Wednesday, February 28, 2018

Four Decades Of Disinflation

Disinflation is when the inflation rate falls. Prices rise each year or time period, but the rate of increase falls. The table below shows the annual  average inflation rate for decades starting with the 1950s. The 1970s had the highest average of 7.41%.

1950s 2.25% 6.00% -0.70%
1960s 2.53% 6.20% 0.70%
1970s 7.41% 13.30% 3.30%
1980s 5.14% 12.50% 1.10%
1990s 2.92% 6.10% 1.60%
2000s 2.54% 4.10% 0.10%
2010s 1.68% 3.00% 0.70%

Starting with the 1980s, each decade has had a lower average than the previous decade. For the 2010s to end up having a higher average than the 2000s, the inflation rate would need to average about 6% over the years 2018-19. That does not seem likely. So we should end up with four decades of disinflation.

The graph below shows the annual inflation rate since 1914.

Thursday, February 22, 2018

San Antonio has highest credit card debt burden in US

From news4sanantonio. Excerpts:
"San Antonio has the highest credit card debt burden in the U.S., according to a new report. The study looked at each of the 25 largest cities in the U.S. and compared the average credit card debt and the median income. If you go by what experts recommend and dedicate 15% of your income to credit card debt, it would take the typical San Antonio resident 22 months to get out of debt and he or she would pay $911 in interest."

"Cities with the highest credit card debt burdens:

1. San Antonio (22 months, $911 interest)
2. Miami/Ft. Lauderdale/West Palm Beach (21 months, $814 interest)
3. Houston (20 months, $799 interest)
4. Los Angeles (20 months, $745 interest)
5. Dallas (19 months, $801 interest)"
Click here to see the news release from

Friday, February 16, 2018

The Resource Curse

By Melissa Mittelman of Bloomberg.

In the book The Economics of Macro Issues, they mention that Russia has many resources but its per capita income is less than that of Luxembourg which has few resources. The book suggests that the economic system matters more that how many resources a country has.

Here are some excerpts from the article, including links to research which says there is no resource curse:
"Striking gold or discovering oil would seem to guarantee instant fortune. Instead, it often leads to conflict, corruption and poverty. History is full of examples of countries whose natural-resource wealth led to less economic success. Revenue from extracting raw materials might be mismanaged or embezzled by government officials, or siphoned off by foreign corporations. The bonanza might crowd out investment in other parts of the economy and make goods and services more expensive. And the country’s fiscal and economic fate might hang on volatile global commodity prices, especially for smaller and less diverse economies. All told, local populations can be left with little to show for their resources except a degraded environment. Economists and social scientists call this phenomenon “the resource curse.” Many countries are trying to determine how to prevent or reverse it."

"The average incomes of African countries, including Angola, Nigeria and Sudan, are low and their health indicators are poor, despite their abundance of oil, diamonds and other precious minerals. While oil exports prop up extensive welfare spending in Middle Eastern petro-states, they remain vulnerable to price swings and their people subject to undemocratic regimes. Brazil continues to grapple with corruption and vast, dangerous slums, though it's rich in resources as varied as oil, iron ore, coffee and soybeans."

"The British economist Richard Auty coined the term “resource curse” in a 1993 book investigating why resource-rich countries under-performed other developing economies. A 1995 study found that economies with high commodities exports grew more slowly from 1971 to 1989, even after controlling for variables such as income and investment rates. Notwithstanding a few success stories (such as Botswana), the negative correlation between raw-material exports and economic growth suggests that resource wealth at least doesn’t help. The most commonly suspected causes include under-investment in other industries (such as manufacturing), exposure to price swings, and concentration of wealth that discourages the development of a rule of law and other conditions needed for a vibrant economy. The resource curse is sometimes lumped with Dutch Disease, named for a 1960s crisis in the Netherlands after it discovered natural gas in the North Sea. It describes what happens when an event like a commodity boom makes a country’s currency more expensive and its other goods less competitive."

"Some researchers question the existence of a resource curse, suggesting that resource wealth helps economic growth after all. Others have suggested that what matters isn’t resource abundance but the amount of diversification in the economy and the strength of a country’s institutions."

"A Stanford University paper challenging the conventional account."

Friday, February 09, 2018

A Special Valentine's Message On Romantic Love

The first one is Researchers at AAAS Annual Meeting Explore the Science of Kissing. 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. (that is from 2009) 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."
More links:

How to Be a Better Valentine, Through Economics by economist Paul Oyer.

Here’s what science says is the secret ingredient to making your love spark 

Can Giving Up Money And Material Things Lead To More Love?

What Do Men In China Need To Get A Bride?

Adam Smith, Marriage Counselor

A Special Valentine's Message On Romantic Love

Can You Put A Price Tag On Love?

Do Opposites Attract? Not Usually, Except Maybe When It Comes To Money

Return of the Love Headhunters

eHarmony To Provide Personal Counselors To Help You Find Mr. Or Ms. Right

Economist Paul Zak, aka Dr. Love (he studies the brain with "neuroeconomics")

This is your brain on love   (brain scans and biology seem to confirm the economic definition given above)

Dollars & Sex: The Blog of Economist Marina Adshade

Do Women Really Value Income over Looks in a Mate? by Marina Adshade

Friday, February 02, 2018

The percentage of 25-54 year-olds employed decreased in January

(Note: For student just beginning this week click here to read something about me).

One weakness of the unemployment rate is that if people drop out of the labor force they cannot be counted as an unemployed person and the unemployment rate goes down. They are no longer actively seeking work and it might be because they are discouraged workers. The lower unemployment rate can be misleading in this case. People dropping out of the labor force might indicate a weak labor market.

We could look at the employment to population ratio instead, since that includes those not in the labor force. But that includes everyone over 16 and that means that senior citizens are in the group but many of them have retired. The more that retire, the lower this ratio would be and that might be misleading. It would not necessarily mean the labor market is weak.

But we have this ratio for people age 25-54 (which also eliminates college age people who might not be looking for work)

The percentage of 25-54 year olds employed is 79.0% for January. It was 79.1% in December. It is still below the 79.7% in December 2007 when the recession started (it was 80.3% in January 2007).  Click here to see the BLS data. The unemployment rate was 4.1% in January (it was 4.1% in December as well). Click here to go to that data. The percentage of adults employed stayed at 60.1%.

Here is a good graph from the St. Louis Fed. It shows that there are about 125 million people in the 25-54 year old group. So since we are 0.7 percentage points below the 79.7% of December 2007, that is still 875,000 fewer jobs (Hat tip: Vance Ginn of the Texas Public Policy Foundation).

Here is the timeline graph of the percentage of 25-54 year olds employed since 2007.

Here it is going all the way back to 1948

The annual numbers are important, too. It rose to 78.63% for all of 2017 from 77.925% in 2016. We have had 4 or more straight years of a 0.5 or more gain. The last time that happened was 1984-89. But we are still below the 79.9% for all of 2007 (the recession started in Dec. 2007).

Again, there are about 125 million people in the 25-54 year old group. So since we are 1.26 percentage points below the 79.9% of 2007, that is still 1.58 million fewer jobs.