• Everyday economics and the cost of roundabouts

    The Reason We Should Drive Around in Circles

    Aug 3 • Behavioral Economics, Economic Thinkers, Entertainment, fiscal policy, Government, Thinking Economically • 136 Views

    Because roundabouts slow cars down, they speed up traffic.

    In European Vacation, Chevy Chase had some difficulty with a roundabout:

    Where are we going? To the order that roundabouts spontaneously create.

    The Benefits of Roundabouts

    With roundabouts, drivers rarely have to stop. Not stopping creates less congestion and burns less fuel than at intersections where we have to stop and then go. Because we drive slowly and have to pay attention to turn-offs and rights of way, the vigilance that roundabouts require leads to fewer collisions. In the long run, they also can cost less than a new traffic signal.

    The switch to a roundabout brings the number of total crashes down by 40 percent and comes close to eliminating accident fatalities. By contrast, traffic experts have identified 56 points of “potential conflict” in a typical 4-way intersection– 32 that relate to other vehicles and 24 with pedestrians.

    Although we started building roundabouts in the U.S. during the 1990s, they began to multiply only recently. Perhaps because they make people uncomfortable, most communities protest when someone proposes a roundabout. Still though, during the past decade, New York upped its total from 18 to 112. Others will probably follow because the federal government provides fiscal incentives for roundabout construction.

    Our Bottom Line: Spontaneous Order

    Spontaneous order is one reason roundabouts are so successful. Told nothing about how to coordinate, large numbers of people can work together productively. Called spontaneous order by economist Friedrich Hayek, the key is a mutual benefit. All drivers in a roundabout share the incentive to avoid careening into each other, to go in the appropriate direction, to maintain a similar pace. As a result, their roundabout navigation is rather orderly.

    Below, do go directly to 00.45 to see how roundabouts resemble skating rinks.


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  • Sanitation gap and human capital

    The World’s Sanitation Gap

    Aug 2 • Developing Economies, Economic Growth, Economic History, Education, Environment, Government, Health Care, Labor, Lifestyle, Macroeconomic Measurement, Thinking Economically • 108 Views

    Throughout a life cycle, the impact of inadequate sanitation grows. Because of disease, stunting and undernutrition, children’s cognitive development is diminished. Continuing through adulthood, the costs include the time and dollars spent on health care treatment, lost productivity and premature death.

    Where are we going? To the sanitation gap among and in countries.

    Sanitation Topics

    First we should decide what we mean by sanitation. In a recent Unicef/WHO paper on how much the world’s sanitation and drinking water have improved, eliminating open defecation was a primary focus while hand washing was also a thread.


    Unrealized production possibilities potential and open defecation

    Hand Washing


    Unrealized production possibilities potential and handwashing


    Sanitation Inequality


    Below you can identify the countries with Inadequate sanitation. I’ve labeled China because it has been cited for its progress.

    Human capital sanitation progress




    Moving to a slightly different geographic perspective, we can look at improved sanitation facilities that are shared by more than one household.

    Human capital and sanitation progress in specific countries


    Rural/Urban Comparison

    In addition to regional differences, there is a rural/urban gap in sanitation quality in certain parts of the world:

    Human capital and sanitation deficit in rural areas


    Urban Areas

    Looking more closely at urban areas, we also can identify sanitation inequality.

    Below, the countries’ order is based on urban sanitation for the middle wealth quintile. The dots, by contrast, indicate the gaps between different wealth quintiles. When the gap is widest between the bottom and the next quintile, the condition is called “bottom inequality.” The opposite, “top inequality” shows a wide gap between the top quintile and those beneath it.

    Sanitation Inequality human capital inequality


    The Future

    Finally, looking at the future (below), you can see that improving sanitation remains a big challenge:

    Future sanitation progress in the world

    Our Bottom Line: Production Possibilities Graphs

    Debilitating human capital, the lack of sanitation chips away at economic growth and GDP’s major components. Consumer spending power is diminished, businesses cope with a less productive work force and a disproportionate amount of government spending is directed toward a distressed population.

    A production possibilities graph can convey the underutilization that inadequate sanitation creates. Below, every point on the curve shows the max the economy can produce with its land, labor and capital. Representing specific output, the dot shows the underutilization. Because underutilization varies, that dot takes us back to the sanitation gap.

    Production possibilities graph and underutilization


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  • The econlife.com economics news summary

    Weekly Roundup: From Robot Servers to Shrimp Farmers

    Aug 1 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Developing Economies, Economic Growth, Economic History, Economic Thinkers, Environment, fiscal policy, Gender Issues, Government, International Trade and Finance, Labor, Lifestyle, Media, Sports, Tech, Thinking Economically • 88 Views

    Our Posts Roundup

    everyday economics and automation at McDonald's Sunday 7.26.15

    Why McDonald’s wants robots…more

    everyday economics and the cost of bubble wrap Monday 7.27.15

    Saying good-bye to bubble wrap…more

    everyday economics and the cost of sleep Tuesday 7.28.15

    The upside of more sleep…more

    everyday economics of gas taxes Wednesday 7.29.15

    A reason to raise the gasoline tax…more

    everyday economics and baseball gender gap Thursday 7.30.15

    Where Major League Baseball strikes out… more


    everyday economics and comparative advantage and shrimp production Friday 7.31.15

    The downside of having lots of shrimp…more

    Ideas Roundup

    • technology
    • capital intensive
    • marginal analysis
    • minimum wage
    • automation
    • externalities
    • creative destruction
    • substitute products
    • productivity
    • personal income
    • tradeoffs
    • salaries
    • taxes
    • regressive taxes
    • transportation infrastructure
    • fiscal policy
    • benefits received
    • gender gap
    • human capital
    • expectations bias
    • comparative advantage,
    • imports
    • exports


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  • everyday economics and comparative advantage and shrimp production

    The Reason for Endless Shrimp

    Jul 31 • Businesses, Demand, Supply, and Markets, Developing Economies, Economic History, Economic Thinkers, International Trade and Finance, Labor, Lifestyle • 173 Views

    I have read (but cannot confirm) that in 2011, a Red Lobster employee observed two gentlemen consuming 782 shrimp during 5.5 hours when the chain had its “Endless Shrimp” promotion. According to a Red Lobster store manager, “Endless Shrimp” is offered every September.

    Where are we going? To the reason we can have endless shrimp.

    Large Shrimp Producers

    Our story starts in Japan before World War II because a marine biologist wanted to bring dancing shrimp to the masses. A pricey delicacy, dancing shrimp were dipped in sake and given to diners while wiggling. As one of the first aquaculture developers, Motosagu Fujinaga helped to make affordable shrimp.

    Once we had the potential from aquaculture, the supply chain could evolve. It just needed four basics:

    1. The shrimp need to be the same. (Aquaculture is the solution.)
    2. They require year round storability and availability. (Flash freezing–first created by Clarence Birdseye– retains texture and some taste while aquaculture provides the mass production.)
    3. Their pricing should be “efficient and transparent.” (Lower Asian wages were the key.)
    4. Demand needs to be predictable so that traders and producers can “forward contract.” (U.S. consumers’ demand for shrimp has become steady.)

    The sad result? High quality domestic shrimp production became dwarfed by inferior imports:

    Comparative advantage and US Gulf of Mexico Shrimp Industry

    From: WSJ

    Our Bottom Line: Comparative Advantage

    First described by 19th century economist David Ricardo, the world economy becomes more efficient when each country produces whatever requires the least sacrifice. For example, if you have to decide who will do the dinner dishes, just ask the alternative for each person. If someone says he will watch Netflix and someone else has work to complete, then the first person has the comparative advantage for the dishes because he sacrifices less.

    Similarly, for shrimp, you can see below which regions have the comparative advantage. Those places are the reason we can order “Endless Shrimp” every September.

    Comparative advantage shrimp exporters

    From: TriplePundit.com



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  • everyday economics and baseball gender gap

    Why Major League Baseball Has a C+ Gender Grade

    Jul 30 • Behavioral Economics, Demand, Supply, and Markets, Entertainment, Gender Issues, Labor, Lifestyle, Sports, Thinking Economically • 170 Views

    A year ago, the San Diego Padres interviewed Kim Ng. A University of Chicago graduate, she started her baseball career as a White Sox intern and then worked for the Yankees from 1998 to 2001. Her baseball background includes 13 seasons as an assistant general manager during which her teams made it to the playoffs, League championships and the World Series. Since 2005 she has sought to be the General Manager of the Dodgers, Seattle Mariners, Padres and the Angels. While the media said that she was highly qualified, each team said, “No.”

    Where are we going? To see where baseball limits its human capital.

    A Baseball Report Card

    The University of Central Florida has a Gender Institute that publishes a report card on race and gender for major league sports. While women fared rather poorly everywhere, Major League Baseball was particularly dismal. With a C/C+ grade, MLB’s teams employed relatively few women in management. (All tables are from “The 2015 Racial and Gender Report Card: Major League Baseball.”)

    There are no female General Managers/ Directors of Player Personnel in MLB.

    General Managers/ Directors of Player Personnel

    Human capital and MLB


    For coaches also, the number was zero.


    Female human capital in MLB


    In the top slot, still no woman who is a CEO/President of a team. However, the New York Yankees, Washington Nationals, Colorado Rockies and the Chicago Cubs each have women at the top. Three female Steinbrenners are Yankee Vice Chairpersons, among the the Washington Nationals Principal Owners are women in the Lerner family, Laura Ricketts is a co-owner of the Chicago Cubs, and Linda Alvarado is one of the Rockies owners.




    To find higher numbers, we need to look at vice presidents. And yet, with 65 female VPs out of 376 among 30 teams, the female presence is relatively small.

    Vice Presidents

    Human capital in MLB


    Our Bottom Line: Human Capital

    When you eliminate women from your supply of human capital, you are diminishing your team’s potential talent.


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