• Weekly roundup and African statistics and new data sources like cell phones

    How to Correct Misleading Statistics

    Apr 4 • Businesses, Demand, Supply, and Markets, Developing Economies, Economic Growth, Economic Thinkers, Households, Innovation, Labor, Lifestyle, Macroeconomic Measurement, Tech, Thinking Economically • 108 Views

    Sometimes a picture is worth more than a thousand statistics:

    Measuring poverty from NASA Observatory night lights

    From: NASA Earth Observatory

    In this dazzling NASA satellite image of the earth at night, Rwanda is dark. Assuming that darkness means little is happening, we can form hypotheses involving production and education and safety.

    Where are we going? To the new statistics.

    Locating Better Numbers

    Economist Morten Jerven tells us that we have a problem with data from most African economies. In 2007, Dr. Jerven visited the Zambian Central Statistical Office in Lusaka. It was staffed with 3 people. The one person in the office pulled together cement purchases to estimate national construction. The value of agricultural production was based on crop forecasts for eight crops. Growth for retail, wholesale and transport were taken from prior growth rates. The result, though, was one precise number, a GDP number.

    The question then is where to find more dependable data.

    Cell Phones

    One possibility is cell phone calls. Concluding that a cell phone could predict an Individual’s socioeconomic characteristics, a group of researchers looked at hundreds of surveys and billions of phone records. After corresponding specific data from the surveys with phone records, they had a springboard for interpreting billions of phone records.

    Think of what your phone can say. It tells your location, the length of your talk and the time. Phone facts can reveal people’s social networks and their travel patterns. Calls mostly made during work hours imply that you have a 9 to 5 job. Made from different locations, they reflect motorcycle ownership. We can even form conclusions about affluence by differentiating between the caller (who pays) and the recipient, .

    I’ve copied below a map from Science Magazine that shows how phone data was used to form wealth assumptions that focused on groups of just 5 to 15 subscribers.

    Using cell phone data to supplement misleading statistics and data that is inaccessible

    From: “Predicting poverty and wealth from mobile phone metadata”

     

    Our Bottom Line: Correcting Misleading Statistics

    In the developing world where data is harder to collect, technology can generate a new flow of numbers that verifies, specifies or disproves what we think we already know.  For countries like Rwanda, the data flow from nighttime satellite pictures and cell phones help policy makers know what really is happening.

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  • March Madness

    Who’s making money during March Madness?

    Apr 3 • Perspectives • 131 Views

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  • coffee history and innovation

    Why Coffee (Might Have) Caused the Industrial Revolution

    Apr 3 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Economic Growth, Economic History, Economic Thinkers, Financial Markets, Innovation, Labor, Lifestyle, Macroeconomic Measurement, Thinking Economically • 119 Views

    In 1792 under a Buttonwood tree at 68 Wall Street, 24 securities brokers signed an agreement that formalized their trading rules. As you might have expected, they soon decided to relocate indoors.

    Where are we going? To the role of coffee in our economic history.

    The Tontine Coffee House

    What ultimately became the New York Stock Exchange really began in a coffee house. Established by the brokers who had signed the Buttonwood Agreement, in 1793 they started trading securities (and drinking coffee) at the Tontine Coffee House. During midmorning the group’s leader called out an alphabetized list of stocks and bonds and the brokers responded with their bids and offers. The result was a market, the process through which they determined the price and volume for all that they traded.

    Below, in this 1797 painting, the Tontine Coffeehouse has the flag atop its roof and Wall Street is the street at the far right:

    Coffeehouses, Wall Street and innovation

    From: NY Historical Society

    Coffee History and the Industrial Revolution

    Originating in Yemen, traveling to Turkey and then moving to Europe by the mid-seventeenth century, coffee was about a lifestyle change. Because of a polluted water supply, beer had been a typical European’s beverage-of-choice. Starting with a breakfast of a bowl of beer soup (actually an eggs and beer and butter mixture), you could have sipped beer throughout the day.

    The arrival of coffee resulted in less beer and more caffeine in the European diet. Or, as New Yorker Magazine writer Malcolm Gladwell explained, they chose “being jittery to being drunk.” Meanwhile, we could say that London’s coffee houses became idea incubators while factory workers became more alert. Coffee has even received some of the credit for the increase in productivity and innovation that characterized the industrial revolution.

    Our Bottom Line: Human Capital

    Whether we believe that coffee played a large or small role in the history of stock markets and innovation, we can conclude that it has affected the development of human capital. Defined as the learning that makes people more productive, human capital’s potential has been boosted by caffeine and the coffee houses where people gathered to share ideas and trade stocks and bonds.

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  • Weekly Roundup The econlife.com economics news summary

    Weekly Roundup: From Buying Big Macs to Selling Waders

    Apr 2 • Businesses, Demand, Supply, and Markets, Developing Economies, Economic Debates, Economic History, Economic Thinkers, Gender Issues, Government, International Trade and Finance, Labor, Lifestyle, Money and Monetary Policy, Regulation, Sports, Thinking Economically • 99 Views

    Weekly News Roundup

    Trans-Pacific Partnership Sunday 03.27.16

    The impact of the TPP on waders…more

    professional tennis and the equal pay debate Monday 03.28.16

    What female tennis players are protesting…more

    weekly roundup, restroom access, economic power and externalities Tuesday 03.29.16

    How restrooms are about power…more

    Weekly roundup, brexit and divorce Wednesday 03.30.16

    What you should know about Brexit…more

    Weekly roundup, nest eggs and baby boomer savers Thursday 03.31.16

    Why savers are unhappy…more

    Weekly roundup and minimum wage rates and buying Big Macs Friday 04.01.16

    Where minimum wage buys a Big Mac…more

    Ideas Roundup

    • comparative advantage
    • market system
    • division of labor
    • trade barriers
    • sports economics
    • gender issues
    • income
    • externalities
    • identity economics
    • feminist economics
    • foreign exchange
    • interest rate policy
    • minimum wage
    • standard of living
    • wages and salaries,

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  • Weekly roundup and minimum wage rates and buying Big Macs

    The Amount of Work it Takes to Buy a Big Mac

    Apr 1 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Developing Economies, Economic Growth, Economic History, Households, Labor, Lifestyle, Macroeconomic Measurement, Regulation • 103 Views

    Yesterday, the UK minimum wage was £6.70 an hour. Today, covering workers 25 and older, it rose to £7.20 while for 2020, the target is £9.

    As a result, the 26 minutes of work needed to buy a Big Mac before the hike will drop to 18 minutes in 2020. When it takes less work to buy more Big Macs, we can say that your standard of living has gone up.

    What a Minimum Wage Will Buy

    For people earning a minimum wage, how much you need to work to buy a Big Mac depends on where you live. Below, the Financial Times has done some comparing for us. Do note that the UK hourly minimum wage is now £7.20:

    Minimum wage rates in different countries

     

    Looking at specific cities, UBS did a similar study. Slightly different from FT, their wage data was based on a weighted index for 15 professions. I’ve copied a section of their table for the Big Mac, bread, rice and an iPhone 6:

    Wage rates and purchasing power in different cities.

    From: “Prices and Earnings 2015: Do I earn enough for the life I want?” UBS

    Our Bottom Line: Standard of Living

    The nominal wage rate is what labor earns in current prices. So, if you divide that wage rate by the price of a Big Mac or an iPhone 6, you can get an idea of what that worker can buy.

    Then, moving from a nominal wage to a real wage that accounts for inflation, we can compare yearly changes and (hypothesize) economic progress. Comparing real wages in U.S. manufacturing for a 40-hour week in 2007 to comparable workers’ real wages in 1890, we would see that, “…weekly earnings would be 50% higher today than they actually are if work hours had not declined so dramatically since 1890.”

    In other words, working less we can earn much more (and can buy more Big Macs)…and that is what a rising standard of living is all about.

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