• Weekly Roundup The econlife.com economics news summary

    Weekly Roundup: From Sweden’s Tax Evaders to Libya’s Safe Crackers

    May 20 • Behavioral Economics, Demand, Supply, and Markets, Economic Debates, Economic Growth, Economic History, Financial Markets, fiscal policy, Government, Health Care, International Trade and Finance, Labor, Macroeconomic Measurement, Money and Monetary Policy, Regulation, Thinking Economically • 46 Views

    Weekly News Roundup

    weekly roundup and tax evasion Sunday 05.15.16

    How tax evasion in Sweden and Italy differ…more

    bank vault Libya oil price Monday 05.16.16

    Libya’s safe cracking problem…more

    weekly roundup and Greek bailout Tuesday 05.17..16

    Why Greek debt is here to stay…more

    Weekly roundup and Single-payer healthcare plan Wednesday 05.18.16

    Deciding if single-payer healthcare is worth the cost…more

    Weekly roundup and Cheese glut Thursday 05.19.16

    The problem that U.S. cows have created…more

    Weekly roundup and Behavioral nudges and apple slicing Friday 05.20.16

    The economics of sliced apples…more

    Ideas Roundup

    • behavioral economics
    • fiscal policy
    • taxes
    • social norms
    • externalities
    • monetary policy
    • currency
    • GDP
    • sovereign debt
    • unemployment
    • opportunity cost
    • supply and demand
    • foreign exchange
    • incentives

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  • Weekly roundup and Behavioral nudges and apple slicing

    Why We Eat Sliced Apples

    May 20 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Economic Thinkers, Government, Innovation, Labor, Lifestyle, Regulation, Thinking Economically • 53 Views

    We were eating fewer apples until we started slicing them.

    The impact of behavioral nudges on apple consumption

    Where are we going? To behavioral nudges.

    Apple Sales

    Economists from Cornell wondered why elementary and middle school students were not eating their apples. Cafeterias had tried making them cheaper but sales had not increased. When schools implemented the FDA mandate to include some fruit in every lunch, the kids threw it out.

    The Cornell group suspected the problem was that an apple is tough to eat. For smaller children with braces it can be uncomfortable and messy. Meanwhile, middle schoolers–especially the girls–could feel uncomfortable chomping into an apple.

    Suspecting that the children might feel very different about sliced apples, the Cornell group arranged for three school cafeterias to receive commercial slicers that they used on every student’s apple while three other schools served as a control. The results were unequivocal. In the schools with the slicers, daily average apple sales were up 71% and, with 73% of the children eating more than half an apple, waste was way down.

    Our Bottom Line: Behavioral Nudges

    Economists would call apple-slicing a nudge. Defined as decision-making approaches that “steer people in a certain direction,” nudges relate to economics because they can affect our demand curves and government regulations. Hoping to shape behavior, the British and U.S. governments have even appointed nudge units.

    The economist who served on President Obama’s nudge unit shared a list of nudges that push us toward (what they believe is) optimal decision-making. These are several:

    1. default rules  (automatic enrollment)
    2. simplification
    3. use of social norms (“Everyone is doing it.”)
    4. more convenience
    5. pre-commitment strategies
    6. reminders

    Is #2 or #4 the nudge that encourages apple-slicing?

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  • Weekly roundup and Cheese glut

    What To Do About Our Cheese Glut

    May 19 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Financial Markets, Government, International Trade and Finance, Labor, Thinking Economically • 62 Views

    Looking around the world, the biggest cheese consumers include France, Iceland and Germany. Meanwhile, in Japan, South Korea and South Africa, a cheese lover might be hard to find.

    Annual Per Capita Cheese Consumption/Selected Countries (2014)

    Cheese glut and national consumption

    From. Canadian Dairy Information Association

    Although we are relatively big cheese eaters, still the U.S. has a cheese glut.

    Where are we going? To the power of supply and demand.

    The Cheese Glut Story

    Our story starts on a farm in St. John, Michigan. Observing skyrocketing milk prices in 2014, Carla and Kris Wardin expanded their cowherd from 250 to 400.

    When milk production rises, so too does the amount of cheese we make. Meanwhile, cheese had become increasingly popular at home and was selling well in foreign markets. But then, the dollar strengthened, cheese exports became relatively expensive and cheese imports, cheap.

    You can see where this is going. Combine more cows, more milk, more imports and declining foreign sales and it all adds up to a cheese glut. Even this year, because record milk production is projected, cheesemakers will be adding to what they already have in cold storage. (Frozen cheddar can be stored for years but not feta.)

    Our Bottom Line: Supply and Demand

    It’s classic supply and demand.

    This is where prices moved. You can see 2014 highs and then the slide.

    Cheese glut and cheddar price history

    First we have the price of cheese rising because of a surge in demand:

    Demand increase for cheese

    But then, by the end of 2014, supply goes up while demand starts to decrease. Where the orange lines intersect, you can see a lower equilibrium price:

    Cheese glut and prices

    What to do about the glut? We might have to eat three more pounds of cheese a year.

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  • Weekly roundup and Single-payer healthcare plan

    The Cost of a Single-Payer Healthcare Plan

    May 18 • Businesses, Demand, Supply, and Markets, Economic Debates, Government, Health Care, Macroeconomic Measurement, Thinking Economically • 75 Views

    Asked to identify countries with a true single-payer healthcare plan, you could name just two. Only in Canada and Taiwan do we have the government paying the medical bills and setting the prices.

    Where are we going? To the costs of the single-payer system.

    Taiwan’s Single-Payer Plan

    Started in 1995, Taiwan’s National Health Insurance (NHI) includes “outpatient visits, inpatient care, dental care, traditional Chinese medicine, renal dialysis, and prescription drugs.” Also according to a Brookings Report, everyone has access to the same care and benefits that taxes on payroll as well as additional income like dividends and bonuses fund.

    The system’s advocates point out that the life expectancy for men is 76.69 years, for women, 83.25 years, and cost is relatively low:

    Single-payer healthcare plan cost in Taiwan

    From: Brookings

    But you can see the varied grades that the system has received for healthcare quality:

    Single-payer healthcare plan in Taiwan

    From: Brookings

    Looking more specifically at the patient experience (D grade in previous table), the following data on time spent with a doctor provides some insight:

    Single-payer healthcare plan Taiwan evaluation

    From: Brookings

    Our Bottom Line: Single-Payer Healthcare Plan Costs

    Defined economically as what we sacrifice, the cost of eating pizza is the turkey sandwich we might have eaten for lunch and the cost of awakening early is an extra hour of sleep.

    Similarly, the cost of a single-payer plan is about a lot more than money. Yes, it takes us to the dollars we would spend but also what we sacrifice. In a recent study from the Urban Institute, the U.S. “cost” for a single-payer plan would involve incentives for medical care providers, patient coverage, hospital stays, the existence of insurance companies, pharmaceutical firm profits, the federal budget, the federal bureaucracy, time with a doctor…the list is endless.

    So when pondering a politician’s healthcare proposal or a slice of pizza, an economist would always remind us that there is no free lunch.

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  • weekly roundup and Greek bailout

    A Greece Update in 4 Graphs

    May 17 • Businesses, Demand, Supply, and Markets, Economic Debates, Economic Growth, Economic History, Financial Markets, fiscal policy, Government, International Trade and Finance, Labor, Lifestyle, Macroeconomic Measurement, Money and Monetary Policy, Thinking Economically • 55 Views

    Because of new taxes required by the latest Greek bailout, coffee drinkers will soon have a 20% price hike.

    Where are we going? To an economic update for the fourth bailout.

    Excessive Debt

    Just like you can judge whether the mortgage on your home is too large by comparing it to your income, you can decide if a country owes too much through a debt to GDP ratio.

    Quite high for the EU (below), Greece’s debt to GDP ratio was 176.9 for 2015:

    Debt that led to Greek bailout

    From: NY Times

    A Weak Economy

    Meanwhile, the Greek economy had a declining GDP during two of the past three quarters and high unemployment.

    GDP growth during the past 12 months:

    Greek bailout and recession

    Unemployment during the past 12 months:

    Unemployment and bailout

    Our Bottom Line: An Austerity Debate

    When you think of the debt that is due, please return to the numerator and denominator of the debt to GDP ratio.

    Bailout needed for Greek debt

    From: WSJ

    The goal is for the debt to GDP ratio to decrease, ideally with a larger denominator. However, targeting less spending and higher taxes, the terms of the fourth bailout focus on the numerator. Some economists say the numerator focus is the reason that Greece’s GDP is declining, unemployment remains high… and coffee will be much more expensive.

    But that takes us to the austerity debate, a topic for another day.

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