• U.S. Jobs and China

    Sep 30 • Demand, Supply, and Markets, Developing Economies, Economic Debates, Economic Thinkers, Government, International Trade and Finance, Labor, Regulation, Thinking Economically • 378 Views


    “The China Syndrome”

    The Economic Lesson


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  • “Nutty” Regulations

    Sep 29 • Businesses, Labor, Macroeconomic Measurement, Regulation, Thinking Economically • 460 Views

    Asked if we wanted accurate labeling on food packages, most of us would say yes. Calorie counts in restaurants would come in handy. Should boilers be more environmentally friendly?

    Describing a walnut package labeling regulation that adversely affected one business firm, Senator Susan Collins suggested “a regulation time-out.”

      “The economy needs a regulation time-out”


    susan collins



    pending legislation she has proposed.

    “U.S. Government Works at Cross-Purposes, Hindering Housing Recovery” bloomberg

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    Who Are We?

    Sep 29 • Behavioral Economics, Economic Debates, Environment, Government, Households, Innovation, Labor, Regulation, Thinking Economically • 405 Views

    Environmental concerns? You might want to look at what the The American Community Survey for 2010 says about who drives alone to work (105 million) and how many of us take public transportation (7 million). If education is your focus, one table in the Survey says that 17.7% of everyone 25 and over has a bachelor’s degree. Maybe childcare? For 54% of all married couple families, the husband and wife are in the labor force .

    And this is just a tiny bit of the wealth of data in the The American Community Survey for 2010. I suggest looking at it.

    News articles that discuss some of the tables are here (commuting time), here (smarter cities), and here (assorted conclusions).

    The Economic Lesson

    The margin is an imaginary line that separates the current amount you are doing from the extras you might be contemplating. Whether looking at education or driving or any other section of the American Community Survey, you are currently at the margin. Let’s assume that you want something extra at the margin like more college graduates. Then, as economists, you should consider the cost and the benefit before making a decision.

    An Economic Question: If any of the 2010 American Community Survey’s statistics concern you, how might our regulators and the US Congress create incentives that change our behavior?

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    An Aviator Stuntman and the Stimulus

    Sep 28 • Behavioral Economics, Demand, Supply, and Markets, Economic Debates, Government, Macroeconomic Measurement, Money and Monetary Policy, Thinking Economically • 444 Views

    You’ve probably never heard of Lincoln Beachey.

    An aviation pioneer, Beachey flew at the beginning of the 20th century. During one of his first air exhibitions, Beachey did something totally terrifying when his plane stalled. The opposite of what anyone had ever done before, he counterintuitively turned his plane into the spin and pointed its nose downwards. Reversing a deadly nosedive, he landed safely.

    Hearing about Lincoln Beachey on a Radio Lab podcast, I thought of February 2009. With the economy nosediving, the President proposed and the Congress approved a massive injection of stimulus money. A seemingly logical maneuver, it appears not to have had the impact that many of us expected.

    Are we responding like Lincoln Beachey’s predecessors who turned away from the spin and pointed their noses upward? Or does the intuitive response work and we just need more?

    The Economic Lesson

    One group of economists describes the American Jobs Act as the additional stimulus we need. Seeing the money directed toward job creation, infrastructure projects and payroll tax cuts, a second group of economists says it is a repeat of the failed 2009 stimulus program.

    As with Lincoln Beachey, we seem to have a group that believes the logical sounding Keynesian approach will work and a second group saying, if we look more closely and think like Friedrich Hayek, we would see it is profoundly flawed.  You might enjoy looking at the Keynes/Hayek rap debates here.

    An Economic Question: Is your bias toward more or less government economic intervention. Explain.

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    Moneyball Economics

    Sep 27 • Businesses, Demand, Supply, and Markets, Economic Thinkers, Financial Markets, Innovation, Labor, Thinking Economically • 1496 Views

    A wonderful baseball movie, Moneyball is also about economics.

    The story focuses on the Oakland Athletics, a second-tier baseball team with a small budget. A speedy runner? A homerun hitter? The stars cost many millions that Oakland just did not have.

    Faced with a futile future, the Athletics general manager, Billy Beane, realized a good team need not be about star players. Instead of individuals, it was actually about the whole team’s ability to win. And that meant looking more closely at why teams win. Beane concluded that it meant getting on base. And that meant walking was as valuable as hitting. It meant recognizing the small stuff that most people ignored.  It required processing countless stats and avoiding the human response on which baseball scouts depended. And it worked.

    Listening to the “bean counters,” Beane put together a team of unknowns that together almost produced a championship.

    In this fascinating NPR Fresh Air podcast, Michael Lewis talks about his book Moneyball.

    The Economic Lesson

    In the stock market, when buying a house, or when putting together a baseball team, price matters. People who identify a resource that is undervalued have the best chance of achieving success. For securities and home buyers, success means prices rise after you buy your asset. For Billy Beane, it was acquiring valuable players for a price he could afford.

    This returns us to the role of prices. Prices convey information. Sometmes, though, goods and services are mispriced. Then, very wise people can benefit before the market realizes its mistake.

    Billy Beane soon faced the problem that his undervalued players would gain value. And then, again, he could not afford them.

    An Economic Question: In addition to undervaluing an asset, sports economists have said that Moneyball is about Joseph Schumpeter’s creative destruction. Do you agree? Explain.

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