The Chicago MSA should look just like Sweden in terms of economic and social outcomes in theory. Why doesn't it in practice?

The WSJ has a nice chart ranking countries Gross Domestic Product (GDP) and inserting the Gross Metropolitan Product (GMP) for various regions in the US.  In other words, they are comparing a whole countries value of their production to the value of production for specific geographic regions in the US.

For instance, the GMP for the Metropolitan Statistical Area ("MSA") for Chicago and its environs (Joliet, Naperville, Il-In-WI)  in 2012 was $571,000,000,000.

The Gross Domestic Product for Sweden in 2012 was $525,700,000,000.  

Pretty close to each other in output value. I wondered how this worked out on a per capita (per person) basis.

The population in the Chicago MSA was 9,522,434 in 2012
The population of Sweden was 9,577,000 in 2012. (Wow! Almost identical populations)

The Gross Metropolitan Product PER PERSON the Chicago MSA was $57,695
The Gross Domestic Product PER PERSON in Sweden was $54,892

The dollar value of output per person is actually HIGHER in the Chicago MSA.

BOTH get lots of snow in the winter. Both have pretty good hockey teams.

But that is where most of the similarities end when it comes to the way people think about the two places, especially in terms of social outcomes.

Why would that be?

Only in the ObamaCare discussion: Numbers are difficult. When some = millions and when millions = some. Math is hard for ideologues.

I read A LOT of stuff from the different perspectives regarding the "Obamacare" official roll-out.

Language is important and here is something I find curious, but not surprising.

Liberal commentators/writers refer to the number of people getting cancellation notices as "some" or "JUST 5% of the population!!!", which is, of course, millions of people (are we not "equal"?)

Conservatives commentators/writers emphasize the "MILLIONS!!" who may (or may not) lose their current policies and pretty much ignore the millions of uninsured and/or un-insurable. (Opps, where did they go??)

It is a minor point but just something I picked up on in the discussions.  Put your ideology aside and listen for yourself.  I believe you will hear it a MILLION TIMES (or 5% or the time).  Choose your quantity.   :)

I like sports that produce winners and losers, but I don't like Federal polices that do the same thing.

Can't we do stuff that merges one-sides "Millions" with the other sides "5%"?  Rhetorical question....

US production of oil exceeds the import of oil for the first time since 1994. This is either "Fracking" good news or bad news...

Depends on your opinion of Fracking.

The RED line represents imports of oil. The BLUE line represents domestic (US) production of oil.

The  RED line and the BLUE line cross circa 1994 and 2013.

In between these two time periods,  imports of oil are greater than the domestic production of oil.  It is hard to see, but 137,000 more barrels a day the U.S. produced than it imported in the week ending Nov. 8, 2013.  (the tips of the lines cross on the far right).  There are 42 gallons in a barrel.

Source: Wall Street Journal

If you were to add domestic production and imports at each of those two intersect points you would have roughly 14 million barrels per day in 1994 and  about 16 million barrels per day in November of 2013.

We are producing more ourselves (good and bad there) and consuming more overall on a daily basis (good and bad there, too). In fact, 14.3% more.

FRACK!! (insert your own tone and emphasis).

List of the 50 Greatest Breakthroughs the world has seen and why they become insignificant as time passes.

The Atlantic has compiled a terrific list of "The 50 Greatest Breakthroughs Since the Wheel". 

I encourage you to read the article associated with the list. The author does nice job of creating over-arching categories that each of the breakthroughs fall into. Notice a common word?:

1. Innovations that expand the human intellect 

2. Innovations that are integral to the physical and operating infrastructure of the modern world 

3. Innovations that enabled the Industrial Revolution 

4. Innovations extending life 

5. Innovations that allowed real-time communication beyond the range of a single human voice 

6. Innovations in the physical movement of people and goods 

7. Organizational breakthroughs that provide the software for people working and living together in increasingly efficient and modern ways

All/most of the breakthroughs identified came about as a result of MANY small innovations and discoveries aggregated over time and allowed the  "Big Idea/Product" to eventually emerge. This is an under-appreciated aspect of the process by which these game-changing ideas and products come about.

While all the items of the list stand prominent by themselves, they pale in comparison to the "spin-off" ideas and innovations that were spawned as a result of the initial breakthrough.

Think of electricity and its eventual democratization ("cheapened",or scaled, so it is available to the masses) and how it allowed the proliferation of seemingly infinite new ideas and products.  Electricity is now an afterthought and its significance is virtually lost in the process as time passes.

If you look at the list you can substitute anyone of the identified 50 breakthroughs with the word "electricity" in the above paragraph and come to the same conclusion.

Eerie, isn't it?

"Remittances" to Latin America are 8 times more than foreign aid to that region. That has to be good, right? But what the heck is a Remittance?

An important topic we cover in AP Macroeconomics is "Balance of Payments". This is an accounting of the flow in the trade of goods and services, factor payments on interest or dividends paid or received, certain transactions involving the buying and selling of physical and/or financial assets, and subsets of other transactions that occur across borders.

According to Pew Research:

""Remittances are a larger source of money to Latin America than official foreign aid. In 2011, when foreign aid to Spanish-speaking Latin America nations totaled $6.2 billion, formal remittances were more than eight times that—$53.1 billion. 

Wow! That is amazing? Oh, wait, you don't know what a "Remittance" is? That's ok. I will help you out.

Remittances are cash transfers (or it could be non-cash assets) that migrants to a country send back to their home country.  For example, a Mexican migrant in the US works, earns money, then sends a portion of it back to Mexico to his or her family.  It also works in reverse. An American migrant in Mexico sends money back home to the US.  Hence, a "Net value" is obtained---The amount leaving the country versus how much is coming back.

In the US Balance of Payments in 2012 net remittances from all countries were -$79,913,000,000 (negative $79.913 billion).  This means there was a net OUTFLOW of dollars from the US to foreign countries.

By comparison, TOTAL foreign aid by the US to the rest of the world was approx $54 billion in 2012. Remittances earned in the private sector play a larger role than foreign aid financed by tax dollars.

Pew Research has a new study out showing the effect of remittances to Latin America.  The study can be found HERE but I am posting a couple of interesting graphs for your viewing pleasure.

As you might expected due to geographic proximity, most of the remittances are earned in the US.


Mexico is by far the country that receives the most remittances.  A little over $20 billion whereas the rest of Latin America/South America takes in a little over $30 billion.



However, the total effect on the recipients economy, as measured by the impact the remittance has on the nations GDP, is not equal. El Salvador, Honduras, and Guatemala (as percent of their GDP) are highly dependent on this source of income.



Remittances and Foreign Aid are just two sources of US dollars to Latin America. For example, this does not count charitable donations, religious or non-religious.

Even the SNAP ("Food Stamp") Program has a Wall Street Connection. Mind Blown...

This from the Wall Street Journal Today:  

"Wal-Mart estimates it rakes in about 18% of total U.S. outlays on food stamps, or about $14 billion of the $80 billion the U.S. Department of Agriculture says was appropriated for food stamps in the year ended in September 2012."

Food Stamp (now called SNAP, are not actual paper stamps anymore  but a Debit Card) benefits were recently "cut" by approx. 5.5%.  This means Walmart, ceterus paribus, will potentially lose about $770 million in sales.

This led me to wonder how other companies might be adversely affected by the cut in the program. Found this from HERE (list not exhaustive):

All of them made sense to me. They are in the wholesale/retail food or drink business.  BUT, what does JP Morgan have to do with the SNAP program?

Led me to this graphic of the SNAP hierarchy and how the program is administered (found HERE).

I learned that JP Morgan (a big financial institution) is a major "middleman" in the program and they contract with 24 States to administer the program. I did not know this and assumed it was directly administered by the Federal Govt (Ag Dept).

 It pays handsomely to be one of these contractors.  JP Morgan earns a monthly fee for EACH SNAP recipient is anywhere from $.65 to $1.45 (it depends on the State they contract with).  They earn additional revenues on the rental of the machines retailers use to process SNAP cards, as much as $14.95 per month,per point of sale machine.

I am not making a judgement about this relationship.

I just did not know about it before.  If you didn't, well, now you do.  Hope it helps. :)

Half of the Trade Deficit in September was from Oil Imports. Is this good thing? Bad thing? Or is just "a thing"?

Below is a graph (which I modified for instructional purposes) from Calculated Risk.

It shows the MONTHLY status (deficit or surplus) in the trade of goods and services that the US has with the rest of the world. It does not include ALL items accounted for in the Current Account of the Balance of Payments, but most of it.  We would call this "Net Exports" in our GDP equation (C + I + G + N(x)).

The gap between the RED line and the Blue line represents the value of imported oil in a particular month (not inflation adjusted as far as I know).

This graph is useful in showing the significance of oil in international trade.  As you can see, in September the dollar value of oil imported into the US was approx $20 billion.  That accounts for about 50% of the trade deficit in September.  Yes, just one commodity albeit an important one.

This graph also gives a nice perspective as to how dependent we are on "foreign oil" at any particular time. For the most part that means Canada and Mexico where we get a majority of our imported oil.

Oil imports usually increase during good economic times and decrease during bad. The BLACK line generally shows this---trends up during recessions, down during non-recessionary period(s).

However, in the last couple of years it has trended up DURING the economic recovery from the Great Recession.  How can that be?

That is the question for you.  There could be multiple reasons. Any guesses??

The phrase "Do you want fries with that?" will not be uttered by a human being in 10 years. It will just be a button on an order pad.

When Businesses allocate their investment dollars (presumably from profits) one of the major things they look at is the price of labor relative to the price of physical capital they can deploy in their operations. Both can be assigned a dollar value on an hourly basis---how much it costs to hire, train, and offer benefits to a worker versus the use a machine/technology in a 60 minute time span.

There are lots of explicit costs (money costs) and implicit costs (how employees/customers are affected) that go into this consideration. The cost of technology to do "routine jobs"  has fallen tremendously just in the past 10 years and the closer it gets to the cost of employing a unit of human labor the more likely it is to be used as a substitute for labor.

Here is an example of "technology creep" into lower skill level of the work force.  What has happened to mid-wage manufacturing is coming to the retail/service sector.

Do we still think it is a good idea to raise the minimum wage and make it competitive with technology? The issue is more complex then is promoted in populist circles. More thought and consideration is needed on this issue than I see taking place.

Bolt Burgers: the most high-tech burger you’ll ever order, coming soon

No restaurant in D.C. has been better outfitted for the iPhone generation than the forthcoming Bolt Burgers. It is a restaurant full of screens -- touchscreen systems for ordering your food and making your drinks, tablets at every table, and a 16-foot-wide projected TV screen to watch while you wait for your order.

You can order food without having a single interaction with another human being, which, for millennials who prefer texting and online ordering through Seamless to picking up the phone, is a major plus.

How many foreign students study in the US? Where do they study? What do they study? All these questions I KNOW you have wondered about are answered HERE!!

It is well known that the US offers some of the best higher education opportunities in the world. The latest report from the Institute of International Education has a great deal of profile data on foreign students studying in the US (and US students studying abroad).

Below is some of that data I thought interesting and that most people would not know.  Now you will!

In raw numbers, China sends the most students to US colleges and universities.  They represent 29% of the total.  You can see the drop off after that.

Here are the colleges/universities that are the most receptive to the inflow of foreign students. Northern and Midwestern institutions are favored by foreign students, for the most part.

What do they study?  I was actually surprised that "Business and Management" was first on the list. However, if you combine Engineering and Math/Computer Science, and Physical/Life Sciences, then the "STEM" majors dominate.

Finally, how do foreign students pay for their US education?  Like most students in the US, parents/family are the primary source by far.  

Check out the "Fast Facts" from the study. Lots more information on this interesting topic.

Jobs report out today!! Still creating too many lower wage, lower benefit jobs relative to the whole. However, I DID find a bright spot...

The latest jobs report is out (October 2103).  About 204,000 jobs added in October (2013). It surpassed expectations. In the first graphic below are the major categories jobs are slotted into.  I highlighted categories where the job gains were the largest.

One encouraging sign is under "Professional and Business Services" is only 3,300 of the 44,000 jobs created were of the Temporary type. The ratio of  number of "Temporary Help Services" jobs to the total is much lower compared to the previous reporting periods you see listed. It was 17% a year ago (9,000/53,000) and 7.5% (3,300/44,000) in October 2013.  It certainly nets out much better compared to August and Sept of 2013.  Hey, I am trying real hard here to find a green shoot.

Fewer Temporary workers, more Full-time employees.  That is a signal of SOME confidence in the economy on the part of businesses in a category that employs people in higher wage jobs, for the most part. See the image below the jobs number for the major categories of jobs that fall under "Professional and Business Services".

The number of Retail and Leisure/Hospitality jobs created at this time does not really impress me THAT much.  They are generally lower wage, lower benefit jobs.  While it is nice to have them, when one looks at the overall employment picture you want to look not only at the quantity of jobs but the quality of them as well.

Nice graphs showing trends in GDP and the Labor Markets...

Here some valuable metrics that give some perspective on the state of the economy and its short and long(er) term prospects.  These are unusual in that they give a band (shaded BLUE) for margin of error. Having just studied GDP and Unemployment in class, the top right and bottom right graphs are very helpful.

Source:  Wonkblog

Micheal Bloomberg has a soul mate in North Dakota in his fight to rid the world of fat kids.

I see NY Mayor Michael Bloomberg has a soul mate to help him rid the world of rotund people.

A woman in Fargo, North Dakota, said in a radio interview Tuesday morning that she plans on handing out fat letters to kids she considers “moderately obese” instead of candy this Halloween 

“I just want to send a message to the parents of kids that are really overweight,” she told Y-94. “I think it’s just really irresponsible of parents to send them out looking for free candy just ‘cause all the other kids are doing it.” 

In the letter, the woman, identified only as Cheryl, tells parents that it takes a village to raise a child. 

“I’m contributing to their health problems and really, their kids are everybody’s kids. It’s a whole village,” she told Y-94.

From The Washington Times. 

If you like old pictures and ones that tell an economic story, then check this out!

I love old pictures like this one (found HERE with others of early American time periods) for a lot of reasons, but since I am an economics teacher I found the prices of Lemonade (10 cents), Peanuts and Oranges (5 cents) the most interesting.  (Photo is of Las Vegas, Nevada in 1905)

I wondered what those prices would be in current dollars (or cents).  While not a perfect measurement, I used  inflation calculator from HERE and  determined that peanuts and oranges that cost $.05 in 1905 would cost $1.26 in 2012 and a cup of $.10 lemonade would cost $2.54 as measured in current dollars!  Seems kind of expensive and I believe would be considered "luxury goods" in 1905.  

The average wage in 1905 was $.22 per hour.  It would take 23% of hourly income to buy and orange ($.05/$.22 X 100).  Today the average wage is about $20.00 per hour. An orange costs about $.20. A worker today would spend 1% of hourly income to buy an orange ($.20/$2.00 X 100).  Perspective.  Not a perfect measure of standard of living but a reference point.

Interesting to note these items look like they are being sold by the bank itself. Makes sense. That is where the money is, literally and figuratively.

Who owns the Federal Reserve Bank of the United States? Good question that is sort of answered here...

Here is a nice primer from an independent source as to who (or what) "owns" the Federal Reserve Bank of the US ("The Fed" for short).  It is considered a "quasi-governmental" institution---a hybrid privately owned bank with heavy government oversight.  However, the lines are not really all that clear as to where one stops and the other starts.

"...But the Fed is a weird entity when it comes to “ownership”.  It exists due to an act of Congress.  But it is also considered an independent entity because it is not part of the Executive or Legislative branches of government.   The Fed exists because Congress created it, but it doesn’t enact policy measures with any Congressional or Presidential approval.  Politically, this makes it a very independent entity..."

An excellent supplement to the AP Macroeconomics unit on Monetary Policy.

Go HERE to read the whole thing...

Nice graphic on the rise of bottled water and the demise of soft drinks. However, one question remains unanswered...

The NYTIMES has a nice article on the rise of bottled water use and the demise of soft drinks in the US.

"...But bottled water is washing away the palate trained to drain a bubbly soda. By the end of this decade, if not sooner, sales of bottled water are expected to surpass those of carbonated soft drinks, according to Michael C. Bellas, chief executive of the Beverage Marketing Corporation.
“I’ve never seen anything like it,” said Mr. Bellas, who has watched water’s rise in the industry since the 1980s..."

It is a useful example to teach supply and demand, specifically two determinants of demand---a change in consumer preferences and the availability of substitutes.  At a given price the quantity demanded for bottled water is more than is was before and for soft drinks it is less than what it was before. The demand curve for bottled water shifts to the right and to the left for soft drinks as consumers change their preferences for a drink with less sugar, and water is a viable substitute to quench a thirst.

Here is a graphic that accompanied the article showing the movement in the market for the two categories of drink.

I think it is interesting to note that while the consumption of bottled water has leveled off since 2007-08, the consumption of soft drinks has continued to decline, even post-recession.  What are people drinking? The population has increased over this time period.  Are people wising up and just drinking what comes out of the facet for pennies on the dollar? What do you think?