• Ethical Man

    Jan 25 • Thinking Economically • 221 Views

    For the

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  • A Macro-difference With Micro-insurance

    Jan 24 • Thinking Economically • 180 Views

    Listening to a recent segment of Marketplace.org (1/15.2010), I heard about microinsurance. The concept sounds like win/win for everyone.

    With more resilient structures, Haitians can purchase microinsurance policies that cost $1 to $2 a day. Correspondingly, a Lloyd’s report cited Bolivian health insurance being sold for $5 a month.

    For low income individuals, microinsurance represents risk protection for structures, businesses, and health catastrophes.
    For insurance companies, it means new markets, new customers, new products, and billions of dollars of new revenue.
    www.microinsurancecentre.org/UI/DocAbstractDetails.aspx?DocID=753

    It is a pleasure to see new markets and profits for large insurance firms potentially doing good.

    Comments? What am I missing?

    The Economic Life:
    Bangladesh Nobel prize winning (2005) economist Muhammad Yunus has been called a microfinance missionary. Through microfinance, very small loans are making a very big difference. Being able to borrow small sums has enabled poor entrepreneurs in developing nations to start and sustain businesses.

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  • Steel and Banks: President Kennedy and President Obama

    Jan 23 • Thinking Economically • 192 Views

    Commenting on yesterday

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  • Deja Vu Glass-Steagall?

    Jan 22 • Thinking Economically • 222 Views

    Thinking back to Glass Steagall (and related 1930s legislation) which was formally repealed in 1999 (summarized in “It’s Complicated”, my 1/17 blog), there were five problem areas that sound remarkably similar to today’s challenges:
    1. Abuse of diversified investment services. Banks had conflicts of interest when they implemented commercial and investment activities.
    2. Branch banking: There was concern about banks becoming too large.
    3. Interest Rates: Competing for savers through higher interest rates, banks engaged in potentially destructive through high interest rates.
    4. Deposit Insurance: Money was fleeing the banks because of lack of confidence.
    5. The Power of the Federal Reserve: Which banking authority should be strengthen to prevent future banking abuses?

    Today, the White House indicated similar banking industry goals. But Glass-Steagall worked for a 1930s banking environment. Today we have an interconnected world. If US banks are constrained, will businesses easily move to those abroad who are not? As happened during the 1970s here, will disintermediation (my 1/17 blog) resurface?

    http://www.whitehouse.gov/the-press-office/president-obama-calls-new-restrictions-size-and-scope-financial-institutions-rein-e

    The Economic Life:
    The impact of financial legislation can be unpredictable. Hopefully, legislators will consider opportunity cost more so and populist rage less so when deciding what ultimately will benefit the most people.

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  • Responding to the Sound of a Price

    Jan 21 • Thinking Economically • 190 Views

    Does $2.22 sound very different from $2.33? The answer is yes. In a soon-to-be-released study by Keith Coulter of Clark University and Robin Coulter of the University of Connecticut in The Journal of Consumer Research, research indicates that shoppers expect a much better deal when the price is $2.33.
    In one experiment, people were told an original price and a sale price and later asked which sale price represented the bigger discount. Ignoring the math, people instead appeared to go by the sound of the sale price. Because $2.22 sounded

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