• Because of new attitudes and economics, there is less supply of "marriageable" men and more valuable women in marriage markets.

    Why There is Less Marriage

    Oct 21 • Behavioral Economics, Demand, Supply, and Markets, Economic History, Economic Thinkers, Education, Gender Issues, Households, Labor, Lifestyle, Thinking Economically • 100 Views

    According to a recent Pew Research report, more of us are not married. In 2012 close to 20 percent of people 25 and older were not married. In 1960, the number was nine percent.

    Where are we going? New attitudes and economics have changed marriage markets.

    Attitudes

    More of us believe that it is okay not to be married.

    Pew asked survey participants whether they believed that society is better off with marriage. While the response was almost evenly divided, the age split was not. Younger adults tended to say that marriage was not crucial for society while those who were older disagreed. All though did agree that people who were planning to share an entire life together should tie that knot.

    Marriages markets are changing because of attitudes.

    Economics

    So, not only do we have less pressure from society to get married but also economic changes have transformed the incentives. Because of more education, higher wages and birth control, women can get married when they are older. Consequently, they are waiting longer and expecting more from the men they meet.

    The problem, as you can see below, is that fewer men have what women want.

    Marriages markets are changing because of economics.

    But it does depend on the city:

    Marriage markets in different cities

    From: Pew Research

     

    Supply, Demand and Marginal Utility

    This takes us to supply and demand.

    Considering that we have a lower supply of qualified men and we have women who have become “more valuable” because of higher pay and more education, supply decreases, demand increases and the equilibrium price for marriage rises.

    Explained by Nobel economics prize winner, Gary Becker (1930-2014), forget love and marriage. Instead think utility functions. People marry because they expect to “raise their utility level above what it would be were they to remain single.” Defining utility as welfare, economists could say that the marginal utility of marriage (each extra unit of welfare) has decreased.

    Our Bottom Line: Behavioral Economics

    Extending far beyond money and finance, economics uses tradeoffs, cost, utility and incentives to explain behavior.

     

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  • Ebola's impact on GDP is mostly from our behavior.

    The Ebola Impact on Economic Health

    Oct 20 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Developing Economies, Economic Growth, International Trade and Finance, Labor, Macroeconomic Measurement, Regulation, Thinking Economically • 166 Views

    Ships delivering grain to West Africa might refuse to dock because of the Ebola outbreak. The World Bank calls it “aversion behavior.”

    Most of the economic impact of an infectious disease outbreak might not be caused by the disease itself. Yes, people with an infectious disease may need public sector healthcare and, in the private sector, they and their caregivers can no longer go to work. However, for the SARS and H1N1 flu epidemics, the World Bank estimates that 80 to 90 percent of the economic impact was caused by changes in our behavior.

    The Economic Impact of Aversion Behavior

    With SARS and H1N1 and now Ebola, the fear of contagion has affected public and private decision-making. We can identify disruptions by looking at air, land and water travel, businesses and border policies.

    This map of air travel from PLOS, “Assessing the International Spreading Risk Associated with the 2014 West African Ebola Outbreak,” conveys an image of the possible lost connections to which the World Bank refers:

    Air travel from West Africa

    From: PLOS by Marcelo F.C. Gomes et al.

    In Sierra Leone, by September 1, the number of weekly flights plunged from 31 to 6. Among the country’s six hotels in Freetown with 490 rooms and 500 employees, two have closed. Responding to occupancy rates that plummeted from more than 60 percent to 13 percent, these hotels vastly diminished their work force. Correspondingly, airline staffing is way down as is demand for water taxis and ferries.

    You can also see (below) the precipitous drop in visitor arrivals:

    GDP impact of ebola relates to visitor decline

    From: World Bank

     

    Although the World Bank explained that quantifying aversion behavior is inexact, they conveyed its scope with domestic and international data. Domestically, their focus was transportation disruptions and increasingly higher transaction costs impacting land, labor and capital. With trade, they cited the escalating imbalance between lower prices for West African exports and more expensive imports. For foreign direct investment (FDI), the problem has been canceled projects and underutilization of existing foreign-owned businesses.

    Our Bottom Line and GDP

    As we expressed in our previous post on the economic impact of Ebola in Liberia, the victim is the GDP. Depending on the Ebola trajectory, the impact on West Africa’s production of goods and services could be short term or have a long lasting catastrophic impact.

    Foregone GDP from ebola

    From: World Bank

     

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  • McDonald's Delivers in Many Developing Nations.

    The Reason There Are Fewer Russian McDonald’s

    Oct 19 • Businesses, Demand, Supply, and Markets, Developing Economies, Economic History, Economic Thinkers, Entertainment, Government, International Trade and Finance, Labor, Lifestyle, Regulation, Thinking Economically • 160 Views

    Changing its name from Oyster Bar to No Oyster Bar, an upscale Moscow restaurant switched from Parisian snails to Russian blini and beetroot soup. The reason is the Russian embargo of food from nations protesting its Ukraine policy.

    With the embargo eliminating imports, local Russian producers are benefitting. Edam and gouda, previously from Europe, now have more Russian producers. At an agricultural fair, homegrown moose meat was offered as an alternative to prosciutto.

    The only complaints (otherwise patriotism reigned) that I could discover were about McDonald’s. Shown in the following map, McDonald’s is closing some of its 437 restaurants. The reason is overzealous Russian sanitary law regulation that materialized after the embargo began.

    For the McDonald’s map below…

    • Numbers over the markers indicate how many have closed.
    • Yellow: closed for an upgrade or renovation
    • Red: closed
    • Orange: legal violations

     

    Ignoring the efficiencies of comparative advantage, Russian is closing many McDonald's restaurants.

    From: Vox

     

    McDonald’s (Russian) History

    In 1990, just after Gorbachev and perestroika, McDonald’s arrived at Pushkin Square. The Russian economy had a competent defense sector but the production and distribution of consumer goods and services was a disaster. With perestroika, a restructuring had begun that McDonald’s could boost.

    Opened as a joint venture between McDonald’s Canada and the Russian government, the restaurant exclusively used local suppliers and accepted only rubles. McComplex, the processing plant they built, had a “meat production line, dairy, potato processing plant, bakery, garnish line, pie line, liquid products line, quality control laboratory, and distribution unit.” It could produce one million buns a week, 127,470 cheese slices, and equally large amounts of its other ingredients. Also, McDonald’s built and equipped with modern communications a 12-story office building in Moscow that far exceeded the technological status quo. For the restaurant’s 600+ jobs, more than 20,000 people applied. Smiling at customers was one of the skills employees learned.

    Charging 3 rubles and 75 kopeks for a Big Mac (approximately one-third of a typical daily Soviet wage), they served 30,567 people on opening day.

    From The Calvert Journal:

    “Once inside we were blown away by the number of young cashiers behind the huge counter, smiling, moving like bees, serving one meal after another. Nothing like our fat old ladies in white gowns sitting in front of empty shelves, pyramids of dusty canned food as window dressing. In our excitement, we ordered one of everything, super size, like everyone around us. My mum probably spent our monthly savings on it. I still remember how insanely huge the milkshake looked and I didn’t know how to hold a Big Mac with my tiny hands — I was nine years old at the time — so it landed on the ground after the first bite. A tear rolled down my cheek and my mum stormed off for a new burger.”

    The opening day queue:

    On January 31, 1990, the first Russian McDonald’s opened in Pushkin Square. Twenty-four years later it was “temporarily” shuttered.

    Our Bottom Line: Comparative Advantage

    During the early 19th century, economist David Ricardo explained that trade optimized efficiency. Instead of doing all they are good at, countries should identify their comparative advantage and then make the good or service for which they sacrifice less than someone else gives up. The same would be true for Derek Jeter. Even if Jeter is the best at baseball and mowing his lawn, he should only play baseball. Someone else who sacrifices less can do the lawn.

     

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  • The econlife.com Weekly Roundup

    Our Weekly Roundup: From Dental Care to Haircuts

    Oct 18 • Behavioral Economics, Developing Economies, Economic Debates, Economic Growth, Economic History, Economic Humor, Environment, Gender Issues, Government, Households, Innovation, Labor, Macroeconomic Measurement, Regulation, Thinking Economically • 116 Views

    Everyday economics and human capital formation SUNDAY 10.12.14

    When practice might not matter…more

    Everyday economics indicators MONDAY 10.13.14

    A recession’s unusual economic indicators…more

     

    Everyday economics of LED bulbs TUESDAY 10.14.14

    How LED bulbs might surprise us…more

     

    Everyday economics for government pension plan WEDNESDAY 10.15.14

    Ranking old age pensions…more

     

    The GDP growth rate can be affected by an elderly population. THURSDAY 10.16.14

    The best place for Grandma…more

    Including frivolous and necessary spending, fiscal policy for legislative branch expenses might be a microcosm for the entire federal budget. FRIDAY 10.17.14

    The cost of a Senator’s haircut…more

     

    Economic Ideas Roundup

    • human capital
    • GDP
    • entitlements
    • opportunity cost
    • income elasticity of demand
    • economic indicators
    • deliberate practice
    • positive externalities
    • fiscal policy

     

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  • Including frivolous and necessary spending, fiscal policy for legislative branch expenses might be a microcosm for the entire federal budget.

    What Legislators Spend on Themselves

    Oct 17 • Economic History, Economic Humor, Government, Labor, Macroeconomic Measurement, Thinking Economically • 144 Views

    Looking at the federal budget, out of a total of close to $3.5 trillion, the legislative branch spends $4.47 billion on itself. A tiny slice of the budget pie, Senate and House spending is still interesting for the insight it provides. So let’s take a look.

    The Barbershop and More

    We can start with a controversial allocation, the barbershop.

    But first, a quiz. Can you identify each of the following senators? (Answers follow at the end of this post.)

    A small part of fiscal policy, Senate spending includes its barbershop and hair salon.

    From: Mother Jones

     

    Called Senate Hair Care Services in the Secretary of the Senate’s budget report, the institution dates back to the 19th century when its services were free (to the Senate–not the taxpayer) until the late 1970s. Now, while the barbershop/salon charges $20 for a trim and $75 for a perm, with “sequestration,” the manicures were eliminated. Between October 1, 2013 and March 31, 2014, the $177,488.29 that the Senate Hair Care Services lost, the federal budget absorbed.

    There for Senators, staffers and interns, barbershop appointments are available for you and me too. But the scheduling hierarchy dictates that the most powerful Senators have priority. When they want their hair done, they get the slot, even if someone else has it. The priority list moves downward, with interns at the bottom and then those who are not affiliated with the Senate.

    We also have an Architect of the Capitol (AOC). I just learned that the capitol dome needed restoration because of 1300 cracks in its 8.9 million pounds of cast iron. Begun in 2013, the repair was managed by the AOC. In addition, as you might imagine, with multiple 19th and 20th century buildings to refurbish and more to maintain, they have to prioritize because of budgetary restraints.

    You can see below that we have not even mentioned the largest slices of the legislative branch’s spending pie–our legislators’ salaries–and the smaller pieces like the Government Printing Office, a photographic studio, a recording studio, mileage reimbursement, childcare, and mailing expenses.

    Although three years old, the totals in the following graph are pretty close to today’s–enough to give us a realistic picture of what the legislative branch costs us in dollars and sacrificed alternatives.

    Fiscal policy includes budget for legislative branch.

    From: Dayton Daily News.

    Our Bottom Line: Fiscal Policy Decisions

    Faced with a deficit that annually adds to a potentially unmanageable debt, we need a dose of reality to see where the spending goes and the relative size of its slice. Should we be concerned about the barbershop?

    Answers: John C. Calhoun, Andrew Burnsides, Joe Biden, Kay Bailey Hutchison, John F. Kennedy, John Edwards, Rand Paul, Strom Thurmond

     

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