I discovered these wonderful economic Valentines at Freakonomics.com. They were created by Elisabeth Fosslien.
This #FedValentine is from econlife:
Roses are nice but money we exalt, Be my Valentine and you get the (gold) vault.
Sources and Resources: There is more economic humor at Elisabeth Fosslien’s Valentines here at her website and FedValentines here at Freakonomics.
Posted by: adminEcon
Tags: economists' love notes, FedValentines, Justin Wolfers
Comments (0) Add a Comment
Behavioral economists might be able to explain our response to income inequality.
In a paper on money and happiness, economist Richard Easterlin initially asks the reader how she feels if her income rises. Then he asks how she reacts when it stays the same.
His goal is to display that more than changes in your own income, it matters what happens to everyone else. If everyone else’s income remains the same when yours rises, then you feel pretty good. However, if your income remains the same when others make more, you feel less well off.
Perhaps this “Easterlin Paradox” (that explores the connection between money and happiness) explains the nation’s response to the rising incomes of the top 1%. Also, it relates to the monkey in this very funny video.
Easterlin’s paper on happiness is here, and the Freakonomics blog that present links to work that refutes it is here.
Posted by: adminEcon
Tags: behavioral economics, Capuchin monkeys, Easterlin Paradox, grapes, happiness, incentives, income, Justin Wolfers, rewards, Richard Easterlin
Comments (1) Add a Comment
More wealth seems to mean fewer children. Look at a graph of fertility in the U.S from 1800-1990. The birth line plunges. Consider India, China, South Korea, Singapore. As per capita GDP rises, births plummet. See this gapminder graph for rich countries and poor countries. The number of children per woman is much less in more affluent nations.
1977 was a turning point in the U.S. Before, a majority of Americans told Gallup pollsters that they preferred 3 or more children. After, the number declines to 2. Gallup also tells us that currently, families earning more than $75,000 annually are more likely to want smaller families than lower income households. Here, you can see the Gallup information.
Here and here you can see most of the family size trends discussed.
The Economic Lesson
An economist would call a good, “normal,” if your demand for it increases when your income rises. By contrast, for “inferior” goods, our demand decreases when we earn more. Dinners at nice restaurants are normal goods. Used cars are “inferior” goods.
Does that mean that children are “inferior” goods if more affluence means less? Here, economist Justin Wolfers explains why.
An Economic Question: During the great recession, how did consumers’ demand curves shift for normal and inferior goods? Examples?
Posted by: adminEcon
Tags: emerging economies, fertility rates, GDP, inferior goods, Justin Wolfers, normal goods
Comments (0) Add a Comment
Although the unemployment rate is 9.2% for the entire labor force, it is 4.4% for college grads (and 10% for high school graduates, no college).
But which college graduates earn more? It depends on your undergraduate major. Counseling psychology or petroleum engineering? The difference is $91,000 a year. The median income for a counseling psychologist is $29,000 while for a petroleum engineer, $120,000. Divided by group, engineering, computers and mathematics are at the top while education, psychology and social work are at the bottom.
And finally, will more money make you happy? At the Aspen Institute, where happiness researchers have gathered, the money can make us happy group seems to have the most convincing research. (Here, you can watch the debate.)
The Economic Lesson
Happiness researchers frequently cite the Easterlin Paradox which implies that once we reach a certain level of wealth, more wealth does not lead to more happiness because of our quest to outdo our neighbors. On the other hand, economist Justin Wolfers used data to prove that people in rich countries are happier than those in poor countries and the rich are happier than the poor.
An Economic Question: Do you believe that “happiness” or “satisfaction” research is valid? Explain.
Posted by: adminEcon
Tags: college majors, Easterlin Paradox, education, happiness, Justin Wolfers, Robert Frank, unemployment
Comments (0) Add a Comment
It is possible, after all, that money can make us happy.
A recent Brookings paper from 3 University of Pennsylvania researchers concluded that people experience greater “subjective well-being” or life satisfaction when they are more affluent. Comparing rich and poor individuals in countries, they found that the rich were happier. Looking from one nation to another, they concluded that people in nations with a higher per capita GDP were more satisfied than those in lower per capita GDP countries. And finally, with economic growth their third focus, they observed that people became more satisfied with their lives as the GDP increased.
You might enjoy this CNBC interview of the researchers who concluded that money does make us feel better.
How do you measure happiness? You could look at the World Values Survey a recent Gallup World Poll, or Eurobarometer information to see data that researchers have used. For example, they actually found that in richer countries, people smile more. (But they did not experience more love.)
The Economic Lesson
Not everyone agrees that money brings happiness.
For economist Richard Easterlin, measuring the connection between money and happiness takes us to diminishing marginal utility. Easterlin says that as wealth accumulates, it bestows increasingly less extra satisfaction. Believing that that pleasure from wealth is relative, he also expressed the Easterlin Paradox. As long as you have more than your neighbor, you feel good. Consequently, rich or poor, people just need to have more than someone else to feel good.
Posted by: adminEcon
Tags: Easterlin Paradox, GDP, happiness, Justin Wolfers, money, Richard Easterlin, wealth
Comments (0) Add a Comment
