Food for Thought on the Pay to Ride bus situation in KISD

Hello, My name is Gene Hayward. Full Disclosure: I teach Advanced Placement Economics at Central HS AND I do not live in the district, so take what I say with as many grains of salt as you like :) ...I would like to inject a thought into the Pay to Ride System, which in principle I support, but I do have a major concern that I do not think has been thought through. This should not be an area for conflict because it WILL have to be addressed in some fashion by everyone here…Here goes…According to the latest Texas Education Agency AEIS reporting system at http://ritter.tea.state.tx.us/cgi/sas/broker , in 2009-2010 school year KISD had 5,830 students classified at “Economically Disadvantaged”. Most of you probably did not know it was that high!! I was surprised myself. The Federal Govt. has used their criteria to determine this and school MUST allow students with this designation all the benefits of this designation. The district, to my knowledge, cannot means test any further to determine benefits (someone correct me it I am wrong). PLEASE keep that last point in mind, regardless of how you may personally feel about it. Those of us in the schools know that even though there may be a stigma attached to this label parents DO take advantage of the benefits accorded them. The pay for ride system will be no different. Let’s assume that only half take advantage of any help to pay for busing. This means 2,915 students will need roughly $300 per year (amount not set in stone yet—you are welcome to insert your own figure) for the bus. 2,915 X $300 = $874,500!! Can the community raise that amount? Can Durham subsidize that amount? Some combination thereof? Now, you can play with the 2,915 number—is it lower? Higher? I don’t know. BUT if we are approaching this as a business decision, would it not be appropriate to have some idea of the potential money needed and a plan to pay for this? I honestly don’t see where this amount is going to come from.

Now, I will point out a potential flaw in my own scenario---I will counter myself by assuming bus service is not a “right” as defined by education law, State or Federal. Someone can correct me on that. If it is not, then an administrative process has to be set up to means test potentially a couple of thousand of applications for financial assistance. Who is going to do this and how much would THAT cost?

What do y’all think? I respectively submit this for constructive criticism…Thank you!

That did not take long...The Tom Tom navigator has been effectively "Creatively Destroyed"..

The Tom Tom came to market in 2002 and the writing is on the wall (or LCD/LED screen) for its demise.  The "Smart Phone" is rapidly consolidating the sheer number of separate devices we currently use into one hand-held device.  I marvel at the changes I have seen in my lifetime (51 years), more specifically in the last 20 years. 

Smart Phones Sting Tom Tom

""Dutch navigation-system maker TomTom NV cut its sales forecast for the second time in two months, an indication that smartphones are eating into the market for standalone navigation devices more quickly than expected.

TomTom pointed to the crumbling North American market for personal-navigation devices, which it now expects will shrink by 30% this year.

Smartphone use, meanwhile, keeps growing. Some 72.5 million people in the U.S. owned smartphones as of the first three months of 2011, up 15% from the fourth quarter, according to market tracker comScore.

Increasingly powerful phones are disrupting the markets for a number of portable devices. Makers of videogame players, digital cameras and hand-held video recorders all are feeling some pressure. Hand-held GPS devices have become a particularly hard sell.""

"I want to ride my bicycle, because it creates jobs. I want to ride my bicycle because it is effective fiscal stimuluuuuss"-Yes, sung to the Queen song.

According to this research paper, infrastructure spending to support bicycle transportation trumps infrastructure spending on road projects in terms of jobs created per million dollars spent (11.4 jobs vs 7.8 jobs, respectively)...Do I have to wear the funny helmet?

HT: Andrew Sullivan

From the research abstract at PERI:

""Pedestrian and bicycling infrastructure such as sidewalks, bike lanes, and trails, can all be used for transportation, recreation, and fitness. These types of infrastructure have been shown to create many benefits for their users as well as the rest of the community. Some of these benefits are economic, such as increased revenues and jobs for local businesses, and some are non-economic benefits such as reduced congestion, better air quality, safer travel routes, and improved health outcomes. While other studies have examined the economic and non-economic impacts of the use of walking and cycling infrastructure, few have analyzed the employment that results from the design and construction of these projects. In this study we estimate the employment impacts of building and refurbishing transportation infrastructure for cyclists and pedestrians. We analyze various transportation projects and use state-specific data to estimate the number of jobs created within each state where the project is located.


The data for this study were gathered from departments of transportation and public works departments from 11 cities in the United States. Using detailed cost estimates on a variety of projects, we use an input-output model to study the direct, indirect, and induced employment that is created through the design, construction, and materials procurement of bicycle, pedestrian, and road infrastructure. We evaluate 58 separate projects and present the results by project, by city, and by category. Overall we find that bicycling infrastructure creates the most jobs for a given level of spending: For each $1 million, the cycling projects in this study create a total of 11.4 jobs within the state where the project is located. Pedestrian-only projects create an average of about 10 jobs per $1 million and multi-use trails create nearly as many, at 9.6 jobs per $1 million. Infrastructure that combines road construction with pedestrian and bicycle facilities creates slightly fewer jobs for the same amount of spending, and road-only projects create the least, with a total of 7.8 jobs per $1 million. On average, the 58 projects we studied create about 9 jobs per $1 million within their own states. If we add the spill-over employment that is created in other states through the supply chain, the employment impact rises by an average of 3 additional jobs per $1 million.""

Are you proud of your "Made in America" car/truck? Would that be ""Built Ford Tough" or "I Love What You Do For Me, Toyota"? Interesting comparison here...

Globalization in a nutshell...Your "Made in America" car or truck may very likely be made by a foreign company. In the graphic below, I put side by side cars.com analysis of the cars/trucks that are for sale in the US from 2006 and 2010.  They rank vehicles by where they are assembled and if they contain over 75% made in America sourced parts. There has been quite a re-shuffling of the deck in just 3 years.

I don't completely know the reason for this,  I will offer a semi-educated guess as to what maybe happening.  Japanese companies in the US are generally (if not at all) unionized, hence pay lower wages than US automakers. This means they can "affordably" buy US made parts--Jobs for assemblers AND for the workers in the industries making the parts. US automakers on the other hand, pay higher assembly wages, hence must cut costs by purchasing less expensive parts from foreign sources--- Jobs for assemblers in the US but not so much for workers in the industries making the parts. The net effect: On a per car basis which company is supporting more American jobs?

(HT: Carpe Diem--what would I do without this resource!)

From Cars.com---""What Are the Top American-Made Cars?

""Cars.com's American-Made Index rates vehicles built and bought in the U.S. Factors include sales, where the car's parts come from and whether the car is assembled in the U.S. We disqualify models with a domestic parts content rating below 75 percent, models built exclusively outside the U.S. or models soon to be discontinued without a U.S.-built successor. ""



Source: Cars.com



""Detroit's full-size pickups, once a dominant force on the AMI, remain off the chart. The F-150 held a commanding No. 1 spot in the first three years that Cars.com compiled the index, with domestic parts content as high as 90 percent. Alas, today's Michigan- and Missouri-built F-150 bears only 60 percent domestic content rating. Similarly, the Chevrolet Silverado, which held second place for much of the F-150's reign, has just 61 percent domestic content. Chrysler's Ram 1500 pickup's 70 percent domestic content fares better, but it still falls short of the AMI's 75-percent cutoff.""

I have wasted money on some good or service, but I have never wasted money on money...Confused? Read this and you won't be confused but will be angry...

Wasting money on money. Who gets to say that? Well, some politicians and a bureaucratic structure that probably knew this was a bad idea but did not act, gets that distinction. I guess it is a stupid question to ask if anyone lost a job/election over this. Nice example of unintended consequences that really could have been avoided by resisting someone's pet project or idea.  Gee Whiz--please be better stewards of the peoples money...

Got this from Greg Mankiw:

""On today's Planet Money, we visit an underground vault that's full of money nobody wants.


The money — bags and bags of dollar coins — is the result of a 2005 law that requires the U.S. Mint to print a series of coins bearing the likeness of each U.S. president.

The problem is, people don't really like dollar coins. And there aren't enough people who are fired up about, say, Rutherford B. Hayes, to make much of a difference.

So more than 1 billion dollar coins are now sitting, unwanted, in Federal Reserve vaults around the country. By the time the program wraps up in 2016, the Fed will be sitting on 2 billion unwanted coins, according to the Fed's own estimates.

The total cost to manufacture those unwanted coins: $600 million.""

Is re-paving a road "stimulative" to the economy? Compare these two photos. Are we using 1930's policies to solve 2011 problems?

Are "infrastructure projects" stimulating to the economy like they were during the Depression?  Are we using 1930's policies to solve 2011 problems? If the goal is to implement the use of machines/capital then we are doing the right thing. Road projects are a necessity, that is clear. But to justify them on the basis that they are, in large part, going to get our economy back on track and significantly lower unemployment seems a bit of a stretch to me.  If the goal of stimulus is to employ the masses, then, well, perhaps we should ask if "shovel-ready" is a literal or figurative term. More focus should be on the jobs of the future, not of the past...Just sayin'.

Repaving a road in Louisiana in the 1930's with a mix of labor and technology/capital...count the workers relative to capital...

Source HERE


Repaving a road today in Louisiana with today's mix of labor and technology...count the workers relative to capital

Source HERE

I assume the road in the bottom picture was done in a day or so and the road in the first picture took, well, I don't know how many days (weeks?)...

This "Summer" we need to "Fall" for the Arab "Spring" or it will be a dark "Winter" for seasons to come for us. The issue in one chart here...

Further evidence (for me) that the underlying reason for the "Arab Spring" movement in the Middle East can be explained in economic terms.  The chart below shows the rate of unemployment for young(er) people in select Middle Eastern countries relative to other parts of the world.  Below that are snapshots of most of the countries represented in the chart.  Focus just on the population pyramids in each one.

There is a toxic mix of a lack of economic opportunity AND a demographic balance tilted toward the very young.  Also, as noted here, "In contrast to most of the world, joblessness in many Middle Eastern countries tends to increase with schooling: the unemployment rate among those with college degrees exceeds 15 percent in Egypt, Jordan, and Tunisia."

Hmmm...lots of young, educated people with access to technology, diffuse knowledge of the "outside" world and a lack of opportunity domestically---Change in the region is inevitable--regardless of the despots actions today...   

Source: The Conversable Economist

 



More evidence that you need to obtain Higher Education---see graph and explanation here

This graph shows the change in income over time between someone with a college degree vs a high school diploma. Notice on the tail end to the right that the lines start to move in opposite directions.  Before this time period they pretty much moved together (exception is between 1980 and 1985).  I want to emphasize that this does NOT mean that someone with solely a HS diploma will not succeed financially. These are moving averages. However, you will notice the decline in income for those with HS degree only. Also, This graph is not counting people with associate degrees or some other type of technical skills based education/training.  I would assume if you graphed the incomes of this class of people, the line would fall somewhere in between these two. 

Source: Business Insider

From all that I read in the business/economic literature, I believe this trend will continue. We are in the midst of a higher skills based economy, not only domestically but globally.  Like it or not, for most of us, it is a necessity to obtain, whether through college or other advanced educational institutions, and maintain the highest skill set we possibly can.  We may not like it, but that is simply the way it is.  We (maining you) gotta get on board with it...

Gas prices are too low and need to be higher! Our kids, grand-kids and great-grand kids will THANK US!

I am convinced the only way get off our dependence on oil (domestic and foreign) is to ensure the price of gasoline stays elevated.  A gas tax or a tax on a barrel of oil seems to be the preference of many/most economists.  $4.00 per gallon seems to be the generally accepted price that moves Americans to change their consumption behavior. It is a short term pain we must go through to obtain the long-term benefits.  Please read this short piece below.  I added emphasis on the parts I think are important.  You will see when the prices are high people start to make alternative choices in the types of vehicles they purchase.  The process works, it just has to be allowed to work itself through to the end.  The current policy to use the Strategic Oil Reserve only serves to slow down the process and sends mixed signals to the people. I am not insensitive to the hardships the high price of gas puts on people. I am MORE sensitive, however, to the hardships the will be visited upon the next generation if we don't take REAL action today. Is that so wrong? 

This is also a great read for AP Microeconomic teachers and students. Data is provided to calculate various elasticities...
Via Mark Thoma

From MIT Sloan Experts: My latest research* looks at how consumers adjust to high gas prices by changing the kinds of car they buy, and the prices they pay. What launched this research was the debate around the effectiveness of a gas tax to reduce climate change; the goal was to determine whether consumers undervalue fuel economy. If consumers do undervalue fuel economy, then such a tax would not shift enough consumers to buy smaller, more fuel-efficient automobiles.

I try to do my research with an eye toward showing policymakers what will happen if they adopt Policy X over Policy Y. I am not a granola environmentalist, but I do see a lot of inefficient policies out there, and as an economist that’s frustrating.

And here’s the thing…

At the moment, the US relies on a variety of subsidies and “performance standards” to reduce greenhouse gas emissions from the transportation sector. On the fuel side, we have ethanol subsidies and the Renewable Fuel Standard, which is an implicit subsidy program. On the vehicle side, we have Corporate Average Fuel Economy Standards, or CAFE standards, which dictate the average fuel economy of an automaker’s annual fleet. The current standard for passenger cars is 30.2 mpg. The standard for light-trucks — a classification that also includes SUVs under 8,500 pounds — is 24.1.

On the electricity side, lawmakers also use the Energy Star program, which was created in the early 1990s, to force appliance makers to create more efficient products. Policymakers seem to believe that consumers are not going to buy the correct dishwasher, or the correct air-conditioner. So instead, they regulate the manufacturer of these appliances to comply with certain efficiency requirements, rather than let the price of electricity reflect the social cost of that dishwasher or air-conditioner.

My research shows that performance standards – such as CAFE standards – may be more inefficient than previously thought, and that pricing instruments, such as a gas tax, would likely have a bigger impact on reducing greenhouse gas emissions.

My colleagues and I found that a jump in the price of gas causes a significant change in the kinds of cars that consumers buy and the price they pay for them. A $1 increase in the gasoline price changes the market shares of the most and least fuel-efficient new cars by +20% and -24%, respectively. Changes in gasoline prices also change the relative prices of the most fuel-efficient cars and the least fuel-efficient cars. For new cars, the relative price increase for fuel-efficient cars is $363 for a $1 increase in gas prices; for used cars it is $2839. (For comparison: a $1 increase in gas prices alters the budget of the average household by about $50 a month.)

I am not naïve, and I realize that no politician has ever been elected on a platform of: ‘I’m going to raise your gas prices,’ but by advocating alternatives, they’re promoting inefficient policies that simply hide these inflated costs. There’s a lot of resistance from consumers about the prospect of a gas or carbon tax, but I believe this is mainly because consumers are misled to believe that performance standards are cheaper.

The run-up in the price of gas in recent years has been substantial enough to make top auto executives give up their historic opposition to gasoline price taxes: some have even suggested that Congress should consider a variable gasoline tax that would create a $4 floor for retail gasoline prices.

Mike Jackson, CEO of AutoNation, the largest U.S. dealership chain, told the Wall Street Journal: “We need more expensive gasoline to change consumer behavior. Otherwise, Americans will continue to favor big vehicles, no matter what kind of fuel-economy standards the government imposes on automakers.”

Four dollars a gallon, he added, ‘is a good start.’ Hear, hear.

SHOW ME THE MONEY! Or at least where it is going. A nice interactive on Remittances world-wide from the Financial Times.

The Financial Times has a terrific interactive that show the changes in inflows and outflows of "remittances".  Remittances are the flows of currencies in and out of a country. They are a part of the Balance of Payments calculation maintained by the government (go HERE for the latest report). The Balance of Payments has two main accounts: The Current Account and The Capital Account. Remittances are part of the Current Account, specifically in the category "Unilateral Net Transfers".    

Source: The Finacial Times

 Example: If a "foreigner" living/working in the US sends (remits) dollars to their home country (presumably exchanged for the local currency) that is recorded as a DEBIT (subtraction) in the Current Account.  If an American living/working in a foreign country sends the local country back to the US (presumably exchanged for dollars) that transaction is recorded as a CREDIT (addition) in the Current Account. As you might expect, the net balance of remittances for the US is negative (more dollars leaving to go to the Foreign Exchange Market (FOREX) than there are returning from the FOREX)...

Ahhh...the Good Ol' Days! When the boys played games and the girls washed dishes...



Source: Coyote Blog

 Notice to the upper right the "girls" washing dishes while the "boys" play a game...When we harken for the "good ol' days" we better becareful what we harken for.  But it is ok. I am pretty sure the Dad was paying a 90% Marginal Tax Rate so all is well... :)

State of Texas (and other States) has a wealth-redistribution scheme I 100% approve of...I think "UWILL2"...

I did not know Texas was doing this, but what a great idea---auctioning off vanity plates to the highest bidder:

What Drives People to Take a Creative License?

""To boost state coffers, Texas sold a Dallas doctor a "PORSCHE" for $7,500.  Then it sold him "AMERICA" for $3,000.

Both were license plates, sold at auction. "I will get my American citizenship next month, so it means a lot to me," says Salman Waheed, an intensive-care physician. He also wanted "FERRARI," but dropped out when bidding for that one went too high—eventually netting $15,000, the top price paid.

After years of selling vanity plates as a modest sideline—charging as little as $5—states think there's more money to be made in whatever drives people to buy them. Facing budget crunches, states are raising surcharges or proposing annual fee hikes for custom plates.
Texas has gone a step further. It hired a private company to raise $25 million over the next five years by auctioning off vanity plates. "People like to express themselves, especially in Texas," says a spokesperson for the Texas Department of Motor Vehicles. This year, at the nation's first such auction, Texas sold 33 plates for $139,400...""

Nobody gets hurt and people pay what they believe the plate is worth to them. Vanity plates are a "want" and not a "need".

This illustrates the microeconomic concept of Consumer Surplus and how a business, or government, can increase its revenues by segregating its customers by their willingness to pay.

Below is a demand curve for the market for vanity plates. I am keeping it very simple with the numbers just to illustrate the concept.  Assume that the state does not charge much more for a vanity plate relative to a "regular" license plate.  Assume the price charged by the state is $100 and they sell 3 license plates total (vanity and non-vanity). 

The total revenue from the sale of license plates is $300.  But we know from our market demand curve that someone was "willing and able" to pay $300 and someone else was "willing and able" to pay $200 for vanity plate. The 3rd buyer did not want a vanity plate, just a regular one so she paid $100.  See graph below. However, buyers 1 and 2 did not have to pay a higher price because the price set by the government was $100 and they could get the plate cheaper than what they were willing to pay.  They retain significant Consumer Surplus.  NICE DEAL FOR THEM!!

Would it not be great to extract some money from these vain people?  In this particular market, according to the article, it is easy to segment customers. Texas is doing this through an auction system.  The state can still sell 3 license plates, but they can transfer that Consumer Surplus from the buyers to the state.  See the graph below for the math in how revenues to the state are affected.

This is a "wealth-redistribution" scheme that I approve of 100%. 

I bet I could get "HAYWARDECON" very cheap!! What do you think?? :)

My conspiracy theory---Pres Obama will be in NY to interview a NEW VP candidate for 2012...AND they won't have to change the monograms on the White House towels...

Justin Bieber---Joe Biden...Coincidence? I think the President really needs the Middle School vote this time around.... :)


Source: Fox NY

 Full Article HERE:

""President Barack Obama and international teen sensation Justin Bieber are expected in New York City on Thursday. Expect 'Obama-Bieber' gridlock throughout the day especially in Midtown Manhattan and the West Side of Manhattan as the two very popular and heavily protected figures travel around town.""

Here is an Economics version of "That 70's Show"--This episode is about the divergence of the actual rate of unemployment from the Natural Rate of Umemployment. See Donna's analysis here!

Well, not Donna, but...Jared Bernstein, former Economic Advisor to President Obama, has a nice analysis on why middle class wages have stagnated over time.  It is useful to the study of AP Macroeconomics in that it uses the concepts of Productivity, Unemployment and the NAIRU ("Non-Accelerating Inflation Rate of Unemployment"). In class, I use a simplified version of this---just the NRU ("Natural Rate of Unemployment").

The NRU or NAIRU is, given current conditions, the lowest unemployment rate an economy can reach WITHOUT triggering inflation. If the actual unemployment rate observed in the economy equals the NRU, then the economy is said to be at full-employment.  You can see from the first graph below (the BLUE line) that the NRU has hovered consistently between 5% and 6% since 1949. The RED line represents the actual unemployment rate at a given time. 

When the actual unemployment rate goes below the NRU, this means there is a relative scarcity of labor (skilled and unskilled, but skilled is probably more relevant) in the marketplace. Wages tend to increase during this period of time. When the actual unemployment rate goes above the NRU wages tend to stagnate because there is a relative surplus of labor available in the marketplace.  What do you notice about the trend between the NRU and the actual unemployment rate over time? 


Source: Jared Bernstein

This was pretty amazing to me.  In the above graph, examine the two lines before 1979 and after. Look at the chart below. Prior to 1979 the economy spent more time at or below the NRU and after 1979 more time at or ABOVE the NRU.    

Source: Jared Bernstein

Wage and employment gains primarily come through gains in productivity. Productivity is defined as the amount of output a worker produces in an hour of work.  If a worker produces more output in a labor hour it is generally due to  (1) enhanced skills (education and/or training), (2) production efficiencies through improved processes, or (3) using new/improved tools/capital equipment. 

Two things SHOULD happen as a result--1. Workers produce more, the business makes more money, the workers get paid more (2) Workers produce more, the business makes more money and they hire more workers.

As you look at the graph below, remember--productivity gains should translate into income gains for workers....

Source: Jared Bernstein

Pretty shocking, isn't it? Prior to 1979 wage growth keep up with worker productivity.  After 1979 wage growth was stagnant relative to gains in productivity.   

What went on in the mid-1970's to change this?  If my friend over at The New Arthurian Economics is reading this, I THINK he has the answer.. Try HERE and HERE to get started...

Are you an introvert? Read these Top 10 Myths/Stereotypes people have about you...

Source: Jerry Bito
Myth #1 – Introverts don’t like to talk.

This is not true. Introverts just don’t talk unless they have something to say. They hate small talk. Get an introvert talking about something they are interested in, and they won’t shut up for days.

Myth #2 – Introverts are shy.

Shyness has nothing to do with being an Introvert. Introverts are not necessarily afraid of people. What they need is a reason to interact. They don’t interact for the sake of interacting. If you want to talk to an Introvert, just start talking. Don’t worry about being polite.

Myth #3 – Introverts are rude.

Introverts often don’t see a reason for beating around the bush with social pleasantries. They want everyone to just be real and honest. Unfortunately, this is not acceptable in most settings, so Introverts can feel a lot of pressure to fit in, which they find exhausting.