• barbies

    What Barbie Tells Us About Women

    Jun 23 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Economic Growth, Economic History, Entertainment, Fashion, Gender Issues, Innovation, Labor, Lifestyle • 165 Views

    Our Monday gender issue focus

    Equipped with a smart phone, a tablet and her distinctively shapely proportions, pink-clad Entrepreneur Barbie just arrived.

    Because Barbie reflects what has become culturally acceptable, I guess we should applaud her newest incarnation. In 1959, Barbie (her name was Barbie Millicent Roberts from Willows, Wisconsin) began as a teenage fashion model but since then, examples of her 150 professions include astronaut, presidential candidate, Women’s World Cup Soccer player, surgeon and news anchor.

    The one missing category was CEO.

    Entrepreneur Barbie

    From: Salon

    So yes, now as an entrepreneur, we can finally expect her to run a firm. Tweeting, “Remember if you can dream it, you can be it,” she takes the first step. But according to a Dell study, here is what else she will need:

    Entrepreneurs Success SSRN-id1604653__1__pdf

    And, she is in the right place. Looking at entrepreneurial ecosystems, business environments, and entrepreneurial aspiration, according to the Dell study, the most welcoming entrepreneurial environments are in Australia, Sweden, and the United States.

    Covering 30 countries, here are the best places to be a female entrepreneur:

    In several nations, including the United States, the environment supports entrepreneurs.

    From: Dell

    And finally, I guess it did not matter that Barbie broke up with Ken for several years before they got together again:

    Most female entrepreneurs are married.

    From: Dell

    Our bottom line: Barbie is a barometer of normal. If she is an entrepreneur, then women have indeed begun fully to contribute their human capital in the US.

    Did you own a Barbie doll? Her profession? The year? Maybe we can gather some of our own Barbie history. Please let us know in a comment.

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  • Creating inefficient use of land, labor and capital, a Comcast Time Warner merged firm would become a monopsony.

    Why Mickey Mouse Worries About Monopsonies

    Jun 22 • Businesses, Demand, Supply, and Markets, Economic Debates, Economic History, Entertainment, Financial Markets, Households, Labor, Lifestyle, Media, Regulation • 155 Views

    No, we don’t mean monopoly. A monopoly is the single seller in a large or small geographic area. Monopsony, by contrast, indicates there is a single buyer.

    In a competitive market structure, monopsony means one buyer.

    From: SMBC

    Where are we going? Whereas a monopoly has the power to charge too high a price, the amount a monopsony pays to its suppliers is too low. As a result, like monopolies, they are inefficient users of land, labor and capital.

    Comcast’s pending acquisition of Time Warner Cable is an example of why monopsonies are worrisome. Not yet approved by the Justice Department, a merger of Comcast with 21.6 million subscribers and Time Warner Cable with 11.4 million would create a more concentrated competitive market structure. As the 2 largest cable companies in the US, combined, they would control close to 30% of the market and have the power to offer suppliers of programming like Walt Disney an excessively low price. From the supply side, Disney then has the incentive to provide less programming. And even if Disney said okay, the monopsony would probably not pass along its savings to us.

    Until the beginning of 1976, when baseball players were no longer prohibited from negotiating elsewhere because of the reserve clause, team owners ran monopsonies. Some say public school teachers work for a monopsony because there is only one local school district. Others see company towns where there is one employer as a monopsony.

    You can see below the markets in which monopsony creates a gap–called the “rate of exploitation”– between the wage that is paid and the market wage.

    As a competitive market structure, monopsony creates inefficiencies

    From: “Monopsony in American Labor Markets”

    Our bottom line? A firm’s competitive market structure shapes its behavior. For monopsony, that means excessive control of suppliers–who could be other producers or labor–and inefficiency.

    Do you think the Comcast/Time Warner Cable Deal should proceed? Please let us know in a comment.

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  • milk pour splash blue background

    If Milk is Good For Us, Why Are We Drinking Less?

    Jun 21 • Businesses, Demand, Supply, and Markets, Developing Economies, Economic History, Economic Humor, Government, Households, Innovation, Lifestyle • 227 Views

    Do you remember those milk mustaches?

    An industry ad, "Got Milk" was the response to perfect competition

    We first heard “Got Milk?” in 1993. I loved the campaign because, in class, it was the ideal way to illustrate a market that resembled perfect competition. Since firms are small and their products are identical, in perfectly competitive markets one business has a tough time differentiating itself from another. For milk, that meant less incentive to innovate and industry ads.

    Increasingly though, milk ads seem not to be working. Looking at milk consumption since the 1970s, the USDA reports that the proportion of preadolescent children not drinking milk daily rose from 13% to 24%. They also point out that the trend has gone on for a long time. Those of us born during the 1960s drink less milk than our grandparents who were born before 1930.

    Because of perfect competition, milk producers advertise together but still consumption is down.

    From: USDA

    So, what has happened? Yes, we are consuming the same volume of beverages–but just not as much milk. The reasons range from changing demographics (for example baby boomers and Hispanics, two high growth groups, are drinking less milk) to lack of innovation, to some price volatility, to more competition.

    Here is what we have replaced our milk with:

    Perfect competition makes it rough for milk producers to compete

    From: CoBank


    Our bottom line? Primarily because of perfect competition, milk producers have a tough time competing against each other and the new drinks that have entered our diet. (And we haven’t even mentioned the role that government plays with price supports but we will… another day.)

    What do you drink instead of milk? Please let us know in a comment.

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  • CEPR not sure if recession phase of business cycle has ended in euro area

    The Reason That Recession Dates Matter

    Jun 20 • Businesses, Economic Debates, Economic Growth, Economic History, Government, Labor, Macroeconomic Measurement, Money and Monetary Policy, Regulation • 230 Views

    Asked to define a recession, you can give the mechanical answer. It is 2 or more adjacent quarters of a real GDP decline. So, if Q1 GDP grows by 3%, Q2 by 2% and then Q3 by 1%, is that a recession? (I always use that as a tricky quiz question.) No, it is not a recession because GDP has still grown. The rate has just decelerated.

    After reading “The Upshot” NY Times column about a possible “prolonged pause” in a euro area recession, I started thinking about the impact of business cycle dates. For the euro area, the austerity debate could resurface with some saying spend more and others calling for less sovereign debt.

    In the US, the National Bureau of Economic Research (NBER) is the official source of business cycle dating while for the EU, it is the Center for Economic Policy Research (CEPR). Both say that when they determine the start and end of a recession, yes, GDP dips are important. But also they care about the depth and duration of the GDP drop, unemployment data and, less crucially, a range of other indicators. For several quarters during the 1980-1982 recession, GDP even grew.

    And therein lies the problem.

    The further we depart from the mechanical definition, the tougher it becomes to decide. After all, what is a significant real GDP decline? When does unemployment take us across that recessionary line? And what if several of the euro area countries are in recession while others are not?

    It appears that at the moment we are in the midst of a euro area statistical dilemma. In their June 16th report, the CEPR said they are just not sure where the euro area is in the business cycle. It could be in the midst of a prolonged recessionary pause or the recovery could have begun.

    Euro area business cycle

    From: CEPR

    Below, I have noted the 2 possibilities within the 4 phases of the business cycle. If they are at Point A, the trough is yet to come. However, being at Point B means the worst is behind them.

    The Eurozone's business cycle might be in a recession pause phase.

    Our bottom line? Business cycle dates have political implications that shape fiscal and monetary decisions. For that reason, it matters whether the CEPR says the euro area recession has ended.

    According to the NBER, the US recession dates were December 2007-June 2009. Please let us know in a comment if, anecdotally, you disagree.

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  • A Janet Yellen Dashboard of economic indicators lets us graph Fed decision-making

    What We Should Know About Monetary Policy

    Jun 19 • Businesses, Economic History, Economic Thinkers, Financial Markets, Government, Households, Labor, Macroeconomic Measurement, Money and Monetary Policy • 242 Views

    Having heard Janet Yellen’s press conference yesterday, I learned that the Federal Reserve expects that the economy will improve, their bond buying will diminish and, during the foreseeable future, interest rates will start to ascend. And yes, she spoke about unemployment and housing and financial markets and inflation targets.

    But where can you and I go from there? How better to grasp monetary policy?

    In class, we start by distinguishing fiscal and monetary policy. While fiscal policy is all about how the President and the Congress spend, tax and borrow, monetary policy takes us to the supply of money and credit in the economy.

    From there, our next step is to identify the 3 goals of the Federal Reserve’s monetary policy:

    • Economic growth
    • Price stability
    • Low unemployment

    Okay, so that’s the stuff to be memorized. But what really is going on in this hugely complex monetary world. What does the Fed really do?

    Happily, several weeks ago, financial writer David Wessel at the Brookings Institution provided a wonderful interactive for us to understand what monetary policy is all about. Using Janet Yellen’s “Dashboard,” he places us in the “cockpit” of her “airplane.” Looking over her shoulder, we can see the indicators that let her decide whether to brake or accelerate the economy.

    Here, Wessel introduces the dashboard:

    The dashboard interactive starts with 4 basic indicators:

    Monetary Policy Indicators from Janet Yellen's Dashboard

    From: Brookings Institution

    If you click on Markets, this is the next image:

    Monetary Policy Markets Indicators

    From: Brookings Institution Illustration by Lauren Nassef

    And finally, the dashboard indicator of “Wealth,” takes you to the S&P and housing:

    Monetary Policy Indicators Household Wealth

    From: Brookings Institution

    Our bottom line: We can understand Fed monetary policy by looking at the economic indicators that shape their decisions.

    Knowing that there is considerable disagreement between economists who care about controlling inflation and those who would first solve unemployment, if you were Janet Yellen, which indicator do you think is most crucial? Please let us know in a comment.

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