• Down to Earth and “Up in the Air”

    Dec 28 • Thinking Economically • 241 Views

    Yesterday I saw “Up in the Air”, the new George Clooney movie that has been called a comedy. As Ryan Bingham, Clooney was a “transition specialist”. Firms hired his employer to “fire” people. Excellent in many ways, the movie was about technology, romance, detachment, and relationships. Also, it was about this recession.
    Joe Morgenstern said it best in his Wall Street Journal review:
    “When I saw ‘Up in the Air’ at its first public screening at the Telluride Film Festival last summer, I was startled by the eloquence of those vignettes, and admired the director for portraying working-class Americans without a trace of glib pity or condescension. I had no inkling of what is now public knowledge, that the interviewees were real people who had lost real jobs; they’d been invited by Jason Reitman and his colleagues to talk about their experiences on camera.”
    Through “Up in the Air”, the unemployment statistics become very real. For November, there were 15 million unemployed and 165,346 individuals fired through 1797 “mass layoff actions”.

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  • More Than a Price

    Dec 27 • Thinking Economically • 229 Views

    Listening to a wonderful Radio Lab (WNYC 10/09/09) podcast on Numbers, I started to think about a comment about what you can learn from a gas pump. $1.40? Maybe a teenager with little to spend. $10.04? Probably a cash payment but the attendant did not turn off the equipment fast enough. $60.00? A person with a credit card and a large gas tank.
    Indeed, prices tell a story, provide information, and serve as incentives and disincentives. When prices are set by government, they lose their ability to convey information and affect behavior.
    Maybe we can call prices messengers?

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  • A Sick Health Care Bill?

    Dec 26 • Thinking Economically • 261 Views

    Reading the Concord Colition’s 15 page assessment of health care reform provides a sound sense of the questions I would like to ask. http://www.concordcoalition.org/files/uploaded-pdfs/1223FinalHealthCarebrief.pdf
    1. Does it matter that people who fund the program will not benefit? During the 1930s, when Social Security was passed, its originators believed it would achieve success only if those paying for it received its benefits. They did not want a poverty program.
    2. Which incentives are being created? I wonder whether, for consumers, there is an incentive to consume more and, for physicians, a disincentive to provide more.
    3. Will taxes on the affluent increase revenue and will economic growth be affected? (you might look at: http://seekingalpha.com/article/78256-lying-with-charts-wsj-edition) Certain economists have tried to prove that even when tax rates change, tax revenue remains a relatively consistent proportion of GDP (18%).
    4. And finally, as suggested by Arnold Kling during a December 18 Bloomberg/Tom Keene interview, can those with power know enough to design appropriate legislation for so many diverse people?

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  • Should We Stop Giving Holiday Gifts?

    Dec 25 • Thinking Economically • 283 Views

    According to Wharton School economist Joel Waldfogel, we might be better off if we stop gift giving. Dr. Waldfogel says that all too often, the value of the gift to the recipient is less than the price the giver paid. The resulting “deadweight loss” makes him conclude that holiday gift giving is not as beneficial as many assume.
    Perhaps this is an ideal example of economists knowing the price of everything but not the value or (opportunity) cost.
    Waldfogel discusses his research in a recent Slate article and today’s “Note”, a youtube interview:
    http://www.slate.com/id/2236567
    www.youtube.com/watch?v=6HqM8hIP0G0

    Deadweight Loss: Value that “disappears” because a price does not reflect a cost/benefit match. If you are willing to pay $30 for a t-shirt which cost a gift giver $50, then the deadweight loss is $20. If the giver got $10 of pleasure, still the deadweight loss in $10.00. More typically, deadweight loss refers to taxes and monopoly pricing.

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  • Pleasing Ricardo

    Dec 24 • Thinking Economically • 262 Views

    During the 1990s, ignoring the protests of horrified Italian cheesemakers, the US placed a tariff on Pecorino cheese. The reason was bananas. Favoring their former colonies, the EU taxed bananas coming from all other Latin American countries that were grown primarily by US firms like Chiquita and Dole. The Pecorino tax was a retaliatory policy.
    Finally the (banana) warring countries have agreed on a solution and all bananas will be treated equally. An article about the banana war is at:
    http://uk.news.yahoo.com/18/20091215/tbs-latin-americans-eu-strike-historic-d-5268574.html

    David Ricardo, a nineteenth century British economist, was the first to defend free trade through the idea of comparative advantage.
    Comparative advantage: When each nation produces goods and services that have a low opportunity cost (less sacrifice) and trade them for what they do not produce, production is more efficient throughout the world.

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