Wednesday, November 28, 2007

The Misery Index

The misery index is simply the inflation rate plus the unemployment rate. The graph below shows how it has changed since 1970. Notice it used to be alot higher. From 1975-83 the average unemployment rate and the average inflation rate were both 7.7% for an average misery index of 15.4. This year it will probably be about 8.7.

Sunday, November 18, 2007

Want Kids Immunized? Threaten the Parents With Jail

Student are supposed to get vaccinated against certain diseases. But what if the parents don't take care of it? Make it costly for them not to, like sending them to jail. Here is the intro to one of the articles:

"UPPER MARLBORO, MD. — The threat of jail time injected a little motivation into scores of parents who lined up around the courthouse Saturday to get their children vaccinated on the spot or prove they've already had the shots.

It was one of the strongest efforts yet by a U.S. school system to ensure that youngsters are immunized, upsetting some parents who grumbled that Prince George's County officials went too far and irking opponents of mass vaccinations, who demonstrated outside.

Two months into the school year, county officials realized more than 2,000 students didn't have the vaccinations required to attend class. So Circuit Court Judge C. Philip Nichols ordered parents in a letter to appear at the courthouse Saturday or risk 10 days in jail."

You can read about it here and here and here

Friday, November 16, 2007

Is Barry Bonds Guilty?

He has been charged with four counts of perjury and one of obstruction of justice following a four-year investigation into steroids. But what evidence is there that he used steroids? I can't comment on the chemical and biologicial issues, but I have analyzed his stats. What comes out is that probably no other player has had such a dramatic and sustained improvement in his late thirties. Players normally have their best performances in their late 20s but Bonds had his best years in his late 30s. Some players have done better in their late 30s than they did before, but no one has improved as much as Bonds. Why would a player do so much better in his 30s, an age when many players' careers are actually over? A special training program? Better nutrition? Some new batting technique? It raises the questions that steroids were involved, so Bonds may have had something to hide. You can read my analysis on this here and here and here

Wednesday, November 14, 2007

Did the Clear Air Act Reduce Crime?

I talk about the Clean Air Act of 1990 in class and how, like any other regulation, it decreases supply. Any regulation raises costs to producers, so that is why supply is reduced. The price of the good increases and the amount produced falls. But we also hope that regulations have benefits. The first Clean Air Act from the 1970s called for a reduction in lead in gasoline. It turns out that this may have had other benefits by reducing crime. Below is an exerpt from the New York Times article Criminal Element

"The answer, according to Jessica Wolpaw Reyes, an economist at Amherst College, lies in the cleanup of a toxic chemical that affected nearly everyone in the United States for most of the last century. After moving out of an old townhouse in Boston when her first child was born in 2000, Reyes started looking into the effects of lead poisoning. She learned that even low levels of lead can cause brain damage that makes children less intelligent and, in some cases, more impulsive and aggressive. She also discovered that the main source of lead in the air and water had not been paint but rather leaded gasoline — until it was phased out in the 1970s and ’80s by the Clean Air Act, which took blood levels of lead for all Americans down to a fraction of what they had been. “Putting the two together,” she says, “it seemed that this big change in people’s exposure to lead might have led to some big changes in behavior.”"

The economist, Jessica Wolpaw Reyes, of course, did attempt to hold all other factors constant. But only more research will show if she is right.

Sunday, November 11, 2007

Another Book Relates Religion to Economics

The book is Shopping for God: How Christianity Went From in Your Heart to in Your Face by James Twitchell. You can read reviews of it here and here. There is an interview with the author here. About a year ago, I had an entry about a similar book. You can read that entry here.

One of Twitchell's main points is that competition in the religion market is fueling the rise in mega churches. If a church wants more members, it has to offer a better deal and more benefits than other churches

Friday, November 09, 2007

Employers Want To Know: Which Job Applicants Will Fit In?

If a prospective employer asks you if you're nice, if you get along with others, are you a team player, etc, you will, of course, say yes. Who wouldn't? Since no one says "I don't get along with co-workers," how will employers figure out who will and won't fit in? It is the age old search for information and indicators (or signals as economists call them) of who people truly are. So employers are devising all kinds of new ways to figure out who will be right for them. Below is an exerpt from the article Employers study applicants' personalities to give you an idea

"At KaBoom, a nonprofit that builds playgrounds, the board was hammering co-founder and CEO Darell Hammond four years ago over the organization's high employee turnover. "I rationalized that they were on the road too much, when in reality, it was the wrong fit in the wrong role," he said. He started thinking about who left and why, then focused on the characteristics of workers who stayed. The list of traits: Can do, will do, team fit, damn quick and damn smart. His team kept a closer eye on job applicants in the reception area, which is set up as a playground, to see how they acted around playground equipment. "If you're early, you may have to sit on a swing or the bottom of a slide," Hammond said. People who stand with a tight grip on their briefcases instead of sitting on the playground equipment aren't asked back.""

Wednesday, November 07, 2007

Has the Minimum Wage Kept Pace with Inflation?

The first federal minimum wage was set in 1938 at $0.25 per hour. As of this past July, it went up to $5.85. It will go up to $6.55 next July and $7.25 in July of 2009. To see the history of changes in the minimum wage CLICK HERE. The numbers below show by what percentage the wage increased each time it was raised, followed by the change in the CPI in that year relative to 1938. For example, the increase in 1939 raised the minimum wage 20% while prices actually fell 1.42%. The 1967 increase raised the minimum wage 12% while prices in that time (since 1963, the time of the previous increase) went up 9.15%. There have been times when the increase in the minimum wage was less than the increase in prices. In 1990, the minimum wage increase was 13.43% over the 1981 level while prices since 1981 were up 43.78%. Since 1938, the minimum wage has increased 2240% while the Consumer Price Index is up 1371%. To make a long story short, this amounts to an increase in the minimum wage of 63%, adjusted for inflation.

1939 ** 20.00% ** -1.42%
1945 ** 33.33% ** 29.50%
1950 ** 87.50% ** 33.89%
1956 ** 33.33% ** 12.86%
1961 ** 15.00% ** 9.93%
1963 ** 8.70% ** 2.34%
1967 ** 12.00% ** 9.15%
1968 ** 14.29% ** 4.19%
1974 ** 25.00% ** 41.67%
1975 ** 5.00% ** 9.13%
1976 ** 9.52% ** 5.76%
1978 ** 15.22% ** 14.59%
1979 ** 9.43% ** 11.35%
1980 ** 6.90% ** 13.50%
1981 ** 8.06% ** 10.32%
1990 ** 13.43% ** 43.78%
1991 ** 11.84% ** 4.21%
1996 ** 11.76% ** 15.20%
1997 ** 8.42% ** 2.29%
2007 ** 13.59% ** 29.22%

Sunday, November 04, 2007

What is the Inflation Rate?

It may not be as obvious as you would think. The CPI was 207.917 in August and 208.490 in September. The 208.49 means that what cost $100 in 1983 now costs $208.49. Since 208.49/207.917 = 1.00276, prices were up .276%. If that happens for 12 months, the inflation rate would end up being 3.36%.

But that is based on just one month. In September 2006, the CPI was 202.9. That means that prices went up 2.76% in the last 12 months. In all of 2006, they were up 2.5%. So far in 2007, they are up 3.3%. The CPI was 201.8 in December of 2006. Since 208.49 (the Sept 2007 CPI) divided by 201.8 =1.033, we get a 3.3% increase. That works out to .364% per month. If we get that increase over 12 months, the inflation rate would be 4.4%.

How could they have gone up 2.76% over the last 12 months while they might go up 4.4% for all of this year? Prices fell in the last few months of 2006. The same thing happened in 2005. Both of those years we were headed to 4-5% inflation but prices fell the last few months to give us a decent rate for the year. The CPI was up only 3.4% in 2005. Will we get lucky the last few months this year?

Click here to see inflation statistics

Friday, November 02, 2007

Millionaires Are Regular Folks

It seems like they work hard and don't want to show off too much. Here are the first two paragrahps from an article titled More U.S. millionaires are middle-class

"Sitting on a million but still middle-class? New research has found that more and more Americans worth at least $1 million want luxury goods such as yachts but otherwise lead family-focused, work-oriented lives.

Private wealth specialists Lewis Schiff and Russ Alan Prince found the number of Americans with $1 million to $10 million had risen to 8.4 million households -- or 7.6 percent of U.S. households -- and was growing at 15 percent a year."

At that rate, about half of American households will be millionaire households in 13 or 14 years. Maybe a little longer, since if inflation averages 3% a year, after 13-14 years $1 million will only be worth about $600,000 or $700,000. But since the number of millionaires is growing 15% a year while inflation has averaged just about 3% a year for the last 24 years, it is not just rising prices that is causing the number of millionaires to grow. So if we subtract 3% from 15%, and use a growth rate of 12% a year, it will take 16 or 17 years before half the households are millionaires.