Friday, April 20, 2018

How Much Has Life Expectancy Improved?

A few weeks ago, one of my classes read a chapter called "The Graying of America" in the book The Economics of Public Issues. It discussed issues like social security and how there are fewer workers paying in to the system for each person receiving money than there used to be.

It also mentioned that life expectancy in 1900 in the USA was 47 and now it is 79. But much of that is because infant mortality has fallen. With fewer babies dying before age 1 or 5, that will cause the average to go up.

But what if we look at people who make it past their infancy? See Life Expectancy by Max Roser of Our World in Data. Excerpt:
"Child mortality is defined as the number of children dying before their 5th birthday. To see how life expectancy has improved without taking child mortality into account we therefore have to look at the prospects of a child who just survived their 5th birthday: in 1841 a 5-year old could expect to live 55 years. Today a 5-year old can expect to live 82 years. An increase of 27 years.

At higher ages mortality patterns have also changed. A 50-year old could once expect to live an additional twenty years. Today the life expectancy of a 50-year old has increased to an additional 33 years."
Those numbers are for England and Wales.

There is much more interesting information at that site along with some great charts and graphs.

Here are links to two other views:

Human Lifespans Nearly Constant for 2,000 Years by Benjamin Radford, Live Science Contributor.

Human lifespans have not been constant for the last 2000 years by John Hawks. He is Professor of Anthropology at the University of Wisconsin.

(Hat tip: Ashley Powell, one of my students, who sent me all these links)

Friday, April 13, 2018

Why 2017 Was the Best Year in Human History

By Nicholas Kristof of The NY Times. Excerpts:

"2017 was probably the very best year in the long history of humanity.

A smaller share of the world’s people were hungry, impoverished or illiterate than at any time before. A smaller proportion of children died than ever before. The proportion disfigured by leprosy, blinded by diseases like trachoma or suffering from other ailments also fell."

"Every day, the number of people around the world living in extreme poverty (less than about $2 a day) goes down by 217,000, according to calculations by Max Roser, an Oxford University economist who runs a website called Our World in Data. Every day, 325,000 more people gain access to electricity. And 300,000 more gain access to clean drinking water."

"As recently as the 1960s, a majority of humans had always been illiterate and lived in extreme poverty. Now fewer than 15 percent are illiterate, and fewer than 10 percent live in extreme poverty."

"Just since 1990, the lives of more than 100 million children have been saved by vaccinations, diarrhea treatment, breast-feeding promotion and other simple steps."

"the 1950s, the U.S. also had segregation, polio and bans on interracial marriage, gay sex and birth control. Most of the world lived under dictatorships, two-thirds of parents had a child die before age 5, and it was a time of nuclear standoffs, of pea soup smog, of frequent wars, of stifling limits on women and of the worst famine in history."

"it’s also important to step back periodically. Professor Roser notes that there was never a headline saying, “The Industrial Revolution Is Happening,” even though that was the most important news of the last 250 years."

Thursday, April 05, 2018

The Deficit Trials 2017 A. D.

This was a commercial back in 1986. It paints a bleak picture of America in the future, presumably caused by the growing national debt ($2 trillion then, about $21 trillion now-adjusted for inflation the 1986 figure would be about $4.4-4.5 trillion now, so we have still risen quite a bit). I think this thing is way over the top but there may be some real dangers from the debt that I mention below. You might have to watch a brief commercial for some product first. We have been covering the deficit and debt this week in my macro classes. If the embedded video does not appear, use the link below it.

Ridley Scott - W. R. Grace Deficit Trials

Real problems the national debt might cause

1. About 31% of the debt is owed to foreign citizens. When they get paid back, they come and buy American goods. That leaves fewer goods for Americans (who can't afford to buy as much due to higher taxes that were needed to pay back the debt). BUT THIS MIGHT NOT BE A CONCERN IF WE ORIGINALLY BORROWED THE MONEY FOR A GOOD PURPOSE.

People borrow money all the time to buy houses and cars. Then they pay it back to a person outside of their family or household. We don’t consider this a burden since the money was put to good use. Right after World War II, the national debt was 120% of the GDP. This was much higher than it is now and we survived. No one complains that we borrowed to win the war. The national debt is about 105% of the GDP now. In 1986, the year the video was made, it was about 50% of GDP.

2. Raising taxes might hurt economic incentives. At higher tax rates, people might want to work and invest less. Fewer businesses might expand and fewer news ones created since you will get to keep less profit. But again, THIS MIGHT NOT BE A CONCERN IF WE ORIGINALLY BORROWED THE MONEY FOR A GOOD PURPOSE. Also, if taxes only go up a little, and the debt is slowly paid off each year (like after WW II), it may not hurt too much.

3. We may have fewer government services in the future if we pay back the debt by lowering government spending. But this means that we are trading more government services today for fewer in the future. THIS IS NOT NECESSARILY A BAD THING IF THE MONEY IS SPENT WISELY (which everyone not might not agree on).

If taxes and interest rates are higher in the future due to the debt, that will lower our future economic growth rate. We will still probably grow, but not as much.

This site shows you the National Debt as it increases along with other interesting data

Some related links:

S&P downgrades U.S. credit rating for first time by Zachary A. Goldfarb of The Washington Post (from 2011)

The US Doesn't Deserve a AAA Credit Rating by Marc Joffe of the Fiscal Times (from 2017)

Here's Why America Will NEVER Be Vulnerable To Foreign Debt Holders by Henry Liu of Business Insider (from 2010)

"The world’s biggest net foreign debtor, by a large margin, is the U.S." See China rebalances away from bonds to buy equities, particularly in Europe by David Marsh of MarketWatch (from 2017)

Just Four Large Countries Have a Higher Debt Burden Than the U.S.

Wednesday, March 28, 2018

Herfindahl-Hirschman at the Movies

By Connor Waldoch of Medium.

Disney wants to buy Fox. This week in my micro classes we are talking about mergers and when the government (Justice Department or Federal Trade Commission) might challenge mergers.

If two firms merge, the new firm, of course, has a bigger share of the market than either of the old firms. When does this gain in market share threaten competition enough to be challenged in court?

Waldoch mentions the Herfindahl–Hirschman Index HHI. The market share of each firm in an industry is squared and then all those numbers are added up to get the HHI. There are 3 categories according to Justice:

Unconcentrated Markets: HHI below 1500
Moderately Concentrated Markets: HHI between 1500 and 2500
Highly Concentrated Markets: HHI above 2500

One thing to add is that if a merger increases the HHI by more than 100 points and the new HHI of the industry is Moderately Concentrated, then the merger is likely to be challenged.

Waldoch shows a graph of what the HHI of the movie industry would have been over several years with Disney and Fox as separate companies and with them having been merged. He does not state specific numbers, but it looks like for 2016, if the two firms had merged, it would have raised the HHI of the movie industry by 500 or so points, from about 1250 to 1750. So that would make it likely to be challenged according to the guidelines. Justice is currently reviewing it.

Here is the graph Waldoch uses:

Friday, March 23, 2018

Ozzy Osbourne Makes The Economics News

See Ozzy Osbourne Brings Antitrust Lawsuit Against AEG for Tying London and L.A. Venues by Eriq Gardner of The Hollywood Reporter. Excerpt:
"On Wednesday, the heavy metal musican filed an antitrust lawsuit against AEG, alleging the entertainment industry giant is illegally tying its venues in London and Los Angeles.

"The tying arrangement at issue is so explicit and brazen that AEG has given it a name: the 'Staples Center Commitment,'" states the complaint filed in California federal court. "Through the Staples Center Commitment, AEG requires that artists and musicians cannot play London’s most essential large concert venue—the O2 Arena —unless they agree to play the Staples Center during the part of their tours that takes place in Los Angeles. Both the O2 and Staples are owned by AEG."

Osborne, represented by lawyers at the top firm of Latham & Watkins, explain that O2 is a "must have" venue for touring musicians because of its popularity and environment.

"Unlike London, however, Los Angeles is a competitive venue market— or has been since at least January 2014, when the 'Forum' reopened in Inglewood after a $100 million renovation," the complaint continues. "Artists touring in Los Angeles have therefore been able to enjoy the benefits of competition between Staples and the Forum. Ozzy would have been such an artist if AEG had not insisted, through the Staples Center Commitment, that he perform at Staples—the venue that AEG owns."

Osborne says he tried to book O2 for the "No More Tours 2" tour and requested February 2019 only to be told that it was available with the condition he play the Staples Center."

The Clayton Act of 1914 outlaws such tying contracts if they substantially lessen competition. It will be interesting to see how far this case goes and what the courts decide. It might matter if there are other venues available. A tying contract is when a firm says that "if you buy product A from us you must also buy product B."

Wednesday, March 07, 2018

Is There Economic And Political Meaning In "The Wizard of Oz?"

We covered international trade in my micro class recently and the text book has something about this in that chapter.

To get a handle on this, you can read Money and Politics in the Land of Oz By Quentin P. Taylor. Also, for my students, there is an article in chapter 15 of the micro book by Tucker and in chapter 18 in the macro book. Below is an excerpt from the Taylor paper:

"Dorothy, the protagonist of the story, represents an individualized ideal of the American people. She is each of us at our best-kind but self-respecting, guileless but levelheaded, wholesome but plucky. She is akin to Everyman, or, in modern parlance, “the girl next door.” Dorothy lives in Kansas, where virtually everything-the treeless prairie, the sun-beaten grass, the paint-stripped house, even Aunt Em and Uncle Henry-is a dull, drab, lifeless gray. This grim depiction reflects the forlorn condition of Kansas in the late 1880s and early 1890s, when a combination of scorching droughts, severe winters, and an invasion of grasshoppers reduced the prairie to an uninhabitable wasteland. The result for farmers and all who depended on agriculture for their livelihood was devastating. Many ascribed their misfortune to the natural elements, called it quits, and moved on. Others blamed the hard times on bankers, the railroads, and various middlemen who seemed to profit at the farmers’ expense. Angry victims of the Kansas calamity also took aim at the politicians, who often appeared indifferent to their plight. Around these economic and political grievances, the Populist movement coalesced.

In the late 1880s and early 1890s, Populism spread rapidly throughout the Midwest and into the South, but Kansas was always the site of its most popular and radical elements. In 1890, Populist candidates began winning seats in state legislatures and Congress, and two years later Populists in Kansas gained control of the lower house of the state assembly, elected a Populist governor, and sent a Populist to the U.S. Senate. The twister that carries Dorothy to Oz symbolizes the Populist cyclone that swept across Kansas in the early 1890s. Baum was not the first to use the metaphor. Mary E. Lease, a fire-breathing Populist orator, was often referred to as the “Kansas Cyclone,” and the free-silver movement was often likened to a political whirlwind that had taken the nation by storm. Although Dorothy does not stand for Lease, Baum did give her (in the stage version) the last name “Gale”-a further pun on the cyclone metaphor.

The name of Dorothy’s canine companion, Toto, is also a pun, a play on teetotaler. Prohibitionists were among the Populists’ most faithful allies, and the Populist hope William Jennings Bryan was himself a “dry.” As Dorothy embarks on the Yellow Brick Road, Toto trots “soberly” behind her, just as the Prohibitionists soberly followed the Populists.

When Dorothy’s twister-tossed house comes to rest in Oz, it lands squarely on the wicked Witch of the East, killing her instantly. The startled girl emerges from the abode to find herself in a strange land of remarkable beauty, whose inhabitants, the diminutive Munchkins, rejoice at the death of the Witch. The Witch represents eastern financial-industrial interests and their gold-standard political allies, the main targets of Populist venom. Midwestern farmers often blamed their woes on the nefarious practices of Wall Street bankers and the captains of industry, whom they believed were engaged in a conspiracy to “enslave” the “little people,” just as the Witch of the East had enslaved the Munchkins. Populists viewed establishment politicians, including presidents, as helpless pawns or willing accomplices. Had not President Cleveland bowed to eastern bankers by repealing the Silver Purchase Act in 1893, thus further restricting much-needed credit? Had not McKinley (prompted by the wealthy industrialist Mark Hanna) made the gold standard the centerpiece of his campaign against Bryan and free silver?"
Now an excerpt from Tucker:
"Gold is always a fascinating story: The Wonderful Wizard of Oz was first published in 1900 and this children's tale has been interpreted as an allegory for political and economic events of the 1890s. For example, the Yellow Brick Road represents the gold standard, Oz in the title is an abbreviation for ounce, Dorothy is the naive public, Emerald City symbolizes Washington, D.C., the Tin Woodman represents the industrial worker, the Scarecrow is the farmer, and the Cyclone is a metaphor for a political revolution. In the end, Dorothy discovers magical powers in her silver shoes (changed to ruby in the 1939 film) to find her way home and not the fallacy of the Yellow Brick Road. Although the author of the story, L. Frank Baum, never stated it was his intention, it can be argued that the issue of the story concerns the election of 1896. Democratic presidential nominee William Jennings Bryan (the Cowardly Lion) supported fixing the value of the dollar to both gold and silver (bimetallism), but Republican William McKinley (the Wicked Witch) advocated using only the gold standard. Since McKinley won, the United States remained on the Yellow Brick Road."
But not everyone agrees with this. Economist Bradley Hansen wrote an article titled The Fable of the Allegory: The Wizard of Oz in Economics in the Journal of Economic Education in 2002. Here is his conclusion:
"Rockoff noted that the empirical evidence that Baum wrote The Wonderful Wizard of Oz as an allegory was slim, but he compared an allegorical interpretation to a model and suggested that “economists should not have any difficulty accepting, at least provisionally, an elegant but controversial model” (Rockoff 1990, 757). He was right—we did not have any difficulty accepting it. Despite Rockoff’s warning, we appear to have accepted the story wholeheartedly rather than provisionally, simply because of its elegance. It is as difficult to prove that The Wonderful Wizard of Oz was not a monetary allegory as it is to prove that it was. In the end, we will never know for certain what Baum was thinking when he wrote the book. I suggest that the vast majority of the evidence weighs heavily against the allegorical interpretation. It should be remembered that no record exists that Baum ever acknowledged any political meanings in the story and that no one even suggested such an interpretation until the 1960s. There certainly does not seem to be sufficient evidence to overwhelm Baum’s explicit statement in the introduction of The Wonderful Wizard of Oz that his sole purpose was to entertain children and not to impress upon them some moral. The Wonderful Wizard of Oz is a great story. Telling students that the Populist movement was like The Wonderful Wizard of Oz does seem to catch their attention. It may be a useful pedagogical tool to illuminate the debate on bimetallism, but we should stop telling our students that it was written for that purpose."
I found a review of the book in the NY Times from 1900 and it does not mention anything about OZ having political or economic meaning. The book was also made into a musical a few years later and none of the reviews of the musical mention any political or economic meaning.

Wednesday, February 28, 2018

Four Decades Of Disinflation

Disinflation is when the inflation rate falls. Prices rise each year or time period, but the rate of increase falls. The table below shows the annual  average inflation rate for decades starting with the 1950s. The 1970s had the highest average of 7.41%.

1950s 2.25% 6.00% -0.70%
1960s 2.53% 6.20% 0.70%
1970s 7.41% 13.30% 3.30%
1980s 5.14% 12.50% 1.10%
1990s 2.92% 6.10% 1.60%
2000s 2.54% 4.10% 0.10%
2010s 1.68% 3.00% 0.70%

Starting with the 1980s, each decade has had a lower average than the previous decade. For the 2010s to end up having a higher average than the 2000s, the inflation rate would need to average about 6% over the years 2018-19. That does not seem likely. So we should end up with four decades of disinflation.

The graph below shows the annual inflation rate since 1914.

Thursday, February 22, 2018

San Antonio has highest credit card debt burden in US

From news4sanantonio. Excerpts:
"San Antonio has the highest credit card debt burden in the U.S., according to a new report. The study looked at each of the 25 largest cities in the U.S. and compared the average credit card debt and the median income. If you go by what experts recommend and dedicate 15% of your income to credit card debt, it would take the typical San Antonio resident 22 months to get out of debt and he or she would pay $911 in interest."

"Cities with the highest credit card debt burdens:

1. San Antonio (22 months, $911 interest)
2. Miami/Ft. Lauderdale/West Palm Beach (21 months, $814 interest)
3. Houston (20 months, $799 interest)
4. Los Angeles (20 months, $745 interest)
5. Dallas (19 months, $801 interest)"
Click here to see the news release from

Friday, February 16, 2018

The Resource Curse

By Melissa Mittelman of Bloomberg.

In the book The Economics of Macro Issues, they mention that Russia has many resources but its per capita income is less than that of Luxembourg which has few resources. The book suggests that the economic system matters more that how many resources a country has.

Here are some excerpts from the article, including links to research which says there is no resource curse:
"Striking gold or discovering oil would seem to guarantee instant fortune. Instead, it often leads to conflict, corruption and poverty. History is full of examples of countries whose natural-resource wealth led to less economic success. Revenue from extracting raw materials might be mismanaged or embezzled by government officials, or siphoned off by foreign corporations. The bonanza might crowd out investment in other parts of the economy and make goods and services more expensive. And the country’s fiscal and economic fate might hang on volatile global commodity prices, especially for smaller and less diverse economies. All told, local populations can be left with little to show for their resources except a degraded environment. Economists and social scientists call this phenomenon “the resource curse.” Many countries are trying to determine how to prevent or reverse it."

"The average incomes of African countries, including Angola, Nigeria and Sudan, are low and their health indicators are poor, despite their abundance of oil, diamonds and other precious minerals. While oil exports prop up extensive welfare spending in Middle Eastern petro-states, they remain vulnerable to price swings and their people subject to undemocratic regimes. Brazil continues to grapple with corruption and vast, dangerous slums, though it's rich in resources as varied as oil, iron ore, coffee and soybeans."

"The British economist Richard Auty coined the term “resource curse” in a 1993 book investigating why resource-rich countries under-performed other developing economies. A 1995 study found that economies with high commodities exports grew more slowly from 1971 to 1989, even after controlling for variables such as income and investment rates. Notwithstanding a few success stories (such as Botswana), the negative correlation between raw-material exports and economic growth suggests that resource wealth at least doesn’t help. The most commonly suspected causes include under-investment in other industries (such as manufacturing), exposure to price swings, and concentration of wealth that discourages the development of a rule of law and other conditions needed for a vibrant economy. The resource curse is sometimes lumped with Dutch Disease, named for a 1960s crisis in the Netherlands after it discovered natural gas in the North Sea. It describes what happens when an event like a commodity boom makes a country’s currency more expensive and its other goods less competitive."

"Some researchers question the existence of a resource curse, suggesting that resource wealth helps economic growth after all. Others have suggested that what matters isn’t resource abundance but the amount of diversification in the economy and the strength of a country’s institutions."

"A Stanford University paper challenging the conventional account."

Friday, February 09, 2018

A Special Valentine's Message On Romantic Love

The first one is Researchers at AAAS Annual Meeting Explore the Science of Kissing. The following quote gives you an idea of what it is all about: "Kissing, it turns out, unleashes chemicals that ease stress hormones in both sexes and encourage bonding in men, though not so much in women." I guess economists call this "interdependent utility functions." Meaning that what brings one person pleasure brings brings the other person pleasure, and vice-versa.

The other is Cocoa Prices Create Chocolate Dilemma. (that is from 2009) The article opens with "Soaring cocoa prices are creating a Valentine's Day dilemma for chocolate makers. They don't want to raise retail prices when recession-weary consumers are trying to limit their spending." The problem is crop diseases in Ivory Coast and Ghana. You might need to be a WSJ subscriber to read the whole article.

Here is a new article from yesterday's San Antonio Express-News (2-13-2011). Romance in bloom at workplace: Survey indicates 59% have taken the risk-filled leap. It seems like many people admit to having a romance at work and/or meeting their spouse at work. So what starts out as economic activity leads to some other needs being met.

Now the economic definition of romantic love.

 Abstract: "Romantic love is characterized by a preoccupation with a deliberately restricted set of perceived characteristics in the love object which are viewed as means to some ideal ends. In the process of selecting the set of perceived characteristics and the process of determining the ideal ends, there is also a systematic failure to assess the accuracy of the perceived characteristics and the feasibility of achieving the ideal ends given the selected set of means and other pre-existing ends.

The study of romantic love can provide insight into the general process of introducing novelty into a system of interacting variables. Novelty, however, is functional only in an open system characterized by uncertainty where the variables have not all been functionally looped and system slacks are readily available to accommodate new things. In a closed system where all the objective functions and variables must be compatible to achieve stability and viability, adjustments in the value of some variables through romantic idealization may be dysfunctional if they represent merely residual responses to the creative combination of the variables in the open sub-system."

The author was K. K. Fung of the Department of Economics, Memphis State University, Memphis. It was from a journal article in 1979. More info on it is at this link. The entire article, which is not too long, can be found at this link.

Then there was this related article: Love really is blind, U.S. study finds. Here is an exerpt:

"Love really is blind, at least when it comes to looking at others, U.S. researchers reported on Tuesday.

College students who reported they were in love were less likely to take careful notice of other attractive men or women, the team at the University of California Los Angeles and dating Web site eHarmony found.

"Feeling love for your romantic partner appears to make everybody else less attractive, and the emotion appears to work in very specific ways in enabling you to push thoughts of that tempting other out of your mind," said Gian Gonzaga of eHarmony, whose study is published in the journal Evolution and Human Behavior.

"It's almost like love puts blinders on people," added Martie Haselton, an associate professor of psychology and communication studies at UCLA."
More links:

How to Be a Better Valentine, Through Economics by economist Paul Oyer.

Here’s what science says is the secret ingredient to making your love spark 

Can Giving Up Money And Material Things Lead To More Love?

What Do Men In China Need To Get A Bride?

Adam Smith, Marriage Counselor

A Special Valentine's Message On Romantic Love

Can You Put A Price Tag On Love?

Do Opposites Attract? Not Usually, Except Maybe When It Comes To Money

Return of the Love Headhunters

eHarmony To Provide Personal Counselors To Help You Find Mr. Or Ms. Right

Economist Paul Zak, aka Dr. Love (he studies the brain with "neuroeconomics")

This is your brain on love   (brain scans and biology seem to confirm the economic definition given above)

Dollars & Sex: The Blog of Economist Marina Adshade

Do Women Really Value Income over Looks in a Mate? by Marina Adshade

Friday, February 02, 2018

The percentage of 25-54 year-olds employed decreased in January

(Note: For student just beginning this week click here to read something about me).

One weakness of the unemployment rate is that if people drop out of the labor force they cannot be counted as an unemployed person and the unemployment rate goes down. They are no longer actively seeking work and it might be because they are discouraged workers. The lower unemployment rate can be misleading in this case. People dropping out of the labor force might indicate a weak labor market.

We could look at the employment to population ratio instead, since that includes those not in the labor force. But that includes everyone over 16 and that means that senior citizens are in the group but many of them have retired. The more that retire, the lower this ratio would be and that might be misleading. It would not necessarily mean the labor market is weak.

But we have this ratio for people age 25-54 (which also eliminates college age people who might not be looking for work)

The percentage of 25-54 year olds employed is 79.0% for January. It was 79.1% in December. It is still below the 79.7% in December 2007 when the recession started (it was 80.3% in January 2007).  Click here to see the BLS data. The unemployment rate was 4.1% in January (it was 4.1% in December as well). Click here to go to that data. The percentage of adults employed stayed at 60.1%.

Here is a good graph from the St. Louis Fed. It shows that there are about 125 million people in the 25-54 year old group. So since we are 0.7 percentage points below the 79.7% of December 2007, that is still 875,000 fewer jobs (Hat tip: Vance Ginn of the Texas Public Policy Foundation).

Here is the timeline graph of the percentage of 25-54 year olds employed since 2007.

Here it is going all the way back to 1948

The annual numbers are important, too. It rose to 78.63% for all of 2017 from 77.925% in 2016. We have had 4 or more straight years of a 0.5 or more gain. The last time that happened was 1984-89. But we are still below the 79.9% for all of 2007 (the recession started in Dec. 2007).

Again, there are about 125 million people in the 25-54 year old group. So since we are 1.26 percentage points below the 79.9% of 2007, that is still 1.58 million fewer jobs. 

Thursday, January 25, 2018

Can adding a phantom third story to their homes help families find a wife for their son?

See Supply, Demand and Marriage by economist Robert Frank. Maybe this shows how powerful supply and demand works if it can help explain marriage. Excerpts:
"IN some cultures, romance isn’t nearly as important as cash when it comes to choosing a marriage partner. And even when money plays no explicit role in selecting a mate, courtship customs are governed by the venerable economic model of supply and demand.

Under the dowry system in India, for example, parents of older brides would typically pay more to prospective grooms. Men with better jobs would receive larger payments, too.

In short, there really is a marriage market in many countries around the world, and economic principles apply to it. In markets with a preponderance of women seeking partners, the terms of trade shift in favor of men. If more men are seeking partners, the reverse is true."

"An imbalance in the opposite direction characterizes the contemporary marriage market in China. The Chinese government’s one-child policy, combined with a cultural preference for sons and technologies that permit selective abortion, have helped to create a large sex-ratio imbalance among young Chinese. For every 100 women in that group, there are now more than 120 men.

According to market models, the terms of trade in the Chinese marriage market should have shifted sharply in favor of women. And evidence suggests that young Chinese women and their families have in fact become much more selective in recent years.

They appear, for example, to focus more critically on the earnings potential of prospective mates. Because house size is often assumed to be a reliable signal of wealth, a family can enhance its son’s marriage prospects by spending a larger fraction of its income on housing. (Other families can follow the same strategy, of course, but when all families do so, the resulting homes are still reliable indicators of relative wealth.) Such a shift appears to have occurred.

For example, when Shang-Jin Wei, an economist at Columbia University, and Xiaobo Zhang of the International Food Policy Research Institute examined the size distribution of Chinese homes, they found that families with sons built houses that were significantly larger than those built by families with daughters, even after controlling for family income and other factors. They also generally found that the higher a city’s male-to-female ratio, the bigger the average house size of families that have sons.

Mr. Wei reports that many families with sons have begun to add a phantom third story to their homes, one that looks normal from the outside but whose interior space remains completely unfinished.
“Marriage brokers are familiar with the tactic,” he reports, “yet many refuse to schedule meetings with a family’s son unless the family house has three stories.”"
Related posts:

A fake job reference can be just a few clicks away.

Fake Economist Fools Portugal.

Slave Redemption in Sudan. (Fake slaves are sold to those who buy slaves and then give them their freedom)

Can A Product Work Just Because It's Expensive?. (fake medicine)

If It Pays To Have Friends, Can You Pay To Have Friends?. (you can hire fake boyfriends)

Study: Half of American Doctors Give Patients Placebos Without Telling Them.

Saudis grapple with fake street sweepers .

Rent a White Guy: Confessions of a fake businessman from Beijing (by Mitch Moxley in The Atlantic Monthly)

Wednesday, January 17, 2018

Another Semester Has Started

Welcome to any new students. The entries usually have something to do with a basic economic principle that is related to a recent news story.

Here is something I wrote for The Ranger (the school paper) back in 2011 titled "Why is college so hard?"

Students might wonder why college, and SAC in particular, is hard. This might sound trite, but I think the faculty at SAC want students to achieve success in life and that means that classes have to be hard if you are going to learn and understand the concepts which provide a foundation for that success.

I think my own experience as a community college student over 30 years ago helps me understand this. My teachers took their subjects seriously and maintained high academic standards. They got me excited because of the expertise they brought to their teaching. Now that I have been a teacher for over 20 years, I can see how important that was.

After finishing my A.S. degree at Moraine Valley Community College (MVCC) in Palos Hills, Ill., I transferred to and graduated from the University of Chicago with a degree in economics. But it was my community college teachers prepared me to handle the rigors of the U. of C.

Later, I got a Ph. D. in economics from Washington State University. But I've accomplished some other things I never could have dreamed of when I began taking classes at MVCC and I think my teachers there paved the way for me.

In 2005, I had a letter to the editor published in The Wall Street Journal (I have now had five published there, three in The New York Times and three op-eds in the Express-News). This one was several paragraphs long, nearly as long as some of their op-ed pieces. It was the first letter in the letters section that day, and I got the top headline. It dealt with NAFTA and trade agreements.

As nice as that was, I got a big shock a few days later when I got a letter in the mail, on official stationery, from Richard Fisher, the president of the Federal Reserve Bank of Dallas. He complimented me on my letter and said it was superb. I had never even met him or ever tried to contact him before.

Wow. I graduated from high school with a 2.7 GPA, and when I started at MVCC, I had no idea what I would do with my life. If you had told me then that someday I would have a letter in the WSJ and get that kind of compliment, I doubt I would have believed you.

Then an adjunct professor at the business school at the University of Chicago contacted me a few years ago and wanted to know if it was OK for her to assign a paper I wrote on entrepreneurs for a class she was teaching on innovation. (Of course, I said yes).

That professor was Nancy Tennant Snyder. She has a Ph. D. from George Washington University and is a vice president at Whirlpool. Business Week magazine has called her one of the leading innovators in the world. She also cited two of my papers in one of her books.

Then I got an email from John Joseph, a professor at the University of Edinburgh. He is an expert on language and politics. He wanted to know if he could include an essay I wrote in a four-volume work he was planning. I again said yes and it was published last year (and it is called Language and Politics).

It is a collection of essays. Mine is titled "The Intersection of Economic Signals and Mythic Symbols." Other contributors include Jeremy Bentham and George Orwell. When I was a community college student, I never imagined being included along with the likes of those great thinkers.

The co-authors of the book The Economics of Public Issues have thanked me in each of the last three editions for my helpful suggestions. Almost all of the people they thank are from big universities. One of the co-authors of this book, Douglass North, is a Nobel Prize winner. Never imagined someone like that would value my input when I started out as a community college student.

Getting such recognition in cases like this gives me a sense of achievement. I know I have made a scholarly contribution to the world. And I want all SAC students to have a chance for this same kind of success (as an academic or any in line of work). I think all SAC faculty do. That is why school is hard, and that is why I'm thankful that my community college teachers were experts who maintained high academic standards.