Friday, January 27, 2017

The Dalai Lama Says It Is Sometimes OK To Be Selfish

This is mostly a post from November, 2013. But there was another article about something similar involving the Dalai Lama this week. So I have a bit about that at the end of this post.

And of course, Adam Smith said when people act selfishly they are led, as if by an invisible hand, to make society better off.

So when might it be OK to be selfish according to his holiness? When caring for others.

Wait, how can that be selfish? Or is this some kind of Zen riddle like what is the sound of one hand clapping? No, it's biology and evolution. See Lending a hand does a body good by Jessica Belasco, from the San Antonio Express-News, 10-25-2013.

She talked to Dr. James R. Doty, a neurosurgeon at the Stanford University School of Medicine and founder of Stanford's Center for Compassion and Altruism Research and Education. Excerpts:

"Practicing compassion — recognizing someone else is suffering and wanting to help relieve that suffering — just might be as important for health as exercise or a healthful diet, some scientists believe.

When we respond to another person's needs, our body responds in turn:

We become relaxed and calm.
Our blood pressure goes down.
Our stress level goes down.

Practicing compassion is associated with lengthened telomeres, the DNA that protects the ends of your chromosomes and is a marker of longevity.

To understand why humans are hard-wired for compassion, Doty said, just look at human evolution: Caring for others was essential to the survival of the species. Humans developed powerful neuropathways associated with nurturing and bonding with their offspring as motivation to care for them in a hostile environment; otherwise their genes could not be passed on. The same was true beyond the nuclear family when humans formed hunter/gatherer tribes.

A few hundred millennia later, our need for compassion remains strong. We may not be facing predators as our ancestors did, but frequent low-level stressors — work deadlines, traffic noise, our cellphone buzzing with texts — keep our fight-or-flight response continually engaged. That releases stress hormones, which raises the risk of disease.

When we're responding to others' needs, though, we engage the “parasympathetic nervous system,” relaxing us, Doty said. Stress hormones decrease, and the immune system is boosted. In fact, that occurs even if we just think about performing a good act for someone.

That's why intervening when someone needs help — whether in the form of a hug, reassurance, financial help or something else — has a powerful impact not just on the person being helped but on the helper.

Studies also have shown that volunteering, which is a way to practice compassion, helps increase longevity — but with an important exception. Study subjects who said they were volunteering to impress somebody or for some other benefit, not because they authentically wanted to help others, didn't enjoy the same benefit."
Adam Smith wrote a book called The Theory of Moral Sentiments. One point he made there was that we are able to sympathize with other people by trying imagine what they are going through (and I wonder if we need to be good storytellers to be able to do that). Neuroeconomist Paul Zak has been studying how the hormone oxytocin plays a role in making us feel good when we have empathy for others (beware: Zak is a big hugger). See an earlier post Adam Smith vs. Bart Simpson for more details.

There is an interesting book called Paleopoetics: The Evolution of the Preliterate Imagination. It relates storytelling to evolution.

Click here to go the Amazon listing. It is by Christopher Collins, professor emeritus of English at New York University. Here is the description:
"Christopher Collins introduces an exciting new field of research traversing evolutionary biology, anthropology, archaeology, cognitive psychology, linguistics, neuroscience, and literary study. Paleopoetics maps the selective processes that originally shaped the human genus millions of years ago and prepared the human brain to play, imagine, empathize, and engage in fictive thought as mediated by language. A manifestation of the "cognitive turn" in the humanities, Paleopoetics calls for a broader, more integrated interpretation of the reading experience, one that restores our connection to the ancient methods of thought production still resonating within us.

Speaking with authority on the scientific aspects of cognitive poetics, Collins proposes reading literature using cognitive skills that predate language and writing. These include the brain's capacity to perceive the visible world, store its images, and retrieve them later to form simulated mental events. Long before humans could share stories through speech, they perceived, remembered, and imagined their own inner narratives. Drawing on a wide range of evidence, Collins builds an evolutionary bridge between humans' development of sensorimotor skills and their achievement of linguistic cognition, bringing current scientific perspective to such issues as the structure of narrative, the distinction between metaphor and metonymy, the relation of rhetoric to poetics, the relevance of performance theory to reading, the difference between orality and writing, and the nature of play and imagination."
Click here to read a longer description by Collins himself.

Here is the new article from this week The Dalai Lama Explains Why Being Kind to Others is the Secret to Happiness. Excerpt:
"Have you ever wondered why it matters that you care for other people?

It seems commonsense that this is a good way to live life. But there are dominant philosophies today that suggest we need to maximize our own individual self-interest.

This comes from economic theories of capitalism that suggest when people look after their own self-interest, then society is better off.

The Dalai Lama explains why this doesn’t make sense in the beautiful passage below. As he says, it’s an obvious fact that your own sense of wellbeing can be provided through your relationships with others. So it’s best to start cultivating practices of kindness and compassion."
Then the article has a long statement from the Dalai Lama on this philosophy. But some economists might say that you can't run a successful business if you don't care about others and try to learn their wants and desires. Here is what Adam Smith said in The Wealth of Nations
“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest. We address ourselves not to their humanity but to their self-love, and never talk to them of our own necessities, but of their advantages”

Thursday, January 19, 2017

My Spring 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. If you want to learn more about me go to Why is college so hard? (you may have to be patient with this site but the article is not long)

If that link is not working try this one

Thursday, January 12, 2017

You Might Have To Swear To Keep That New Job You Just Got

See The Telltale Sign a New Hire Isn’t Fitting In​: Newcomers who stick around and thrive use language styles similar to those of co-workers, researchers say by Joann S. Lublin of the WSJ. Excerpts:
"A team of California researchers" reviewed "10.2 million internal messages" to find this out.

"individuals with low cultural fit had a four-times-higher risk of getting fired after three years.

Researchers scrutinized 64 categories of language style, including curses, expressions of positive emotion and the use of concrete imagery.

Salespeople at the tech firm frequently swore, for instance. New colleagues eager to fit in “had to swear a fair amount in their email,” recalled Sameer B. Srivastava, an assistant management professor at University of California-Berkeley’s Haas School of Business.

By contrast, the study reported, fired recruits “fail to accommodate their colleagues linguistically from the moment they join the organization.’’"

Wednesday, January 11, 2017

How Supply And Demand Have Affected Beef Prices Recently

See Beef prices down — but still lagging cattle price drop. There have been multiple forces over the last couple of years causing supply and demand to shift in both directions at different times. Excerpts:

"With the perfect storm of drought and disease-caused scarcity of not only beef but also chicken and pork now over and foreign demand tempered by the high dollar, U.S. consumers have seen their dollar stretch further at the meat case than two years ago, when beef prices were at record highs."

So with drought and disease over, supply increases pushing price down. The high dollar reduces foreign demand, which also lowers price.

"Although cattle prices may have dropped 40 percent over 2016, consumers haven’t seen that kind of price drop as retailers remain in holdout mode and market forces such as competition with other proteins and global demand remain volatile."

If beef producers are not sure what the competition will look like, they might be betting it is better not to lower prices any more. Same thing with foreign demand. If they think that might come back, then there is no reason to lower prices any more than they have.

"consumers can expect about a 10 percent reduction from 2014 highs of about $6 per pound for beef, but other animal proteins such as chicken or pork still might seem like relative bargains."

"“Pork and chicken kind of ramped up their production very quickly, and then basically we saw a historic downturn in the cattle market,”"

So if supply of pork and chicken go up, then that lowers their prices. Then beef producers have to cut theirs or not raise them.

"“Overall, the retail price of beef in general is currently lower than the price last year at this time,” H-E-B spokeswoman Dya Campos said in an email. “Consumers will see lower prices on beef items, particularly grinds where we have on average 50 cents lower retail prices than last year.”"

"“Although food commodity costs have declined in recent months, certain chain restaurants continue to face a challenging environment, which includes increases in labor costs around the country,” Rob Green, executive director of the National Council of Chain Restaurants, said in an email. “Competitive pressures remain as well, as segments of the industry are facing headwinds resulting from an uneven economic recovery and increasing competition for a consumer’s food dollar.”"

Higher labor costs reduce supply which in turn raises prices. So that might be offsetting some of the price decreases.

"producers,... are ... hoping the new administration will cut trade pacts that are more profitable than the ones Trump criticized on the campaign trail. For example, import tariffs with Japan are now at about 38 percent.

"“As these developing countries, as their economy improves, they all want beef on their plate"

If foreign demand can come back up, that would raise prices

"By way of review, it was weather that caused the 2014 price shock. Prolonged drought had caused pastures to wither across a wide swath of U.S. cattle country, and ranchers were forced to move cattle to whatever green pastures they could find or quickly liquidate their herd."

"The end of the drought led ranchers to start rebuilding. Since it takes roughly two years from pregnant cow to feedlot fattening, no one in the industry was surprised to see supplies rebound by the close of 2016."

So the bad weather reduced supply that caused prices to rise. But then supply increased as the drought ended, helping to lower prices.

"At the same time ranchers were rebuilding, chicken and pork producers were dealing with problems such as porcine epidemic diarrhea and the Midwestern bird flu epidemic that wiped out their stocks."

So if pork and chicken producers saw disease problems, that reduces their supply and raises price. Then beef producers don't have to lower theirs.

"“Pork, once they got all their issues straightened out, they’re able to turn around production in about three months. Chicken can turn their production in around 10, 11 weeks. … All of a sudden we just had these proteins coming in, and I think when you throw that combination together, we just saw prices decline,”"

But then supply increased after the diseases were gone from pork and chicken. So that increases supply and lowers price. Then beef producers have pressure to lower theirs.

"Cattle dropped $34 per hundredweight during 2015, selling for $132 per hundredweight last January. Feedlot operators that were losing $300 to $400 a head on expectations of continued high returns started paying less in 2016, Texas A&M AgriLife Extension Economist Jason Johnson said. That brought 2016’s average down to $124. For 2017, the projections are expected to drop a bit more, to an average of $121."

Tuesday, January 10, 2017

New Book On W. Edwards Deming Mentions My Research

The book is called The Symphony of Profound Knowledge: W. Edwards Deming's Score for Leading, Performing, and Living in Concert by Edward Martin Baker. Deming was a world renown management expert.

It discusses my article "The Calling of the Entrepreneur" on how entrepreneurs are like heroes in mythology. One thing the book says is "Morong's interpretation of the hero myth aligns with Deming's view that joy in work comes from intrinsic motivation, not from the compulsion of extrinsic forces."

A longer version of my article is called The Creative-Destroyers: Are Entrepreneurs Mythological Heroes?

Sunday, January 08, 2017

The Noise-to-signal Ratio as a Metaphor for the Deadweight Loss of Taxes

That is the name of an article of mine that was posted at the "Library of Economics and Liberty" site. Click here to read it. It is an elaboration and expansion on a letter to the editor of the WSJ I had published in 2007. Deadweight loss is a way for economists to show inefficiency of things like taxes and negative externalities. Deadweight loss increases at an increasing rate with taxes, similar to what I said in my letter.

Click here to go to my letter. Or you can read it here.
"Stephen Moore did a great job explaining how complicated our tax code is and how high taxes have gotten relative to what was originally promised in 1913. One other way to see the insidiousness of taxes is to realize that they are just as much the "noise" in the economy as prices are the "signals." The income you get paid is the price for your services and therefore signals the value of those services. But taxes reduce the clarity of that signal (hence, they are noise) by reducing how much of your pay you actually get to keep. As taxes increase, the noise-to-signal ratio in the economy increases even more, meaning distortions, and the misallocation of resources they cause increases disproportionately. For example, if the income tax rate is 10%, you keep 90% of your income. The noise-to-signal ratio is .111 (or .1/.9). But if the tax rate goes up by .10, or to 20%, the noise-to-signal ratio goes up even more, by .15 to .25 since you keep 80% of your income. The .25 comes from .20/.80 equaling .25. Another .10 increase in the tax rate increases the noise-to-signal ratio by .179 from .25 to .429. Then going from a 30% tax rate to a 40% tax rate makes it go up by .238, from .429 to .667. Every tax increase causes increasing damage to the economy's ability to efficiently allocate resources."

Saturday, January 07, 2017

How Parents Might Get Their Kids To Eat Vegetables

Pay them. As economists like to keep saying, incentives matter. See Here’s Why You Should Pay Your Children to Eat Their Vegetables: Study finds short-term cash incentives yield more-healthful eating habits in the long term by Beckie Strum of the WSJ. Excerpt:
"The strategy not only works in the short term, but can create healthful eating habits in children in the long run if the little bribe is carried out consistently for several weeks, according to a study published earlier this year in the Journal of Health Economics.

“As a parent, imagine that there’s something to do that might be worth my effort, and I get the long-term benefit,” says Joseph Price, associate professor of economics at Brigham Young University. He co-wrote the paper with George Loewenstein, professor of economics and psychology at Carnegie Mellon University, and Kevin Volpp, professor of medicine at the University of Pennsylvania.

For a year and a half, the researchers carried out a study of 8,000 children in first through sixth grade at 40 elementary schools to test whether short-run incentives could create better, and lasting, eating habits in children.

At lunchtime, students who ate at least one serving of fruit or vegetable, such as an apple, fresh peaches, pineapple, side salad or a banana, received a 25-cent token that could be redeemed at the school’s store, carnival or book fair.

The researchers saw an immediate spike in consumption, Dr. Price says. “These small incentives produced a dramatic increase in fruit and vegetable consumption during the incentive period,” the researchers wrote. “This change in behavior was sustained.”

Two months after the incentives ended, many more students than before the program started were still eating a fruit or vegetable at lunch. For schools that provided the 25-cent incentive for three weeks, 21% more children were eating at least one serving of fruit or vegetable at lunch than before."

Friday, January 06, 2017

What Brings More Happiness, More Time Or More Money?

Ben Franklin said that time is money, implying that one can be traded for another. You could work a part-time job in addition to your full-time job, for example. You would have more money but less free time.

More money allows you to purchase more goods and services. But if you have to work more, you have less time to enjoy the additional goods you now own. So each of us has to find the mix of free time (leisure time) and goods that makes us happiest.

Anyway, the NY Times had an interesting article on this a few months ago. See What Should You Choose: Time or Money? by HAL E. HERSHFIELD and CASSIE MOGILNER HOLMES. Hal E. Hershfield is an assistant professor and Cassie Mogilner Holmes an associate professor at the Anderson School of Management at the University of California, Los Angeles.

"we found that most people valued money more than time. Sixty-four percent of the 4,415 people we asked in five surveys chose money."

"Is money the right choice? We had also asked our survey respondents to report their level of happiness and life satisfaction. We found that the people who chose time were on average statistically happier and more satisfied with life than the people who chose money.

So money may turn out to be the wrong choice.

But maybe this result simply shows that the people who chose money are more financially constrained and therefore less happy. To check this, we also asked respondents to report their annual household income along with the number of hours they work each week (to measure how much time they have).

We found that even when we held constant the amount of leisure time and money respondents had (as well as their age, gender, marital status, parental status and the extent to which they valued material possessions), the people who chose time over money were still happier. So if we were to take two people who were otherwise the same, the one who chose time over money would be happier than the one who chose money over time."

"more income is positively related to happiness up to a certain point ($75,000, in the United States) and that life satisfaction continues to increase with income beyond that point."

"The people in our studies who chose time over money thought about the resources differently and had different intentions for how they would spend the time or money gained. Unlike those who chose money, who were more likely to be fixated on not having enough, people who chose time focused more on how they would spend it, planning to “spend” on wants rather than needs (e.g., cultivating a hobby versus completing chores at home) and on other people rather than themselves"

Thursday, January 05, 2017

The San Antonio Express-News Printed An Article By Me On How Well The Economy Is Doing

See Forget the numbers — economy is sluggish. The print version has a different title ("Look to past to gauge the economy")

Re: “President-elect is inheriting a great economy,” Catherine Rampell, Other Views, Dec. 30:

I think Catherine Rampell overestimates how well the economy is doing. Rampell stated, “Stocks have reached all-time highs, with the Dow Jones industrial average on the cusp of 20,000.”

It is true that the Dow grew 13.4 percent over the last year and is in record territory. But it was down about 2 percent in 2015.

The important question is, how well is it doing in the long run? Let’s compare 2016 to 1999, when the Dow also was pushing toward record heights.
The Dow grew about 3.2 percent compounded annually from 1999 to 2016. That beat the average increase in the consumer price index, which grew about 2.1 percent annually, by only about 1 percentage point.

But compare that to the previous 17 years, when the Dow increased about 15 percent per year. The CPI increased about 3.3 percent per year in that period.

So, yes, the Dow is close to all-time highs now, but its recent growth rates are not great compared to inflation. If it had grown just 5 percent per year since 1999 (still sluggish), it would be about 26,350 instead of just 19,942.16.

Rampell also said, “The most recent jobs report shows the unemployment rate down to 4.6 percent. It hasn’t been this low since August 2007, several months before the Great Recession began.”

Everyone knows the unemployment rate can be misleading because it declines if people drop out of the labor force.

The labor force participation rate averaged about 59.7 percent in the first 11 months of last year. It was 63 percent in 2007, when the recession began, was above 62 percent every year back to 1994, and has been below 60 percent every year since 2009.

This comparison might be unfair since so many baby boomers are retiring. But what if we look at 25- to 54-year-olds only, those in their prime working years? The percentage of them employed this year has been 77.9 percent. It was 79.9 percent in 2007 and less than 76 percent every year from 2009 to 2013. It was above 80 percent every year from 1996 to 2001.

Comparing 2016 to 2007 on this measure and assuming, say, 100 million 25- to 54-year-olds, that is 2 million not employed. That’s not great.

The recovery since the recession has been week. Economist Robert Barro said that “on average, during a recovery, an economy recoups about half the GDP lost during the downturn.”

What do the numbers say, according to Barro? “The growth rate of U.S. per capita GDP from 2009 to 2011 should have been around 3 percent per year, rather than the 1.5 percent that materialized.”

What about more recently? Barro says, “The growth rate of GDP per worker from 2010-15 was 0.5 percent per year, compared with 1.5 percent from 1949 to 2009.” Again, recent performance has not been great compared to other periods.

One final concern is for the future. Here, also, things could be better because we used to see a higher rate of growth of small business.

Jeffrey Sparshott of The Wall Street Journal reported in October that “the share of private firms less than a year old has dropped from more than 12 percent during much of the 1980s to only about 8 percent since 2010. In 2014, the most recent year of data, the startup rate was the second-lowest on record, after 2010.”

To say an economy is great, it has to be compared to past performance. Unfortunately, we have been falling a little short.

Tuesday, January 03, 2017

Mark Twain On Labor Markets And How Wages Should Be Decided-By Government Fiat Or By Markets?

This is another in a series of posts about A Connecticut Yankee in King Arthur’s Court. This is also from chapter 33 "SIXTH CENTURY POLITICAL ECONOMY." The time traveler, Hank Martin, has discussion with Dowley. Twain seems to think that the government should not dictate wages or who works for whom or for how long. A seemingly chaotic idea in the 6th century, yet law and sense will still prevail.
"Brother Dowley, who is it that determines, every spring, what the particular wage of each kind of mechanic, laborer, and servant shall be for that year?"

"Sometimes the courts, sometimes the town council; but most of all, the magistrate. Ye may say, in general terms, it is the magistrate that fixes the wages."

"Doesn't ask any of those poor devils to _help_ him fix their wages for them, does he?"

"Hm! That _were_ an idea! The master that's to pay him the money is the one that's rightly concerned in that matter, ye will notice."

"Yes--but I thought the other man might have some little trifle at stake in it, too; and even his wife and children, poor creatures. The masters are these: nobles, rich men, the prosperous generally. These few, who do no work, determine what pay the vast hive shall have who _do_ work. You see? They're a 'combine'--a trade union, to coin a new phrase--who band themselves together to force their lowly brother to take what they choose to give. Thirteen hundred years hence--so says the unwritten law--the 'combine' will be the other way, and then how these fine people's posterity will fume and fret and grit their teeth over the insolent tyranny of trade unions! Yes, indeed! the magistrate will tranquilly arrange the wages from now clear away down into the nineteenth century; and then all of a sudden the wage-earner will consider that a couple of thousand years or so is enough of this one-sided sort of thing; and he will rise up and take a hand in fixing his wages himself. Ah, he will have a long and bitter account of wrong and humiliation to settle."

"Do ye believe--"

"That he actually will help to fix his own wages? Yes, indeed. And he will be strong and able, then."

"Brave times, brave times, of a truth!" sneered the prosperous smith.

"Oh,--and there's another detail. In that day, a master may hire a man for only just one day, or one week, or one month at a time, if he wants to."


"It's true. Moreover, a magistrate won't be able to force a man to work for a master a whole year on a stretch whether the man wants to or not."

"Will there be _no_ law or sense in that day?"

"Both of them, Dowley. In that day a man will be his own property, not the property of magistrate and master. And he can leave town whenever he wants to, if the wages don't suit him!--and they can't put him in the pillory for it."

 "Perdition catch such an age!" shouted Dowley, in strong indignation. "An age of dogs, an age barren of reverence for superiors and respect for authority!"

Monday, January 02, 2017

Chapter 33 Of Mark Twain's A Connecticut Yankee in King Arthur’s Court Is Titled "SIXTH CENTURY POLITICAL ECONOMY" And Deals With "Money Illusion"

This is another of a recent series of posts on the book. Economist Eric Crampton had a great post on this a few years ago at Money Illusion in King Arthur's Court. Money illusion basically means that if prices go up 5% and you get a 5% raise, you think you are better off (you are actually no better off).

Wikipedia has a good summary of what it means. In the book, Hank Martin (the time traveler) tries to explain that although you might get paid twice as much as people in another region, if the prices you pay for goods are more than double, you are worse off (the audience wasn't buying it). Here is Crampton's post from 2013:
"Mark Twain channels the frustration of thousands of future Econ 104 lecturers confounded by popular unwillingness to note the difference between the nominal and the real.

Twain's Connecticut Yankee tries to explain to some local freemen that the combination of high wages and high prices in their part of the country, still protected by tariffs, makes them worse off than the combination of lower wages and lower prices in his part of the country, where they have been easing towards free trade.*

After explaining, in what he thought was a crusher, that wages were twice as high in the protected region but that prices were more than twice as high, his audience still preferred higher nominal wages.

"Wait!  Now, you see, the thing is very simple; this time you'll understand it. For instance, it takes your woman 42 days to earn her gown, at 2 mills a day—7 weeks' work; but ours earns hers in forty days—two days short of 7 weeks. Your woman has a gown, and her whole seven weeks wages are gone; ours has a gown, and two days' wages left, to buy something else with.  There—now you understand it!"
He looked—well, he merely looked dubious, it's the most I can say; so did the others. I waited—to let the thing work. Dowley spoke at last—and betrayed the fact that he actually hadn't gotten away from his rooted and grounded superstitions yet. He said, with a trifle of hesitancy:
"But—but—ye cannot fail to grant that two mills a day is better than one."
Shucks! Well, of course, I hated to give it up. So I chanced another flyer:
"Let us suppose a case. Suppose one of your journeymen goes out and buys the following articles:
  "1 pound of salt; 1 dozen eggs; 1 dozen pints of beer; 1 bushel of wheat; 1 tow-linen suit;    5 pounds of beef; 5 pounds of mutton.
"The lot will cost him 32 cents. It takes him 32 working days to earn the money—5 weeks and 2 days. Let him come to us and work 32 days at half the wages; he can buy all those things for a shade under 14 1/2 cents; they will cost him a shade under 29 days' work, and he will have about half a week's wages over. Carry it through the year; he would save nearly a week's wages every two months, your man nothing; thus saving five or six weeks' wages in a year, your man not a cent. Now I reckon you understand that 'high wages' and 'low wages' are phrases that don't mean anything in the world until you find out which of them will buy the most!"
It was a crusher.
But, alas! it didn't crush. No, I had to give it up. What those people valued was high wages; it didn't seem to be a matter of any consequence to them whether the high wages would buy anything or not. They stood for "protection," and swore by it, which was reasonable enough, because interested parties had gulled them into the notion that it was protection which had created their high wages. I proved to them that in a quarter of a century their wages had advanced but 30 per cent., while the cost of living had gone up 100; and that with us, in a shorter time, wages had advanced 40 per cent. while the cost of living had gone steadily down. But it didn't do any good. Nothing could unseat their strange beliefs.
Well, I was smarting under a sense of defeat. Undeserved defeat, but what of that? That didn't soften the smart any. And to think of the circumstances! the first statesman of the age, the capablest man, the best-informed man in the entire world, the loftiest uncrowned head that had moved through the clouds of any political firmament for centuries, sitting here apparently defeated in argument by an ignorant country blacksmith! And I could see that those others were sorry for me—which made me blush till I could smell my whiskers scorching.
You'd think things would be better a few centuries later...

* It would be a fun exam question to have students lay out the conditions under which Twain's stylised facts could be true. The Boss has instituted a common coinage with lots of small change, so the big problem of small change doesn't apply. He also has been, region by region, easing back tariff protections and moving towards free trade. In Region 1, free trade is almost entirely in place; in Region 2, liberalisation hasn't started. Wages across all sectors are lower in Region 1, but prices are sufficiently lower to make real wages higher. Region 2 has higher nominal wages across the board. It is illegal under feudal structures for workers to move across regions, and it's close to illegal for them to change professions (though it seems to depend on the profession). So labour markets should only in the long term through Malthusean effects: sectors with higher real wages see higher population growth while sectors with lower real wages see starvation and decline.

I can, in that set up, see large wage effects in the import-competing sector under liberalisation. But Twain also has the wages of mechanics being lower. In the high tariff region, a master bailiff, master hind, carter, shepherd and swineherd earn 50 milrays a day: twice what they earn in the low tariff region (a milray is a hundredth of a cent). In the high tariff region, mechanics, carpenters, dauber, masons, painters, blacksmiths, and wheelwrights get a full cent a day; in the low tariff region, half. A woman labouring on a farm earns two mills a day (10 milrays, a tenth of a cent) in the high tariff region and half that in the low tariff region. So what in this counts as an import-competing sector? I'd say the shepherd to the extent that the sheep's main product is traded wool rather than non-traded meat (food preservation not yet in a state to allow meat transport across regions); the blacksmith to the extent that he makes wrought iron works for sale rather than repairs to farmers' carts; and farm labour to the extent that they work on transportable wheat and grain rather than livestock.

But Twain allows no variation in the ratio of wages between the high and low tariff regions across sectors. Maybe transportation costs in all of those sectors prevent those workers' product from moving anyway, but Twain has meat being less than half the price in the free trade region (either salt meat moves or forage does); eggs at less than half the price; wheat at 4/9ths the price; clothing at 6/13th to 1/2 the price. He also has beer being cheaper in the free trade region. And it isn't like wages in the non-traded sector are bid down by exit from the traded sector - labour mobility across sectors seems pretty limited. Maybe there's an auxillary unstated assumption that the Lords in the trade experiment regions are commanding that labourers make the appropriate movements across sectors such that we get to the observed equilibrium."