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    Time Matters

    Aug 25 • Behavioral Economics, Businesses, Developing Economies, Economic Thinkers, Innovation, Labor, Macroeconomic Measurement, Thinking Economically • 526 Views

    Faster people tend to live in wealthier nations.

    According to psychologist Robert Levine, cultures with faster walkers probably have more people, a cooler climate, a “vital economy” and they value individualism. Measuring “tempo” in 31 different countries, in A Geography of Time, he explains how time and the fabric of our culture interact.

    To assess your own “time urgency,” Dr. Levine suggests you consider these variables:

    1. Do you care what time it is?
    2. Do you speak quickly? Tolerate interruptions? Look for the point of a statement immediately?
    3. Are you a speedy eater? Walker? Impatient driver?
    4. Do you value punctuality?
    5. Do you depend on lists?
    6. Do wait times annoy you?

    Here, in a past post, we look at more of Dr. Levine’s work.

    The Economic Lesson

    In his NY Times Economic View column, economist Tyler Cowen tells that U.S. productivity numbers are slipping. If a worker has less output per hour, then the impact can be felt far beyond the workplace. Living standards, GDP and wages will be affected.

    And that returns us to time. A society with a faster tempo is likely to be more productive.

    An Economic Question: Specifically, how might “time urgency” and productivity relate? Examples?

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    Made in the USA?

    Aug 24 • Businesses, Demand, Supply, and Markets, Developing Economies, Households, International Trade and Finance, Labor • 558 Views

    One friend recently said to me, “The problem is we don’t make anything anymore!”

    Disagreeing, a San Francisco Fed report says that 88.5% of consumer spending is for goods and services made here. In addition, businesses are buying US made goods that include space related items, gas turbines, and computer chips.

    Maybe though it is not about what we make. Instead, here, one Forbes commentator suggests that we focus on what people learn from manufacturing. Noting that most of the Kindle 2 is made in China, South Korea, and Taiwan, and then assembled in China, he worries that outsourcing provides a springboard for innovation from which we will not benefit.

    The Economic Lesson

    Manufacturing takes us to jobs and innovation. New products and processes fuel economic growth. Yes, we make a lot more than many people realize such as the new products and services described at this WSJ article, “Where the Action Is.”

    An Economic Question: Economists have been debating whether current unemployment is primarily caused by the business cycle or structural changes in the economy that make existing jobs outdated. How might government initiatives attack each type of unemployment?

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    Speedy Airplane Boarding

    Aug 23 • Behavioral Economics, Businesses, Economic Debates, Economic Humor, Innovation, Labor, Macroeconomic Measurement, Thinking Economically • 606 Views

    Closely connected to an airline’s bottom line, speedy boarding means more efficiency. Here you can see the following alternative boarding strategies in action.

    Front to back:

    • Least popular.
    • Early boarders block those who follow them.

    Back to Front

    • Very popular.
    • Used by Continental, Alaska Airlines and others.


    • Check-in time is one way to decide boarding sequence.
    • Preferred by academics as one of the fastest approaches.
    • Used by Southwest, American Airlines and others.
    • American Airlines’ flight attendants say it creates confusion.

    Rotating Zone

    • Alternating back and front for contiguous groups of seats.
    • Air Tran uses it.

    Reverse Pyramid

    • Back-to-front with outside-in.
    • Unused.

    Flying Carpet (really?)

    • Unused.
    • Designed by an Australian mechanical engineer.
    • On a carpet with the seats drawn, a passenger stands on his/her own seat. After 20-30 people position themselves on the carpet, that group boards. Because there is no room for seatmates to stand next to each other, boarders automatically are dispersed for optimal boarding.

    According to the LA Times, United Airlines believes in “outside-in” while Continental boards “back to front.” Now that they have merged, will they choose one or compromise with a reverse pyramid?

    The Economic Lesson

    When an airline boards people more rapidly, it is utilizing land, labor and capital more efficiently. Best illustrated by Southwest Airlines, a fast turnaround means fewer airplanes are needed because more flights can be scheduled using the same equipment. Then, the land, labor and capital that might have been used inefficiently can be allocated elsewhere.

    An Economic Question: Referring to cost (defined as sacrifice), explain why faster lines benefit buyers and sellers.


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    Health Care (Transaction) Costs

    Aug 22 • Behavioral Economics, Demand, Supply, and Markets, Government, Households, Regulation, Thinking Economically • 759 Views

    One of the first parts of the new health care plan to be implemented, the Pre-Existing Condition Insurance Plan (PCIP) surprised its administrators. 

    North Carolina was ready for a “stampede” but initially only 674 people joined. Nationally, 375,000 people were expected but by April 30, the total was 21,454.

    According to this Washington Post blog, logistics might be one problem. To increase enrollees in another federal/state implemented program, the Children’s Health Insurance Program (CHIP), certain states reduced red tape. The key was to eliminate personal interviews, implement a mail-in renewal form, and even partially fill in forms that were sent.

    That takes us to the entire health care program. How will federal and state officials enroll more than 30 million people?

    The Economic Lesson

    Red tape represents a transaction cost. Defined economically, cost means sacrifice. Standing in line, filling out forms, listening to voice mail instructions, we are sacrificing what we otherwise might have been doing. Sometimes, the transaction costs of signing up for a health care insurance program are so daunting that they outweigh the long term benefit.

    With lines reflecting the dysfunction of the former Soviet Union, the huge transaction costs helped to speed its demise.

    An Economic Question: Which transaction costs did you experience today?

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    Recycling Matters

    Aug 21 • Businesses, Demand, Supply, and Markets, Developing Economies, Environment, International Trade and Finance • 523 Views

    Coca-Cola has a recycling problem. Last year, it had hoped to process 100 million pounds of recycled PET (bottle grade) plastic in its Spartanburg, S.C. plant and is not even close. Here is why:

    Less supply of recycled plastic:

    • It is tough to get enough PET plastic because many of us do not recycle plastic bottles. Maybe bottle deposit programs would make a difference. However, Coke and Pepsi say that paying 5 to 10 cents for a returned bottle is inefficient, pricey and unfairly targets them.
    • Coke and Pepsi prefer using municipal recycled plastic. Mixed with other plastics, though, the plastic from curbside programs tends to be less than bottle grade.


    More demand for recycled plastic:

    • Increased demand from China for used plastic in clothing and furniture manufacturing is nudging the price upward. As a result, “virgin PET” is cheaper.


    The Economic Lesson

    Is it ethical for a profit-seeking business to be ethical? Believing that profits are the responsibility of the business firm, Milton Friedman (1912-2006) said that it is not appropriate for corporate management to pursue social responsibility. Agreeing, former Harvard president and Secretary of the Treasury Lawrence Summers cited Fannie Mae and Freddie Mac to display the cataclysmic results of combining doing good with seeking profits.

    In this economix blog, Harvard economist Edward Glaeser discusses the debate surrounding corporate responsbility. Reminding us that it need not be “black and white,” he encourages us to ponder different levels of corporate social responsibility

    An Economic Question: Implying that we cannot put a price on environmental responsibility, a a U.S. senator from Maine, Edmund Muskie, once said, “Can we afford clean water? Can we afford rivers and lakes…which continue to make life possible…?…These questions answer themselves.” Your opinion?

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