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    Gender Matters

    Mar 31 • Behavioral Economics, Businesses, Gender Issues, Labor • 562 Views

    For years, female musicians said that they were being treated unfairly. The problem, they claimed, was audition bias. Many more men were selected for orchestras than women. The response was that the men were better. A Harvard and Princeton study found, though, that when an audition was gender blind, many more women were selected.

    This takes us to Wal-Mart. Currently being heard by the Supreme Court, Wal-Mart v. Dukes involves a class-action suit in which Wal-Mart is accused of over-promoting men and underpaying women. However, before a trial court can decide whether discrimination occurred, the Supreme Court has to say whether a class-action suit can represent the 1.6 million women who have worked for Wal-Mart since 1998.

    Commenting in Court, Justice Ruth Bader Ginsburg said that it was not “at all complicated…Most people prefer themselves. And so a decision-maker, all other things being equal, would prefer someone who looked like him.” The result? “Gender bias could ‘creep’ into the workplace.”

    The Economic Lesson

    For us, the key here is human capital. For an economy to grow and thrive optimally, the factors of production, land, labor, and capital, need to be appropriately allocated. When there is gender bias, women’s talents are underutilized and the entire economy suffers.

    For an orchestra, we need the best musicians. Now, our court system needs to decide whether Wal-Mart promoted and paid its best people.


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    Cotton or Corn?

    Mar 30 • Demand, Supply, and Markets, Developing Economies, Households, International Trade and Finance • 626 Views

    One farmer told the NY Times, “It’s going to be cotton stalks everywhere.”

    With cotton prices soaring, acreage in Texas and other Southern states that had been used for wheat or corn now has cotton growing. 

    The result? A smaller increase in the U.S. corn and wheat crops; and much more cotton. The Times calls it an “acreage war” between the crops that clothe us and those that feed us.

    The Economic Lesson

    This is classic supply and demand. For cotton, the increase in supply will eventually push price down. Meanwhile, for corn and wheat, as supply is less than it would have been, price remains elevated.

    On the demand side, with these supply curves moving, the quantity demanded will change. For cotton, the search has begun for alternative fabrics. And, as we previously noted, when crops get higher prices, so too does the land on which they are grown.

    Consequently, even corn farmers are happy that cotton’s price is high.

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    The Missing Sensor

    Mar 29 • Businesses, Demand, Supply, and Markets, Developing Economies, Economic History, Economic Thinkers, International Trade and Finance, Labor • 421 Views

    According to one estimate, worldwide auto production could slide by 30% because Hitachi Automotive’s Sawa Ibaraki Prefecture plant was debilitated by Japan’s earthquake and tsunami. Hitachi Automotive makes the air flow sensors that are crucial in autos for determining “how much fuel to inject, when to ignite the cylinder, and when to shift the transmission.”

    Translate sensor production into jobs, sales, related parts and you have a massive ripple from one $90 car part. In Shreveport LA, small pick-up truck production from GM stopped. As a result, GM’s Buffalo, NY engine plant had to lay off 10% of its workers. Similarly, in Spain, France, and Slovakia, Peugeot-Citroen announced cutbacks. 

    The Economic Lesson

    This returns us to the classic 1958 pencil essay by Leonard Read. Conveying how people and places around the world are necessary for a simple pencil, at the beginning of the essay, the pencil says, “I, Pencil, simple though I appear to be, merit your wonder and awe…Simple? Yet not a single person on the face of this earth knows how to make me…”

    It also reminds us that “made in …” labels are not entirely accurate. A t-shirt “Made in China” could include cotton grown in Texas. The iPhone is actually made by 9 different suppliers located around the world. And, a pick-up truck that is made in a U.S. factory could include a sensor that was manufactured Japan.

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    The Amazing Washing Machine

    Mar 28 • Developing Economies, Environment, Gender Issues, Households, Innovation, Labor, Macroeconomic Measurement • 382 Views

    In one wonderful 9 minute TED talk, Swedish professor Hans Rosling connects the washing machine to empowering women, educating children and diminishing world poverty.

    The Economic Lesson

    When women are empowered, not only is the gender gap diminished but also the health and education of the household increases. 

    In a Teaching Company lecture, about women and the global economy (lecture #31), Professor Timothy Taylor starts with explaining the world’s missing 100 million women; then he focuses on the importance of women being educated, of women having political power, and of women controlling household income.  

    You might also want to look at a brief IMF paper called “Smart Economics,” in which the authors conclude that “…giving women more access to education, to markets (labor, land, credit) and to new technology, and giving them greater control over household resources often translates into greater well-being for themselves and their families.”

    And finally, if you want lots of data, I recommend this 334 page, 2010 World Economic Forum Global Gender Gap Report. Ranking the gender gap for 134 nations, the report has Iceland with the smallest gap, the U.S. at #19, and Yemen last, at #134.

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    The Center of the Global Economy

    Mar 27 • Demand, Supply, and Markets, Developing Economies, Economic History, Financial Markets, International Trade and Finance, Macroeconomic Measurement • 401 Views

    Let’s start with a dot in the Atlantic Ocean, maybe 900 miles from Morocco. Then, follow that point, as it glides eastward toward Izmir, Turkey. According to London School of Economics Professor Danny Quah, you have just seen how the world’s center of economic gravity has shifted during the past 30 years.

    Explaining that he was not referring to a “cluster” of economic activity, Dr. Quah told readers, for example, to imagine a world with only 2 cities having economic activity. The cluster of economic activity could be found in each city. However, the center of economic gravity would be an inactive spot between the two. While there are many clusters, there is only one center.

    Dr. Quah has a wonderful map in his paper showing the actual and projected eastward trajectory for his world center of economic gravity (WCEG) between 1980 and 2050 (p. 13).

    More specifically:

    1980: 24 degrees west; 66 degrees north, 2800 kilometers beneath the surface of the Atlantic Ocean.

    2008: 27 degrees east; 74 degrees north. “…just south of Izmir Turkey, on the same longitude as Minsk and Johannesburg.”

    2049: 92 degrees east; 30 degrees north. “…no large city precisely but surrounding it are Urumqi, China, Kolkata, India, Dacca and Chittagong Bangladesh.”

    To calculate the WECG, Dr. Quah covered “GDP in all of the world economy.” You might want to look at his paper to see how he identified and then used data from 693 locations.

    The Economic Lesson

    NYU economist William Easterly tells us that we will all benefit from the growing wealth of poorer nations as worldwide production and demand grow.

    Dr. Quah meanwhile suggests that as we observe WECG march eastward, correspondingly, global inequality, political power, and monetary movement will also shift.

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