• China's yuan and trade worries

    Why (not) to Worry About China

    May 10 • Businesses, Demand, Supply, and Markets, Developing Economies, Economic Debates, Economic Growth, Economic History, Environment, Financial Markets, Government, International Trade and Finance, Labor, Regulation, Thinking Economically • 76 Views

    Many of us are concerned about China.

    Where are we going? To knowing the tradeoffs that relate to our China worries.

    The Issues

    Among the eight issues that Pew Research polled to learn about our China concerns, four were economic:

    China worries that relate to the U.S. economy

     

    Politics

    And yes, our China concerns have influenced presidential politics:

    China's economy and the U.S. election

    Our Bottom Line: Tradeoffs

    Looking more closely at the top two of our four economic concerns about China, we can focus on the tradeoffs.

    The Debt

    China is the top holder of U.S. treasuries. Below you can see that at the end of February, China held $1252.3 billion of the U.S. debt:

    Top U.S. Treasuries Holders as of the end of February 2016 (in $ billions)

    China worries and U.S. debt concerns

    From: U.S. Treasury

    The tradeoff: The Chinese own a disproportionate amount of our debt but they are funding our deficit.

    Job Losses

    Local labor markets have lost jobs to China.

     

    China worries and U.S. manufacturing

    From: “The China Syndrome: Local Labor Market Effects of Import Competition in the United States”

    The tradeoff: We are losing higher paying manufacturing jobs but saving money for millions of consumers with cheaper imports.

    So, knowing the tradeoffs, maybe we should worry less about our economic relationship with China.

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  • Weekly Roundup and the income tax rate history and the Congress

    All You Need to Know About the Federal Debt

    May 10 • Economic History, Government, Macroeconomic Measurement • 94 Views

    I just had a tough time reducing the deficit in a new game from Brookings. Called The Fiscal Ship, the game lets you win only if you become a deficit hawk and maintain a steady federal debt level for the next 25 years.

    Budget news deficit xkcd

    “Budget News” from xkcd

    Where are we going? To two graphs, one chart and a game that tell you all you need to know about the federal debt.

    Past, Present and Future Debt

    Spending and Revenue

    Defined as when yearly spending exceeds revenue, the deficit became a bigger chunk of the GDP when we had the 1982, 1991, 2001 and 2008 recessions. You can see below that the deficit or surplus as a percent of GDP is shown as the gap between the blue and green spending lines, Do note that 1998-2001 was the only recent time we had a surplus:

    Federal debt from outlays and revenue gap

    Spending Categories

    As our next step, we should ask about where our money goes. Dominated by mandatory entitlements like Social Security and Medicare, federal spending also includes the interest we have to pay to our bill, bond, and note holders for the money we’ve borrowed from them. The third category, discretionary spending, is topped by defense but also takes us to interstate highway maintenance, the FDA, Homeland Security and many other smaller items.

    Federal debt history

    The Debt

    As a result, with more money going out than coming in, we have had to borrow. Defined as all that the nation owes at a specific time, the debt as a percent of GDP is growing larger:

    Federal debt history

    Our Bottom Line: The Federal Budget

    If you decide to play the game and steer “The Fiscal Ship” on a stable course, you will enter turbulent budgetary waters because almost any decision you make will be controversial. On the spending side, cuts would mean diminishing a social safety net, or education spending or neglecting the transportation infrastructure. Meanwhile, your tax decisions will shape the incentives that motivate individuals and business firms. As a whole, all you decide will reflect your vision of the role of government.

    So, for some insight about yourself and why Congress has made so little progress with controlling the federal debt, I recommend giving The Fiscal Ship a try.

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  • Hamilton tickets and Broadway theater

    The Many Prices of a Hamilton Ticket

    May 9 • Businesses, Demand, Supply, and Markets, Entertainment, Lifestyle, Thinking Economically • 112 Views

    To see “Hamilton,” you probably have to be lucky, famous, rich or very patient.

    Where are we going? To why a hit Broadway show can engage in some price discrimination.

    Hamilton Ticket Prices

    Lucky

    If you are in the lucky category, then one of the 21 front-row $10 tickets could be yours for a Wednesday matinee. You just have to join the 1500 individuals who show up outside the theater between 12 and 12:30 to participate in the lottery. Or you can compete against the 10,000 people who hope to win one of the 21 digital lottery tickets in the front row for other performance days.

    This lucky person got a pair of $10.00 “Hamilton” tickets:

    Monopoly pricing for Hamilton tickets

    From: NY Daily News

    Famous

    In a list of the famous people who have seen “Hamilton,” we can include the Obamas, the Clintons, Paul McCartney, Dick Cheney, Busta Rhymes and Weird Al Yankovic. According to Marketplace.org, it is likely that the show’s PR person, Sam Rudy was their ticket source.

    Rich

    As for those of us who can spend more than our rent on two tickets, the equilibrium price for one has gone beyond $2,000 in secondary markets where brokers resell them with a supply and demand fueled markup. Meanwhile, concluding that they have been underpricing premium seats if resellers can get so much more, the group that owns the Richard Rodgers Theater is reportedly going to charge $995 instead of $549 for their most expensive seats.

    Patient

    And finally, for the patient among us, during February, 2017, box office tickets should be available. Otherwise they are sold out.

    Our Bottom Line: Monopoly Pricing

    When your show has 16 Tony nominations that include the best show, the best actors, the best original score, you pretty much have monopoly status. As a result, charging different groups difference amounts, you can engage in price discrimination.

    Among monopolists, the market is seen through a lens that divides buyers according to what they can spend. So a student might get a low price as well as the person willing to go on a Sunday when Lin-Manuel Miranda’s understudy plays Hamilton. Also, our location preferences divide us as well as whether we are willing to sacrifice time or money for a seat.

    The theater owner’s goal?  By “sorting customers,” their pricing strategy lets them optimize their revenue.

     

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  • unpaid work at home

    What Mom’s Yearly Paycheck Would Be

    May 8 • Behavioral Economics, Economic Debates, Economic Growth, Economic History, Economic Thinkers, Environment, Gender Issues, Health Care, Households, Labor, Macroeconomic Measurement • 122 Views

    A stay-at-home mom is a psychologist for approximately 3.24 hours a week. She also does some interior design, athletic training and event planning. Paid at the going rate for each of her professions, she would make $143,102 a year.

    Where are we going? To whether we should give unpaid work a dollar value.

    A Mother’s Day

    After asking more than 15,000 moms about their daily time use, salary.com plugged in the data for each “job” and created a paycheck for a stay-at-home mom and the moms who also work outside the home.

    Pro-rated, the CEO pay that mom would have received was highest although being an executive chef took the most time:

    including the value of unpaid work in the GDP

    From: salary.com

    When we compare the stay-at-home mom to women who also work outside the home, the difference in weekly home work hours is 92 to 59 and yearly hypothetical pay, $143,102 to $90,223.

    Our Bottom Line: Unpaid Work

    During the 1930s, Nobel Laureate Simon Kuznets used paid production to create the basics of national income accounting–what we now call the GDP. Looking for a metric on which to base a yearly comparison of what we produce, he decided to include only goods and services that could be legally purchased. The value of unpaid work done at home was excluded because it was tough to quantify. Since then, using the dollar value of production as our yardstick, the Kuznets vision for the GDP has been our measure of national success,

    But it does not have to be.

    As far back as the nineteenth century, utilitarians said our success metric should emphasize happiness and, more recently, so too has Bhutan through their Gross National Happiness model. Meanwhile, the OECD has a “Better Life Index” with components ranging from civic engagement to health and work/life balance.

    However, if we wanted to stick with GDP as a measure of national success, we could add negative and positive dollar values to intangibles like pollution, life satisfaction and yes…the value of unpaid work done in the home.

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  • Weekly Roundup The econlife.com economics news summary

    Weekly Roundup: From More Grit to Less Sugar

    May 7 • Businesses, Demand, Supply, and Markets, Developing Economies, Economic Debates, Economic History, Economic Thinkers, Education, Environment, fiscal policy, Gender Issues, Government, Innovation, Labor, Lifestyle, Thinking Economically • 76 Views

    Weekly News Roundup

    Grit and excellence Sunday 05.01.16

    Why we need grit…more

    Elephant ivory and poaching problem Monday 05.02.16

    A better way to fight poachers…more

    Princeton University and non-profit tax exemption Tuesday 05.03..16

    The tax that Princeton might have to pay…more

    Weekly roundup and postal service financial problems Wednesday 05.04.16

    How our mailmen might change…more

    Weekly Roundup and soda tax impact Thursday 05.05.16

    Mexican soda tax problems…more

    Weekly Roundup and gender gap and hiring gender discrimination Friday 05.06.16

    A new way to look at gender discrimination…more

    Ideas Roundup

    • human capital
    • positive externality
    • behavioral economics
    • market system
    • tragedy of the commons
    • taxes
    • unintended consequences
    • creative destruction
    • federal deficit
    • innovation
    • monopoly
    • price elasticity
    • gender discrimination

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