• Deficit Games

    Oct 22 • Behavioral Economics, Government, Macroeconomic Measurement, Thinking Economically • 561 Views

    http://www.nytimes.com/interactive/2011/07/22/us/politics/20110722-comparing-deficit-reduction-plans.html?ref=politics

    Superb interactive

    Time line

    Game of chicken?

    With the deadline 3 months away

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    Millionaire Inventors

    Oct 21 • Businesses, Demand, Supply, and Markets, Innovation, International Trade and Finance, Macroeconomic Measurement, Thinking Economically • 676 Views

    Assume you have $1.4 million dollars that you want to give away. Your goal is to spur the development of new technology, but just not any innovation–something that you want people to invent. Which technology would you choose?

    The people at the X Prize Foundation actually had to make that decision.

    Funded by Wendy Schmidt, wife of Google former CEO Eric Schmidt, their goal was to “…inspire a new generation of oil cleanup technologies that enable a more rapid pace of cleanup…” The winner was Elastec, a small Illinois firm that figured out how to accelerate the speed of removing oil from water from the usual 1,000 gallons of oil per minute to 5,000. Here you can see the oil skimmer recovery equipment that they developed for the competition. According to NPR, the firm is already receiving orders from around the world.

    Here (automotive energy conservation) and here (genome mapping) are other X Prize innovation challenges.

    Our bottom line? We need to encourage the innovation that fuels economic growth. The question, though, is how much the incentives should come from government.

    The Economic Lesson

    Economists can use production possibilities graphs to illustrate economic growth. On production possibilities graphs, a bowed out curve is drawn which illustrates that country’s maximum production capability. Shifting that curve to the right displays the additional productive capability created by the invention.

    An Economic Question: If you could fund an innovation contest, what type of invention would you target?

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    Top Earners

    Oct 20 • Behavioral Economics, Households • 601 Views

    A quiz:

    • Looking at the top 1% of earners, how many are in financial services?
    • Close to 75%, 50%, 25% or 10%?
    • The answer: 10% (or precisely 13.9%)

    Next…

    • How much does the top 1% earn?
    • The 1% threshold is close to $350,000. $200,000, top 5%; 150,000, top 10%; $100,000, top 25%.
    • Here, you can identify your income group. (Stats are for adjusted gross income, 2009.)

    And finally, with Occupy Wall Street expressing anger about money moguls, do most people agree? This Gallup survey concludes that more of us blame government than Wall Street for our economic difficulties.

    These Occupy Wall Street interviews from NPR’s Planet Money provide an unfiltered look at individual protestor’s goals. They let us form our own opinion of the group’s objectives.

    The Economic Lesson
    Saying that education is crucial for income mobility, a 2010 study from the OECD concludes that U.S. intergenerational mobility is relatively low. In other words, fathers and sons, mothers and daughters remain close to the same rung on a social mobility ladder.

    By contrast, this 2007 report from the U.S. Treasury indicates that there is considerable income mobility in the U.S. Describing a hotel with luxurious rooms and shabby rooms, they say that, “…those in small rooms have an opportunity to move to a better one, and that the luxurious rooms are not always occupied by the same people. The frequency with which people move between rooms is a crucial aspect of the trend in income inequality in the United States.”

    An Economic Question: Explain why you would accept income inequality as a consequence of a market system or support more government redistribution of income through taxes.

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    Defrosting the Doughnut Hole

    Oct 19 • Businesses, Demand, Supply, and Markets, Developing Economies, Environment, International Trade and Finance, Macroeconomic Measurement, Thinking Economically • 574 Views

    A global phenomenon will open up new areas for oil exploration, enable ships to take shortcuts, and provide easier access to world markets for iron ore and other minerals.

    The phenomenon? Global warming.

    Because of global warming, the polar ice sheet is shrinking. With this summer having been one of the warmest on record, ships are traveling from Murmansk, near Finland, across the top of the world to Asia in record time. Scientists predict that by 2050, this Northeast Passage will be ice-free during the summer.

    A navigable Northeast Passage means shorter travel time from Europe to Asia and competition for the Suez Canal. It means previously inaccessible resources can now be drilled and mined and transported.

    That takes us to the Arctic Ocean doughnut hole. A huge fishing area that is beyond any nation’s jurisdiction, as it melts, the doughnut hole will attract fishing vessels from around the world.

    Our bottom line? Global warming could have environmental positives that would include huge energy and mineral discoveries, and emissions reduction and cheaper transport from shorter routes.

    The Economic Lesson

    Perhaps one of the first environmentalists, Reverend Thomas Malthus told us in 1798 that population grows geometrically while resource production expands arithmetically. Consequently, resource prices will rise and supply will become increasingly inadequate.

    You can see though, that environmental predictions are tough to make. This NY Times Magazine article describes the bet between the boomsters who said we would not exhaust our resource supply and the doomsters who said we would.

    An Economic Question: Whenever a transaction between two parties affects a third, uninvolved individual or group, economists see an externality. How does global warming relate to positive and negative externalities?

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    The Blackberry Disruption

    Oct 18 • Behavioral Economics, Government, Innovation, Regulation, Thinking Economically • 512 Views

    Last week’s Blackberry blackout saved lives.

    In Dubai, traffic accidents dipped 20%. For Abu Dhabi, the decrease was 40%. Considering that there is approximately 1 traffic accident every 3 minutes in Dubai and a traffic fatality every 2 days in Abu Dhabi, safety soared.

    A fascinating, unintentional experiment.

    The Economic Lesson

    The implications of the Blackberry outage are multiple. Municipal expense, insurance, regulation and privacy are only several of the issues touched by how we use smartphones.

    All though take us to the economic definition of cost. When we choose to use our smartphones everywhere, what are we sacrificing? 

    An Economic Question: Listing costs and benefits, assess the impact of smartphones on our lives.

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