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    Altitude and Attitude

    Apr 1 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Economic Thinkers, Thinking Economically • 451 Views

    A recent article in Scientific American cited a correlation between altitude and attitude. Describing four different experiments, researchers concluded that physical elevation seemed to connect to generosity, kindness, and cooperation.

    This is what they found:

    1. At a mall, shoppers who had gone up an escalator gave more to the Salvation Army than those who traveled down.

    2. In a theater, people who went up to the stage were more likely to volunteer to fill in a questionnaire than those taken down to the orchestra pit.

    3. Asked how much “painfully” hot sauce to give participants in a supposed food tasting study, people up on a stage gave less than those distributing the sauce in the orchestra pit.

    4. For a computer game involving cooperation, people who had just watched scenes from an airplane were more agreeable than those who had looked through a car window.

    The Economic Lesson

    The popular books written by Duke economist Dan Ariely and the work of Princeton psychologist Daniel Kahneman who won the Nobel Prize in economics remind us that economics and psychology intertwine.

    Similarly, by relating self-interest to altitude and attitude, we can again see the psychological territory that economics can occupy.



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    Gender Matters

    Mar 31 • Behavioral Economics, Businesses, Gender Issues, Labor • 593 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 • 662 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 • 455 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 • 404 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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