Taco Bell Gives Away "Free" Tacos, Problems Arise

Maybe you heard that if a player stole a base in the World Series, Taco Bell would give away a free taco to anyone who wanted one on Tuesday from 2-5 pm. There was a stolen base, so they gave them away yesterday. At one Taco Bell, there were so many cars in the drive up lane that they went out into the street. It got so bad that the there was a traffic jam and the police had Taco Bell close their drive up window. Tempers also flared. But the tacos were not really free if you had to wait that long. This all shows that when something is given away for free, it causes problems. You can read about it in Promise of free taco brings on the fans: Tempers flare in Norwell; crowds jam Quincy restaurant

Are Rock Stars "Selling Out?"

With revenue from the sales of recordings down in recent years, rock stars are looking for other ways to make money. Sales of CDs are down because of downloading and file sharing. So some of them have gone back to school to take business classes, sold their songs to be used in TV commercials and have formed partnerships with corporations. Some say they should stay pure, caring only about their music and not "go commercial." The New York Times today had an article on this called If It’s Retail, Is It Still Rock?.

Are Chimps More Rational Than Humans?

Seems hard to believe. But an experiment suggests it. The article is Chimps choose more rationally than humans. My student BRUNO MEJIA sent me this.

It reminds me of research that was done at Texas A & M some years ago. They found that rats and pigeons act rationally. If they had to press a lever so many times to get a drop something to drink or a pellet of food, they "bought" less of either one if the scientists raised the number lever pushes it took to get one. This was like raising the price. More lever pushes to get either food or drink, the less they tried to get of it. So they followed the law of demand. This was reported in Steven Landsburg's book The Armchair Economist.

Moral Hazard and the Housing Crisis

When economists use the term "moral hazard" they mean the fact that when people buy insurance, they might not be as careful as they were before. For example, if you don't have fire insurance for your house, you will be very careful not to create fire hazards. But once you buy insurance, you might not go to as much effort to make sure everything is safe. But that increases the chance that fires will happen.

Reuter's has an article called Popular mortgage "mods" fuel moral hazard by By Al Yoon and Walden Siew. See if you can spot the moral hazard in the excerpt below.

"NEW YORK (Reuters) - Mortgage companies scrambling to ease the terms on thousands of loans destined for default may be doing more harm than good by rewarding investors and homeowners who took on excessive risk.

Efforts to help Americans pay their mortgages have forced companies such as Countrywide Financial Corp (CFC.N: Quote, Profile, Research), the largest U.S. mortgage lender, to expand their practice of loan modifications, which lower payments for borrowers vulnerable to foreclosure. Countrywide on Tuesday said it would refinance or modify $16 billion of loans.

While such concessions are largely a win-win situation for the parties involved, since homeowners keep their homes and the bank reduces losses, the practice may exacerbate a credit crisis that began in July and is leading to growing cries of foul in the $7.2 trillion mortgage bond market.

To some, the loan adjustments are little more than a bailout of bond buyers who were paid to take greater risks. The practice of lowering interest rates or forgiving a portion of the principal could even encourage more of the bad lending that helped create the U.S. housing bubble and subsequent credit crunch."

Want to make $60 an hour? Stand in line for a lobbyist, while its still legal

Lobbyists in Washington are very busy and their time is valuable. So they don't want to wait in line to get a good seat at a Congressional hearing. So they pay people to stand in line for them. Companies exist to find waiters and the internet is used. You can make up to $60 an hour. Seems okay to me. Lobbyists can use their time wisely and low income people can earn alot. But a senator wants to outlaw the practice. It was in today's San Antonio Express-News. The article is
Waiting for dollars won't hurt America and was by Maria Anglin.

When Women Earn More Than Men, Is Dating Affected?

The New York Times had an articled titled Putting
Money on the Table on Sept. 23. It seems that problems arise when a women makes alot more than her boy friend. Sometimes the men don't like it when the women pay for things. Other times women try to hide how much money they make. One woman said that it is "easier to date someone in the same economic bracket." Some women think if the man does not make alot of money that he is not ambitious enough.

With many women making more than men, it is hard to share common interests. If you make alot of money and want to go to the opera and fine restaurants, it helps if the other person can also afford to do so. This raises another issue: Can you have any kind of friend, not just the dating type of friend, who has an income that is not much different than yours? Suppose you like bike riding and you want to join a bike riding club. But if everyone in the club owns expensive bikes that are very light and fast, you can only keep up with them if you also buy an expensive bike. So you have to spend money to keep up. If you don't, there is no point in being in the club since you will just end up being way behind everyone else and the others won't want to go real slow so you can keep pace. My guess is that most people have friends who make a similar amount of money.

But getting back to men, women, incomes and dating, if women have trouble dating men who make less, but it is okay for men to date women who make less, then men have a larger group of potential dates: the women who make as much as they do and the women who make less whereas women who make alot can only date men who make as much. That narrows their field and total number of potential dates, maybe even husbands.

The Worst Jobs for the 21st Century

That's the title of an article from Forbes, which you can read here.

It tells us which jobs are expected grow faster in number than average, which will grow slower and which will actually decline. But what if people make career decisions based on these projections? Say alot of people go into a career that is expected to grow. Will this be a good decision for those people? Maybe not. If you go into a career that alot of other people are entering, the wages might be low or not as high as you expect. It's like when you hear about the best places to live. If they are so great, alot of people move there. Then the cost of living goes up there and although it might be a place with many benefits, you are now paying for them and living there is not such a great deal.

What has happened to wages and employment since NAFTA went into effect?

The San Antonio Express-News had an article on this in today's paper called More jobs, higher pay in years after NAFTA. I highly recommend it, probably because I wrote it. My comments were in response to two articles by Carlos Guerra. The links to his articles are in the article. My basic point is that wages and employment have done well since January, 1994 when NAFTA went into effect.

Is It Too Easy For Students To Get Credit Cards?

It seems that college students are inundated with credit card offers. Some of these cards have fine print which show, for example, that if you miss a minimum monthly payment, it gets raised dramatically. Students also "face peer pressure to live a flashy lifestyle when they're on their own for the first time."

So consumer groups are trying to limit and regulate the offers for credit cards that appear on college campuses. I wonder how much pressure there is for students to live a flashy lifestyle and therefore spend alot of money (which they may not have and need to put on a credit card).

You can read about this in the article Project targets credit cards on campus

More Proof That Tradeoffs Are Everywhere: Blind People Don't Like The New, Quiet Hybrid Cars

How could anyone not like hybrid cars? They use less gas so there is less pollution and we conserve on a scarce resource. But they are so quiet that they may pose a threat to blind people who cannot hear them. The blind often use audio or noise cues to know if there are cars nearby. So the National Federation of the Blind wants regulations mandating that hybrid cars make some kind of easily identifiable noise. The article on this is called Blind people: Hybrid cars pose hazard. Here is the intro:

"Gas-electric hybrid vehicles, the status symbol for the environmentally conscientious, are coming under attack from a constituency that doesn't drive: the blind.

Because hybrids make virtually no noise at slower speeds when they run solely on electric power, blind people say they pose a hazard to those who rely on their ears to determine whether it's safe to cross the street or walk through a parking lot."

Will the Rising Use of Student Loans Hurt the Economy?

There is an interesting article by Marcy Gordon of the Associated Press called Student loans sow seeds of economic ills. The amount of money students are borrowing to pay ever rising tuition costs is also growing rapidly. For some the monthly payment is more than a mortgage.

But I think the part where they think the economy will be hurt is:

"Many in the next generation of workers will be so debt-burdened they will have to delay home purchases, limit vacations, even eat out less to pay loans off on time."

Maybe we should not be too concerned about this. They will pay the money back to someone, who in turn will spend it. It will just mean that the former students will be consuming fewer goods and others, the ones doing the lending right now, will consume more (right now they are consuming less than they could since they are lending money to students). This does not seem to be hurting the economy right now. We have not had a recession since 2001 and the unemployment rate is 4.7%.

Is the Stock Market a Good Investment?

The market closed over 14,000 today. If you had invested in the market about 5 years ago, you would have earned a compound annual rate of return of 10.75%. The market was at 8,397 about 5 years ago and 14,000 is about 66.67% higher than 8,397. If you raise 1.1075 to the 5th power, you get about 1.667. Below are the rates of return if you go back 5, 10, 15, 20, and 25 years.

5-0.1075
10-0.0654
15-0.1028
20-0.1023
25-0.1117

But we are at high point this year. We are up about 10% in just about 9 months. So what if we had started from the beginning of the year? Below are the returns.

5-0.0494
10-0.0635
15-0.0953
20-0.0923
25-0.1128

Radiohead Lets You Name Your Price

The band Radiohead is trying an experiment to let you pay whatever you want for the digital version of their latest album. Will this work? Or will most people just take it for free? My guess is that a few loyal fans will pay something but most people will pay only a little. Thanks to one of my students for letting me know about this.

Click here to read a brief summary of the story

Click here to read the long version of the story. But you may have to register to read this New York Times article.