There Is A Funny Economist Out There

No, really, there is. My students will find this hard to believe after the groaners I tell in class. But Yoram Bauman, who has a Ph. D. in economics from the University of Washington, calls himelf a "stand up economist." He performs all over the country. Here is a link to his site:

Stand Up Economist

I wonder if he is related to Comicus, the first stand up philosopher? (who said the Christians are so poor, they can only afford to have one God) Anyway, the site has a video which you can watch.

Bauman also has a site called

You might be an economist if….

My students will find it rewarding to look at. For example, it says "you might be an economist if you refuse to sell your children because you think they’ll be worth more later."

Should The Sale Of Tiger Parts Be Legal?

This week in one of my classes we read a chapter titled ""Bye, Bye Bison" from the book The Economics of Public Issues. The chapter discussed what happens when no one owns animals. They get over hunted or over fished.

The Wall Street Journal had an article last week called China's Tiger Farms Spark a Standoff: Economists Propose Legalizing Sale of Some Animal Parts, as Poachers and Shrinking Habitat Thin Ranks in the Wild. Here are some key exerpts:

"To curtail demand for poached animals, the economists suggest legalizing the sale of bones from some farm-bred tigers. In China, the bones are in high demand for use in traditional medicines such as rheumatism cures."

"Such sales have been illegal in China since 1993, when Beijing joined a ban on international trade in tiger products. Before then, many tiger farms fed a demand for bones; after the ban, poachers and habitat destruction thinned China's ranks of wild tigers down to a few dozen."

""Farming works if the price of the poached product falls sufficiently so that poaching is no longer profitable," he said. " That's why you don't go hunting in the jungle for wild chickens—because it's cheaper to go to the supermarket. In essence. You've got to get wild tiger bone cheaper than the farmed bone—a big ask."

It costs at least $2,000 to raise a tiger bred in captivity—and $200 or less to kill a tiger, the World Bank estimates.

Mr. van Kooten disputes those figures, saying that poaching is much more costly and that farms could achieve economies of scale to decrease the price of raising a tiger."

The idea is that if tiger parts can be sold legally, the supply would increase, lowering the price. Then poachers would have no need to kill tigers in the wild. Also, I think some poachers might be willing to start doing things legally themselves.

What Was The Rate Of Inflation Last Year? Was It Positive Or Negative?

First, a note to my students. I added some links and informaton to the last post on religion and economics.

This may not be as simple a question as you might guess. You can get data on this from the Bureau of Labor Statistics at Consumer Price Index. The official rate is 2.7%. Why?

In December of 2008, the CPI = 210.228. In December of 2009, the CPI = 215.949. The latter number is 2.7% higher than the first number. But, what if we took the average CPI of all 12 months in each year and then found the percentage change?

The average CPI for all 12 months of 2008 was 215.303. The average for 2009 was 214.537. Notice that the 2nd number is lower. How much lower? 214.537/214.537 = 0.99644. That means that prices were only 99.644% as high in 2009 as they were in 2008. The percentage drop was about 0.356% since 1 - 0.99644 = 0.00356.

The table below shows the CPI in each month for each year and then the % change month-to-month going forward a year.


When you look at the BLS web site linked above, you will see in the last column a -0.4 or a -0.4% (the site does not put any % signs in). That is just rounded up slightly from the actual -0.356%. The last year there was a fall in the CPI, whether by the December-to-December method or the monthly average method was 1955 (it was only the monthly average that was negative).

Usually, the two methods are within 1 percentage point of each other (58 out of 96 years). But in each of the last two years, they differed by more than 3 percentage points (in 2008, the Dec-Dec rate was 0.1% while it was 3.8% using monthly averages). The last time there were two straight years like that was from 1946-48. So we must be having some pretty big month-to-month fluctuations. The graph below shows the absolute difference between the two methods for each year since 1914. Notice that the differences became larger in the last few years.

Can You Mix Economics With Religion?

The ancient Greeks sure thought you could. They had a god of commerce and a god of wealth. You can read about them at Britannica.

Hermes (commerce)

Plutus (wealth)

The name of Plutus came up in a Wall Street Journal article called The Greek Tragedy That Changed Europe. It is about the debt problems that Greece faces and how they might affect the European Union. It says:

"Plutus, the Greek god of wealth, did not have an easy life. As the myth goes, Plutus wanted to grant riches only to the "the just, the wise, the men of ordered life." Zeus blinded him out of jealousy of mankind (and envy of the good), leaving Plutus to indiscriminately distribute his favors.

Modern-day Greece may be just and wise, but it certainly has not had an ordered life. As a result, the great opportunity and wealth bestowed by European integration has been largely squandered."

Here are links for Wikpedia:

Hermes

Plutus

The relationship between economics and religion is summed up very well in a Family Circus cartoon.

The Freaknomics blog has a good article about people donate more money to their churches if other people can see how much they are donating called “We Pretend We Are Christians”

World Unemployment Rates And The Ideal Inflation Rate

In my macro classes this week, I talked about unemployment. Our policy goal is full-employment which means we want to have the lowest rate of unemployment compatible with price stability (when I first took economics in 1978 it was thought to be a 4% unemployment rate). Price stability means a 3% or lower annual inflation rate. The idea is that if we try to0 hard to lower the unemployment rate by increasing AD, inflation will get too high. I explained how this works with a post from last October called Fed Officials Disagree On Threat Of Inflation. It has a graph that shows what happens with AD and AS and how inflation accelerates as AD increases.

Professor Mark Thoma of the University of Oregon had a post at his blog recently on the disagreement over what the optimal inflation rate is called Do We Need to Rethink Macroeconomic Policy?. Some economists think maybe 4% would be okay. But this article gives you a good idea of the issues and controversies surrounding the unemployment-inflation tradeoff.

It might seem silly to worry about small differences in percentage rates, like a 4% vs. 5% unemployment rate. But if economists concluded that full-employment was a 5% unemployment rate but it was really 4%, then our policies would leave about 1.5 million people unemployed since the labor force has about 150 million people in it. On the other hand, if policies tried to lower the UE rate to 4% but the full-employment UE rate is really 5%, then we could trigger very high rates of inflation. So this discussion of the ideal inflation rate is very important.

I did not get a chance to talk too much about unemployment rates in other countries. So here are links to some info on that:

The CIA's country ranks by unemployment rates

A report on current country rates from the OECD

Employment Over Time

We all know that the unemployment rate is high at 9.7%. The recession has been tough. But until the last couple of years, the long-term picture was good. The percent of the civilian noninstitutional population that was employed was trending upward. Here are the average percentages per dedade:

1970s 57.66
1980s 60.1
1990s 62.85
2000s 62.57

The data comes from a Bureau of Labor Statistics site called A-1. Employment status of the civilian noninstitutional population 16 years and over, 1970 to date. The graph below shows the yearly changes.

A Special (Economic) Valentine's Message On Romantic Love

What can an economist say about love on this holiday? You'd be surprised. But first, here is a link to an interesting story in yesterday's San Antonio Express-News: Surveys: Workplace romances in full bloom. We all spend alot of time where we work, so that is going to be a place for many people to meet that special someone. The E-N also had an article about how people are not spending as much as they did last year called Saying ‘I love you’ for less.

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 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."

So How Is The Recession Affecting America's Drinking Habits?

There was an article in the San Antonio Express-News last week called Recession enough to drive a liquor salesman to drink. Apparently people are still drinking, but cheaper brands and they are not drinking high-end beverages in restaurants as much as they were a few years ago.

"San Antonians' love for fiestas hasn't abated — in fact, the March issue of Men's Health magazine ranks San Antonio the seventh drunkest city in the country. But as we've been hammered by the recession, we're cutting back on premium liquors and drinking more cheap booze."

Sounds like what we call inferior goods in economics. The things you buy more of when your income falls (as it does in recessions). Not sure if this really fits the definition because what people are doing when they switch to a cheaper brand is just that they purchasing less quality. Suppose you could measure the quality of, say, vodka (which they discuss in the article), and you could attach quality units to different brands. If you switch to a cheaper brand, you are just buying a lower number of "quality units."

It is like you still go to baseball games or Spurs games but you buy cheaper seats. So a lesser brand may not necessarily be an inferior good. But, by making more meals at home and drinking there, that could be an inferior good since you don't go to restaurants as much. People are buying more margarita mixes, for example because they are not going to restaurants as much. So maybe the margarita mixes are an inferior good.

Finally, the article quoted the chief economist of the Distilled Spirits Council of the United States. Talk about a dream job.

Liechtenstein In Number One!

In per capita GDP, that is. In my macro classes this week we started talking about GDP (gross domestic product or the value of all the goods and services produced in a country in a year). The CIA has a ranking of all countries by their per capita GDP (that is, GDP divided by population). That ranking is at Country Comparison: GDP per capita (PPP). The figures are all stated in dollar terms, so they use exchange rates to make the conversion from each country's own currency. They are also adjusted for "purchasing power parity" or the cost of living. One good thing about this list from the CIA is that each country is a hot link. If you click on a country you go to it's home page and there is alot of info there. Here is the top 10:


Here is something I reported last year:

"The country of Guinea-Bissau has a population of 1.5 million. But their GDP was only about $900 million. That is less money than the movie "The Darknight" has made, even if you take into account its production costs."

So Avatar, too, has probably earned more money than the GDP of some countries (it is up to about $2.2 Billion in revenue and may have cost around $400 million to make).

Click here to read last year's post on GDP. It mentions that Liechtenstein was having some problems in the banking system. One thing the CIA said was: "In 2008 Liechtenstein came under renewed international pressure - particularly from Germany - to improve transparency in its banking and tax systems."

Can You Put A Price Tag On Love?

That might sound sacrilegious, especially with Valentine's day coming up. But "Online dating is a $976 million annual industry in the United States" according to a New York Times article titled: Better Loving Through Chemistry (this is one article which is definitely worth checking out because the picture is very funny). So people are willing to pay big bucks to find love.

The article discusses some online services. Some sites try to match brain chemistry. Others try to match personal values and life experiences. They may simply be facilitating the information gathering process that was once easier in the past when life moved at a slower pace and people lived in more close-knit communities. Or, they may just be getting people together who are very selective. This may sound crass, but love is about people trading something and these services might make the trading easier. Here are some interesting exerpts:

""People tend to be adept at heeding that first spark of attraction but may be less dexterous at recognizing the commonalities that are the foundations of good marriages, says Gian Gonzaga, eHarmony’s senior director of research and development. The site suggests potential matches based on areas of compatibility —like values, beliefs and important experiences — that are predictors of relationship success, he says.

“In the long haul, you want to be able to manage conflicts, celebrate positives and get through the day-to-day relationship,” Dr. Gonzaga said. “Our system is there to take care of that so you can now focus on who you find really attractive, that you feel really passionate about.”

Chemistry.com, meanwhile, uses answers to a detailed questionnaire to suggest potential partners based on their brain chemistry, says Dr. Fisher, a research professor in the anthropology department at Rutgers University. Based on a review of scientific studies on neurotransmitters and chemicals like dopamine in the brain, she determined that humans tend to express one of four dominant temperaments.

Since the site’s introduction in 2006, more than eight million people have answered Dr. Fisher’s questionnaire, and she has used their answers to pinpoint traits that attract people to one another. She says people of decisive, straight-talking temperament, whom she calls “directors,” tend to be attracted to empathetic, intuitive types she calls “negotiators.” Spontaneous types (“explorers”) tend to be attracted to their own kind, while traditional pillars of society (“builders”) also tend to seek out partners that resemble themselves.

“If Helen Fisher can give you right off the bat individuals that your brain is more likely to be attracted to,” she says, “so much the better.”

At the end of the day, however, it may be that the success of such sites is attributable not so much to their proprietary methods as to their choosy, self-selected members who don’t want to wink at and woo the first person whose profile they read online. The sites attract cohorts of people interested in slowing down the online dating and mating process, in finding out more information about potential partners — or in ruling out unlikely suitors — before they graduate to the meet-and-greet stage.

THE more advanced the partner prediction sites, the more they may actually serve a more old-fashioned role. The sites provide background details on a person’s family, education, aspirations, character, genetic traits and general health of the type that was once public information in farming or immigrant communities or even in hunter-gatherer societies, Dr. Fisher says.

Indeed, at least from the point of view of evolutionary science, you’d be better off spending $50 — and more likely to find a mate — by using a premium dating site than by dropping $50 on drinks in the uncertain waters of singles bars."

Maybe That College Degree Is Not As Valuable As You Thought

It seems that previous estimates were wrong. That is the gist of a WSJ article titled What's a Degree Really Worth? An often cited figure is that you earn, on average, $800,000 more in your working life if you have a college degree compared to having only a high school diploma. Here are what seem to be the key exerpts:

"Mark Schneider, a vice president of the American Institutes for Research, a nonprofit research organization based in Washington, calls it "a million-dollar misunderstanding."

One problem he sees with the estimates: They don't take into account deductions from income taxes or breaks in employment. Nor do they factor in debt, particularly student debt loads, which have ballooned for both public and private colleges in recent years. In addition, the income data used for the Census estimates is from 1999, when total expenses for tuition and fees at the average four-year private college were $15,518 per year. For the 2009-10 school year, that number has risen to $26,273, and it continues to increase at a rate higher than inflation.

Dr. Schneider estimated the actual lifetime-earnings advantage for college graduates is a mere $279,893 in a report he wrote last year. He included tuition payments and discounted earning streams, putting them into present value. He also used actual salary data for graduates 10 years after they completed their degrees to measure incomes. Even among graduates of top-tier institutions, the earnings came in well below the million-dollar mark, he says."

But $279,000 is nothing to sneeze at. The one thing that is not clear is if they took into account that the high-school-diploma-only people are earning money earlier and that they can save that money and earn interest. My guess is that this issue is a minor one since you won't be able to save much in these cases.

The part about tuition prices and inflation is interesting. The Consumer Price Index rose 28.8% from 1999-2009. Total expenses for tuition and fees at the average four-year private college rose 69.3%.

Banning Cell Phones While Driving And A Lesson In Ceteris Paribus

The article is Report: Study shows cell phone bans don’t lower accident rates. A study found that states that banned using hand-held cell phones while driving did not see their accident rates go down compared to other states. But "Officials believe that drivers in areas with the ban have obtained hands-free devices, whose accident rates are at the same level as the hand-held devices." This means that all other factors were not held constant. We need ceteris paribus to be able to see if A causes B. We need to change just one thing, hand held cell phone use, without anything else changing. It is possible that this ban really does lead to fewer accidents but that the increased use of hands-free devices raised it back up.