Tuesday, January 31, 2023

When It Comes to Marriage and Money, Opposites Attract

Spouses reshape each others’ financial behavior, for richer and poorer, marriage research suggests

By Julia Carpenter of The WSJ. Excerpts:

"The person you marry will often change your relationship to money.

We tend to choose our partners based on shared values, in-common traits and other similarities, marriage researchers say. But money-management styles are one case in which opposites do attract, said Jenny Olson, an assistant professor of marketing at Indiana University who studies couples’ financial decision-making. 

We are drawn to people who can check and balance our own rigid rules about money, Prof. Olson said. Someone who feels they are too focused on saving and not focused enough on using money to enjoy life might look for a partner who can help them feel more comfortable with an occasional splurge. 

Over the decades, however, spouses often grow more alike. The spendthrifts married to the tightwads manage to find some middle ground, learning from one another in the process, said Scott Rick, a marketing professor at the University of Michigan whose studies marital finances. 

“The spouses who don’t converge have a harder time and those marriages are probably more fragile and could end in divorce,” Prof. Rick said, referencing his analysis of 1,303 couples, which will be published in a forthcoming book. 

This mutual influence along with the built-in financial accountability couples get when they pool their assets are partly why married couples have a financial advantage over their single counterparts, researchers say. The median net worth of married couples 25 to 34 years old was nearly nine times as much as the median net worth of single households in 2019, up from four times as much in 2010, according to research from the Federal Reserve Bank of St. Louis. 

When Kristen James, a 33-year-old product manager in Austin, Texas, first started dating her now-husband, Ben, a 35-year-old startup co-founder, she noticed they came to the relationship with different approaches to their finances. Mr. James considered himself much more of a financial risk-taker; Ms. James preferred to manage her money more conservatively. "

"Couples who communicate about the differences in their financial beliefs are better able to make decisions together, as tedious as that practice may initially feel, said Matt Lundquist, a psychotherapist and the clinical director of Tribeca Therapy, a psychotherapy practice based in New York."

"Talking as a pair also prevents an imbalance of power in which one partner appoints themselves money manager, said Adrian Ward, a marketing professor at the University of Texas at Austin. 

In his own research looking at how couples manage their money, Prof. Ward found that one partner often takes charge of the finances, not because they’re better equipped to do so, but because they have more time for the job. The in-house money manager—whom Prof. Ward calls “the household CFO”—often shuts the other partner out of the decision-making. Sometimes, the other person is relieved, but over time, that partner’s financial literacy suffers."

"Marcella Mollon-Williams, a behavioral financial adviser based in Bowie, Md., runs a premarital financial counseling session for couples. 

The main issue she sees early on in relationships: Couples too often talk about the things one partner wants the other to avoid doing with their money, as opposed to the things they want to do together. 

“Talk about the desires money brings, the things you want to accomplish,” she said. “When you start dreaming together, identifying the things money can buy, it’ll become easier. It’s sort of looking ahead and then working backwards.”"

Monday, January 30, 2023

Life is full of tradeoffs: if we want more graphite for car batteries we might get more emissions in making it or raise humanitarian concerns

See Shift to Mined vs. Man-Made Graphite Raises Shortage Risk for EVs: Natural graphite is greener than synthetic, leading auto makers to turn to mines for the mineral by Scott Patterson and Amrith Ramkumar of The WSJ. Excerpts:

"Mining companies are ramping up supplies of critical minerals for rechargeable batteries such as lithium, cobalt and nickel. Graphite, a key battery component, has largely been overlooked. 

That is about to change. Some of the world’s biggest auto and battery makers and the U.S. government are racing to secure graphite supplies amid looming signs of shortages of the mineral suitable for batteries. So far graphite prices haven’t reflected the tight supply. 

“Graphite always seems to be the forgotten battery material, yet it’s in half the battery,” said Brent Nykoliation, executive vice president of NextSource Materials Inc., which is developing a graphite project in Madagascar. “It’s the largest raw material in the battery.”

Graphite is unusual among materials seen as crucial for the energy transition because it can be man-made as well as mined. Most lithium-ion batteries use synthetic graphite, which is produced from a petroleum byproduct, mostly in China.

But using an energy-intensive, high-emissions process to produce graphite defeats the purpose of the batteries that power EVs and store renewable energy. The production of synthetic graphite can be four times more carbon intensive than that of natural graphite, according to Benchmark Mineral Intelligence, which tracks the battery supply chain. 

As battery and auto makers look to reduce carbon emissions in their supply chains, more are looking to natural graphite, analysts say. The problem: The increase in demand is running headlong into a supply shortage. By 2030, natural graphite is projected to have among the largest supply shortfalls of battery materials, with demand outstripping expected supplies by about 1.2 million metric tons, according to Benchmark."

"Turning to supplies in unstable parts of the world has its own issues. Some analysts have raised concerns that the mine in Mozambique is near a conflict area where attacks by Islamic rebels have fueled a humanitarian crisis."

Related posts:

Tradeoffs and anti-trust policy (2019) 

More Proof That Tradeoffs Are Everywhere: Blind People Don't Like The New, Quiet Hybrid Cars (2007)

Solar Power’s Land Grab Hits a Snag: Environmentalists: Mojave Desert residents say they support clean energy, but not giant projects, citing threat to tortoises and views (2021)

The Recession Cleaned The Air, Another Example Of How Life Is Full Of Tradeoffs (2011)

Life is full of tradeoffs, the case of federal renters assistance (2021)

Environmentalists vs. . . . other environmentalists? Or, are birds more important than clean, cheap energy? (2007)

Tradeoffs: More Goods And Services Might Mean Less Clean Air (2013)

Life Is Full Of Tradeoffs: If We Want To Do More To Fight Climate Change We May Have To Lower Tariffs On Solar Panels Which Might Put U.S. Firms Out Of Business (2021)

Life is full of tradeoffs, wind power vs. fishing edition (2022)

Life is full of tradeoffs, reducing animal cruelty vs. increasing worker safety (2022)

Life is full of tradeoffs: If we want more historic preservation we might have to give up some solar panels (2022)  

Life is full of tradeoffs: Adding geothermal power could hurt the environment (2022)

Life is full of tradeoffs: sustainability vs. competition edition (2022)

Life is full of tradeoffs: more houses to help the homeless vs. more trees (2023)

Saturday, January 28, 2023

Life is full of tradeoffs: more houses to help the homeless vs. more trees

See Housing activists clash with environmentalists over mass timber factory homes in Oregon: ‘We have to do this’ by Claire Rush of The Associated Press. Excerpts:

"Inside a warehouse at the industrial Port of Portland lies what some believe could be the answer to Oregon's housing crisis — a prototype of an affordable housing unit made from mass timber.

Once mass-produced at the factory being planned at the port, the units ranging from 426 square feet (40 square meters) to 1,136 square feet (106 square meters) could be deployed across the state to be assembled in urban and rural communities alike, potentially alleviating a critical housing shortage that has driven Oregon's high rates of homelessness.

“I can't wait to see these homes rolling down the road to those communities who need them right now,” said newly inaugurated Democratic Gov. Tina Kotek, who visited the prototypes Friday. “We have to do this day in and day out in order to meet the goals of providing enough housing for every Oregonian in this state. Because that is the long-term solution to end homelessness.”"

"Mass timber has yet to be widely adopted for affordable housing construction. While Oregon officials are seeking to change that, some environmental groups have expressed concern that increased logging could lead to deforestation if not managed sustainably, which could add to global warming."

"Proponents of mass timber say it uses less energy and emits less carbon than concrete and steel. They also claim it can help reduce wildfire risk, as the material can be made of the smaller trees in a forest’s underbrush. And they point to the rural jobs the industry can create."

"But some environmental groups say cutting down more trees will release more carbon and reduce forests' ability to absorb carbon from the atmosphere.

“The business has gone toward clear cutting, spraying, replanting and cutting them down 35 years later,” said Sean Stevens, executive director of conservation organization Oregon Wild. “When you do that 40-year rotation, you never let them get to that point where they could really contribute to storing more carbon. You’re treating it like a crop at that point.”

Environmental groups have also pushed back on the idea that cutting younger trees will mitigate wildfire risk.

“The reason we’re having big fires today is extreme fire weather that is triggered mostly by climate change, high winds, hot temperatures, low humidity,” said Dominick DellaSala, chief scientist at conservation organization Wild Heritage. “I think there’s some credibility with taking smaller trees, but it isn’t going to solve the fire problem.”"

Related posts:

Tradeoffs and anti-trust policy (2019) 

More Proof That Tradeoffs Are Everywhere: Blind People Don't Like The New, Quiet Hybrid Cars (2007)

Solar Power’s Land Grab Hits a Snag: Environmentalists: Mojave Desert residents say they support clean energy, but not giant projects, citing threat to tortoises and views (2021)

The Recession Cleaned The Air, Another Example Of How Life Is Full Of Tradeoffs (2011)

Life is full of tradeoffs, the case of federal renters assistance (2021)

Environmentalists vs. . . . other environmentalists? Or, are birds more important than clean, cheap energy? (2007)

Tradeoffs: More Goods And Services Might Mean Less Clean Air (2013)

Life Is Full Of Tradeoffs: If We Want To Do More To Fight Climate Change We May Have To Lower Tariffs On Solar Panels Which Might Put U.S. Firms Out Of Business (2021)

Life is full of tradeoffs, wind power vs. fishing edition (2022)

Life is full of tradeoffs, reducing animal cruelty vs. increasing worker safety (2022)

Life is full of tradeoffs: If we want more historic preservation we might have to give up some solar panels (2022)  

Life is full of tradeoffs: Adding geothermal power could hurt the environment (2022)

Life is full of tradeoffs: sustainability vs. competition edition (2022)

Thursday, January 26, 2023

Why has the price of eggs risen so much?

See Soaring egg prices prompt demands for price-gouging probe by Josh Funk of The Associated Press. Excerpts:

"The spike in egg prices has been attributed to the millions of chickens that were slaughtered to limit the spread of bird flu and farmers having to compensate for inflation driving up their costs.

But even though roughly 43 million of the 58 million birds slaughtered over the past year to help control bird flu have been egg-laying chickens, the size of the total flock has only been down 5% to 6% at any one time from its normal size of about 320 million hens.

The national average retail price of a dozen eggs hit $4.25 in December, up from $1.79 a year earlier, according to the latest government data."

"But trade groups say egg prices are largely determined by commodity markets, and experts say the bird flu outbreak — combined with the skyrocketing cost of fuel, feed, labor [these things in red cause a decrease in supply which raises the price-see graph below] and packaging and continued strong demand for eggs — is the real culprit for the price increases.

“Current egg prices reflect many factors, most of which are outside the control of an egg farmer," said Emily Metz, president and CEO of the American Egg Board trade group.

Purdue University agricultural economist Jayson Lusk said “in my view, the basic economics of the situation well explain the price rise.” He said small reductions in egg supply can result in large price increases because consumer demand for eggs doesn’t waiver much." [I wish he had said the quantity demanded does not change much because he is talking about inelastic demand-again see the graph below]

With a steep demand curve, we generally have inelastic demand (as always, slope and elasticity are not the same thing). When the price goes up quantity demanded only goes down a small amount. So in the graph above with the given reduction in supply (which is caused by higher costs for the producers), we get a fairly large price increase. If the demand line was flatter or more elastic, price would not rise so much.

Wednesday, January 25, 2023

Who Benefits When Salary Info Is Public?

It’s good for pay equity, and it can be good for managers, but it’s not so good for superstars.

By Sarah Kessler of The NY Times

This article is a good example of tradeoffs. A new law might help some people while hurting others. There are often both winners and losers from a government policy. New laws also create some unintended consequences (some of those are in red below). Excerpts:

"This month, laws went into effect in California and Washington State that required companies to post salary ranges on job listings. Like similar rules in New York City and Colorado, lawmakers passed them on the premise that pay transparency helped reduce wage gaps.

There’s little debate among researchers that this is the case. “It is totally 100 percent true across all the studies I’ve seen, with very few exceptions,” Zoe Cullen, an economist at Harvard Business School, said. Pay transparency laws are “very good” at reducing wage disparities, she added."

"In a study published in the journal Nature Human Behaviour, researchers analyzed the salaries of 100,000 academics over 20 years. As websites made their salaries easily searchable, the gender pay gap improved by almost 50 percent. But the gap between academics who performed best — based on markers like publications, awards, grants and patents — and those who performed less well also shrank.

“What the transparency seems to do is that it dampens the performance-based incentives,” said Tomasz Obloj, an associate professor at Indiana University Kelley School of Business who co-authored the paper."

"One explanation for why some types of pay transparency tend to weaken the link between income and performance is that this disclosure weakens individual bargaining power. If salaries are public, employers can claim that giving one worker a raise would mean that they would have to give everyone a raise. Workers may also be less likely to try to bargain in the first place if there’s a public salary range for a position.

“They see the posted price and think, Hey, I’m not going to be able to ask for more because obviously they’re not going to change their entire website, which applies to everybody, on my behalf,” Ms. Cullen said. She was a co-author of a working paper for the National Bureau of Economic Research that found wages on average fell by 2 percent when laws protecting pay transparency were introduced in the United States.

There are other ways that employers may benefit from pay transparency. For example, some research suggests that when wages are more transparent, employees tend to work harder.

In an experiment at a large commercial bank in Asia, Ms. Cullen and a co-author found a similar result: Workers tended to underestimate the salaries of their managers. When the bank made salaries public, they learned they would earn more than they had if they moved up the ladder and put in more effort.

Companies that pay fairly may benefit most from this effect. In an ongoing project, Mr. Obloj and his co-authors looked at productivity and pay for 20,000 academics. They found that at universities that paid fairly, increased pay transparency resulted in an overall boost to productivity, while at universities where pay transparency revealed unfair pay, productivity dropped. Other research has suggested a similar pattern for turnover: When pay systems are perceived as fair, pay transparency is associated with lower turnover rates. When it is perceived as unfair, the opposite is true.

When salaries become more transparent, some managers may finesse the system by compensating employees in ways that are less public, like bonuses and benefits. And that can undermine the reduction in pay gaps. “If we’re shifting rewards to other forms where there’s less transparency and where we also know that there is gender inequity, we’re not really solving anything with pay transparency,” said Peter Bamberger, a professor at Tel Aviv University. He co-authored a study published in the Academy of Management Journal that found that employees were more likely to request, and managers were more likely to grant, these kind of perks when pay was public.

In order to avoid the trap of paying everyone the same thing regardless of performance, or shifting to less transparent systems, Mr. Bamberger said companies needed to figure out how to assess performance and explain differences in pay. “Those companies have a competitive advantage,” he said."

Tuesday, January 24, 2023

Relative to the compensation of U.S. production workers, food was almost 12 times as affordable in 2019 as it was in 1919

Blue-Collar Workers and Food Prices in America (1919-2019) by Marian L. Tupy of The Cato Institute. 

The article has some interesting graphs and tables that I don't show. Excerpts:

"Together with Gale Pooley, associate professor of business management, Brigham Young University-Hawaii, I found that, relative to the compensation of production workers, food was almost 12 times as affordable in 2019 as it was in 1919."

What were the results?

  • The time price (i.e. nominal price divided by nominal hourly wage) of our basket of commodities fell from 27.26 hours of work to 3.85 (see the Totals line in column three and five).
  • The unweighted average time price fell by 87 percent (see the Totals line in column six).
  • Put differently, for the same amount of work that allowed a production worker to purchase one basket of the 42 commodities in 1919, he or she could buy 11.73 baskets in 2019 (see the Totals line in column seven).
  • The compounded rate of “affordability” of our basket of commodities rose at 2.49 percent per year (see the Totals line in column eight).
  • Put differently, a production worker saw his or her purchasing power double every 28 years (see the Totals line in column nine)."

See Unskilled Workers and Food Prices in America (1919-2019) by Marian L. Tupy of The Cato Institute.

Monday, January 23, 2023

Violence was widespread in early farming society

Violence and warfare were widespread in many Neolithic communities across Northwest Europe, a period associated with the adoption of farming, new research suggests.

From The University of Edinburgh. The study was by Linda Fibiger, Torbjörn Ahlström, Christian Meyer, and Martin Smith.

"Of the skeletal remains of more than 2300 early farmers from 180 sites dating from around 8000 – 4000 years ago to, more than one in ten displayed weapon injuries, bioarchaeologists found.  

Contrary to the view that the Neolithic era was marked by peaceful cooperation, the team of international researchers say that in some regions the period from 6000BC to 2000BC may be a high point in conflict and violence with the destruction of entire communities.

Formalised warfare

The findings also suggest the rise of growing crops and herding animals as a way of life, replacing hunting and gathering, may have laid the foundations for formalised warfare.

Researchers used bioarchaeological techniques to study human skeletal remains from sites in Denmark, France, Germany, Great Britain, Spain and Sweden.

The team collated the findings to map, for the first time, evidence of violence across Neolithic Northwestern Europe, which has the greatest concentration of excavated Neolithic sites in the world,

The team from the Universities of Edinburgh, Bournemouth and Lund in Sweden, and the OsteoArchaeological Research Centre in Germany examined the remains for evidence of injuries caused predominantly by blunt force to the skull.  

Evidence of injuries

More than ten per cent showed damage potentially caused by frequent blows to the head by blunt instruments or stone axes. Several examples of penetrative injuries, thought to be from arrows, were also found.

Some of the injuries were linked to mass burials, which could suggest the destruction of entire communities, the researchers say.

"Human bones are the most direct and least biased form of evidence for past hostilities and our abilities to distinguish between fatal injuries as opposed to post-mortem breakage have improved drastically in recent years, in addition to differentiating accidental injuries from weapon based assaults."-Dr Linda Fibiger School of History, Classics and Archaeology

The study raises the question to why violence seems to have been so prevalent during this period. The most plausible explanation may be that the economic base of society had changed. With farming came inequality and those who fared less successfully appear at times to have engaged in raiding and collective violence as an alternative strategy for success, with the results now increasingly being recognised archaeologically.-Dr Martin Smith Department of Archaeology and Anthropology, Bournemouth University 

The study is published in Proceedings of the National Academy of Sciences.

Link to study  

School of History, Classics and Archaeology"

Related post: 

Pre-market societies could sometimes have alot of violence

Excerpts from that post

"It is difficult for us to reconstruct the violent tenor of much of feudal life, but one investigator has provided a statistic that may serve to make the point: Among the sons of English dukes, 46 percent of those born between 1330 and 1479 died violent deaths. Their life expectancy when violent death was excluded was 31 years; when violent death was included, it was but 24 years."

Now there is a study out called "The Better Angels of Their Nature: Declining Violence through Time among Prehispanic Farmers of the Pueblo Southwest", American Antiquity, Volume 79, Number 3 / July 2014. See The Most Violent Era In America Was Before Europeans Arrived. It discusses some periods when native American life was quite violent. Here are some excerpts:

"Writing in the journal American Antiquity, Washington State University archaeologist Tim Kohler and colleagues document how nearly 90 percent of human remains from that period had trauma from blows to either their heads or parts of their arms.

Sunday, January 22, 2023

California Has a Gas-Price Mystery: Too High, but Why?

Drivers in the most populous U.S. state are paying more at the pump than anyone else. California’s gas taxes and its strict clean-air policies don’t explain away all of the $1.23-a-gallon difference.

By Jinjoo Lee of The WSJ. Excerpts:

"California’s retail gas price was $4.32 a gallon in December 2022, while it was $3.09 a gallon on average elsewhere in the U.S. That is a $1.23-per-gallon difference. 

There are some quantifiable sources of the California premium. Higher state gas taxes are one reason. The state’s clean air policies are another. These include a cap-and-trade program for greenhouse-gas emissions, a low-carbon fuel standard and a fee for the abatement of leaking underground storage. California also mandates a cleaner-burning gasoline, which adds around 10 cents a gallon.

Tally all of those California-specific costs up, though, and it comes out to about $1.09 a gallon, or 80 cents more than what the average state gas tax is elsewhere in the U.S., according to calculations by Prof. Severin Borenstein at the University of California Berkeley’s Haas School of Business, based on the monthly average for December 2022. But that still leaves a 43-cents-per-gallon difference not explained by California-specific tax and air policy-related costs. Mr. Borenstein was a member of a committee that the California Energy Commission assembled in 2014 to better understand fuel-price fluctuations."

"There is less competition among California’s retail fuel stations compared to other states."

"Fuel margins at California’s gas stations were about 79 cents a gallon on average in 2022, 79% higher than the 44 cents-a-gallon nationwide average"

"Why wouldn’t fat margins attract more new gas stations? Part of it could be that California’s state-level policies all point toward a faster transition away from gasoline. Opening a new gas station looks unappetizing, and some cities aren’t even allowing it."

Related posts:

Factors Influencing The Price Of Gas (2011)

Price-gouging laws can backfire (2017)

People say the president can control gas prices if the president belongs to the other party (2017)

Why are refiners' profits so high and can anything bring down gas prices? (2022) 

Gas Station Owners, Blamed When Prices Rose, Face Risks as Prices Fall (2022)

Friday, January 20, 2023

Are dating coaches who help you with texting modern Cyrano de Bergeracs?

It is amazing how new technologies and a changing economy create jobs that maybe no one could have imagined just a generation ago.

See In the Dating World, Crafting the Perfect Message Is Its Own Art Form: Relationship coaches are now helping single people navigate texting by Sara Radin of the NY Times. Excerpts:

"So she decided to enlist the help of a professional in the newly emerging field of text-specific dating courses. She took a class called Texting Communication Cure Crash Course offered by licensed therapist and dating coach Kelsey Wonderlin, who is based in Nashville.

Ms. Wonderlin, who had been offering dating courses since fall 2021 but began catering specifically to texting issues starting in September, is one of the multiple dating coaches attempting to provide clients with the written communication skills necessary to take matches offline and into the real world — and then keep them going. Among the questions they attempt to help their clients answer: What’s a great first message to send on a dating app? How do you flirt in a way that’s not too creepy? What if they simply don’t respond?

With almost 180,000 Instagram followers, Blaine Anderson, a dating coach in Austin, Texas, has always found that her videos about texting have been a hit with her mostly male audience. This, in addition to her personal experiences receiving weird or too many messages on dating apps, inspired her to launch a course called Texting Operating System in August, “to eliminate guys’ stress and anxiety from communicating with women via messages or text,” Ms. Anderson, 33, said.

According to Damona Hoffman, a dating coach based in Los Angeles and New York and a host of the Dates & Mates Podcast, many people get stuck in what she calls “textationships.” Texting has become its own phase of dating, she said, and her program, “The Dating Accelerator,” which costs $1,297 and combines live coaching sessions and video lessons, teaches people how to avoid it.

Despite the widespread use of dating apps, experts like Ms. Hoffman, Ms. Wonderlin, and Ms. Anderson believe that our society as a whole still significantly lacks digital communication skills. The reason, according to Ms. Wonderlin, is that there isn’t one place where people can go to learn how to start and maintain a healthy relationship. Instead, many are forced to figure things out on their own."

"asking friends for advice can also open up a can of worms. Though one friend might tell you to delay a response so you don’t seem too eager, another may encourage you to double text someone to show you’re interested. Confusion ensues."

"Ms. Anderson’s two-hour video course costs $149 and is divided into seven modules that cover common dating scenarios, from taking a conversation offline to landing a second date. The course mainly focuses on the psychology behind different messages and provides texting templates.

Ms. Wonderlin’s video course, which costs $333, takes students through five modules. It starts by addressing the importance of creating healthy communication early on in a relationship then covers different types of texters — The Dry Texter, The Animated Texter, The Compulsive Texter, The Absent-Minded Texter — and helps students understand what’s a red flag and what is someone’s particular texting style.

The course then teaches participants how to prevent a spiral when someone sends a one-word response or doesn’t respond right away."

Related post:

New Profession Of "Wedding Hashtag Helper" Might Be An Example Of Creative Destruction At Work (2022)

Thursday, January 19, 2023

House Price Growth and Inflation During COVID-19

By Aditya Aladangady, Elliot Anenberg, and Daniel Garcia. They are all economists with the Federal Reserve. Excerpt:

"House prices have risen rapidly during the pandemic, creating $9 trillion in owner occupied housing wealth between the first quarter of 2020 and the first quarter of 2022. Both housing and non-housing inflation also moved up over this time period to its highest level in many decades. This note considers whether the large increase in housing wealth has been an important contributor to non-housing inflation during the pandemic.

There are two main channels through which increases in housing wealth can contribute to non-housing inflation. First, the increase in housing wealth can stimulate additional consumption among existing homeowners, either because they feel wealthier or by relaxing borrowing constraints (Guren et al., 2021; Mian, Rao and Sufi, 2013; Aladangady, 2017). This shift in aggregate demand can result in non-housing inflation, especially when the slope of the aggregate supply curve is steep, as may have been the case during the pandemic. Second, homeowners may become less price sensitive as they become wealthier, allowing some firms to respond to a less price-elastic demand curve by raising markups and prices (Stroebel and Vavra, 2019).

This note documents a strong positive association between non-housing inflation and house price growth across major metropolitan areas during the first two years of the pandemic. Also, we show this correlation is much stronger than in recent history. The association during the pandemic does not appear to be driven by other leading omitted variables that could be correlated with local house price growth and inflation, such as changes in the local unemployment rate or population growth. In addition, we find a strong cross-sectional correlation between house price growth and both nominal and real credit card spending.

Taken together, our results provide suggestive evidence that house price growth has been an important contributor to inflation during the pandemic, in part by shifting aggregate demand along a steeper-than-normal aggregate supply curve. A back-of-the-envelope calculation based on our regression estimates suggests that house price growth could explain about 1/3 of the increase in the consumer price index (CPI) excluding housing services between February 2020 and February 2022. At the lower bound of the 90 percent confidence interval around our regression estimate, house price growth still explains 13 percent of the increase in the CPI excluding housing services."

Tuesday, January 17, 2023

Jeopardy and the inflation adjusted price of a 1908 Ford Model T

For Final Jeopardy yesterday, the category was "Business Milestones." The clue was 

These were first sold in 1908, at a price equivalent to about $27,000 today

The correct question was "What was the Model T." But none of the three contestants got it. This link from The Jeopardy Archive, Show #8786 - Monday, January 16, 2023, has all the clues.

I wondered how they came up with the $27,000 figure because the Consumer Price Index seems to start in 1913. See Consumer Price Index Data from 1913 to Present.

This October 2021 article, The 1st Affordable Automobile: 1926 Ford Model TT, from Car Donation Wizard says:

"In 1908 the Model T cost $850, or around $24,835 in today’s dollars when adjusted for inflation. In 1916, the prices had dropped to only $360 for the most basic Model T, or around $9,059 in today’s dollars. In 2012, the least expensive new car was $10,990. Henry Ford still has us beat."

Given that we had high inflation in 2022 (the CPI was up 6.5%), that $24,835 is in the ball park of what Jeopardy had. This aricle, 2022 Ford Maverick’s $21,490 Base Price Is Less Than Original Ford Model T When Inflation Is Taken Into Account, by Jimmy Dinsmore of Torque News gives a similar figure.

But there is a site that has inflation rates going back to the year 1800. See Value of $1 from 1800 to 2023 from Official Data Foundation. The author is Ian Webster. It lists the Bureau of Labor Statistics as its source. The Federal Reserve Bank of Minneapolis seems to have similar data. See Consumer Price Index, 1800-.

That site shows that what cost $1 in 1800 only cost $0.73 in 1908.  In 2022 it was up to $23.23. That means what cost $0.73 in 1908 costs $23.23 today. If we divided 23.23 by 0.73 we get 31.82, meaning that a good costs 31.82 times as much in 2022 as it did in 1908. If we multiply that by 850 we get 27,048, just about what Jeopardy says it was. Using the Minneapolis Fed site's data would also get us a current price in the $27,000 range.

This site, Ford Model T Original Prices, from FordModelT.net run by Mitchell Taylor shows all the prices of the different body styles for the Model T from 1909 to 1927 (as well as drawings of some them).

The cheapest in 1909 was the Runabout with a price of $825. The price generally kept falling and by 1925 a buyer only paid $260. That is a drop of about 68%.

But, adjusting for inflation, what would you have to pay in 1925 for something that cost $825 in 1909? Prices were 93% higher in 1925 than in 1909. So if the price of the Runabout had just kept up with inflation, it would have been $1,592 in 1925. Yet it was only $260. That means the price actually fell about 84%, adjusted for inflation.

Part of the reason for the fall in price is "economies of scale."

Economies of Scale (Increasing Returns to Scale) = A situation in which long-run average total cost declines as the firm increases its level of output. The percentage increase in Q is greater than the percentage increase in TC.

Suppose a company like Ford makes and sells only 1 car a year. Then the average cost of making a car will be very high. But if they make thousands of cars a year, the high cost of building and maintaining the plant or factory is spread over all those cars and they can sell the car at a reasonably low price.

See Economic Scene; The technology sector's rise and fall is a tale as American as the Model T by economist Hal R. Varian. He is Chief Economist at Google.

Monday, January 16, 2023

Is the TV show Yellowstone changing consumer's taste in clothing?

One of the shift factors for demand curves is tastes and preferences. If they increase, so does demand. I  used to say in class that economists don't have much to say about why tastes and preferences change, but this looks like a good example.

‘Yellowstone’ Show Has Suburbanites Dressing Like Cattle Ranchers: People who ride commuter trains, not horses, are wearing cowboy hats and snap-button shirts to imitate the characters on the Paramount Network hit. By Jacob Gallagher of The WSJ. Excerpts:

"Ryan Capalbo’s life is nothing like that of a rough and tumble cowboy.

The 34-year-old spends his days toiling over foster care cases, not tending to cattle. And he lives in Dobbs Ferry, N.Y., where people ride commuter trains, not horses.

Yet, on any given day, this suburbanite dresses like a hardened rancher in Tecovas cowboy boots and a snap-button shirt. “I’ve definitely adopted a very western style to my wardrobe,” said Mr. Capalbo."

"Each episode is an hour-long rodeo of western fashions. Characters gallop across the screen in prodigious cowboy hats, dust-coated bluejeans and belt buckles big enough to sit a teacup on.

The rustic look is compelling and has inspired fans far from the bucolic Montana pastures where “Yellowstone” is filmed to dress like John, his testy daughter Beth (Kelly Reilly) or his dark-hatted ranch foreman Rip Wheeler (Cole Hauser).

“People want to look and live like a Dutton,” said Jill Martin, the co-founder of Shop the Scenes, a website that allows people to buy authentic items worn on TV shows like “Yellowstone.” (The company was co-founded by “Yellowstone” executive producer David C. Glasser.) Ms. Martin noted that her site has several times sold out of the $995 faux lynx-fur coat Beth Dutton wears while getting married. “Cowboy couture is cool,” said Ms. Martin."

"“We’re in this massive western moment,” he said [Stetson vice president of marketing Tyler Thoreson]. Indeed, even before the Duttons galloped onto Paramount Network in 2018, a western twang was detectable in the fashion world, with high-fashion labels like Gucci showing pinched cowboy hats on the runway and musicians like Lil Nas X wearing brocade Nudie suits on the red carpet.

Still, “Yellowstone” gave some giddy up to the trend. The show, said Mr. Thoreson, “helped shine a light on something that’s been there all along.”

He likened the Dutton clan’s fashion influence to that of “Urban Cowboy,” which in 1980 had ambitious city slickers throwing on yoked shirts and tottering cowboy hats, in the style of “Bud,” John Travolta’s honky-tonking character from that film."

"The show’s fashion influence is broad. Wrangler has a line of 40 “Yellowstone” branded items—mostly subtle logo T-shirts and hats for fans who would rather not dress like they wandered off the O.K. Corral. And Stetson recently signed Luke Grimes, who plays Kayce Dutton on the show, to be the face of its fragrance line."

Related posts: 

Are TikTok influencers changing consumers' tastes? (2023)

James Buchanan, Frank Knight and John Stuart Mill on choice and utility functions (2022)

Has the pandemic changed tastes (which change demand)? (2020)

Boats, Pools and Home Furnishings: How the Lockdown Transformed Our Spending Habits (2020)

Are some blue jeans really Democratic and others Republican? (2019)

TV chefs showcase recipes using mutton, prices jump (2019)

Grocery stores try to alter the tastes and preferences of men (2018)

Are Your Friends Making You Fat? (2009)

What If You Discovered That You Liked Celine Dion? (How One Company Tried To Determine Buyers' Tastes And Preferences) (2009)

Sunday, January 15, 2023

Does Evolutionary Psychology Support Joseph Campbell's Belief In The Need For A World Mythology?

(First posted in 2009)

The mythologist Joseph Campbell wrote a book called The Hero With A Thousand Faces which inspired George Lucas to make the Star Wars movies. Campbell often talked about the need for a new world mythology. This issue came up in a fascinating article in yesterday’s New York Times called a “A Grand Bargain Over Evolution” by Robert Wright. It discusses how “religion and science are actually compatible” because “evolutionary psychologists have developed a plausible account of the moral sense.” The part of the article that reminded me of Campbell is below. Then that is followed by quotes from him that are very similar. He died in 1987, so his remarks were very prophetic.

Here is the NY Times quote:

“Clearly, this evolutionary narrative could fit into a theology with some classic elements: a divinely imparted purpose that involves a struggle toward the good, a struggle that even leads to a kind of climax of history. Such a theology could actually abet the good, increase the chances of a happy ending. A more evolved religion could do what religion has often done in the past: use an awe-inspiring story to foster social cohesion — except this time on a global scale.

Of course, religion doesn’t have a monopoly on awe and inspiration. The story that science tells, the story of nature, is awesome, and some people get plenty of inspiration from it, without needing the religious kind. What’s more, science has its own role to play in knitting the world together. The scientific enterprise has long been on the frontiers of international community, fostering an inclusive, cosmopolitan ethic — the kind of ethic that any religion worthy of this moment in history must also foster.”

Now what Campbell had to say. From page 112 of the book An Open Life: Joseph Campbell In Conversation With Michael Toms.

Michael Toms often interviewed Campbell at KQED in San Francisco for the radio program New Dimensions. Here they discussed social fragmentation. The following two paragraphs are from Campbell.

“And there's going to be [social fragmentation] for a long time. Unfortunately, many of the new mystically motivated movements are reactionary against other peoples. We have this "Power" and that "Power" and the other "Power." These are delaying actions. People are afraid to move into the free fall of a totally new way of looking at others. So the new mythology to come must be a global mythology, and it's got to solve the problem of the in-group by showing that there's no out-group. We're all members of a society of the planet, not of one particular place, and the fact that the three main religions of the Western world-Judaism, Christianity, and Islam-can't live together in Beruit is a refutation of all three in terms of their value for the contemporary world. They're monstrous! We must begin to realize that each is saying in his own language what the other is trying to say in his. There must be brotherhood and cooperation. Because unless that comes, we're going to blow ourselves to smithereens.

Every single one of the old horizon-bound mythologies reserved love for the in-group, and aggression and denigration were reserved for the out-group. Now, something's got to break that. And when we see that picture of our planet taken from the moon, the question arises: What are we going to do with our aggression? How is it going to be absorbed into love and transmuted from gross matter to gold? I think teaching "I-thou" relationships, rather than the "I-it" relationships, which [theologian Martin] Buber spoke about, is the first step. The teaching of humanity rather than the teaching of in-group appreciations is what's important.”

I think that Campbell clearly talked about the same thing as what Robert Wright did in the Times article. He mentioned narrative and awe-inspiring story as something that could foster social cohesion. This is the mythology that Campbell discussed.

If you are wondering why an economist is discussing this, click on the link above which explains the name of this blog. It has to with entrepreneurs being like heroes from mythology. Campbell thought so, too and you can read about that at Joseph Campbell on Entrepreneurship

Related posts:

Adam Smith And Joseph Campbell On The Dangers Of "The Man Of System"

Joseph Campbell Meets Joseph Schumpeter (The Entrepreneur As Hero)

Adam Smith Meets Joseph Campbell 

Does Neuroscience Prove That You Should Follow Your Bliss?

Friday, January 13, 2023

Why inflation might be coming down

In yesterday's post I said the Consumer Price Index was up just 0.16% from June to December last year (although that is not seasonally adjusted). But that was after it went up 7.0% in 2021 and was up 6.2% in the first six months of 2022. Here are a couple of articles that address why.

See How Japan Kept Inflation Rates Low by John Greenwood and Steve H. Hanke. Excerpt:

"As [Nobel Prize winning economist Milton] Friedman said long ago, “I know of no exception to the proposition that there has been a one-to-one relation between substantial rises in prices and substantial rises in the stock of money.” Recently, one of us (Mr. Hanke) completed a study of 147 countries from 1990 to 2021. The correlation between the growth rate in those countries’ money supplies and inflation rates was 0.94, close to Friedman’s one-to-one relation. Changes in the money supply and changes in inflation are clearly joined."

See M2 graph from the Federal Reserve bank of St. Louis.

The graph shows that the money supply (as measured by M2) started increasing rapidly in Feb. 2020. But in March 2022 it started to decrease a bit. So the high inflation mentioned above in 2021 and the first half of 2022 could have been caused by the rapid increase in the money supply and the more recent, lower rate of inflation might be due to a decline in the money supply (what exactly is part of M2 is given at the end of this post).

M2 was up 19% in 2020 and 16% in 2021. From March 2022 to Nov. 2022, M2 was down about 1.8%.

See also Inflation Is Turning the Corner by Greg Ip. Excerpts:

"When Fed officials first used the word transitory, it was widely interpreted as “brief.” A more nuanced interpretation was that many prices were rising because of idiosyncratic supply-demand imbalances that would wash away as the economy normalized."

"gasoline, which hit an average of $5 a gallon in June, is now down to $3.27"

"Prices of long-lasting goods, especially automobiles, shot up as locked-down consumers splurged and parts shortages drove up prices. But demand for such goods has softened as the pandemic recedes and the parts shortage improves."

"The pandemic and ultralow interest rates fueled a boom in purchases of larger houses or houses in different parts of the country. Meanwhile, builders struggled with shortages of land, materials and workers. All those factors have receded, and home prices are now falling and new rents rising much more slowly."

Here is the info about M2 from the St. Louis Fed. 

"Before May 2020, M2 consists of M1 plus (1) savings deposits (including money market deposit accounts); (2) small-denomination time deposits (time deposits in amounts of less than $100,000) less individual retirement account (IRA) and Keogh balances at depository institutions; and (3) balances in retail money market funds (MMFs) less IRA and Keogh balances at MMFs.

Beginning May 2020, M2 consists of M1 plus (1) small-denomination time deposits (time deposits in amounts of less than $100,000) less IRA and Keogh balances at depository institutions; and (2) balances in retail MMFs less IRA and Keogh balances at MMFs. Seasonally adjusted M2 is constructed by summing savings deposits (before May 2020), small-denomination time deposits, and retail MMFs, each seasonally adjusted separately, and adding this result to seasonally adjusted M1."