• Everyday economics and the positive externalities of childhood vaccination have an economic impact.

    The Vaccine Benefits That No One Talks About

    Feb 24 • Behavioral Economics, Developing Economies, Economic Growth, Economic History, Economic Thinkers, Education, Innovation, Labor, Macroeconomic Measurement, Thinking Economically • 165 Views

    On July 16, 1776 John Adams received a letter from Abigail’s uncle saying that she, the children, and other relatives (17 of them) were in his house in Boston for their smallpox inoculation because of an outbreak that threatened all of them. Distraught, Adams said he had to remain in Philadelphia because he was “…in the midst of scenes of business, which must not stop for anything.”

    In John Adams, David McCulloch tells us that the procedure was “to make a small incision, then with a quill scoop the ‘pus from the ripe pustules’ of a smallpox patient into the open cut.” The goal was to create a mild case of the disease that developed the patient’s immunity. Adams’s family all recovered from an ordeal that he believed everyone should undergo.

    John Adams wisely recognized the health benefits of vaccination. By choosing inoculation though, the Adams family was also helping the economy of their developing nation.

    The Economic Impact of Vaccination

    Researchers at Harvard used data from the Philippines to hypothesize that vaccinations have an impact on human capital development. Although they point out that their data is not sufficiently definitive, they cite vaccinated children’s test scores to show they fare better than a non-vaccinated control group. Consequently, they say, healthier children attend school more frequently, fare better in school and as a result, learn more. As adults, they then are able to be more productive at work and to earn more and to live longer.

    Furthermore, vaccinations diminish family size because more children survive beyond five years old and smaller families mean more attention is given to each child. On the national level, as we saw with the Ebola outbreak, disease affects the level of foreign direct investment and tourism.

    Here is a broad picture of the income to health connection…

    Positive Externalities vaccinations, income and health

     

    And the synergy they create…

    Positive Externalities vaccinations, health and income

    Our Bottom Line: Positive Externalities

    In The Wealth and Poverty of Nations, Harvard professor emeritus David Landes says, “Institutions and culture first; money next; but from the beginning and increasingly, the payoff was from knowledge.”

    The payoff is a ripple of positive externalities. We start with a child who is vaccinated. Avoiding a host of childhood diseases, that child can benefit more from school and share her learning as a daughter, a worker and a mother. Looking at its ROI (return on investment), for developing nations like the U.S. 250 years ago or in contemporary Africa, vaccinations help the economy.

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  • everyday economics and the driver license renewal process shows the tradeoffs of public goods and services.

    A Renewing My License Story

    Feb 23 • Behavioral Economics, Demand, Supply, and Markets, Economic Debates, Economic Humor, Government, Health Care, International Trade and Finance, Regulation, Thinking Economically • 214 Views

    Renewing my license at the NJ Department of Motor Vehicles, I started wondering about standing in line.

    Please imagine the following.

    My local DMV is a free standing, old and rather small, rectangular one story brick building. When you enter, a clerk standing behind a counter gives you a number on a blue piece of paper and suggests you sit down on one of maybe 200 folding chairs that are set up in a series of rows. Soon, 242, my number is called out by another clerk who checks my documents and then sends me to another row of chairs to await a picture.

    It is crucial, I gather, for me to sit next to the lady with the black and white bag. I do what I am told and then hear a clerk call out, “Next.” That next person was sitting in the first chair in our row. When he goes to the counter for his picture, the person who sat next to him moves into his chair. And everyone else is supposed to switch to the seat on the left. Sort of like musical chairs, every time a new person goes to the counter, we all get up in unison, and then sit down in the next chair.

    And that is when I started asking the people around me, why are we doing this? I learn that this is the DMV method for determining who is next in line.

    Government and Lines

    Government has never been very good at lines. But the worst stories I’ve heard are from the former Soviet Union and communist Eastern Europe. In Poland during the 1970s, you might have taken an hour or two off from work, rotating with a brother or sister, to stand in line. Everyone could have been waiting for a pair of shoes but if a shampoo were available, you bought it. There were even queue rules like mothers with small children got to go first. So people temporarily borrowed small children.

    Where are we going? Back to the NJ DMV.

    Looking at the bigger picture, let’s ask if issuing drivers’ licenses should be a government responsibility.

    Our Bottom Line: Public Goods

    Using an economist’s definition of a public good, we can identify the minimum and for some of us the maximum of what government should provide.

    A lighthouse is typically classified as a public good because its service is non-excludable and a necessity. Non-excludable just means that we cannot prevent everyone from using the beacon. Similarly, since everyone enjoys the benefits of national defense and tornado sirens, they too are non-excludable necessities. Because businesses have a tough time profiting from non-excludable items, if they are necessities, government provides them.

    If our criteria is that government should only provide a non-excludable necessity, does that cover driver licenses?

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  • Everyday economics and taxes at the Oscars

    The Oscar Costs That No One Mentions

    Feb 22 • Businesses, Economic History, Economic Humor, Entertainment, Government, Macroeconomic Measurement, Thinking Economically • 178 Views

    New Yorkers helped to pay for Birdman and California partially picked up the tab for American Sniper.

    Tax Costs

    As you can see below, every Academy Award best picture nominee was supported by tax breaks and subsidies from municipalities. Believing that a film shoot would help the local economy, cities, states and countries created incentives to attract the business. In sacrificed tax dollars, we paid the cost.

    No Free lunch and film subsidies and tax breaks

    More Tax Costs

    The nominees who do not win for best actor/actress, supporting actor/actress, director and the host each receive a goodie bag. Valued at (an inflated?) $167,586.76, the bag includes a 24 karat six-pack of herbal tea-based lollipops ($68), a VIP tour of a sea salt reserve ($1,548), a wearable liposuction device ($4,068), and a gift certificate for a home visit from a horoscope-dreams-mind control guru ($20,000).

    There is one catch.

    The IRS says the gift is taxable income because it really is all about business.

    Acceptance Speech Costs

    And finally, using the economic definition of cost, there is always a sacrificed alternative when we thank someone.

    In 42 of 1396 speeches, Steven Spielberg was thanked the most. Here are the top 10:

    •  Steven Spielberg (42)
    •  Harvey Weinstein (34)
    •  James Cameron (28)
    •  George Lucas (23)
    •  Peter Jackson (22)
    •  God (19)
    •  Fran Walsh (18)
    •  Sheila Nevins (17)
    •  Francis Ford Coppola, Barrie Osborne (16)
    •  Martin Scorsese, Saul Zaentz (15)

    However, expressed since 1971, these thanks were the best:

    • 15 thanked their high school teacher.
    • 181 wives were thanked but only 37 husbands
    • 125 moms were thanked but only 81 dads
    • Only 24 said, “I would like to thank my children.”

    Our Bottom Line: TNASTAFL

    Remembering there is never any such thing as a free lunch, let’s enjoy the awards!

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  • The econlife.com Weekly Roundup

    Weekly Roundup: From Playing Monopoly to Flying Drones

    Feb 21 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Developing Economies, Economic Debates, Economic Growth, Economic History, Economic Thinkers, Government, Health Care, Innovation, Labor, Macroeconomic Measurement, Regulation, Thinking Economically • 118 Views

    Our Posts Roundup

    Everyday ecnomic and  new kinds of cocoa beans Sunday 2.15.15

    A new taste for chocolate…more

    Everyday economics and monopoly games Monday 2.16.15

    The messages from Monopoly…more

    Everyday economics and Identifying the economic consensus and how average Americans disagree. Tuesday 2.17.15

    How economists disagree with us…more

    everyday economics and drone regulation and Amazon drone deliveries Wednesday 2.18.15

    When drones touch our property…more

    Everyday economics and Aging populations and birth rates Thursday 2.19.15

    Where people are growing the oldest…more

     

    everyday economics and the birth rate

    Friday 2.20.15

    How birth rates relate to old age…more

     

    Ideas Roundup

      • BRICs
      • MINTs
      • developing nations
      • supply chain
      • monopoly
      • tradeoffs
      • economic consensus
      • innovation
      • property rights
      • redistribution
      • aging populations
      • entitlements
      • fertility rate
      • dependency ratios

     

     

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  • everyday economics and the birth rate

    Part 2: What To Do When More People Are Old

    Feb 20 • Behavioral Economics, Developing Economies, Economic Debates, Economic Growth, Economic History, Environment, Gender Issues, Government, Health Care, Households, Labor, Macroeconomic Measurement, Thinking Economically • 167 Views

    Russia’s Mayor of Ulyanovsk thought he could boost Russia’s low birth rate by giving a half-day off on September 12. On this “Conception Day,” the women who signed up were supposed to get pregnant. To win money, a car and other big prizes, and to have the National Anthem playing during the delivery, they had to give birth precisely nine months later on National Day. The idea worked. On June 12, 2007, three times the region’s average number of babies were born.

    Where are we going? To babies and the elderly population.

    As we looked at yesterday, an aging population creates problems about support. Today we ask whether the right birth rate is the solution. Sort of like Goldilocks, countries have to avoid too many babies and too few, and figure out what is “just right.”

    What is Just Right?

    From a statistical perspective, “just right” is the 2.1 births per woman that maintain a population. Here we find a divide between more and less affluent countries. For 2005-2010, the high income country average was 1.65 births per woman (U.S., 2.06 and Japan, 1.34) while lower income nations averaged 4.03.

    Looking through a budgetary lens, to identify “just right,” we can focus on the expense of the elderly. You can see below that by 2050, the projected median age in Japan and South Korea is 53, in Germany, 51 and Spain, 50.  These more affluent countries will need tax payer money for the government programs that sustain older people.

    Birth rates might offset these aging populations

    Thinking of the above median projected ages, you can see why, below, certain nations need more youth to enter the labor force and support the elderly through their taxes while others do not. The U.S., for example, with a replacement rate close to 2.1 might be near a sweet spot. European nations in red, like Germany, have a fiscal rationale for increasing their birth rate.

    Optimal birth rates and federal budgets

    From: National Transfer Accounts

    Looking at the impact of a higher birth rate on a country’s standard of living can change our answer to “just right.” Here we have to consider the cost of children. The public cost of education and the private cost from family time, resources and money mean that higher fertility rates could be prohibitively high.

    Birth rates affect the standard of living

    From: National Transfer Accounts

    Our Bottom Line: Tradeoffs

    Using a federal budget yardstick and a standard of living yardstick, we can get different answers to the “just right” fertility rate. In countries that will have a demographic imbalance from an aging population, a higher fertility rate will create healthier national budgets through a bigger tax paying labor force. On the other hand, the cost of children creates a tradeoff that might be too expensive.

    And that is why Harry Truman asked if anyone could locate a one-handed economist.

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