Wednesday, April 01, 2015

Odysseus Started The Industrial Revolution

Factory work may have been a commitment device to get everyone to work hard. Odysseus tying himself to the mast was also a commitment device. Dean Karlan, Yale economics professor explains how commitment devices work:
"This idea of forcing one’s own future behavior dates back in our culture at least to Odysseus, who had his crew tie him to the ship’s mast so he wouldn’t be tempted by the sirens; and Cortes, who burned his ships to show his army that there would be no going back.

Economists call this method of pushing your future self into some behavior a “commitment device.” [Related: a Freakonomics podcast on the topic is called "Save Me From Myself."] From my WSJ op-ed:
Most of us don’t have crews and soldiers at our disposal, but many people still find ways to influence their future selves. Some compulsive shoppers will freeze their credit cards in blocks of ice to make sure they can’t get at them too readily when tempted. Some who are particularly prone to the siren song of their pillows in the morning place their alarm clock far from their bed, on the other side of the room, forcing their future self out of bed to shut it off. When MIT graduate student Guri Nanda developed an alarm clock, Clocky, that rolls off a night stand and hides when it goes off, the market beat a path to her door."
 See What Can We Learn From Congress and African Farmers About Losing Weight?

Something like this came up recently in the New York Times, in reference to factory work and the Industrial Revolution. See Looking at Productivity as a State of Mind. From the NY Times, 9-27. By SENDHIL MULLAINATHAN, a professor of economics at Harvard. Excerpts:
"Greg Clark, a professor of economics at the University of California, Davis, has gone so far as to argue that the Industrial Revolution was in part a self-control revolution. Many economists, beginning with Adam Smith, have argued that factories — an important innovation of the Industrial Revolution — blossomed because they allowed workers to specialize and be more productive.

Professor Clark argues that work rules truly differentiated the factory. People working at home could start and finish when they wanted, a very appealing sort of flexibility, but it had a major drawback, he said. People ended up doing less work that way.

Factories imposed discipline. They enforced strict work hours. There were rules for when you could go home and for when you had to show up at the beginning of your shift. If you arrived late you could be locked out for the day. For workers being paid piece rates, this certainly got them up and at work on time. You can even see something similar with the assembly line. Those operations dictate a certain pace of work. Like a running partner, an assembly line enforces a certain speed.

As Professor Clark provocatively puts it: “Workers effectively hired capitalists to make them work harder. They lacked the self-control to achieve higher earnings on their own.”

The data entry workers in our study, centuries later, might have agreed with that statement. In fact, 73 percent of them did agree to this statement: “It would be good if there were rules against being absent because it would help me come to work more often.”"
The workers, like Odyssues, tied themselves to the mast to resist the temptation of slacking. This made it possible for factories to generate the large output of the Industrial Revolution.

Friday, March 27, 2015

Student loan delinquency is higher than for other borrowing

Click here to read the article. Excerpts:
"Student loans had a higher delinquency rate than credit cards, auto loans and home mortgages over the past three years, the Federal Reserve Bank of New York reported recently.

Outstanding student loans in the country have reached $1.16 trillion, an increase of $77 billion from a year ago. About 11.3 percent were in default – more than 90 days delinquent – in the last quarter of 2014, compared with 11.1 percent in the previous quarter.

By comparison, 3.5 percent of car loans were past due, as were just 3.1 percent of mortgage loans."

"Outstanding household debt increased to $11.83 trillion, a 1 percent rise over the previous quarter. Home mortgages and student loans, which increased by $39 billion and $31 billion, respectively, are the biggest contributors to the rise in debt.

The student loan delinquency rate – payments missed for fewer than 90 days – may be much bigger than the default rate shown in the report. An earlier report by the New York Fed said the delinquency rate for student loans was 21 percent in 2012."

"During the recent financial crisis, Americans reduced other debts but they continued education financing, according to the New York Fed.

“I’m not that surprised, too much, about the findings,” said Mike Branch, a certificated financial planner at Focus Financial, based in Minneapolis.

He does college-planning workshops for parents of high school students.

“Schools are selling kids the idea of student loans,” Branch said. “They tell those young students, particularly teenagers still at high schools, not to worry too much about the money because they can borrow. But those kids really have no idea what it takes to pay those loans back, and how much money they’ll have to make, and how that’s going to affect their lives after college.”"

Friday, March 20, 2015

Are Computer Programs Replacing Journalists?

See If an Algorithm Wrote This, How Would You Even Know? by SHELLEY PODOLNY of the NY Times.

In my macroeconomics class, we talk about the types of unemployment. Here is one of them:

Structural-unemployment caused by a mismatch between the skills of job seekers and the requirements of available jobs.

One example of this is when you are replaced by a machine. We don’t have as many bank tellers any more because people use ATMs. Another example is when there is a fall in demand for your product, so you get laid off, like with typewriters since people now use computers. A third example is geographical, when the jobs are not in your region of the country.

This article might be an example of this type of unemployment. Excerpts:
"these days, a shocking amount of what we’re reading is created not by humans, but by computer algorithms"

"Companies in this business aim to relieve humans from the burden of the writing process by using algorithms and natural language generators to create written content. Feed their platforms some data — financial earnings statistics, let’s say — and poof! In seconds, out comes a narrative that tells whatever story needs to be told."

"These robo-writers don’t just regurgitate data, either; they create human-sounding stories in whatever voice — from staid to sassy — befits the intended audience."

"when presented with sports stories [some written by humans, some by computers] ... study respondents couldn’t tell the difference."

"Then we have Quakebot, the algorithm The Los Angeles Times uses to analyze geological data. It was the “author” of the first news report of the 4.7 magnitude earthquake that hit Southern California last year, published on the newspaper’s website just moments after the event. The newspaper also uses algorithms to enhance its homicide reporting."

"90 percent of news could be algorithmically generated by the mid-2020s, much of it without human intervention."
The article even has a quiz you can take to see if you can tell the difference between a human written article and a computer written article. If journalists lose their jobs to computers, maybe professors are next. Are you even sure who or what wrote this blog post?

Here are two related posts:

Robot Journalists-A Case Of Structural Unemployment?

Structural Unemployment In The News-Computers Can Now Tell Jokes 

WHAT do you get when you cross a fragrance with an actor?

Answer: a smell Gibson.

Robot jockeys in camel races

Monday, March 16, 2015

50 College Majors With the Best Return on Investment

From Business News Daily. Excerpts:
"Topping this year's rankings were computer programming and entrepreneurship, both of which have average annual salaries of more than $85,000 for graduates and above-average job growth. Overall, degrees in information technology, computers programming/computer science, business/management, medical support, and retail and administration were the five categories that offer the largest return on investment."
Here is the top 10:
  1. Computer programming, specific applications
  2. Entrepreneurship/entrepreneurial studies
  3. Network and system administration
  4. Information technology
  5. Computer software technology
  6. Osteopathic medicine/osteopathy
  7. Business/commerce, general
  8. Computer systems networking and telecommunications
  9. Business administration and management, general
  10. Computer and information systems security/information assurance

Friday, March 06, 2015

$60,000 fine for driving14 mph over the speed limit

See Why Finland fined this driver $60,000 for going 14 mph over the limit. Excerpts:
"Reima Kuisla was on his way to the airport when he got caught going 103 km/h (64 mph) in an 80km/h (50 mph) zone, setting him back 54,024 euros. It’s a seemingly excessive penalty until you realize how Finland calculates its fines.

Unlike in the United States, where the flat fine is based on location and speed over the limit, Finland bases the penalty also as a percentage of daily income, according to the previous year’s tax return. Since Reima Kuisla earned over 6.5 million euros ($7 million) in 2013, he had a penalty equivalent to a brand-new BMW M3. The rationale is that the fine should sting for anyone, whether they’re scraping by or living in the lap of luxury."

"He wasn’t the only one to pay a hefty sum in Finland — a Nokia executive had pay 116,000 euros (over $103,00) back in 2002 for speeding on a Harley. Say what you will about excessive fines, but that's a penalty no one forgets."

Friday, February 27, 2015

CPI Lower Than A Year Ago

See Gas’s Drop Drives U.S. Into Deflation Territory: Consumer-price gauge shows 0.1% year-over-year decline in January, first since October 2009, amid sharp fall in gas costs from the WSJ.

The Bureau of Labor Statistics has records going back to 1913. See CPI Detailed Report: Data for January 2015. It is a PDF file and you need to find Table 24.

It might be easier to see all the data at this site.

The base year (or period) is 1982-84. The Consumer Price Index was closest to 100 in 1983 when it was 99.6. For all of 2014 it was 236.736. That means it took $236.736 to buy what cost $100 in 1983.

The CPI in January 2014 was 233.916. The CPI in January 2015 was 233.707. So that was down. Prices rose 0.8% from December 2013 to December 2014, though.

Excerpt from the WSJ article:
"Driven by a tumble in oil prices since mid-2014, the consumer-price index fell 0.1% in January from a year earlier, the Labor Department said Thursday. It was the first year-over-year decrease since October 2009. Prices fell 0.7% from December.

While the reading indicates little upward price pressure across the U.S. economy, it’s different from the downward forces plaguing other major economies.

“We haven’t suddenly become the eurozone or Japan,” said Richard Moody, chief economist at Regions Financial Corp. The dip in overall prices doesn’t reflect the “underlying health of the U.S. economy.”

In Japan and parts of Europe, negative forces such as weak demand and constrained credit caused a drop in prices for a broad swath of goods and services.

In the U.S., falling consumer prices can be pinpointed to a single sector: energy. Energy costs fell almost 20% over the past year, and gasoline prices alone fell by more than a third.

Consumer prices outside of energy advanced a healthy 1.9% in January from a year earlier. Prices for many staples are growing even faster. Food costs are up 3.2% from a year earlier, shelter costs rose 2.9% and medical care advanced 2.3%.

Removing both food and energy costs, consumer prices rose 0.2% last month and are up 1.6% from January 2014. The year-over-year change in so-called core prices held steady in January from December, after trending down from a recent peak of 2% last May."

Friday, February 20, 2015

All is not well (financially) in the world of college football

See Time for a Presidential Panel to Investigate College Sports by Andrew Zimbalist in The Chronicle of Higher Education. He is a professor of economics at Smith College who specializes in the economics of sports. Excerpts:
"The median revenue of athletic programs within the Football Bowl Subdivision (FBS) of Division I grew to $61.9-million in 2012-13 from 28.2-million in 2003-4—an inflation-adjusted increase of 76 percent. And it continues to grow. College football’s new playoff system, which held its national championship game last night, yielded a 12-year contract with ESPN worth $7.3-billion."

"only a couple dozen universities that are pulling in the big bucks. According to the NCAA’s most recent figures, out of 128 schools in FBS, only 20 athletic programs have an operating surplus."

"Overall, the median operating deficit in FBS athletic departments is approximately $12-million."

"So, what’s going on—how can losses be piling up as revenues soar? First, costs are growing faster than revenues. There are no stockholders in Division I athletics. That is, athletic departments do not have to answer to a board of directors or company owners who are looking for profits to go up each quarter so the company’s stock price will rise.

Athletic departments are not profit maximizers. They are win maximizers."

"Without pressure to maximize profits, when revenues rise, the athletic directors find ways to spend it in pursuit of winning."

"the top athletes at FBS schools produce a value well in excess of $1-million. The surplus produced by these players goes in part to the coaches who recruit them and in part to support the "nonrevenue" sports at the school."

"The NCAA now allows colleges to provide four-year scholarships to players, to increase the value of a full-ride scholarship by several thousand dollars to cover the full cost of attendance, and to provide better benefits."

"these additional costs of $1-million-plus will (a) make it more difficult for the vast majority of colleges—unable to afford the financial burden—to compete effectively on the playing field, (b) force these colleges into larger athletic deficits, robbing funds from the academic budget, or (c) impel some colleges to follow the lead of the University of Alabama at Birmingham and end their football program."

"college sports is faced with increased inequality and greater insolvency. Every extra dollar going to intercollegiate athletics is a dollar lost to academic programming. At the top 24 spenders in college sports between 2005 and 2012, football coaches’ salaries calculated on a per-player basis rose more than 60 percent (several now exceed $5-million and in 41 of 50 states a head coach is the highest-paid public official in the state), while academic spending per student dropped 2 percent."

"The NCAA functions as a trade association of the athletic directors, conference commissioners, and coaches, especially those from the big five conferences, and has proven time after time that it is incapable of constructively reforming itself."

"Congress can stand idly by, as it is wont to do, and refuse to get involved in the business of college sports. Or, it can recognize that it is already involved in that business—via an elaborate network of tax preferences and subsidies"