The story of 7 million missing horses and mules in the 1920's and why it was a good thing for YOU today!!

I have really enjoyed reading some very old published reports on prices and other data from the 1920's and 1930's.

I found this gem in a 1930 report from the Bureau of Labor on the effect the transition from a horse and mule economy to a mechanized one (cars, trucks, farm implements, etc). 

Note the yellow highlighted numbers. During the decade of 1920 to 1930 the number of horses and mules used in cities and on the farm decreased by 7.037 million.  This freed up 18.5 million acres to produce food for human consumption instead of feeding those horses and mules.

For reference, the WHOLE State of South Carolina is 19.26 million acres.  So, in the decade of the 1920's alone there was the equivalent of the state of S.C. put into play food production to feed people rather than to feed  animals.

The usual story is that mechanization, especially on the farm, increased productivity in terms of food production as if the equipment itself produced those higher yields.

At least in the beginning, the fact that agricultural yields did not have to be used to "fuel"  animals and could instead head to market for HUMAN consumption seems to be a better explanation. The supply of food increased and decreased prices---a BIG DEAL!!



Source: HERE

Another great tidbit from this report is the suggestion that mechanization was a BAD thing for farmers AND people in general:

 LOL! I think history has answered that question!

 And this (sorry it is so small---Blogspot really stinks sometimes).  Notice the reasoning on why mechanization will produce negative results for agriculture:

And finally this:

Decorating Easter Eggs and feeling nostalgic? How much did eggs cost during The Depression era compared to today? I think you will find this interesting...

The idea for this blog entry comes from HERE, but I have wanted to use for a while the historical data from the link below.  Now is my chance!

Let's go back 80 years to the depths of The Great Depression and see how the price of eggs to make the traditional Easter decoration has changed.

A dozen eggs in 1933 cost 22.3 cents (source HERE and noted below from the document)


Source: HERE

Today, the US average for a dozen eggs is $1.93 (Source: CPI Detailed Report (complete text and tables) February 2013 (PDF))

In inflation adjusted dollars, 22.3 cents in 1933 would be $3.98 in 2013.

The $1.93 we would pay for a dozen eggs today would be the same as 11 cents in 1933. 

What people in 1933 would have given to get eggs half price!!

Eggs are a bargain TODAY compared to Depression Era prices.

If you are a teacher, THIS link is great for finding prices and wages from the 1920's and up.  A terrific way to teach inflation and standard of living.

Oppa, Kim Jong-un style...Here is my entry into the "Why Austin?" for nuclear annihilation. :)

Kim Jong-un and company. 



For my Aggie friends...

Nice graph showing the change in "Routine vs Non-Routine" jobs over time. If you are in the first category you need to look over your shoulder. See here why...

This graph blows me away (Source: AEI).  It shows over time, the change in the share of jobs that are "routine" or "non-routine" in nature. 

"Routine" jobs are ones that entail performing tasks that have become so standardized and simple they require very little skill to accomplish.  Labor contributes a relatively small amount to the overall value of the product or service created. They can be replaced by technology to perform the routine tasks or by low wage workers around the world.  

"Non-Routine" jobs are ones that require the labor performed to evolve and actively participate in creating a product or service.  Labor contributes a relatively large amount to the overall value of the product or service created.  Non-routine jobs depend on the use of technology and higher level skills (education) to create that value.

Technology and competition from low wage workers globally can be a substitutes for routine jobs.  Technology and higher level skills are complements to non-routine jobs.

Source: American Enterprise Institute

As you can see from the graph, this trend in the labor market has been going on for a LONG time.

How do we address and change this?  How do we get people to want to stay in school, get additional training, and constantly upgrade their skills to keep up in a changing world.

Dunno.  But seems like that is what we should think about as a country.

If your high school granted admissions on the basis of a single test what would the demographics look like? Well, NYC does this and the results are quite amazing. See the numbers here...

I did not know NYC did this for admission to various high schools. Quite extraordinary.

Here are the results of admitting students to select high schools in New York City based SOLELY on a competitive exam to get in (HT: Newmarksdoor).

—Stuyvesant offered admission to 9 black students; 24 Latino students; 177 white students; and 620 students who identify as Asian. 

—Bronx Science offered admission to 25 black students; 54 Latino students; 239 white students; 489 Asian students; and 3 American Indian/Alaskan Native students. 

—Brooklyn Tech offered admission to 110 black students; 134 Latino students; 451 white students; 960 Asian students; and 5 American Indian/Alaskan Native students.

Read more here:  Most Eighth Graders Matched to a High School of Their Choice

Read more on the use of a single test to determine admissions:  Debate of Single-Test Admissions Policy Divides on Access and Race

Immigration is a feature of a Market Economy not a bug. We need to get on the right side of this issue. Read here why I think so...

We need more immigrants, not fewer. The benefits, in my opinion, far outweigh the costs.  We just don't seem to be aware of (or acknowledge) the benefits as much as we do the costs. 

Shame on us for not measuring twice and cutting once. 

Please read this whole posting that the following excerpt comes from: Why The Red States Will Profit Most From More U.S. Immigration.

Most immigrants come to the US but they GO to work:

Over time, the immigrant impact may prove greatest in terms of economics. Immigrants, in a word, tend to be resilient, and opportunistic by nature. Although many immigrants and their offspring still lag behind economically, over time they appear to be integrating. Overall their rate of home ownership still lags that of native born Americans, but appears to have held up better since the recession. 

Nowhere is the impact greater than in the entrepreneurial sector. Between 1982 and 2007, the number of businesses owned by the primary immigrant groups, Asian Americans and Hispanics grew by 545% and 696% respectfully. In contrast businesses owned by whites grew by only 81%.

Perhaps more important still, even in the midst of the recession, newcomers continued to form businesses at a record rate, even as those by native-born entrepreneurs declined. The immigrant share of all new businesses, notes Kauffman, more than doubled from from 13.4% in 1996 to 29.5% in 2010.

 

Where are these industrious immigrants moving to and which political party should benefit from their presence?:

(In addition to #1 Nashville)...Other cities are equally surprising, including #2 Birmingham, AL; #3 Indianapolis, IN; #4 Louisville, KY and#5 Charlotte, NC, all of which doubled their foreign born population between 2000 and 2011. Right behind them are #6 Richmond,VA, #7 Raleigh,NC , #8 Orlando, Fl, #9 Jacksonville,Fl and #10 Columbus, OH. All these states either voted for Mitt Romney last year or have state governments under Republican control. None easily fit the impression of liberally minded immigrant attracting bastions from only a decade ago. 

 The Republican Party has the biggest incentive to appeal to these immigrant groups, but fails to do so.  

You can't be pro-business and entrepreneurship and at the same time hold harm against those same people, who also share those values, because of their country of origin.

We all fight our own battles no matter how insignificant... :)

Creating poor incentives: "The Startling Rise of Disability in America"

National Public Radio (NPR) has a terrific article (and graphs!!) on the rise in the number of people receiving Federal Disability Compensation.  It is quite eye-opening.

Seems like this program has resulted in TONS of un-intended consequences.

People have an incentive to lie and they are enabled to do so by government and other self-interested parties (read the part about the "disability-industrial complex"). 

It creates a lack of respect for a well-intentioned program and causes the rest of the population to be more cynical about government than is necessary.    

"...The federal government spends more money each year on cash payments for disabled former  workers than it spends on food stamps and welfare combined. Yet people relying on disability payments are often overlooked in discussions of the social safety net.  

People on federal disability do not work. Yet because they are not technically part of the labor force, they are not counted among the unemployed.

In other words, people on disability don't show up in any of the places we usually look to see how the economy is doing. But the story of these programs -- who goes on them, and why, and what happens after that -- is, to a large extent, the story of the U.S. economy. It's the story not only of an aging workforce, but also of a hidden, increasingly expensive safety net...."  NPR. "Unfit for Work: The startling rise in disability in America"

I encourage you to read it.  It is important for understanding the citizen-to-government relationship and how a breakdown in this relationship (mainly a lack of respect) is very harmful to the nation.

A little more information on why our main Federal budget issue will be Medicare, primarily, and Social Security in the coming decades. You gotta see these numbers, especially if you are under 25 years of age!!

A little more information on why our main Federal budget issue will be Medicare, primarily, and Social Security in the coming decades.

Here are the projected changes in US population from 2015 to 2030, just 17 years from now. (ATTENTION STUDENTS: this is right in the round house punch of your careers!!). 

Age 18 to 64
    Year 2015---199,150,000
    Year 2030---205,349,000

An increase in this age group of 6,199,000 or a 3.1% increase.

Age 65 and older
   Year 2015---47,695,000
   Year 2030---72,774,000

An increase in this age group of 25,070,000 or a 52.5% increase

In 2015 there will be 4.1 people between the age of 18 to 64 for every 1 over the age of 65.

In 2030 there will be 2.8 people between the age of 18 to 64 for every 1 over the age of 65.

That is a 31.7% DECREASE.

Data from US Census: Table 2. Projections of the Population by Selected Age Groups and Sex for the United States: 2015 to 2060

My short, in simple terms, take on why Medicare will continue to cost more and be a bigger part of the Federal budget for many years to come.

My short, in simple terms, take on why Medicare will continue to cost more and be a bigger part of the Federal budget for many years to come.

Let's use a very simplistic example to illustrate.

Assume there are 100 retired people receiving $100 per year in Medicare benefits.  The total cost for Medicare is $10,000 for year 1.

Assume in Year 2 we add 10% more retirees.  Now we have 110 retirees receiving $100 (assume no increases in prices) in Medicare benefits.  The total cost for Medicare is $11,000 in Year 2. 

Assume in Year 3 we add 10% more retirees BUT we cut the amount we spend on Medicare payments by 5% (arbitrary number I choose). Now we have 121 retiress receiving $95 in Medicare benefits. The total cost for Medicare is $11,495.

We cut payments ("saved" money!), but the overall cost of the program increased.

While we may be able to slow the "per person" payments (cost) for Medicare, the overall cost of Medicare is going to INCREASE because of the sheer number of recipients moving into eligibility for the program.  We may be able slow the growth in cost ("bend the cost curve") relative to projections, but we will not be able to make it less expensive overall. 

That is the reality.  That is the budget challenge, it seems to me. 

Ezra Kline (Washington Post) has a post on this topic (where I got the idea) and has this paragraph that highlights the issue for me:

"...There’s a reason that policymakers prefer to talk about health-care costs than old people. If the problem is just rising costs, then perhaps there’s some cost control “silver buller” — maybe premium support, or paying for quality rather than service — that will cut costs without hurting anyone. But if the problem is more people, then the answer, really, is higher taxes, lower benefits, more debt or some combination of the three..." (emphasis/underline mine)

Why are women obtaining college degrees at a much higher rate than men? Do the guys need a little extra help??

I saw this graphic in an article at The Atlantic illustrating the "colleg degree gap" between men and women in cities/metropolitan areas around the US.  The article is very interesting. Worth a read.

I have to admit, the disparity took me a bit by surprise.  As of 2011, as a percentage, women earned 27% more college degrees than men earned (36.1% - 28.4%/28.4% X 100). That seems statistically significant, even to a high school economics teacher.

What are the social implications, if any, of this trend? Do we need more Affirmative Action policies for men from all the groups listed below? 

Source: The Atlantic

My simple explanation of what a "Tax Expenditure" is---this is a term you WILL hear more about in the coming weeks as we approach ANOTHER budget crisis.

My take on the difference between a Tax Expenditure and a Government Expenditure.  This stuff tends to hurt most peoples brains BUT the distinction matters because it is a BIG topic of discussion with Congress and the President as they attempt to tackle our Federal budget problem(s).

(When I refer to "Government" below, I am referring to the Legislative and Executive branches because they determine taxing and spending policy)

You earn $1,000 in income.  Government taxes that income at 10%.  You pay $100 in taxes. Government then spends that $100 on a program to promote clean air.  You are taxed and the government spends it--- a straight up "Direct Government Expenditure" towards a policy goal).

Alternative scenario.

You earn $1,000 income. Government taxes that income at 10% and you owe $100 in taxes. Assume at this moment the Government has your $100.  Instead of spending it directly on a program to promote clean air, government returns it to you in the form of a $100 tax credit for buying a hybrid car to promote clean air.  You have your $100 back to spend on something specific.

This is referred to Government spending (to accomplish a goal they COULD do themselves with the tax revenue) through the Tax Code---or more simply, a "TAX EXPENDITURE" 

A Government Expenditure is when government taxes you and spends the money directly to achieve a policy goal.

A Tax Expenditure is when the government forgoes the tax revenue it WOULD HAVE collected from you and though tax credits and/or deductions allows you to spend it on a specific thing to achieve a policy goal.

Below is a list of the most expensive and popular Tax Expenditures.  The numbers to the right represent the amount of tax revenue forgone by the Federal government because of the granting of various tax deductions and tax credits to achieve various policy goals. (number is "billions of dollars")

Source: Business Insider

Dramatic graphic on the decline of teen driving. This trend saves fuel AND lives

 

I have had a couple of posts recently regarding the decline of fuel demand in the US and one of the contributors is a decline in the desire of today's teen to get a drivers license.  Just saw this graphic today in the LA Times that accompanies an article about this trend:

Source: LA Times

In the 16 to 19 year old  range that is quite a dramatic decline.   According to data from the Federal Highway Agency, there were 9.1 million 16 to 19 year olds with drivers licences in 2010 and 11.2 million in 1983. That is a decrease of 2.1 million 16  to 19 year olds on the roads of America in the last 30 years.

 

I was curious as to how this downward trend might affect traffic deaths in this age range over this same time period.  I found this graph:

Source: HERE

Seems like evidence that the decrease in the number of teen drivers is the contributing factor in the decline in teen traffic deaths.

In doing cursory research (meaning just google searches) most government agencies cite many reasons for the decline in teen traffic accidents. Most often they take credit for various initiatives they have undertaken to educate teens on the dangers of driving or additional laws and enforcement.

Maybe. But maybe not.  Perhaps cultural changes are more influential, as the article suggests.

Maybe is is just the emergence of the Smartphone.  Needs fewer oil changes, I suppose.

See here how Google gets its employees to make healthier eating choices without the heavy hand of force. Are you listening NYC Mayor Bloomberg?

Below is an except from a recent article in the NYTIMES on Google's corporate work structure, or lack of it.  This passage I found interesting (HT: Marginal Revolution for the prompt) because it employs behavioral economics to "nudge" people, of their own free will, to a desired outcome. 

"...In keeping with a company built on information, this seeming spontaneity is anything but. Everything has been researched and is backed by data. In one of the open kitchen areas, Dr. Welle pointed to an array of free food, snacks, candy and beverages. “The healthy choices are front-loaded,” he said. “We’re not trying to be mom and dad. Coercion doesn’t work. The choices are there. But we care about our employees’ health, and our research shows that if people cognitively engage with food, they make better choices.”

So the candy (M&Ms, plain and peanut; TCHO brand luxury chocolate bars, chewing gum, Life Savers) is in opaque ceramic jars that sport prominent nutritional labels. Healthier snacks (almonds, peanuts, dried kiwi and dried banana chips) are in transparent glass jars. In coolers, sodas are concealed behind translucent glass. A variety of waters and juices are immediately visible. “Our research shows that people consume 40 percent more water if that’s the first thing they see,” Dr. Welle said. (Note to Mayor Bloomberg: Perhaps New York City should hide supersize sodas rather than ban them.)..."---NYTIMES
 

Google is employing a technique called "Choice Architecture" as developed by Economists Cass Sunstein and Richard Thaler in their book "Nudge: Improving Decisions about Health, Wealth, and Happiness

Choice architecture describes the way in which decisions are influenced by how the choices are presented. It is in arranging the choice architecture in a certain way that individuals can be nudged in a certain way without taking away their freedom of choice. A simple example of a nudge would be placing healthy foods in a school cafeteria at eye level, while putting less healthy junk food in harder to reach places. Individuals are not prevented from eating whatever they want, but the arranging of the food choices in that way has the effect of decreasing consumption of junk food and increasing consumption of healthier foods.---Wikipedia

.Re-read the initial passage.  Recognize the concept?

There are ways to get people to do what you would like them to do without force, real or perceived.

This kind of thinking could help create better policies and more cooperation.

This is a GREAT example of how COOL Economics can be (is).  :)

Demand for gasoline is down and fuel efficiency is way up. Who gets the credit? See the answer here...

I may be suffering from a mild case of the "correlation is causation" fallacy, but the other day I posted the second graph you see below and suggested fuel efficiency was one of the factors in "demand destruction" of fuel consumption in the US. 

Today, I saw this graphic posted at Quartz that shows the change in fuel efficiency in Miles Per Gallon (MPG) change for cars and trucks over the last 35 years.  After a 20 year decline in efficiency from 1985 to 2005, efficiency shot up (yellow highlight).

Which auto manufacturers are leading the charge in making fuel efficient vehicles?  Scroll down, I will meet you there....

Source: Quartz

Surprised?  Probably not.  The first 7 out of the 11 listed are "foreign" manufacturers (not that there is anything wrong with that!).  They all have a significant manufacturing presence in the US, so it is all good.  :)