Community Colleges Central to Nation's Welfare

The College Board released a report that suggests that strengthening community colleges is a key to maintaining economic growth in the future. You can read a news article about this article here. As the world economy grows more competitive, community colleges will play a significant role in training and re-training workers in new skills as well as exanding educational opporunties for all Americans.

Some Good Insights On Immigration

In one of my macro sections we read a chapter in The Economics of Macroissues on immigration. Of course, it is a big issue in this election year. The Sunday New York Times magazine had an in-depth article on immigration a couple of years ago. The author, Roger Lowenstein, talked to two of the top economists who study immigration, David Card and George Borjas. The article was called The Immigration Equation. The article paints a generally favorable view of immigration, although Borjas finds a downside.

Venezuela's Chavez threatens to seize properties, citing price speculation

That is the title of an Associated Press article that you can read here. This relates to the first chapter of the book The Economics of Macroissues. It discusses how societies where he government can take away your property easily don't grow as fast in terms of per capita income. This could be a problem for Venezuela if Chavez starts doing this (or more of it).

The article also mentions that there are shortages of products like sugar whose prices are controlled. This is basic chapter 3 material in all of the textbooks I am using this semester. Chavez blames inflation on those hording goods. But we expect supply to decrease (that is, the supply line shifts to the left) when sellers expect higher prices in the future.

Government has no business meddling in the normal business cycle

That is the title of David Hendrick's business page column in the San Antonio Express-News the other day. You can read it here. Here is an exerpt:

"The "stimulus" being sought is too late. The recession already has started. By the time taxpayers find "more money in their pockets," to quote the Bush administration, the downturn will be easing."

This is similar to something we call "the policy lag" problem in economics. We can't always get a policy to work at the time we want it to. In fact, there has been some good news lately. The Wall Street Journal reported

"The number of U.S. workers filing new claims for unemployment benefits fell unexpectedly last week for a fourth-straight week, suggesting that a resilient labor market at the start of the year might keep the U.S. economy from sliding into recession." You can read that story here.

Should Movie Downloaders Who Clog The Internet Pay More?

The San Antonio-Express News had an article titled In a test, Time Warner Net hogs will pay for bytes. The basic idea is that people downloading movies use up lots of bandwidth and that slows down things for the rest of us that use the internet for more basic purposes. Since they are slowing things down, maybe they should pay more. So if they do this less (which would follow the law of demand), then things would go faster for the rest of us. Some experts say that more broadband infrastructure could take care of the problem.

But these big downloaders might be creating what we call negative externalities. Some people impose costs on others like drivers who create pollution. One solution to that is to tax the polluting activity. This higher price on the movie downloaders is like a tax.

This is also like paying a toll on highways. When few people are on the highways, you don't need tolls. But if things get congested, one way to unclog them is to charge a toll. I had a blog entry on this a couple of months ago. You can read that here.

Best Cities For Jobs In 2008

That is the name of an article that you can read here. Texas cities and Salt Lake City are high on the list. But it is never clear what anyone should do with this info. Should you move to one of these places? Maybe not, if lots of other people are. In that case the number of applicants might grow to more than the number of job openings. This kind of thing happens all the time. If we designate certain cities as the best to live in, more people might move there, driving up real estate prices and housing prices (and possibly creating other problems, like more air pollution). Then those places are not so great anymore.

Kidnapping: An Occupational Hazard Faced by Drug and Immigrant Smugglers

Every occupation has its drawbacks. You probably think that they need to worry about shooting it out with rival gangs in turf wars. But there has been a rash of kidnappings in Phoenix. You can read about it in Kidnappings cross the border. Here is an exerpt:

"The kidnap victims are typically drug- or immigrant-smugglers, who are seen as inviting targets because they have a lot of money, they can raise large sums of cash on short notice, and they are unlikely to go to the police, for fear their own shady dealings will come to light."

I guess this is the high price of success. Many cases go unreported. Apparently the victims' families don't want to call the police. So they are more of a target and they can't go the authorities.

Do Monkeys Pay for Sex?

That is the title of a Time Magazine article which you can read here. The male monkeys pay for sex by grooming the female monkeys. The article discusses how this behavior conforms to our ideas about supply & demand and scarcity. "The study also showed that the number of minutes that males spent grooming hinged on the number of females available at the time: The better a male's odds of getting lucky, the less nit-picking time the females received."

Adam Smith, in The Wealth of Nations, talked about the human race's "propensity to truck, barter, and exchange one thing for another." Maybe evolution has built this into us. For more on how our attitudes, especially in relation to economics, might come from other primates, read Why people believe weird things about money. (I saw this latter link at the Freakonomics blog)

Update: To any of my new students checking this out for the first time, I hope to generate some discussion on these issues so feel free to leave comments. You can do so anonymously if you want. I usually post something about 3 times a week, like Sunday, Tuesday and Thursday. Sometimes I am a day late.

Is An Electronic "Helicopter Drop" Feasible?

Economist Mark Thoma wrote about something called a "helicopter drop" on his blog last Sept. It was called "The Repo Man" The idea is that the FED (Federal Reserve Board), simply drops money out of helicopters so that people would spend it. We might do this if there is not enough aggregate demand (AD) in the economy. The FED might have lowered interest rates to stimulate spending, but businesses and consumers might be afraid to spend more even at these lower interest rates. So the argument is that if we are all just given cash, we would spend it.

But what if people don't spend it, the cash they recieve? Mark Thoma said that even the money they just stuff into cookie jars might make them take more risks, which could increase AD. But supposing that even that does not happen and there is no effect on AD, that everyone just holds it? Then I guess the drop does not work.

But suppose that everyone has an account with the FED and we are all given debit cards that initially have a zero balance. If the FED saw the need for a quick stimulus that they know would be spent, they could simply announce that everyone citizen now has $100 (or whatever amount is appropriate) in their account and they have some fixed, finite time period to spend it, say 1-3 months. If you don't spend that money, use the debit card, then after the deadline your account reverts back to zero. Maybe it would not be all citizens, just those who earned below a certain amount the previous year. Maybe the FED debit card could only be used in department stores and grocery stores if people are worried about what it gets spent on. People could not get cash back or withdraw the value in cash from the FED.

All consumers would have an incentive to spend it fairly quickly and we could get a quick stimulus to the economy with no time lag issues (other than the time it takes for the FED to realize the policy is needed). Once people started spending money, the FED would have to pay the stores the money that we spent in some similar fashion to the way current debit cards work. The FED would simply use a computer to put the money in everyone's account. They would have to create new money to pay the stores.

I know this might seem like a crazy idea and there could be all kinds of technical and logistical issues. Fraud and theft could be problems. There would be a cost of creating the debit cards and running the program.

Update: My department chair here at San Antonio College, Bruce Norton, said that people who get money put into their debit card accounts might spend less out of their paycheck than they normally do if they can spend the money in these accounts. They would put $100 from their paycheck into the bank (something they would not normally do) and can spend the money from the debit card. So it is possible that this increase in the money supply will not lead to an increase in AD. But it would be no worse than any other money supply increase. And if people in lower income groups get this money, their MPCs (marginal propensity to consume) may be higher than it is for other people, so they might be likely so spend it. Also, if we don't have enough AD, some of the people getting this money will be unemployed, so they are likely to spend it (I am not suggesting getting rid of unemployment insurance or other programs like this).

End of Semester

Since this is finals week and the semester is just about over, I won't be blogging until around Jan 10.

Is The Environment Sacred?

Last week in the San Antonio Express-News, Michael E. Kraft, professor of environmental sciences at the Unviersity of Wisconsin-Green Bay, said that "in writing the Clean Air Act, Congress explicitly instructed the agency (EPA) to base its decisions on public health and not economic costs." Then in yesterday's Express-News, the environmental watchdog Germanwatch said the U. S. was the 2nd worst "climate sinner" behind Saudi Arabia. So we are at the point where air should be cleaned no matter what the cost and those who don't go along with this are sinners. It seems that this has now become a religious crusade. Environmental policy should be made both scientifically and cost-effectively. If it isn't we will all pay a very high price in the long run.

Also, here is an exerpt from an article in the International Herald Tribune

"James Lovelock, a British scientist whose 2006 book, "The Revenge of Gaia," argued that most of humankind is doomed, does not think much of renewable energy. At a panel on climate change at the University of Cambridge this summer, Lovelock was asked what would be the most effective action people could take. Because humans and their pets and livestock produce about a quarter of the carbon dioxide in the atmosphere, he said, "just stop breathing.""

Gaia is an earth goddess, so again, we see the extremism that results when religion is brought in: die (stop breathing) to save mother earth.

An Economic Analysis of Toll Roads in San Antonio

This is a big issue here. There was an op-ed article on this in the San Antonio Express-News yesterday by John Merrifield, economics professor at UTSA. You can read it here. One of the big points is that if you build special lanes for toll payers, they will only be used when the rest of the lanes are very congested. Why pay to use the toll lanes when the free lanes are moving pretty fast? So you end up building lanes that don't get used much. But things still move slowly during rush hour and that may be the time to have tolls. That would cut down on the congestion and speed things up.

Some Good Economic News: Alot of New Jobs Added and Productivity is Up

You probably hear alot of bad economic news: the dollar is down, the housing crisis, high oil prices, etc. But there was some good economic news today. Worker productivity was up 6.3% (adjusted to an annual rate) in the third quarter. That is a very high rate. In the long run, the only way to raise our standard of living is through productivity growth. You can read about this here. The economy also added 189,000 new jobs in November, many more than predicted. You can read about that here.

Tattoos: Symbols of Rebellion or Signs of Selling Out to the Man?

It seems that tattoos are now being used for advertising. That means they are furthering the aims of the capitalist, for profit making system. So how can getting a tattoo be a rebellious act when it merely helps preserve the status quo? You can read all about it at Tattoos: a new favorite of advertisers

Historical Tax Rates

Ever wonder how much people paid in income taxes in the past? Some of my students have asked about this. Our current federal income tax began in 1913. If you made under $20,000 then, your tax rate was 1%. In 1963, every dollar you made above $400,000 your rate was 91%. In 1980, your rate between $45,800 and $60,000 was 49%. In today's terms, those incomes would be between $100,000 and $120,000. That 49% is higher than even the highest bracket now (35%). The Tax Foundation has all of the historical income tax rates. Click here to go to that site.

The Misery Index

The misery index is simply the inflation rate plus the unemployment rate. The graph below shows how it has changed since 1970. Notice it used to be alot higher. From 1975-83 the average unemployment rate and the average inflation rate were both 7.7% for an average misery index of 15.4. This year it will probably be about 8.7.

Want Kids Immunized? Threaten the Parents With Jail

Student are supposed to get vaccinated against certain diseases. But what if the parents don't take care of it? Make it costly for them not to, like sending them to jail. Here is the intro to one of the articles:

"UPPER MARLBORO, MD. — The threat of jail time injected a little motivation into scores of parents who lined up around the courthouse Saturday to get their children vaccinated on the spot or prove they've already had the shots.

It was one of the strongest efforts yet by a U.S. school system to ensure that youngsters are immunized, upsetting some parents who grumbled that Prince George's County officials went too far and irking opponents of mass vaccinations, who demonstrated outside.

Two months into the school year, county officials realized more than 2,000 students didn't have the vaccinations required to attend class. So Circuit Court Judge C. Philip Nichols ordered parents in a letter to appear at the courthouse Saturday or risk 10 days in jail."

You can read about it here and here and here

Is Barry Bonds Guilty?

He has been charged with four counts of perjury and one of obstruction of justice following a four-year investigation into steroids. But what evidence is there that he used steroids? I can't comment on the chemical and biologicial issues, but I have analyzed his stats. What comes out is that probably no other player has had such a dramatic and sustained improvement in his late thirties. Players normally have their best performances in their late 20s but Bonds had his best years in his late 30s. Some players have done better in their late 30s than they did before, but no one has improved as much as Bonds. Why would a player do so much better in his 30s, an age when many players' careers are actually over? A special training program? Better nutrition? Some new batting technique? It raises the questions that steroids were involved, so Bonds may have had something to hide. You can read my analysis on this here and here and here

Did the Clear Air Act Reduce Crime?

I talk about the Clean Air Act of 1990 in class and how, like any other regulation, it decreases supply. Any regulation raises costs to producers, so that is why supply is reduced. The price of the good increases and the amount produced falls. But we also hope that regulations have benefits. The first Clean Air Act from the 1970s called for a reduction in lead in gasoline. It turns out that this may have had other benefits by reducing crime. Below is an exerpt from the New York Times article Criminal Element

"The answer, according to Jessica Wolpaw Reyes, an economist at Amherst College, lies in the cleanup of a toxic chemical that affected nearly everyone in the United States for most of the last century. After moving out of an old townhouse in Boston when her first child was born in 2000, Reyes started looking into the effects of lead poisoning. She learned that even low levels of lead can cause brain damage that makes children less intelligent and, in some cases, more impulsive and aggressive. She also discovered that the main source of lead in the air and water had not been paint but rather leaded gasoline — until it was phased out in the 1970s and ’80s by the Clean Air Act, which took blood levels of lead for all Americans down to a fraction of what they had been. “Putting the two together,” she says, “it seemed that this big change in people’s exposure to lead might have led to some big changes in behavior.”"

The economist, Jessica Wolpaw Reyes, of course, did attempt to hold all other factors constant. But only more research will show if she is right.

Another Book Relates Religion to Economics

The book is Shopping for God: How Christianity Went From in Your Heart to in Your Face by James Twitchell. You can read reviews of it here and here. There is an interview with the author here. About a year ago, I had an entry about a similar book. You can read that entry here.

One of Twitchell's main points is that competition in the religion market is fueling the rise in mega churches. If a church wants more members, it has to offer a better deal and more benefits than other churches