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    Economics and Literature

    Apr 5 • Thinking Economically • 268 Views

    Thinking of how Economics is Everywhere, I am reading The Literary Book of Economics in which economist Michael Watts displays the connection between literature and major economic ideas.  

    Discussing 78 examples, from fiction, nonfiction, and poetry, he includes the connection between Dickens’s Hard Times and negative externalities, Amy Tan’s Joy Luck Club and the efficient market hypothesis, and Jon Krakauer’s Into Thin Air and price elasticity of demand. Similarly, while David Sedaris surely was not thinking about labor markets when he debated whether he needed a job after finding $50, he was indeed thinking economically.

    The Economic Lesson

    Concerning so much more than money, when we slice away all of its complexities, economics is fundamentally about making choices among scarce resources.

     

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    A History of Financial Regulation

    Apr 4 • Financial Markets, Regulation • 264 Views

    The Plunge Protection Team is composed of the chair of the Federal Reserve, the Secretary of the Treasury, the SEC, and the Commodities Futures Trading Commission.  Officially called the Working Group on Financial Markets, this group was formed after the 1987 stock market crash. As described in a 1997 Washington Post article, its mission has been to monitor and prevent financial crises.

    Proposed financial regulation from the Chris Dodd committee includes creating a Financial Oversight Stability Council that is charged with “identifying, monitoring and addressing systemic risk.” 

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    The Economic Lesson

    To see the content of major federal banking and financial regulation during the past century, this link provides a list of laws and their content. It is excellent.

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    Social Insecurity

    Apr 3 • Economic History, Government • 273 Views

    Is there a “lock box” with surplus social security funds? Sort of.  

    In 1983,  when we had inadequate funding for the social security program, a commission led by Alan Greenspan suggested extra sources of revenue for a Social Security trust fund. As a result, primarily through higher payroll taxes, more was collected for social security than they needed then and the money was put aside.

    Here is where you can imagine a lock box. Theoretically kept in the lock box, U.S. treasury securities were purchased with the social security surplus. As a result, social security surplus revenue became available to the U.S. government to spend until the social security administration needed the money.  

    Fast forward to now.  In a recent NY Times article, we learned that this year social security benefits exceeded social security revenue.  Because the recession was the likely cause, all should return to normal soon. But what is normal? Normal means that in 2016, the program will face a tipping point and pay-outs will consistently exceed revenue.

    Are you concerned about the future of social security? Comments?

    The Economic Lesson

    Hoping to give “ownership” to all of us, the creators of Social Security designed a universal pay-as-you-go program in 1935. When we “pay-as-you-go”, we are giving today’s workers’ payroll tax dollars to today’s social security recipients.

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    Tall Stories: Height and Success

    Apr 2 • Households, Macroeconomic Measurement • 264 Views

    A recent Daily Mail article about President Sarkozy’s height sensitivity reminded me of studies that relate height to success.  

    But first, some height stats:

    • Nicholas Sarkozy (France): 5’5″
    • Barack Obama (U.S.): 6’2″
    • Angela Merkel (Germany): 5’8″
    • Gordon Brown (U.K.): 5’11”
    • Stephen Harper (Canada) 6’2″
    • Carla Bruni Sarkozy (French first lady): 5’10”
    • Napoleon Bonaparte: 5’6″
    • 39 U.S. presidents were taller than average while 5 were shorter

    A 2004 New Yorker article has wonderful facts about the economic implications of height: 

    • The tallest in Europe, the average male in the Netherlands is 6’1″ and the average female is 5’8″. Consequently, homes, cars, ambulances and clothing need to be redesigned.  Ceilings need to be higher and ambulances need to be longer.
    • Taller men earn more.  One study indicated that an average six footer will earn close to $165,000 more than someone who is 5’5″ during a 30 year period.
    • Historically, as cities grew larger, humans became shorter. Economists theorize that deficient nutrition was the cause.
    • Height corresponds to economic growth. When affluence grows, so too do people.

    The Economic Lesson

    Called anthropometric history, the history of human height has become an economic field of study. Economists use height data to form hypotheses about GDP, national affluence, food consumption, real family income, wages and prices.

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    The Ten Best Money Movies

    Apr 1 • Entertainment, Financial Markets, Thinking Economically • 231 Views

    From a Forbes.com, 2006 reader survey, the 10 best money movies:

    1. Wall Street (1987; 35% of votes)
    2. Trading Places (1983; 10% of votes)
    3. The Sting (1973; 6% of votes)
    4. Ocean’s Eleven (1960; 5% of votes)
    5. Boiler Room (2000; 5% of votes)
    6. It’s a Mad Mad Mad World (1963; 4% of votes)
    7. Casino (1995; 4% of votes)
    8. Glengarry Glen Ross (1992; 4% of votes)
    9. The Treasure of the Sierra Madre (1948; 4% of votes)
    10. American Psycho (2000; 3% of votes)

     

     

     

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