• 15568_4.6_000000667950XSmall

    Handy Quotations

    Apr 6 • Economic Thinkers, Thinking Economically • 346 Views

    On Economics:

    Economics is “the study of mankind in the ordinary business of life.”   Alfred Marshall, 1842-1924 (U.K. economist).

    “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.” Friedrich von Hayek, 1899-1992 (Austrian-born, U.K. citizen economist).

    “…persons, with big wigs many of them and austere aspect, whom I take to be Professors of the Dismal Science.”  Thomas Carlyle, 1795-1881 (Scot. teacher, writer, satirist), on the (sometimes) dreary character of economics.

    On economists:

    “In the long run we are all dead.”  John Maynard Keynes, 1883-1946 (U.K. economist), referring to economists’ emphasis on the future impact of their ideas. 

    “Give me a one-handed economist. All my economists say, “On the one-hand; on the other.” Harry Truman, 1884-1972 (U.S. president).

    The Economic Lesson

    Economics books say that economics is a social science that explores how we produce and distribute scarce resources (land, labor, capital).

    No Comments

    Read More
  • 15566_4.5_000012067999XSmall

    Economics and Literature

    Apr 5 • Thinking Economically • 349 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.


    No Comments

    Read More
  • 15564_4.4_000004478097XSmall

    A History of Financial Regulation

    Apr 4 • Financial Markets, Regulation • 322 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.” 


    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.

    No Comments

    Read More
  • 15562_4.3_000010345649XSmall

    Social Insecurity

    Apr 3 • Economic History, Government • 351 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.

    1 Comment

    Read More
  • 15560_4.2_000010186118XSmall

    Tall Stories: Height and Success

    Apr 2 • Households, Macroeconomic Measurement • 326 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.

    No Comments

    Read More