Sunday, February 27, 2011

From The Life Is Not Fair Category: Better Looking, Tall, Thin People Make More Money

See Ways Your Appearance Affects Your Paycheck. Here are some excerpts:

"Men who are at least 6' tall make an average salary of $5,525 more than their shorter, 5'5 counterparts..."

"... 1% increase in body mass [for a woman] results in a 0.6 percentage point decrease in family income..."

"people with above average looks typically received premiums in pay of 5% or more, and that less attractive people "suffered a salary penalty of up to 9%.""
Here is some research from a few years ago that explains why looks might matter from an evolutionary perspective:

"So you think beauty is in the eye of the beholder? Think again. According to new research from the University of Exeter in Great Britain, the preference for pretty faces over ugly ones is embedded in our brains from the moment of birth and possibly prior to birth.

Newborn babies come fully equipped with built-in preferences, including a preference for an attractive face, that help them make sense of their new environment, report the BBC News Online and Newsweek magazine. The Exeter researchers showed more than 100 infants two images that were placed side by side. One was of an attractive face, while the other was a less attractive face. The babies, ranging in age from five hours old to two days old, spent about 80 percent of the time looking at the attractive face, while barely glancing at the unattractive face.

"You can show them pair after pair of faces that are matched for everything other than attractiveness. This leads to the conclusion that babies are born with a very detailed representation of the human face," Dr. Alan Slater, a psychologist at Exeter, explained to the BBC News. Why would infants have this capability? "It helps them to recognize familiar faces--particularly that of the mother--and it helps them in learning about the social world. Attractiveness is not simply in the eye of the beholder, it is in the brain of the newborn infant right from the moment of birth and possibly prior to birth," he added.

When those babies grow up, the preference for pretty faces doesn't change. And it crosses all cultures and geography as well. When an insular European is shown the faces of two Africans, the one he chooses as most attractive is also the same one an African chooses. And it works the other way around when an African is shown the faces of two Europeans.

"Although we think that standards of facial beauty vary over time and culture, they don't actually change that much," Slater explained to Newsweek. The evidence indicates that there is a biological and universal standard."

So don't blame a man when he can't help but look at a pretty face! He's biologically programmed that way."

Friday, February 25, 2011

The Percent Of The Civilian Noninstitutional Population Employed Since 1970

(This is a post from last October with an update at the end, including a link to a comaparison of unemployment rates in different countries from 2002-09)

I talked about unemployment in my macro classes yesterday. If you go to this site by the Bureau of Labor Statistics called Employment status of the civilian noninstitutional population 16 years and over, 1970 to date, you can see unemployment rates going back to 1970. It also shows the percent of the civilian noninstitutional population that is employed. The graph below shows how that has changed over time.

The general trend since 1975 has been up, although it has flutctuated. Unfortunately, it has been going down for a couple of years and we are well below the high of 64.4% in the year 2000. It was 59.3% in 2009.

But the average for the years 1970-84 was 58%. So we are still above that. That does not mean what we have is good. But it just puts what is currently going on in perspective.

Some will say that we have a large prison population, so they are not part of the figures and that prison population has been growing. In 2008, the U. S. prison population was 1,610,446. See Prisoners in 2008. Suppose we increase the number of people in the civilian noninstitutional population by that amount. Right now it is 235,801,000. The new figure will be 237,411,446. Now let's keep the number employed the same, at 139,877,000. That would 58.9% employed, still higher than the average from 1970-1984.

Now there were some tough economic times in that earlier period. But we survived and we weren't exactly destitute. So although the economy is not doing well right now, maybe things are not so bad.

Update: For all of 2010, the percent employed in the US was 58.5%. From 1975-83, the average annual unemployment rate was 7.7% and the the average inflation rate was also 7.7%. The average annual percent employed in that period was 58.21%, still less than what we had in 2010 or any other recent year. The last 9 years averaged 61.9%.

Click here to see international comparison of unemployment rates by country.

Also, here is something from the Wall Street Journal last December about how GDP growth is related to unemployment:

"Okun's Law," as it came to be known, has been tweaked over the years, and now states that for every two percentage points the economy grows above its long-term trend annually, unemployment falls by a percentage point.

Most economists peg the economy's long-term trend rate at about 2.5%, which is roughly where economists polled by The Wall Street Journal estimate growth stands in the current quarter.That means, according to Okun's Law, that the economy isn't growing fast enough to bring down unemployment."

Wednesday, February 23, 2011

We Spend A Much Smaller Percentage Of Our Incomes On Food And Clothing Than We Used To

Economist Mark Perry has posted two great graphs at his blog (links to the two entries are below). But here are the graphs, They show that over time the percentage of our income that we spend on food and clothing has been falling. It looks like in 1950 that about 30% of our income went to food and clothing combined. Today it is only about 12.5%.

Here are the links to his two posts on this:

As a Share of Income, Americans Have the Most Affordable Food in World & It's Never Been Better

As a Share of Income, Clothing and Footwear in U.S. Are More Affordable Today Than Ever Before

Sunday, February 20, 2011

Can Some Places Really Be The "Best" Places To Retire To?

See The Best Places to Retire Outside the U.S.

But if people really believe this and many of them go to a given country, things won't be very fun due to the crowds (which reminds me of something that Yogi Berra said about a restaurant: "nobody goes there anymore, it's too crowded").

This also illustrates what economist Steven Landsburg calls the "Indifference Principle." "Except when people have unusual tastes or unusual talents, all activities must be equally desirable."

This applies to any of the countries on the list in the article. Once everyone sees it as a good deal, they start going there. Only people with unusual tastes will really enjoy it. That is, you will have to like what that country has to offer alot more than the average person or the crowds and congestion will erode your enjoyment. That country won't be any better than anywhere else for retirement. Other places will be just as desirable.

Saturday, February 19, 2011

Incentives Matter, Even When It Comes To Returning Bottles

See Shades of 'Seinfeld': Maine bottle scam alleged form the AP. Here are the first two paragraphs:

"A memorable "Seinfeld" episode features Kramer and Newman taking thousands of cans and bottles to Michigan so they can get a nickel more per container than they would in New York, but beverage distributors say there's nothing funny when it happens for real.

In Maine, which has a more expansive bottle-redemption law than neighboring states, three people have been accused of illegally cashing in more than 100,000 out-of-state bottles and cans for deposits, the first time criminal charges have been filed in the state over bottle-refund fraud, a prosecutor said.

A couple that runs a Maine redemption center and a Massachusetts man were indicted this week for allegedly redeeming beverage containers in Maine that were bought in other states."
And here is more:

"An estimated 90 million cans and bottles are fraudulently cashed in each year in Maine, costing beverage distributors $8 million to $10 million, said Newell Augur, executive director of the Maine Beverage Association.

People from other states — especially New Hampshire, which has no "bottle law" — routinely redeem loads of cans and bottles in Maine, Augur said. Redemption centers pay customers 5-cent refunds on most beverage containers and 15 cents for wine and liquor bottles. The centers, in turn, get that money back from distributors, plus a 3 1/2- or 4-cent handling fee per container."

"Officials estimate that up to 1 billion beverage containers are sold in Maine each year. Containers sold in other states, however, carry the Maine deposit stamp because it's not cost-effective to change labeling for each state."

Wednesday, February 16, 2011

Adam Smith, Marriage Counselor

That is an article from the NY Times. Click here to read it. It is by Jenny Anderson, co-author of the book “Spousonomics,” written with Paula Szuchman (as you can probably guess, I am continuing with the Valentine's theme from Sunday).

They discuss how using incentives and economic theories like loss aversion, game theory and information processing costs can improve your marriage. The two authors answered questions at Freakonomics.

Finally, neuro-economist Paul Zak explains why romance in the workplace is important. Go to The Container Store Cheers Office Romance, Love This Valentine's Day. Here is an excerpt:

"Research has shown that a loving work environment causes the brains of those in it to produce the neurotransmitter oxytocin, which motivates people to care for the people around them, the company says, citing the findings of Paul Zak, founding director of The Center for Neuroeconomics Studies and professor of economics psychology and management at Claremont Graduate University.

In 10 years of research, I have shown that when we are loved and trusted, we in return love and trust others," Zak told WalletPop.

"Love is the foundation for all economic exchange which, at its core, is about serving others. Love creates employee engagement, builds customer loyalty and creates sustainable businesses. Imagine that: the best business practices derive directly from love.""

Sunday, February 13, 2011

A Special Valentine's Message On Romantic Love

Below is a repeat of last year's Valentine's day post. First there are a couple of new links:

The first one is Kisses unleash chemicals that ease stress levels. 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. 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."

Friday, February 11, 2011

New Technologies Open Up Oil And Gas Reserves

In one of my macro sections this week we read a chapter from the book The Economics of Macro Issues about technology. It mentions how better techniques have expanded our proven reserves of resources like oil. Some more cases of this were in the news recently.

One was New drilling method opens vast oil fields in US from the Associated Press. Here is an excerpt:

"A new drilling technique is opening up vast fields of previously out-of-reach oil in the western United States, helping reverse a two-decade decline in domestic production of crude.

Companies are investing billions of dollars to get at oil deposits scattered across North Dakota, Colorado, Texas and California. By 2015, oil executives and analysts say, the new fields could yield as much as 2 million barrels of oil a day — more than the entire Gulf of Mexico produces now.

This new drilling is expected to raise U.S. production by at least 20 percent over the next five years. And within 10 years, it could help reduce oil imports by more than half, advancing a goal that has long eluded policymakers."

Something similar has happened with natural gas. See IEA doubles global gas reserves estimates from the BBC. Here is an excerpt:

"The world may have twice as much natural gas than previously thought, according to the rich nations' think tank the International Energy Agency (IEA).

The world may have 250 years of gas usage at current levels thanks to "unconventional gas" from shale and coal beds, Anne-Sophie Corbeau, senior gas expert at the IEA told BBC News."

It also has a nice picture explaining the new technique (I pasted it below). The authors of The Economics of Macro Issues also have a book called The Economics of Public Issues. Here is an interesing excerpt:

"In 1914, for example, the Interior Department announced that there was only a ten-year supply of oil left. That same department told us in 1939 that there was a thirteen-year supply. Then in 1951 we were told that oil wells would run dry in the mid-1960s. President Jimmy Carter in the 1970s said that we would use all proven reserves of oil in the world by the end of the 1980s."

Wednesday, February 09, 2011

Should Children Be Forced To Visit Their Aging Parents?

A couple of weeks ago I had a post about something from SuperFreakonomics, how children are more likely to visit their parents in nursing homes if the parent is rich (and if they have a sibling, since they are in competition for the inheritance). Now it turns out that China might force children to visit their parents. A proposed law would allow parents to sue their children if they don't visit. It is not clear how often they would have to visit or for how long. See China Might Force Visits to Mom and Dad from the NY Times. Here is one tidbit that has economic implications:

"In Shandong Province, for instance, a court ordered three daughters to each pay their 80-year-old mother between 350 to 500 renminbi, roughly $53 to $75 a month, after the mother claimed that they ignored her and treated her like a burden, The Qingdao Evening News reported this month."

Sunday, February 06, 2011

Will Computers Replace Professors?

This past week in one section of my macro class we read a chapter about technology and how people respond to it from the book The Economics Of Macro Issues. It mentioned Luddites, people who destroyed industrial equipment in England in the early 1800s. They were weavers who lost their jobs to new machinery. See What is a Luddite? by Steve Anderson at Utah State University.

Today, the New York Times had an article called Online Courses, Still Lacking That Third Dimension by Randall Stross. It raised the question of computers doing the teaching, making it possible to do away with professors. Here are some excerpts:

"“We should focus on having at least one great course online for each subject rather than lots of mediocre courses,” Bill Gates suggested in his 2010 annual letter for the Bill & Melinda Gates Foundation.

Developing that best-in-the-world online course — in which students would learn as much, or more, than in an ordinary classroom or a hybrid online class — requires significant investment. The Open Learning Initiative at Carnegie Mellon University, which has developed about 15 sophisticated online courses, mostly in the sciences, spent $500,000 to $1 million to write software for each. But neither Carnegie Mellon nor other institutions, which are invited to use its online courses, dares to use them without having a human instructor, too."

'Separately, many universities have put free videos online featuring their best lecturers. And Academic Earth, an aggregator Web site founded in 2009, makes the lectures easy to navigate. It says it offers 150 full university courses.

But even when lectures are accompanied with syllabuses, handouts, sample problem sets and other aids that Academic Earth has for some of its courses, is the experience really complete? The Massachusetts Institute of Technology also shares the raw materials of courses in its OpenCourseWare program. For the benefit of autodidacts who aren’t M.I.T. students, it strives to publish materials online for every M.I.T. course. But students cannot interact and do not receive vital feedback about their own progress that an instructor or software provides.

“Unlocking the Gates,” by Taylor Walsh (Princeton University Press) is a recently published history of M.I.T.’s online venture, as well as those of Columbia, Harvard, Yale, the University of California, Berkeley, and others. Comparing the book’s case studies, I found that Carnegie Mellon seems to have made the most progress in developing fully self-contained online courses. Anyone can use them free, with the proviso that Carnegie Mellon doesn’t offer credit.

But course credit can be earned at other institutions if instructors send their students to the site. Students pay nominal course registration fees, generally $15 to $60, and Carnegie Mellon sends data about each student’s progress to the instructor at the student’s home institution.

Carnegie Mellon, however, does not use these online courses as replacements for its own humanoid instructors. “Any tuition-driven, private university would have a hard time being the first one to make a change as drastic as offering an entirely automated course,” Ms. Walsh told me recently."

Friday, February 04, 2011

Even If You Don't Like Sports, You Might Be Paying For Them

See The Price of Football That Even Nonfans Pay by Mark Frost. From the Wall Street Journal, page D6, February 3, 2011. Cities spend tax payers money on stadiums. They don't always generated the hoped for benefits and some cities are still paying for stadiums that have be demolished. Here are some excerpts from the article:

"...the state (i.e., the taxpayers) still owes about $110 million in debt on the old Giants Stadium."

"Harris County, Texas, still owes about $32 million in debt on the Houston Astrodome, which opened in 1965 and was dubbed the "Eighth Wonder of the World." The RCA Dome in Indianapolis, which was demolished in 2008, still has about $60 million of outstanding debt and will not be paid off for at least 10 years. Even tiny Vero Beach, Fla., longtime home to Dodgers Spring Training, is on the hook for some $17 million in debt after the Dodgers moved to Glendale, Ariz., two years ago. Pima County, Ariz., taxpayers similarly still have to pay $21.3 million in stadium debt after the Chicago White Sox and Arizona Diamondbacks moved their training camps to Phoenix from Tucson."

""The problem with tearing down stadiums early isn't the debt," said Neil deMause, who co-wrote "Field of Schemes" (Bison) and blogs at a website with the same name. "It's the revenues that you're giving up by allowing teams to move into new buildings with sweetheart leases.""

"...there was nothing functionally wrong with the old Yankee Stadium, the old Giants Stadium, or many other stadiums that have been replaced over the past decade. The problem was that the old stadiums didn't generate enough luxury revenue. So New Jersey, which is about $36 billion in debt at last count, gave up about $15 million in annual tax revenue so that the Giants and Jets could be more profitable."

"The politicians spent the money that was originally intended to pay off the debt on other things. It's a common problem. Revenues get diverted to other programs and the stadium debt gets refinanced."

"The other problem is that cities often overestimate how much revenue a stadium tax will generate—and they often do it to make the new tax and the new stadium more palatable to the citizenry."

Wednesday, February 02, 2011

If Profits Are Up, Why Is The Unemployment Rate Still Over 9%?

See Profits Are Booming. Why Aren’t Jobs? by Michael Powell. From the NY Times, 1-9-11. Here are some of the reasons he gives as possibilties:

"More so than in the past, many American-based corporations earn a great portion of their profits overseas. And thanks to porous tax laws, these companies return fewer of those profits to American shores than in the past.

“The big American companies are really global,” said Robert Reich, former labor secretary for President Clinton. “They can show big profits from foreign sales. G.M. is making more Buicks overseas than in the United States. There’s no special pop for the United States worker.”

Key corporate sectors, too, have undergone a Darwinian pruning during the last three years. In the financial arena, a few hyperprofitable firms now stand where many more once stood.

“If you’re Goldman and Morgan Chase, and you once had to compete against Bear Stearns and Merrill Lynch, well, of course it’s easier now to show a profit,” said Daniel Alpert, managing partner of Westwood Capital L.L.C., an investment banking firm. “If you have a modest reduction in expenses, and an industry consolidation at the same time, that translates into a massive increase in earnings.”

Surviving corporate leaders drew sobering lessons from their near-death experience of 2008 and 2009, when brand-name corporations nearly ran short of the cash needed to meet payrolls.

“They found the financial system was nowhere near as safe as they thought — they no longer think they can borrow as quickly,” said Simon H. Johnson, an economics professor at M.I.T. and former chief economist for the International Monetary Fund. “So the amount of cash that they think they should have for precautionary purposes is way up.”

Interest rates are so low that traders can pile up profits by exploiting the spread between a near-zero funds rate and rates on Treasury bonds. This allows some corporations to mark profits without selling much or hiring anyone.

Desmond Lachman, a former managing director at Salomon Smith Barney who now serves as a scholar at the American Enterprise Institute, a conservative policy center, sees corporate leaders reshaping their worlds.

“Corporations are taking huge advantage of the slack in the labor market — they are in a very strong position and workers are in a very weak position,” he said. “They are using that bargaining power to cut benefits and wages, and to shorten hours.” That strategy, Mr. Lachman said, serves corporate and shareholder imperatives, but “very much jeopardizes our chances of experiencing a real recovery.”

These profits, however, may not be as large as they seem. Justin Fox, editorial director of the Harvard Business Review Group, dices the question of productive corporate profits still more finely in a recent column. He figures that pre-tax domestic corporate profits exclusive of the financial sector are the best measure of the “underlying health of business in America.”

He’s not terribly impressed. Profits for these companies “repeatedly topped 12 percent in the 1950s and 1960s,” he writes. But in the third quarter of 2010, this sector’s share of national income stood at 7.03 percent.

Some economists, conservative and liberal, divine forbidding portents in all of this. If profits and employment no longer rise and fall together, they worry, then an already strained social compact will grow yet more frayed.

Market bulls applauded in November when the Conference Board revealed that consumer confidence was on the rise. But David Rosenberg, an economist at the investment firm Gluskin Sheff, noted that this increase owed entirely to the optimism of higher-income Americans, who are feeling better and better."