The Dangerous Economist: October 2023

Monday, October 30, 2023

Home Insurance Is So High in This Florida Town, Residents Are Leaving

In West Palm Beach’s Flamingo Park neighborhood, some homeowners are dropping insurance, and others who can’t are selling

By Deborah Acosta of The WSJ. Excerpts:

"Florida’s explosion in insurance premiums threatens to ground the state’s highflying housing market. Florida home prices soared more than 60% since 2019"
"Home-insurance costs are rising everywhere, but they are rising especially fast in Florida where premiums have tripled in the past five years. Some premiums have increased by about nine times what they were last year"
"A combination of extreme weather events, higher costs to rebuild and a rise in litigation has put the state’s insurance industry into crisis. Multiple insurers have pulled out of the state altogether. Gov. Ron DeSantis last year signed a bill meant to reduce some of the litigation and bring insurance costs down, but many in the industry say it isn’t enough.
The surge in insurance premiums has led many people who own their homes outright to drop insurance. While some of these homeowners without mortgages have gotten rid of all their insurance, others have dropped only their wind coverage, which pays off after a hurricane and where the prices have risen the fastest. Newer homes generally have experienced smaller run-ups in insurance costs."

The EU forbids the use of gender to help calculate car insurance premiums, leading women to pay more and men to pay less (2021)

Lose the Fat to Lower Your Insurance Rates (2007)

How Did Astronauts Of The 60s "Purchase" Life Insurance? (2012)

Should Overweight People Pay More For Health Insurance? (2009)

Should We Pay People To Adopt A Healthy Lifestyle? (2010)

'Spy car' worries raised by new Allstate patent (2015)

Should your company or insurer reward you for meeting exercise goals? (2016)

How insurance companies are using technology to better assess how risky customers might be (2018)

The EU Says Insurers Can No Longer Discriminate On The Basis Of Gender (2011)

Some History of Insurance (2019

Technology Was Supposed to Transform Insurance Pricing. It Hasn’t (2023)

Obscure Model Puts a Price on Good Health—and Drives Down Drug Costs (2020)

Pharmacy-benefit managers and drug prices (2023)

Patients Lose Access to Free Medicines Amid Spat Between Drugmakers, Health Plans (2023)

Employers Cut Off Access to Weight-Loss Drugs for Workers (2023)

Friday, October 27, 2023

Economics in Don Quixote, Part 3 (knights never paid for lodging or anything else plus some Schumpeter)

I just started reading the famous book by Cervantes. I don't know how many parts I will end up with but I will post excerpts from the book related to economics from time to time if I see more of them as I read.

Don Quixote thinks he does not have to pay anything for staying at the inn because he is a knight and knights never have to pay for anything. This reminds me of some ideas from economist Joseph Schumpeter. That passage is below the excerpt from Don Quixote.

This excerpt is from THE HISTORY OF DON QUIXOTE, Vol. I., Part 6. (CHAPTER XVII. IN WHICH ARE CONTAINED THE INNUMERABLE TROUBLES WHICH THE BRAVE DON QUIXOTE AND HIS GOOD SQUIRE SANCHO PANZA ENDURED IN THE INN, WHICH TO HIS MISFORTUNE HE TOOK TO BE A CASTLE:

"As soon as they were both mounted, at the gate of the inn, he called to the host and said in a very grave and measured voice, "Many and great are the favours, Senor Alcaide, that I have received in this castle of yours, and I remain under the deepest obligation to be grateful to you for them all the days of my life; if I can repay them in avenging you of any arrogant foe who may have wronged you, know that my calling is no other than to aid the weak, to avenge those who suffer wrong, and to chastise perfidy. Search your memory, and if you find anything of this kind you need only tell me of it, and I promise you by the order of knighthood which I have received to procure you satisfaction and reparation to the utmost of your desire."

The innkeeper replied to him with equal calmness, "Sir Knight, I do not want your worship to avenge me of any wrong, because when any is done me I can take what vengeance seems good to me; the only thing I want is that you pay me the score that you have run up in the inn last night, as well for the straw and barley for your two beasts, as for supper and beds."
"Then this is an inn?" said Don Quixote.

"And a very respectable one," said the innkeeper.

"I have been under a mistake all this time," answered Don Quixote, "for in truth I thought it was a castle, and not a bad one; but since it appears that it is not a castle but an inn, all that can be done now is that you should excuse the payment, for I cannot contravene the rule of knights-errant, of whom I know as a fact (and up to the present I have read nothing to the contrary) that they never paid for lodging or anything else in the inn where they might be; for any hospitality that might be offered them is their due by law and right in return for the insufferable toil they endure in seeking adventures by night and by day, in summer and in winter, on foot and on horseback, in hunger and thirst, cold and heat, exposed to all the inclemencies of heaven and all the hardships of earth."

"I have little to do with that," replied the innkeeper; "pay me what you owe me, and let us have no more talk of chivalry, for all I care about is to get my money."

"You are a stupid, scurvy innkeeper," said Don Quixote, and putting spurs to Rocinante and bringing his pike to the slope he rode out of the inn before anyone could stop him, and pushed on some distance without looking to see if his squire was following him."

Sancho Panza, squire to Don Quixote, ended up getting assaulted by several men. After this, the innkeeper took Sancho's saddlebags (alforjas) as payment. Sancho was in such a hurry to leave that he did not notice.

Schumpeter said of capitalism that it has no "trace of any mystic glamour" and that "the stock exchange is a poor substitute for the Holy Grail." The bourgeois are "rationalistic and unheroic" and thus incapable of leading a nation. A knight searching for the Holy Grail will not care too much about money, like Don Quixote.

Here is a relevant passage from Schumpeter's book Capitalism, Socialism and Democracy:

"there is surely no trace of any mystic glamour about [the industrialist and the merchant] which is what counts in ruling men, [wrote Schumpeter in Capitalism, Socialism, and Democracy.] The stock exchange is a poor substitute for the Holy Grail. We have seen that the industrialist and merchant, as far as they are entrepreneurs, also fill a function of leadership. But economic leadership of this type does not readily expand, like the medieval lord’s military leadership, into the leadership of nations. On the contrary, the ledger and the cost calculation absorb and confine.

I have called the bourgeois [i.e, the businessman] rationalist and unheroic. He can only use rationalist and unheroic means to defend his position or to bend a nation to his will. [In other words, the businessman is not good at using or applying force, so he must use his wits, just as Pareto warned.] He can impress by what people may expect from his economic performance, he can argue his case, he can promise to pay out money or threaten to withhold it, he can hire the treacherous services of a condottiere or politician or journalist. But that is all and all of it is greatly overrated as to its political value. Nor are his experiences and habits of life of the kind that develop personal fascination. A genius in the business office may be, and often is, utterly unable outside of it to say boo to a goose—both in the drawing room and on the platform. Knowing this he wants to be left alone and leave politics alone."

Wednesday, October 25, 2023

Orange Juice Prices Are at Record Highs—and Could Keep Climbing (article illustrates supply and demand principles)

Prices at the grocery store are up more than 10% from last year

By Hardika Singh and Kirk Maltais of The WSJ.

"Orange juice prices have been climbing as citrus groves have faced a spreading greening disease and extreme weather. [those two factors cause supply to shift to the left, raising prices] Prices for frozen concentrate orange-juice futures have more than tripled since late 2021 and emerged as one of this year’s top-performing commodities, with prices setting records week after week. On Friday, they jumped to a fresh record high of $3.91 a pound, up from $2.11 last October, according to FactSet.
In grocery stores, a gallon of orange juice on average cost $9.18 during the four-week period ending Oct. 7, up more than 10% from the same time last year, according to data from the Florida Department of Citrus and Nielsen.
Analysts say rising prices could drive away shoppers, deepening the yearslong slide in orange juice demand [this is not a decrease in demand-the demand line is not moving-it is a decrease in quantity demanded] as Americans reach for a growing variety of alternatives in the beverage aisle, including those with less sugar.
This year, orange production from the Sunshine State is expected to increase from 2022’s hurricane-marred output [another decrease in supply or leftward shift of the supply line] but is still down more than 50% from two years ago, according to the Agriculture Department. Brazil, the world’s largest orange producer and the source for roughly 70% of the world’s orange juice, has also been hit by the citrus-greening disease [another decrease in supply or leftward shift of the supply line] and won’t be able to fill much of the supply gap, analysts said."
"In Florida, farmers say trees are slowly recovering from Hurricane Ian’s devastation, but that there are no signs of relief from the disease, which can render fruit from infected trees bitter and impossible to use for juice."
"Many Florida farmers have left the business, Johnson said, with some pivoting to growing other fruits or raising cattle." [when the price of good A falls, supply of good B rises, if firms can produce more than one good]
"Higher labor costs are also hurting bottom lines" [another decrease in supply or leftward shift of the supply line]

Monday, October 23, 2023

Economics in Don Quixote, Part 2 ("primitive communism")

This excerpt is from THE HISTORY OF DON QUIXOTE, Vol.I., Part 4. (CHAPTER XI. WHAT BEFELL DON QUIXOTE WITH CERTAIN GOATHERDS):

"Happy the age, happy the time, to which the ancients gave the name of golden, not because in that fortunate age the gold so coveted in this our iron one was gained without toil, but because they that lived in it knew not the two words "mine" and "thine"! In that blessed age all things were in common; to win the daily food no labour was required of any save to stretch forth his hand and gather it from the sturdy oaks that stood generously inviting him with their sweet ripe fruit. The clear streams and running brooks yielded their savoury limpid waters in noble abundance. The busy and sagacious bees fixed their republic in the clefts of the rocks and hollows of the trees, offering without usance the plenteous produce of their fragrant toil to every hand. The mighty cork trees, unenforced save of their own courtesy, shed the broad light bark that served at first to roof the houses supported by rude stakes, a protection against the inclemency of heaven alone. Then all was peace, all friendship, all concord; as yet the dull share of the crooked plough had not dared to rend and pierce the tender bowels of our first mother that without compulsion yielded from every portion of her broad fertile bosom all that could satisfy, sustain, and delight the children that then possessed her. Then was it that the innocent and fair young shepherdess roamed from vale to vale and hill to hill, with flowing locks, and no more garments than were needful modestly to cover what modesty seeks and ever sought to hide. Nor were their ornaments like those in use to-day, set off by Tyrian purple, and silk tortured in endless fashions, but the wreathed leaves of the green dock and ivy, wherewith they went as bravely and becomingly decked as our Court dames with all the rare and far-fetched artifices that idle curiosity has taught them. Then the love-thoughts of the heart clothed themselves simply and naturally as the heart conceived them, nor sought to commend themselves by forced and rambling verbiage. Fraud, deceit, or malice had then not yet mingled with truth and sincerity. Justice held her ground, undisturbed and unassailed by the efforts of favour and of interest, that now so much impair, pervert, and beset her. Arbitrary law had not yet established itself in the mind of the judge, for then there was no cause to judge and no one to be judged. Maidens and modesty, as I have said, wandered at will alone and unattended, without fear of insult from lawlessness or libertine assault, and if they were undone it was of their own will and pleasure. But now in this hateful age of ours not one is safe, not though some new labyrinth like that of Crete conceal and surround her; even there the pestilence of gallantry will make its way to them through chinks or on the air by the zeal of its accursed importunity, and, despite of all seclusion, lead them to ruin. In defence of these, as time advanced and wickedness increased, the order of knights-errant was instituted, to defend maidens, to protect widows and to succour the orphans and the needy. To this order I belong, brother goatherds, to whom I return thanks for the hospitality and kindly welcome ye offer me and my squire; for though by natural law all living are bound to show favour to knights-errant, yet, seeing that without knowing this obligation ye have welcomed and feasted me, it is right that with all the good-will in my power I should thank you for yours."

Primitive communism: Marx’s idea that societies were naturally egalitarian and communal before farming is widely influential and quite wrong (plus Ruth Benedict on property rights)

Economics in Don Quixote, Part 1 (the "precautionary motive" for demanding money)

Saturday, October 21, 2023

Economics in Don Quixote, Part 1 (the "precautionary motive" for demanding money)

This excerpt is from THE HISTORY OF DON QUIXOTE, Vol. I, Part 1. (CHAPTER III. WHEREIN IS RELATED THE DROLL WAY IN WHICH DON QUIXOTE HAD HIMSELF DUBBED A KNIGHT):

"He [landlord of the inn that Don Quixote wanted to stay at] asked if he had any money with him, to which Don Quixote replied that he had not a farthing, as in the histories of knights-errant he had never read of any of them carrying any. On this point the landlord told him he was mistaken; for, though not recorded in the histories, because in the author's opinion there was no need to mention anything so obvious and necessary as money and clean shirts, it was not to be supposed therefore that they did not carry them, and he might regard it as certain and established that all knights-errant (about whom there were so many full and unimpeachable books) carried well-furnished purses in case of emergency, and likewise carried shirts and a little box of ointment to cure the wounds they received. For in those plains and deserts where they engaged in combat and came out wounded, it was not always that there was some one to cure them, unless indeed they had for a friend some sage magician to succour them at once by fetching through the air upon a cloud some damsel or dwarf with a vial of water of such virtue that by tasting one drop of it they were cured of their hurts and wounds in an instant and left as sound as if they had not received any damage whatever. But in case this should not occur, the knights of old took care to see that their squires were provided with money and other requisites [for emergencies], such as lint and ointments for healing purposes; and when it happened that knights had no squires (which was rarely and seldom the case) they themselves carried everything in cunning saddle-bags that were hardly seen on the horse's croup, as if it were something else of more importance, because, unless for some such reason, carrying saddle-bags was not very favourably regarded among knights-errant. He therefore advised him (and, as his godson so soon to be, he might even command him) never from that time forth to travel without money and the usual requirements, and he would find the advantage of them when he least expected it."

This all sounds like what in economics we call the "precautionary motive" for demanding money. Money demand is defined as what portion of your wealth you wish to hold as cash. Probably in the case of Don Quixote, it would be coins. But both coins and cash are a widely acceptable medium of exchange. Although, Don Quixote was simply leaving his money at home. So it might be a bit different.

Perhaps we could say that money you carry as you travel is different than money you leave at home for safe keeping. They are two different forms of wealth in that the level of security differs.

Thursday, October 19, 2023

Life is full of tradeoffs: reaching net zero emissions by 2050 vs. the costs of the transition

See Europeans Love Green Policies—Until the Bill Comes Due: Voters in the region worry about climate change. But they also like their cars by David Luhnow and Bojan Pancevski of The WSJ. Excerpts:

"For years, Europe has been at the forefront of the global drive to curb carbon emissions and slow climate change, pledging to reach net zero emissions by 2050. Overwhelming numbers of Europeans say they like the idea.
Now, however, a small but growing backlash suggests a more complicated truth: Voters may like the idea more than the reality. As the time draws near to take concrete actions and the costs of the transition become more visible, some members of the public and politicians will get cold feet.
This week, the U.K. said it would delay a planned ban on the sale of new gasoline-powered cars and vans to 2035 from 2030, and ease plans to force households to scrap their gas-powered boilers for pricier but cleaner heat pumps. It also promised never to impose a carbon tax on meat or aviation, two other sources of emissions."
"Germany, run by a coalition that includes the Green Party, also recently watered down its plans to ban new gas heaters for homes after a backlash from homeowners and opposition politicians."
"in both the U.S. and Europe, voters can become far more wary when climate policy starts to involve painful trade-offs, especially when it comes to homes or cars. France’s yellow vests or gilets jaunes protest movement of 2018-19 began when the government tried to raise taxes on diesel and petrol to aid the country’s transition to green energy. The government quickly backtracked."

Life is full of tradeoffs: If we want more wind farms, we might have fewer jaguars & pumas and less water (2023)

Life is full of tradeoffs: we can preserve more natural & cultural treasures by giving up uranium that promotes cleaner energy & less energy dependence (2023)

Life is full of tradeoffs: More Renewable Diesel Might Mean Higher Food Prices (2023)

Life is full of tradeoffs: More wind power might mean more light pollution & noise (2023)

Life is full of tradeoffs, west Texas wind power vs. the Air Force, landowners, ecotourists, astronomers, archeologists and conservationists (2023)

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: We can have more bison or we can preserve archaeological sites (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)

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 (2023)

Life is full of tradeoffs: If we support American workers with trade restrictions it might mean more inflation (2023)

Tuesday, October 17, 2023

Dollar’s Resurgence Is a Headache for the Rest of the World

Surging Treasury yields help send the U.S. currency to its best quarter in a year

By Chelsey Dulaney of The WSJ. Excerpts:

"The greenback on Monday reached its highest level of the year, bringing its gain since mid-July to 6.6%."
"The dollar’s strength has been driven by surging Treasury yields. The 10-year U.S. Treasury yield reached a new 16-year high Monday of 4.682%."
"Any big currency move produces both winners and losers. In the U.S., a strong dollar is politically popular and largely good for consumers because it holds down inflation by keeping import prices in check, and makes trips abroad cheaper.
For the rest of the world, however, the return of the strong dollar is a largely unwelcome development. In many countries, interest rates are at their highest in years or decades, already increasing the risk of financial stress. The combination of those higher rates, a stronger U.S. currency and elevated oil prices spells lower growth across the world and more financial vulnerability.
U.S. companies with big overseas businesses like Apple are also getting hit as the value of their overseas revenue falls in terms of the U.S. currency and their goods become more expensive for foreigners."
"The greenback is still by far the most widely used currency for global trade and finance, which means its fluctuations ripple far outside of the U.S. Commodities, like oil or wheat, are usually priced in dollars. And governments, companies and households around the world have borrowed trillions of dollars in the U.S. currency. When the dollar’s value rises, it gets more expensive for others to buy imports or repay their debts."
"In recent months, currencies in Latin America and Eastern Europe have been hit hard. Central banks in Brazil, Poland and Hungary have started cutting policy rates after winning praise for their quick action to tighten monetary policy in 2021, well ahead of the Fed and other developed-market central banks. They are now under pressure to pause or slow rate-cutting plans to prevent further pressure on their currencies."
"A paper co-written by Obstfeld last year showed how the shock of a sharp rise in the dollar leads to yearslong economic underperformance in less developed economies. Consumption, output, investment and government spending all come under pressure alongside the local currency."
"The euro, which topped $1.10 over the summer, has fallen back toward $1.05 as the eurozone economy stagnates and worries over debt sustainability in fragile southern economies like Italy re-emerge."

The weakening dollar is having rippling effects around the world (2017)

Higher U.S. interest rates recently helped fuel a surprise rally in the dollar (2018)

Sunday, October 15, 2023

Why No One’s Going Into Accounting (supply and demand are part of the story)

Pay has stagnated in a profession once seen as a sure thing, while other fields are more lucrative; ‘pretty much a death sentence for my dreams.’

By Lindsay Ellis and Paul Overberg of The WSJ. Excerpts:

"An accounting career, once a launchpad into the upper middle class for hundreds of thousands of Americans, is no longer paying off.
Salaries have risen for young people in finance, marketing, logistics and consulting in recent years. Even young teachers have seen a slight uptick. At the same time, the median, inflation-adjusted pay for young accountants has stagnated, according to a Wall Street Journal analysis of salary data compiled by the Census Bureau.
This pay disparity is a major reason why fewer people are choosing accounting careers, threatening to worsen an already dire shortage of accountants. Some of the nation’s largest college accounting programs, such as Florida Atlantic University and the University of Maryland, have seen their enrollment or number of undergraduate majors decline by double-digit percentages in recent years. That has led to even greater workloads for existing accountants, and more than 300,000 have left the profession between 2019 and 2022, according to the Bureau of Labor Statistics."
"Accounting has been an especially popular major with low-income students over the years, according to industry executives and researchers.
“These students who don’t have social capital would get the short end of the stick in another career,” said Paul Madsen, a University of Florida accounting professor whose research has found accounting majors are more motivated by pay than other students."
"adjusted for inflation, 20-somethings’ accounting salaries stayed at about $56,000 since the 2008 financial crisis.
Some attribute the stagnant pay simply to supply and demand—in the past, when companies had plenty of students to recruit, they weren’t pressed to increase entry-level earnings. Also, some smaller accounting offices have said they are worried about their own profitability, and are reluctant to raise clients’ rates.
Higher starting salaries with other majors was the top reason why non-accounting majors who had considered the field decided against it, according to a survey of nearly 500 students this spring by the Center for Audit Quality, an industry group."
"A recruiter at the firm [Weaver, a Texas-based accounting firm] said it has raised entry-level pay for client-services graduates three times—by $12,000 altogether—since January 2022 to better compete for young recruits. By comparison, Weaver raised its starting pay by a total of $8,000 in the 12 years between 2009 and 2021."
"the University of Maryland’s business school, where the number of accounting majors fell by about 30% since 2018."
"At Florida Atlantic University, the number of undergraduate and master’s enrollees in the accounting program has been almost cut in half from about 1,500 in 2017."
"Ultimately, pay for accountants will have to rise to draw more students to the field"
"A recent review of job postings from Revelio Labs, a provider of workplace data, shows entry-level accountant salaries have started to increase."

If there really is a shortage, then pay will rise. If it is not rising, is there some regulation preventing that? If not, maybe there really is not a shortage. If other majors are making more money, then fewer graduates will offer their services as accountants. That is one of the factors I used to talk about in labor markets. When wages are constant in job A and they go up for job B, some workers switch from A to B.

Saturday, October 14, 2023

Looks Like Some Pretty Good Capitalists Run The Congress

This is actually a post from 2009. But I thought it worth sharing again.

Go to Policy, portfolios and the investor lawmaker: As stock ownership rises in Congress, experts warn of potential ethics concerns from the Washington Post this past week.

Most members of the House of Representatives own stock. The article says "The investments increasingly put lawmakers in the position of voting or advocating on matters that could affect their personal wealth, whether the lawmakers realize it or not."

Politicians who rarely agree on anything might be found to be voting for the same bill if it matters to their pocket book. They are supposed to report what they own but the drag their feet and the records are not very well computerized, so they are harder to analyze. And they are good at this investing stuff. From 1985-2001, the legislators beat the market by .55 basis points a month. In a year that means 6.6 percentage points above the market.

In that time, the market (DJIA) gained just a bit under 1% a month (from 12-31-85 to 12-31-2001). It went from 1,546 to 10,021. So, if you had $1,546 in the market it became worth $10,021. But, if you were a member of Congress, it rose about 1.5% a month and you would have ended up with $26,970. Each dollar in the market grew into $6.48 while for the lawmakers it grew into $17.44.

"The researchers, whose findings were presented at a congressional hearing in July, said the statistics suggest that those unusual returns must be based on lawmakers' access to "government and important social contacts.""

But legislators acting on their self interest is not new. Charles Beard wrote about this in his book An Economic Interpretation of the Constitution of the United States. He argued that self-interest was a big force in how the framers wrote the constitution.

In the 1950s, Forrest McDonald We the People : The Economic Origins of the Constitution, in attempt to refute Beard. But more recently, economic historian Robert A. McGuire wrote a book called To Form a More Perfect Union: A New Economic Interpretation of the United States Constitution. He used modern statistical analysis to show that the Beard thesis may be legitimate.

My students might recall something like this that I talk about on the first day of the semester. Congressmen in the early 1790s voted on the "Funding and Assumption Act" based on how much money they would receive if that bill passed. The bill paid back all of the debts from the Revolutionary War at full value (they were not getting paid back before the Constitution was passed because under the Articles of Confederation all states had to agree to a tax increase-this did not happen much so taxes were never raised to pay back the money the government borrowed to finance the war). But under the Constitution if both the House and the Senate passed a tax increase and the president signed it, it became law.

The debts were securities or bonds. Some congressman owned them. I found how much about half the congressmen owned in these bonds from McDonald's book. The ones who voted yes on the bill had an average of about $6,000 while the ones who voted no had about $700. So it is possible that money influenced the vote.

Here is a passage from John Spencer Bassett's book about the "Funding and Assumption Act" The Federalist System, 1789-1801:

"All the speculating class, in Congress and out of it, were zealously in favor of the scheme; and while it was till being debated they were trying to by all the means known to their class to buy up, even in the remote parts of the country, the old bonds at the depreciated values."

Here are they guys who voted yes and their dollar value of their bond holdings:

AMES 35
BASSETT 0
BURKE 5252
BUTLER 0
CLYMER 14000
DALTON 12
DCARROLL 227
ELLSWORTH 5985
FITZSIMMONS 2668
GALE 4252
GERRY 50000
GROUT 0
IZARD 20865
JOHNSON 0
KING 10000
LANGDON 27921
MORRIS 11000
PARTRIDGE 2195
PATERSON 0
READ 341
SEDGWICK 1680
SHERMAN 7729
STRONG 10903
STURGES 189
SUMTER 0
WADSWORTH 1625
WHITE 1619
WLSMITH 11910

Now the no votes

BALDWIN 2500
COLES 0
FEW 640
GILMAN 1025
GRIFFIN 0
HARTLEY 0
LIVERMORE 0
MADISON 0
MATHEWS 0
MJSTONE 3814
MOORE 0
MUHLENBERG 0
SCOTT 127
WILLIAMSON 2600

60 Minutes: Insider trading is legal for members of Congress-but it is nothing new, it started in 1790 (2011)

Thursday, October 12, 2023

The Seasonally Adjusted CPI Was up 0.40% in Sept & 3.7% over the last 12 months

See Consumer Price Index for All Urban Consumers: All Items in U.S. City Average from FRED (Federal Reserve Economic Data) compiled by the Research Division at the Federal Reserve Bank of St. Louis for data on the seasonally adjusted CPI.

That site shows a graph but if you click on the Download button you will get the actual numbers in Microsoft Excel.

The Consumer Price Index for All Urban Consumers: All Items in U.S. City Average (CPIAUCSL) was 307.481 in Sept. and 306.269 in Aug. Since 307.481/306.269 = 1.0040, that means it was up 0.40% in Sept. If we had that every month for 12 months it would be up 5.45%.

It was 296.539 in Sept. 2022. Since 307.481/296.539 = 1.037, that means it was up 3.7% over the last 12 months.

The non-seasonally adjusted CPI was 307.789 in Sept. and 296.808 in Sept. 2022. That was up 3.7% since 307.789/296.808 = 1.037. So pretty close to the seasonally adjusted CPI. This is still above the Fed's target of 2.0% (although they prefer to use the Personal Consumption Expenditures Price Index).

For more information, see Don’t expect prices to go down soon: It will take a while to ‘wring extra inflation out of the economy,’ says economist Mike Winters of CNBC. Excerpts:

"Inflation isn’t getting worse — but it’s still too high.
That’s the takeaway from the latest consumer price index report released Thursday, which reveals that the cost of U.S. goods and services stayed flat in September with a year-over-year rate of 3.7%, the same as August.
However, that’s still well above the Federal Reserve’s target of 2%. Despite inflation dropping from a June 2022 peak of 9.1%, the central bank doesn’t expect inflation to reach its target until at least 2026.
Month over month, overall inflation increased 0.4% in September. In August, the month-over-month rate was 0.6%.
Core inflation — the measure of prices excluding volatile food and gas prices — is considered by the Fed to be the best measure of where inflation is headed.
In September, core inflation posted a second consecutive monthly gain of 0.3%, which is roughly half the rate of inflation during summer 2022. That’s still a bit too high, based on the Fed’s target."

Tuesday, October 10, 2023

Claudia Goldin is this year's winner of the Nobel Prize in Economics

She is a professor at Harvard and an expert in economic history, labor markets and gender issues. Click here to read the press release from the Nobel Prize committee.

Click here to read a profile of her from The WSJ back in 1996.

Here are two old posts that mentioned her.

Is there sufficient evidence to conclude that women experience systematic pay discrimination?

The time demands of many jobs can explain much of the gender pay gap

Here is that post:

See How to Win the Battle of the Sexes Over Pay (Hint: It Isn’t Simple.) by Claudia Goldin. She is a professor of economics at Harvard University and a past president of the American Economic Association. Excerpts:

"unequal treatment in hiring and in the work setting is real and may be reflected in unequal pay.
Yet it is also true that the time demands of many jobs can explain much of the pay difference, a finding that has sobering implications. Eliminating the gender earnings gap will require changes in millions of households and thousands of individual workplaces.

Even defining the gender earnings gap isn’t simple: It cannot be reduced to a single number, though it often is expressed that way. According to a commonly used measure adopted by the United States Census Bureau, women in 2016 earned 81 cents for each dollar earned by men, both working full-time.

This definition focuses on the annual income of the individual at the median — or middle — of the income distribution for men and for women. Another valid option is to focus on mean, or average, earnings."

"The gap is larger among more educated people, for example, and varies according to occupation, often in big ways. Among college graduates, it is far larger in business, finance and legal careers than in science and technology jobs. In health care, it is larger when self-employment is high (think dentists) and much lower when professionals are mainly employees (think pharmacists).

What’s more, the gap is a statistic that changes during the life of a worker. Typically, it’s small when formal education ends and employment begins, and it increases with age. More to the point, it increases when women marry and when they begin bearing children.

Using the data that shows women earn 81 cents for each dollar earned by men, when the careers of recent college graduates start, the gap is much smaller: 92 cents for each male dollar. By the time college-educated women are 40 years old, they earn 73 cents.

Similar patterns appear using data for women and men who have earned master’s degrees in business administration. Immediately after graduation, women earn 92 cents for each male dollar. A decade later they earn only 57 cents.

Correcting for time off and hours of work reduces the difference in the earnings between men and women but doesn’t eliminate it.

On the face of it, that looks like proof of disparate treatment. It may seem understandable that when a man works more hours than a woman, he earns more. But why should his compensation per hour be greater, given the same qualifications? But once again, the problem isn’t simple."

The data shows that women disproportionately seek jobs — including full-time jobs — that are more likely to mesh with family responsibilities, which, for the most part, are still greater for women than for men. So, the research shows, women tend to prefer jobs that offer flexibility: the ability to shift hours of work and rearrange shifts to accommodate emergencies at home.

Such jobs tend to be more predictable, with fewer on-call hours and less exposure to weekend and evening obligations. These advantages have a negative consequence: lower earnings per hour, even when the number of hours worked is the same.

Is that unfair? Maybe. But it isn’t always an open-and-shut case. Companies point out that flexibility is often expensive — more so in some jobs than others.

Certain job characteristics have a big impact on the gender earnings gap. I have looked closely at these issues, including the extent to which workers are:

■ Subject to strict deadlines and time pressure

■ Expected to be in direct contact with other workers or clients

■ Instructed to develop cooperative working relationships

■ Assigned to work on highly specific projects

■ Unable to independently determine their tasks and goals

Occupations with a lower level of these characteristics (like jobs in science and technology) show smaller gaps, corrected for hours of work. Occupations with a higher level (like those in finance and law) have greater gaps. Men’s earnings tend to surge when there are fewer substitutes for a given worker, when the job must be done in teams and when clients demand specific lawyers, accountants, consultants and financial advisers. Such differences can account for about half the gender earnings gap.

These findings provide more nuance in explaining why the gap widens with age and why it is greater for women with children. Whatever changes have already taken place in American society, the duty of caring for children — and for other family members — still weighs more heavily on women. And if you thought that moving to a more family-friendly nation would eliminate the gap, think again. In several nations, including Sweden and Denmark, a “motherhood penalty” in earnings exists, even though these nations have generous family policies, including paid family leave and subsidized child care."

"In sum, the gap is mainly the upshot of two separate but related forces: workplaces that pay more per hour to those who work longer and more uncertain hours, and households in which women have assumed disproportionately large responsibilities."

See also “Gender Gap” in The Concise Encyclopedia of Economics by Claudia Goldin.

Sunday, October 08, 2023

London School of Economics Professor Mary Morgan says storytelling continues to play a key role in economic analysis today

See What is the role of storytelling in economics? Excerpt:

"Vignettes scattered through Adam Smith’s writing illuminate his arguments. Such thought experiments continue to play a key role in economic analysis today.
Economists are great storytellers. Their tales might be anecdotes of economic events that they have observed and which seem significant. More often, they are small, thoughtfully imagined stories about how the economic world works. Economists use these narratives to reason about why things happen in the way that they do – and perhaps what might happen next.

Where did this style of doing economic science come from? Well, maybe from Adam Smith, who is often seen as the father of the discipline."

She gives some examples from The Wealth of Nations, including his use of the the pin factory to demonstrate the value of the division of labor.

Is good business as much about storytelling as the stock market? (2023)

Is Storytelling Important For The Economy? (2021)

Economists Love Fables And Parables (Or, What Is The Essence Of Economic Analysis?) (2011)

Friday, October 06, 2023

The % of 25-54 year olds employed was 80.8% in Sept. after three straight months of 80.9%. Average hours worked unchanged

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 many college age people who might not be looking for work).

The percentage of 25-54 year olds employed was 80.8% in Sept, down from 80.9% in June-Aug. It was 80.6% in Jan. 2020 just before Covid. The 80.9% in June was the highest since the 80.9% in April, 2001. 80.8% is higher than every month from June 2001 to May 2023. It was 80.1% in Dec. 2022

It was 80.6% in Jan. 2020 and 69.6% in April 2020. Click here to see the BLS data. The unemployment rate was 3.8% in Sept. The labor force participation rate was 62.2% for all of 2022 and is now 62.8%.

The unemployment rate was 3.6% for all of 2022. Click here to go to that data

60.416% of the adult population was employed in Sept. (that is people 16 years old and older).

60.433% of the adult population was employed in August. So a slight decrease.

Here is the timeline graph of the percentage of 25-54 year olds employed since 2013.

Now since 1948

Now hours worked. This comes from the St. Louis FED. See Average Weekly Hours of All Employees, Total Private. It was 34.4 in both Sept. & August.