• Everyday economics and inaccurate Greek statistics

    The Dangerous Side of Economics

    Mar 27 • Behavioral Economics, Economic Debates, Economic Growth, Economic History, Economic Thinkers, Financial Markets, fiscal policy, Government, International Trade and Finance, Labor, Macroeconomic Measurement, Regulation, Thinking Economically • 90 Views

    Greece’s chief statistician could again wind up in jail.

    Georgiou’s “Crime”

    Brought in during 2010 to overhaul the Greek statistics office, Andreas Georgiou, a former IMF official, concluded that his country’s deficit was bigger than had been reported. While an initial revision inflated the deficit from 3.7 percent of GDP to 12.5 percent, Mr. Georgiou took it further to a whopping 15.8 percent–a record eurozone level.

    As you know, the impact on the country was calamitous. Georgiou’s revised deficit and GDP figures necessitated an unheard of discipline in order to secure the bailout loans it needed from the international community. Gargantuan government spending had to be cut, government employees fired, government pensions slashed.

    Although everyone knew they were fudging the numbers, still the Greek government used them to show they met eurozone requirements. In 2011, because Georgiou injected some reality, he was brought to court and accused of “breach of faith” and aiding the creditors. Or as he said, “I am being prosecuted for not cooking the books.”

    But they did not prosecute him, he remained at the statistical office, and the controversy seemed to fade away…until now. With a new left wing government, the courts have again contacted him. Several weeks ago, he was summoned by prosecutors, a sign that he could be tried in court.

    All because of the deficit.

    Greek budget deficit history.

    Our Bottom Line: Benford’s Law

    During the 1920s, Frank Benford, a physicist at GE, noticed that “one” appeared more frequently as the first digit of a number. To test his thesis, he accumulated random lists. He was said to have noted all of the numbers in an issue of Reader’s Digest. He went through demographic and scientific data. Finally he calculated that #1 was the first digit in 31% of the numbers, #2 for 19%, and #9 was the first digit in only 5% of all of his numbers.

    The current relevance of Benford takes us to Greece. Providing a clue that something was fishy,  just before Greece joined the euro in 2001, its deficit statistics deviated considerably from Benford’s Law.

    And finally, I never can leave a story about Greece without Merle Hazard’s “Greek Debt Song.”

     

    No Comments

    Read More
  • Seasonable shopping and the growing economy.

    To shop, or not to shop…

    Mar 26 • Perspectives • 77 Views

    No Comments

    Read More
  • Everyday economics and adding an interior slippery surface to a container is an innovation that will save time and lessen waste.

    The Connection Between a Killer Plant and Elmer’s Glue

    Mar 26 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Economic Growth, Economic History, Economic Humor, Environment, Households, Innovation, Lifestyle, Thinking Economically • 101 Views

    Our story starts with a carnivorous pitcher plant that has a slippery surface. Insects land on its rim, sniff the nectar inside and too late discover they have no traction. You can guess what happens next as they slide to their demise.

    The Nepenthes Pitcher Plant

    Positive externalities from the concept of the pitcher plant.

    From: Botany.org

    Inspired by the pitcher plant, a group of scientists at Harvard created SLIPS: “slippery liquid-infused porous surfaces.” Or as they explained, “We call it SLIPS, because everything does.”

    The Ketchup Connection

    The same concept is about to affect our glue. An oxymoron, yes, a non-stick glue container will be available. The basic idea is that the inside of a container prevents us from using all that it holds. Now, with a slippery coating that a startup, LiquiGlide, has licensed to Elmer’s Products, all of the glue (like insects in a pitcher plant) should slide out of the bottle.

    Soon, LiquiGlide tells us, we can eliminate our struggle to empty the mayonnaise jar, our toothpaste tube, and Heinz might no longer be the slowest Ketchup in the West.

    Probably from the 1970s:

     Our Bottom Line: Positive Externalities

    Positive Externalities and getting more out of containers.

    From: WSJ “The Last Drop”

    A ripple of benefits, the positive externalities that slippery containers will create relate to time, waste and efficiency.

    They also return us to the unexpected origins of good ideas.

    2 Comments

    Read More
  • Everyday economics and Sunday shopping productivity

    Why We Need Sunday Shopping

    Mar 25 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Economic Debates, Economic Growth, Economic History, Entertainment, Government, Labor, Lifestyle, Macroeconomic Measurement, Regulation • 89 Views

    German Sundays are rather quiet. With loud noises banned, you can walk down a residential street without hearing a lawnmower or a leaf blower. German law also prohibits supermarkets, department stores and most other retailers from opening. You cannot even get into a laundromat.

    Like Germany, France too limits Sunday business. French courts have told a home improvement chain store to close 15 locations on Sundays and Sephora was ordered to lock up its Champs-Elysée flagship store at 9 pm on Sunday rather than midnight. As you might expect, store owners resent losing business that could add 15 or 20 percent to their bottom line especially since employees, paid three times their normal hourly rate on Sundays, are happy to work. But they also say Sunday rules are okay if everyone complies.

    Where are we going? To how the length of the work week matters.

    More Sunday Shopping

    In France, a sluggish economy appears to have created a tipping point. With the French economics minister saying Sunday business is necessary for economic growth, his government has pushed through legislation that chips away at the Sunday rules. Projected to be a reality by next Christmas, the new regulations extend the number of businesses with permission to open on Sundays.

    I suspect we could say that the camel’s nose is in the tent. More than just a law, permitting Sunday shopping represents a cultural shift toward working harder and longer hours.

    Our Bottom Line: the Work Week

    We might have some irony here. Looking back at U.S.history, we have to go back to the 1920s when Henry Ford became one of the first U.S. employers to implement the five-day work week. Five days became viable only after work hours declined from a 60 to 70 hour average during the 19th century to 50 hours by the 1920s.

    The difference was how long we had to work to pay for our necessities. In 1918, close to one hour of work would get us a dozen eggs. Now, we just need a few minutes.

    Fundamentally though, it was all about more productivity enabling the length of the work week to shrink. With output and wages going up, both the supply and demand sides of labor markets–employers and employees– could agree on a shorter work week.

    Now though in France, the pendulum has swung too far in that direction.

    No Comments

    Read More
  • Everyday economics and March Madness is about big business.

    Following the March Madness Money

    Mar 24 • Businesses, Demand, Supply, and Markets, Labor, Sports, Tech, Thinking Economically • 95 Views

    “Several years ago, it was decided to ‘seed’ the best players through the championship draw in handicap tournaments so that the players in each class shall be separated as far as possible one from another.”

    American Lawn Tennis, 13 January 1898

    And so began the first recognized use of “seed.” When you seed a tournament, you make sure the playoffs will flower by scattering the best teams in the early rounds and weeding out the weakest. As a result similar “seeds” do not compete against each other until the end. The March Madness seeds were scattered so that #1 Wisconsin could start against #16 Coastal Carolina and #1 Duke played #16 Robert Morris.

    The seeding pattern enables a team to earn a unit for every game it plays except for the championship match. A team that makes it to the championship match usually gets five units. And that takes us directly to March Madness money.

    Where are we going? To the business side of March Madness.

    Following the Money

    The Teams

    $255,379 will be paid per unit by the NCAA to a team’s conference in 2015. If a conference has many winning teams, it receives more units than a less successful conference. The value of those units are then shared among all of the teams in the conference.

    The Coaches

    • $1 million plus paid to 35 college basketball coaches in 2014.
    • At $9.7 million, Duke’s head coach Mike Krzyzewski is at the top.
    • 30 percent of Division I athletic spending went to coaches and staff.

    The NCAA

    • $900 million in revenue from broadcast rights, “corporate partners,” tickets.
    Incentives from March Madness NCAA revenue

    From: NCAA

     

    You and me:

    • $9 billion (estimates vary considerably) in bracket bets.
    • $1.9 billion of unpaid or unproductive work time because 77.7 millions workers will have watched or been distracted by March Madness.
    • 94 million chicken wings purchased during 2014 March Madness.
    • 15 million hours related to March Madness on digital devices.

    CBS and Turner Broadcasting

    • $10.8 billion paid to NCAA for 14-year broadcast rights deal.
    • $1.5 million received per 30 second ad in 2014 (Super Bowl 2015 equivalent was $4.5 billion.)
    • $1 billion plus in ad revenue totals.

    Colleges:

    Basketball revenue varies considerably.

    The top:

    Incentives differ among NCAA March Madness school for dollar support.

    The bottom:

    Incentives different for March Madness bottom five.

     Our Bottom Line: Big Business

    Looking at the massive spending and revenue that relate to the NCAA, the teams, schools and coaches, the media and many of us, we can characterize March Madness as big business.

    No Comments

    Read More