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    Paying Kids For Good Grades

    Dec 24 • Behavioral Economics, Demand, Supply, and Markets, Economic Debates, Households, Innovation, Thinking Economically • 597 Views

    What happens when you combine a $100 student payment with a teacher bonus for high A.P. grades, better lab equipment, free tutoring, Saturday classes and extra teacher training?

    At one Boston school, the results for an A.P. statistics class were:

    • A surge in enrollment from 12 in 2008 to 61 in 2010.
    • A grade of 3 or more for 70% of the class including 31 low-income students.
    • A grade of 5 for 1/4 of the class. Worldwide, 13% of all students taking the A.P. stat test got the highest grade.
    • A $7300.00 cash bonus for the teacher.

    Paying kids for grades is controversial. This NYC program was discontinued.

    Here, a Harvard professor discusses the issues that surround money for grades and why it can fail. His conclusions indicate that “traditional price theory” (i.e. a high price) might not work for grades but they can be successful for other tasks such as reading books.

    The Economic Lesson

    Paying for grades related to supply and demand.

    • Supply: Land, labor and capital became cheaper because a nonprofit was providing teacher training, student preparation (tutoring) and lab equipment.
    • Demand: The high price that the school was willing and able to pay crossed the supply curve at a large quantity.  As a result many students were willing and able to “produce” A.P. scores of at least 3.

    Harvard research implied, though, that it was crucial to have had teacher training, student preparation (tutoring) and lab equipment.

    An Economic Question: How might you draw demand and supply curves that illustrate a before and after for the market in AP grades? Assume that what is paid for good A.P. grades can include money and intangibles like pleasure.

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    Fast (and Slow) Food

    Dec 23 • Businesses, Demand, Supply, and Markets, Households, Innovation • 642 Views

    Wendy’s is about to pull ahead of Burger King in the U.S. The reason? People care about their lettuce and the shape of their burgers. Led by new ownership, Wendy’s now has 11 different greens (not just iceberg), a slightly rounded bun and burger, and russet French fries with “gourmet” salt. Maybe though the 2010 stats for the U.S. say it all. 

    • McDonald’s: 14,027 stores; $2.3 million sales per store
    • Wendy’s: 5,883 stores; $1.4 million sales per store
    • Burger King: 7,264 stores; $1.2 million sales per store

    Other food strategies…

    1. Competing for the “casual dining” market, Olive Garden discovered that gnocchi can make a difference…but only if it is in chicken soup. As for pesto, it was rejected as too green (and strong and oily). 
    2. Referring to TCBY’s successful pistachio frozen yogurt launch, a restaurant trade letter says that pistachio nuts may be the 2012 hot item because they are “exotic but not threatening.” 
    3. And finally, molecular gastronomy with an ultra slow souvide approach will be crucial for upscale restaurants. 

    The Economic Lesson

    On a scale of most competitive to least competitive, the 4 basic market structures are perfect competition, monopolistic competition, oligopoly, monopoly. Competing in monopolistically competitive markets, restaurants try to create a unique identity because there are so many similar firms. Beauty salons, clothing manufacturers and supermarkets also compete in monopolistically competitive markets.

    An economic question: In product markets and factor resource markets, how do restaurants compete?

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    Looking back at 2011

    Dec 22 • Businesses, Demand, Supply, and Markets, Developing Economies, Economic Debates, Economic History, Financial Markets, Government, Labor, Macroeconomic Measurement, Money and Monetary Policy • 513 Views

    After looking at these 18 charts, I thought, what you learn depends on whom you ask. Created by Washington Post journalist Ezra Klein, the slide show is from “some of his favorite economists” who were asked for “the graph that had done the most to influence their thinking in 2011.”

    My concern is that the topics are precisely what you would expect. Most focus on the U.S. budget, health care, debt, jobs, inequality, interest rates. Even when targeting the developing world, the connection is their savings feeding our debt. Tyler Cowen’s graph is the only chart that relates to innovation.

    Yes, I do recommend looking at the 18 charts for a quick summary of key issues. However, if you ignored headline topics about the U.S., where would you focus?

    The Economic Lesson

    Economist Michael Mandel has said that our economic yardsticks shape our problem solving. The GDP, for example–a total of investment (tools, equipment types of items–not stock market), consumer spending, government spending and exports minus imports–insufficiently focuses on key areas of local and globally interwoven activity.

    His point?  What we measure determines government policy. 

    An economic question: If you were creating 10 charts that not only looked back on 2011 but would take our focus forward productively, which topics would you select? 

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    Employee Holidays

    Dec 21 • Businesses, Developing Economies, Labor, Macroeconomic Measurement, Thinking Economically • 522 Views

    Just some facts today on who gets the most paid time off.

    According to the Economist, looking at a combination of public holidays and annual leave days for which workers have to be paid, Austria, Greece and France are at the top of the list while Canada, China and the Philippines are at the bottom. Although the U.S. has no federal mandate for paid holidays, still we average 15 days and are sixth from end of a 19 nation list.

    Summarizing, the Economist says that North Americans and Asians have fewer holidays than South Americans and Europeans.

    And…the royal wedding meant an extra day off for the U.K.

    The Economic Lesson

    Cost and benefit can be assessed privately and socially. For days off, there could be a lot of difference between well being from the worker’s perspective and the broader considerations for business and society.

    An economic question: How might you compare cost/benefit in a high holiday country for the single worker and for his or her employer?

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    What Can An N-Gram Tell Us?

    Dec 20 • Economic History, Economic Thinkers, Innovation • 558 Views

    For laughing and learning this TED talk is wonderful. 

    Having digitized 15 million books, Google enabled us to access a mammoth body of knowledge. However, just reading the entries from the year 2000, without eating or sleeping, absorbing 200 words a minute, would take someone 80 years. How then to learn from an information avalanche that could easily bury you?


    A new discipline focusing on the frequency of selected words and phrases, culturomics conveys trends and I suspect much more. The TED researchers told us, for example, that the word “women” appears much more frequently than “men” after 1970. They also compared the date that that an innovation appeared to when its name became common usage. As you might expect, since 1800, the time span has narrowed considerably. Even censorship in Nazi Germany can be displayed through their database.

    You can see why their website is addictive. Entering apple, for example, I observed when its usage skyrocketed. Then I compared it to PC to see how their trajectories differed. I also tried stock market, 1929 and Adam Smith.

    What is an n-gram? It is the word(s) that their database tracks. For example, “the United States of America” is a 5-gram and 1929 is a 1-gram. 

    The Economic Lesson

    As the U.S. economy grew, so too did the “infrastructures” that facilitated its expansion. A transportation infrastructure of roads, canals, and railroads moved people and goods. Our financial infrastructure moves money and credit. Google’s accomplishments and n-grams relate to our information infrastructure.

    An economic question: What might compose a financial and information infrastructure?

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