad has helped children with special needs take to the device more quickly, but that its use in therapy wasn't something Apple engineers could have foreseen.


"We take no credit for this, and that's not our intention," Mr. Jobs said, adding that the emails he gets from parents resonate with him. "Our intention is to say something is going on here," and researchers should "take a look at this.""

Frederic Bastiat and Adam Smith commenting on the nature of why people work to produce a good, such as the i-Pad, and the residual benefits that society enjoys from that pursuit:

"By virtue of exchange, one man's prosperity is beneficial to all others."--Frederic Bastiat 

"By pursuing his own interest [every individual] frequently promotes that of the society more effectually than when he really intends to promote it...."--Adam Smith

This article is a great teaching tool as well---creative destruction, positive externalities, and competition come to mind first.  I highly recommend it to everyone to read....