• economic news summary and Brooklyn and gentrification

    Finding the New Brooklyns

    Oct 30 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Economic Debates, Economic Growth, Economic History, Government, Households, Labor, Lifestyle, Macroeconomic Measurement, Thinking Economically • 155 Views

    By Adrienne Wolfe with Elaine Schwartz

    You could have pork belly, tomato jam, pickled vegetables and local cheese at an of-the-moment restaurant in Brooklyn…but it also might be Detroit.

    Detroit is known for a lot of things: the birthplace of cars and Motown Records, the largest municipal bankruptcy, poverty and crime. Now we can add America’s New Food City. Named one of the best new restaurants by Bon Appetite, Rose’s Fine Food is a high-end diner in Detroit. In an old pawnshop, Gold Cash Gold offers an Oyster Happy Hour for Equality. And Republic was among the top 100 restaurants for foodies in America.

    So how can Detroit, a city with unemployment, housing, and crime problems, be the home to new, emerging restaurants?

    As the paradigm for once run-down, tired cities turned trendy, hip, and full of life, Brooklyn might have some answers. Just a subway ride from neighboring Manhattan, Brooklyn served as a blank slate for both visual and culinary artists who wanted cheap prices and low rent. Now pockets of Detroit are also attracting creative occupants.


    The NY Times has dubbed a myriad of cities the new Brooklyn. Like Detroit, each of the “New Brooklyns” is a cheaper alternative for artists and anyone else looking for less expensive housing. When the new residents stimulate economic and residential development, the result is gentrification.

    To identify where gentrification is occurring, the website governing has gathered data from the American Community Survey. Their criteria included increases in median household income, median home values and the number of bachelor degrees.

    Looking at the largest 50 cities in the U.S., they placed Portland, Oregon at the top of their list of cities where gentrification occurred.

    Below you can see the top nine on governing’s list:

    Gentrification and poverty

    Meanwhile Detroit, fourth from the last, is near the bottom of the list:

    gentrification and poverty

    Our Bottom Line: Urban Economic Development

    Gentrification can be controversial. When more affluent residents move into an under-invested mostly poor community, the development that unfolds can displace the current population. Researchers also note though that the moving rate for a gentrified neighborhood’s original residents can be rather similar to what it would have been without development. Furthermore, gentrification can diminish the average poverty rate and improve a once rundown area for those who remain.

    With Brooklyn a synonym for gentrification, we can either imagine an economic development process or further inequality. Both possibilities return us to a first step in the gentrification process for Detroit and some good restaurants.

    No Comments on Finding the New Brooklyns

    Read More
  • Economics news summary and the Phillip's Curve

    The Impact of a Legendary Economics Curve

    Oct 29 • Demand, Supply, and Markets, Economic Debates, Economic History, Economic Thinkers, Government, Macroeconomic Measurement, Money and Monetary Policy • 152 Views

    If you want to sound like an economist, just cite the Phillips Curve. Displaying the inverse relationship between unemployment and inflation, the Phillips Curve tells us that when one goes up the other goes down.

    Phillips Curve

    Phillips Curve

    Where are we gong? To whether the Fed believes in the Phillips Curve.

    Bill Phillips, the Moniac and the Curve

    Dr. Phillips and the Moniac

    Alban William Housego (Bill) Phillips was not your typical economist. After growing up on a New Zealand dairy farm and apprenticing at a hydroelectric station because he couldn’t afford college, he traveled to England via Australia, China, Russia and Japan. Along the way he hunted crocodiles, worked in a gold mine, learned differential equations through a correspondence course and was detained by the Japanese who thought he was a spy. However, he made it to London and by 1940 had his economics degree from the London School of Economics (LSE). During the war, while serving in the Royal Air Force Volunteer Reserve he was captured near Java. As a POW for three and one half years, he secretly built and operated miniature radios.

    Bill Phillips

    The phillips curve and monetary policy

    From: Wikipedia

    After the war Bill Phillips began his academic ascent at LSE but reputedly was most interested in building a hydraulic model of the economy called Moniac during his spare time. The model’s amazing (!) water flows are worth seeing for four minutes or so in the following video:

    The Curve

    We have to fast forward to 1958 for the publication of the original Phillips Curves. Below you can see its initial form in “The Relation Between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom,1861-1957:”

    The original Phillips curve and monetary policy

    From: “The Phillips Curve: A Rushed Job?”


    Our Bottom Line: The Phillips Curve Debate

    In the following Phillips Curve, assume you are at Point A and want to lower your unemployment rate. Using monetary policy, you should be able to decrease interest rates, increase economic activity, and thereby move to Point B.

    Phillips Curve and Monetary Policy


    Yes? Maybe.

    The reaction to the Phillips Curve is varied. Agreeing with its basic premise, some economists say its accuracy just depends on the yardstick we use to measure inflation. At the other extreme, classical economists believe the curve displays a tradeoff that does not exist. Others suggest the curve is irrelevant right now because we have low unemployment and low inflation. However, they are challenged by the scholars predicting an inflationary time lag.

    But what about Janet Yellen?

    In a September 24, 2015 speech, she refers to an expectations-augmented Phillips Curve and then says that our inflation expectations are “well-anchored.”  She then continues, “The fact that these survey measures appear to have remained anchored at about the same levels that prevailed prior to the recession suggests that, once the economy has returned to full employment (and absent any other shocks), core inflation should return to its pre-recession average level of about 2 percent.”

    Providing an affirmation of monetary easing, it appears that her Phillips Curve is somewhat horizontal.


    2 Comments on The Impact of a Legendary Economics Curve

    Read More
  • economic news summary and China's five year plan

    Do You “Wanna Know What China’s Gonna Do?”

    Oct 28 • Demand, Supply, and Markets, Developing Economies, Economic Growth, Economic Humor, Entertainment, Thinking Economically • 145 Views

    At the end of this week, China’s leaders will have approved their thirteenth five-year economic plan.

    For now though in a rather perky sing-along animated video, they suggest “If you wanna know what China’s gonna do, best pay attention to the Shí sān wǔ (十三五).” (Pronounced Shí sān wǔ, the Chinese characters refer to the numbers you see in the video, 13 for the plan number and 5 for its duration,)


    Our Bottom Line: A Top Down Development Plan

    Thinking of the three basic economic systems–tradition, command and the market–you can see at the end of the video how command still characterizes the Chinese economy:

    “When the plan comes out the work’s not done,

    In fact it’s really just begun,

    Because every province county, city too,

    Have got to figure out what they’re gonna do,

    As the plan goes from high to low,

    The government’s experience continues to grow,

    They had to work hard and deliberate,

    Because a billion lives are all at stake…”

    Very much “top down,” their 2016-2020 development plan contrasts with the bottom up dynamic of the market.



    No Comments on Do You “Wanna Know What China’s Gonna Do?”

    Read More
  • economic news summary and unemployment

    Solving the Mystery of the Disappearing Workers

    Oct 27 • Behavioral Economics, Demand, Supply, and Markets, Economic History, Education, fiscal policy, Gender Issues, Government, Health Care, Labor, Lifestyle, Macroeconomic Measurement, Thinking Economically • 122 Views

    We might be able to solve a mystery today.

    During January, we said that millions of workers were “missing” from the labor force.

    Limited to people who are 16 or older and have a job or are looking for one, the labor force numbers approximately 156 million. But the civilian population includes another 94 million individuals who are also older than 16 who could be in the labor force but are not.

    So where are they?

    Finding the Missing Workers

    Let’s start with a chart of the working status of the civilian population that is 16 or older. If we combined the five green rectangles under “Don’t Want a Job” and the single red box labeled “Not in labor force but wants a job,” we would get a total of 94 million workers.

    The labor force and the participation rate

    From: The Atlanta Fed


    Next, looking at the (above) rectangles as a (below) graph, we can picture some of the numbers. The retired group is a whopping 41 million people. Add to that 15 million individuals who are in school, 20 million who care for the aged and children and then those who are disabled and you get a total of 76 million. I suspect that with “other” and “want a job but not in the labor force,” we have found many of our missing workers.

    Labor force and participation rate


    Our Bottom Line: the Participation Rate

    In our January post, we said we had a mystery. If we divide the size of the labor force by the potential labor force (which includes everyone who could be and is in the labor force) and then multiply by 100, we get a September 2015 labor force participation rate of 62.4 percent. That 38.6 percent–the “non-participation” rate- is the 94 million people we thought were missing.

    the labor force and the participation rate mystery

    And yes, that is a lot of people for the employed population to support. But we can save that for another day.

    No Comments on Solving the Mystery of the Disappearing Workers

    Read More
  • econoic news summary and property rights in outer space

    It’s Time for Outer Space Lawyers

    Oct 26 • Businesses, Demand, Supply, and Markets, Economic Growth, Economic History, Economic Thinkers, Government, Innovation, Regulation, Tech, Thinking Economically • 147 Views

    Space rocks are chock full of raw materials we can use on earth. But if you figure out how to mine an asteroid, will you own what you get?

    Where are we going? To outer space property rights.

    Space Property Rights

    Congress has decided it is time to describe our property rights in space. The last cosmos related legal document that they approved was the 1967 UN Outer Space Treaty. At the time, because military proliferation was the concern, the document emphasized no weapons in outer space, international cooperation and “free access to celestial bodies.” They did not detail economic issues because, as they expressed it, the possibility was too remote.

    Not anymore.

    Congress has proposed the Space Resource Exploration and Resource Act of 2015. Specifically dealing with asteroids, the law says that any entity that obtains asteroid resources has the same property rights as federal and international law guarantees it on earth.

    According to space lawyer and University of Mississippi Law School professor Joanne Gabrynowicz, the proposed law has huge gaps. Congress mentioned no regulatory bodies to license and regulate asteroid mining and ignored the need for international agreements.

    Asteroid Mining

    Meanwhile, among the firms with an asteroid mining agenda, Planetary Resources lists James Cameron and Google’s Larry Page and Eric Schmidt as investors. Its plans? Stated very simply, they hope to profit from resources in outer space. As a beginning, this year they successfully launched a satellite and, in 2016, their Arkyd-100 scope is supposed to analyze a selected asteroid as it orbits the earth.

    In this captivating 2 minute video, Planetary Resources redefines the traditional image of an asteroid as they explain what they hope to do.


    Our Bottom Line: Property Rights

    Secretary of the Treasury Alexander Hamilton realized that the sanctity of contracts was essential for U.S. economic development. As a result, when he had to decide who owned Revolutionary War bonds, the benevolent patriots who had sold the bonds at a discount or the ruthless speculators who bought them, he chose the speculators. Why? Government has to enforce a legal contract.

    So, whether on earth or in outer space, economic development requires secure property rights. After all, if we invest the time and money to secure water and platinum from an asteroid, we need to know that contract law guarantees our ownership rights.

    No Comments on It’s Time for Outer Space Lawyers

    Read More