NCAA Proposes Interim Policy for Athletes to Profit From Images

 By Laine Higgins & Louise Radnofsky of The WSJ.

I posted something on this last week when the Supreme Court ruled that limits on compensating college violate U.S. antitrust law (it is one the links below for related posts).

Excerpts from The WSJ article: 

"Under pressure to overhaul its vision of amateurism in college sports, the National Collegiate Athletic Association on Monday indicated that it would allow athletes in all 50 states to make money from their name, image and likeness as soon as July 1 without forfeiting their eligibility. 

In making the move—which is still one step from final approval—the NCAA bowed to the actions of numerous state legislatures around the country, which have already moved to make it legal for college athletes to profit from their images."

“While opening NIL activities to student-athletes, the policy leaves in place the commitment to avoid pay-for-play and improper inducements tied to choosing to attend a particular school,” said the NCAA in a statement. 

According to the Division I Council’s proposals, any student athlete in the country will be able to cash in once the policy is approved by the Board of Directors, no matter if their state has a law allowing athletes to profit from their name, image and likeness. The Board is scheduled to vote on the interim policy on Wednesday."

"On Monday, it confirmed that athletes may sign deals so long as they are “consistent with the law of the state where the school is located.”"

"The NCAA has repeatedly said it wants what it calls “guardrails” to prevent NIL activity from turning college sports into a pay-for-play venture. For example, the NCAA will not permit athletes to use the intellectual property of their universities or athletic conferences in NIL deals. The association also wants to limit the extent to which universities can facilitate sponsorships on behalf of their athletes to prevent nefarious recruiting inducements and booster involvement."

"Monday’s statement offered few details aside from suggesting that athletes disclose their NIL activity to their universities and athletic conferences and permitting them to use “professional services,” including agents, when negotiating endorsement and sponsorship deals."

Related posts:

Cost of attendance stipends in college sports 

How The Economics Of College Sports Might Be Distorted 

All is not well (financially) in the world of college football

Will Moving To NCAA Division I Status Pay Off For The University of the Incarnate Word?

The Flutie Effect: When The Teams Win, More Students Apply To The College.

There's A New Book On The Economics Of College Sports 

NCAA Takes Another Court Hit on Athlete Compensation: The Ninth Circuit ruled that the organization’s restrictions violated federal antitrust law 

The NCAA wants an antitrust exemption from Congress so it can oversee name, image and likeness deals

What Economists Say About "March Madness"

Public universities spend more per per athlete than they do per student

March Madness Is a Moneymaker. Most Schools Still Operate in Red. 

Supreme Court Rejects NCAA’s Tight Limits on Athlete Benefits, Compensation

How to Motivate Your Teen to Be a Safer Driver

Showing teenage drivers how to avoid being distracted behind the wheel works better than nagging them to put their phones away, research finds

By Julie Jargon of The WSJ. Excerpts:

"Through apps from insurers and other providers, parents can track their teens on the road and see how well they’re driving."

"An age-old parenting quandary is whether and when to use positive reinforcement or punishment with children. When it comes to teen driving, the stakes for choosing the right approach are high. Do you take away teens’ driving privileges if the tracking apps show them to be speeding or using their phones too much while driving, or do you focus on what they’re doing right?"

"Summer is the most dangerous time of year for auto accidents, and new teen drivers are three times as likely as adults to be involved in a deadly crash, according to the Automobile Association of America. Distraction plays a role in about 6 out of 10 teen crashes."

One man "had been using State Farm’s Drive Safe & Save app to keep tabs on his young drivers, and to receive insurance discounts if they drove without speeding or braking too hard."

"A State Farm spokesman said the app positively reinforces safe driving behavior by offering insurance-premium discounts up to 30%."

"New research is emerging that shows positive reinforcement works best with drivers, according to a study out of Australia and preliminary findings from University of Pennsylvania researchers, who are still analyzing data collected from more than 2,000 drivers. In their study, one group of drivers received weekly feedback from Progressive Auto Insurance’s Snapshot app on how their hand-held phone use while driving compared with that of others in their age group; another group received up to $50 at the end of a seven-week period if their phone use was among the lowest in their demographic group; and another received both feedback and the monetary incentive."

"Still another group received weekly feedback and weekly incremental incentives that could add up to $50 if the driver had comparatively low phone use all seven weeks. Depending on how their phone use compared with others for the week, they would either earn or forfeit money. They would receive text notifications letting them know how much of their weekly allotment they had received—or sacrificed.

Drivers who were promised money at the end of the study for keeping their phone use comparatively low showed a 17% reduction in phone use, compared with a control group. The drivers whose earnings were meted out week by week did even better, reducing their phone use by 23%. “Showing people how much they were losing each week created regret,” said lead study author Kit Delgado, an emergency room physician and associate director of the Center for Health Incentives and Behavioral Economics at the University of Pennsylvania."

Related posts:

Lose the Fat to Lower Your Insurance Rates  

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

Should Overweight People Pay More For Health Insurance?

Should We Pay People To Adopt A Healthy Lifestyle? 

'Spy car' worries raised by new Allstate patent 

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

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

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

Some History of Insurance 

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

How Odysseus Started The Industrial Revolution

Factory work may have been a commitment device to get everyone to work hard. Odysseus tying himself to the mast was also a commitment device. Dean Karlan, Yale economics professor explains how commitment devices work:

"This idea of forcing one’s own future behavior dates back in our culture at least to Odysseus, who had his crew tie him to the ship’s mast so he wouldn’t be tempted by the sirens; and Cortes, who burned his ships to show his army that there would be no going back.

Economists call this method of pushing your future self into some behavior a “commitment device.” [Related: a Freakonomics podcast on the topic is called "Save Me From Myself."] From my WSJ op-ed:

Most of us don’t have crews and soldiers at our disposal, but many people still find ways to influence their future selves. Some compulsive shoppers will freeze their credit cards in blocks of ice to make sure they can’t get at them too readily when tempted. Some who are particularly prone to the siren song of their pillows in the morning place their alarm clock far from their bed, on the other side of the room, forcing their future self out of bed to shut it off. When MIT graduate student Guri Nanda developed an alarm clock, Clocky, that rolls off a night stand and hides when it goes off, the market beat a path to her door."

 See What Can We Learn From Congress and African Farmers About Losing Weight?

Something like this came up recently in the New York Times, in reference to factory work and the Industrial Revolution. See Looking at Productivity as a State of Mind. From the NY Times, 9-27-2014. By SENDHIL MULLAINATHAN, a professor of economics at Harvard. Excerpts:

"Greg Clark, a professor of economics at the University of California, Davis, has gone so far as to argue that the Industrial Revolution was in part a self-control revolution. Many economists, beginning with Adam Smith, have argued that factories — an important innovation of the Industrial Revolution — blossomed because they allowed workers to specialize and be more productive.

Professor Clark argues that work rules truly differentiated the factory. People working at home could start and finish when they wanted, a very appealing sort of flexibility, but it had a major drawback, he said. People ended up doing less work that way.

Factories imposed discipline. They enforced strict work hours. There were rules for when you could go home and for when you had to show up at the beginning of your shift. If you arrived late you could be locked out for the day. For workers being paid piece rates, this certainly got them up and at work on time. You can even see something similar with the assembly line. Those operations dictate a certain pace of work. Like a running partner, an assembly line enforces a certain speed.

As Professor Clark provocatively puts it: “Workers effectively hired capitalists to make them work harder. They lacked the self-control to achieve higher earnings on their own.”

The data entry workers in our study, centuries later, might have agreed with that statement. In fact, 73 percent of them did agree to this statement: “It would be good if there were rules against being absent because it would help me come to work more often.”"

The workers, like Odyssues, tied themselves to the mast to resist the temptation of slacking. This made it possible for factories to generate the large output of the Industrial Revolution.

How Economists Put A Price Tag On Your Life

 

By James Broughel. He is a senior research fellow at the Mercatus Center. Excerpts:

"One common metric economists rely on is the value of a statistical life (VSL), which is a measure of how much money a group of individuals is willing to pay to reduce the probability of its members dying. For example, workers in a relatively dangerous industry like construction receive higher wages than they might otherwise get elsewhere. Given the statistical realities involved, one can add up the excess wages earned by workers in exchange for taking a riskier job to ascertain how much as a group they jointly place on a life lost in their industry.

One claim sometimes made by public health experts, regulators, and even from some economists is that when they use the VSL, they are only putting a dollar value on “risk,” not on anyone’s actual life."

"Is it true that when economists employ the VSL, they are not placing a dollar value on individual lives?

To start, consider a hypothetical: Let’s say for the sake of argument that air pollution in a city affects a population of 1 million people. Over the course of a lifetime, four people in the population die early from causes related to air pollution, and the deaths are more-or-less random. Thus, each member of the population faces a 1-in-250,000 risk of death. 

Now let’s say that government planners decide to implement a public health regulation that they expect will reduce the number of people who die prematurely from air pollution from four to two. Furthermore, let’s say the city’s 1 million people are each willing to pay $20 for this reduction, which lowers any particular individual’s chance of dying from 1-in-250,000 to 1-in-500,000. Collectively, therefore, the city’s population is willing to pay $20 million, or $10 million for each person saved."

"As a group, the population is indeed placing a dollar value on specific, individual lives. Whether its “risk” or “lives” that is valued is semantics in this case."

Related post

Obscure Model Puts a Price on Good Health—and Drives Down Drug Costs. (it discusses QALY, for “quality-adjusted life year”)

"One year spent in perfect health equals one QALY. A year with some kind of health problem that affects quality of life would be worth less than one QALY." 

So if a drug adds years of life or improves the health of remaining years that counts as so many QALYs and the price is based on that

When Money Is No Object

Sure, using a credit card is easy, but paying with invisible money makes saving harder and spending easier. People behaved differently when they saved—and spent—cold, hard cash.

By Jason Zweig of The WSJ. Excerpt:

"Nowadays, zooming through with digital toll technology like E-ZPass, you may have no idea how much you just paid. Once money is dematerialized, using it doesn’t feel like spending.

“As we move away from paying with those gross motor movements,” says Kathleen Vohs, a marketing professor at the University of Minnesota, “we lose that sense of its being an exchange, the gravity of using money.”

Dozens of studies have shown that consumers using credit cards rather than cash are less likely to remember how much they spent, take less time deciding what to buy, are more willing to pay high prices and make a greater number of purchases. They also exert less self-control, buying more junk food, luxury goods and other impulsive items.

Studies on debit cards and mobile payments show similar results. A recent neuroscience experiment found that spending with credit cards, rather than cash, activates the same reward centers of the brain that are triggered by cocaine and other addictive drugs. If spending cash hurts, perhaps using credit makes you high.

Of course, it’s hard to say whether people are spending more and saving less because cash is dying—or whether cash is dying because people are spending more and saving less.

For most of the second half of the 20th century, Americans saved roughly 10% of their disposable personal income. In the late 1980s, U.S. consumers began to save less until, by 1995, they saved only 3% of available earnings. That number rebounded in the 2000s and 2010s, then shot up during the pandemic as the economy locked down and people received government stimulus payments.

One of the main factors driving the long-term decline of savings in the U.S. is the fall in interest rates since the early 1980s, says Jonathan Parker, a financial economist at the Massachusetts Institute of Technology. Lower interest rates reduce the return on bank accounts, cut the cost of borrowing, and raise the value of stocks and real estate, making people feel they can spend more."

 

The ariline industry looks competitive

See Air Travel Prices Have Barely Budged in 25 Years. (It’s True.) by Scott McCartney of The WSJ. Excerpts: 

"In the first quarter of 1996, the average domestic airline ticket cost $284, according to the Transportation Department’s Bureau of Transportation Statistics. Twenty-five years later—the first quarter of this year—the average domestic ticket cost? $260.

Adjusted for inflation, air travel in the U.S. has gotten much cheaper. That 1996 ticket in today’s dollars would be $482"

"But history suggests that inflation in airline tickets ends quicker than your last vacation. Over time, prices have fallen, even after the industry consolidated to four giant airlines commanding a large share of the marketplace.

Competition is a constant in the airline business. If prices in markets get high, another airline swoops in, sensing opportunity. Technology has helped airlines cut costs on a massive scale over the past two decades. It’s also made it easy for consumers to comparison-shop, keeping prices down.

Even pre-pandemic, when demand for air travel was strong, prices were a bargain. Domestic tickets in the fourth quarter of 2019 were 26% cheaper than the same period of 1995 in today’s dollars."

"add-on fees now generate a lot of airline revenue that might have previously been priced into tickets. In 2019, baggage fees totaled $5.8 billion for U.S. airlines, according to BTS. Those fees were 2.9% of operating revenue. And that doesn’t count fees for seat assignments, early boarding and other services.

John Heimlich, chief economist at Airlines for America, the industry’s Washington, D.C., lobbying organization, says even if fees were included, “the trajectory is the same. There is not a big difference between the average fare with or without fees. A lot of people don’t pay fees.”"

"Cheap airline tickets have driven a boom in air travel. Far more people travel today than in past decades.

Those tickets have also, in the eyes of many travelers, cheapened airline service to barely acceptable levels. Many feel compelled to pay extra for adequate legroom or even first-class seats—and that’s exactly the strategy airlines have pursued."

"Because competitors match prices, the impact of Spirit and other ultra-low-cost carriers like Frontier, Allegiant and Sun Country extends to travelers who never fly them.

“They have pricing power way beyond what their size would project,” says Scott Nason, a former American Airlines pricing and technology executive who now is president of SDN TT&H Consulting, based in the Dallas area."

"the share of domestic passengers carried by the ultra-low-cost carriers increased from 4% in 2009 to 11% in 2019."

"Those carriers were up to 15% market-share in 2020."

"After the big airline mergers—Delta and Northwest combined in 2008, United and Continental in 2010, Southwest and AirTran in 2011, and American and US Airways in 2013—the remaining large carriers enjoyed record profits. The four had 80% of the U.S. market, and capacity—or, the number of available seats around—was stable.

As demand rose, so did prices. From $302 in the second quarter of 2009, the average domestic ticket price jumped to $402 in the same period of 2014. Then airfares started descending again. By the second quarter of 2018, the average price was down to $349. The comfort zone big airlines had found was already eroding."

Related posts:

Is The Airline Industry An Oligopoly? (from 2014)

It seems like airlines are not passing along all of the increased fuel costs to consumers (from 2018)

 

Energy Prices in Europe Hit Records After Wind Stops Blowing

Heavy reliance on wind power, coupled with a shortage of natural gas, has led to a spike in energy prices

By Joe Wallace of The WSJ. 

In one of my classes this week we are reading the chapter about green energy in the book The Economics of Public Issues. It mentions that back up power (usually fossil fuel) is needed for when the wind does not blow. These backup power stations have to start and stop as the wind blows and that causes more pollution than if they ran constantly.

Excerpts from the WSJ article:

"Natural gas and electricity markets were already surging in Europe when a fresh catalyst emerged: The wind in the stormy North Sea stopped blowing.

The sudden slowdown in wind-driven electricity production off the coast of the U.K. in recent weeks whipsawed through regional energy markets. Gas and coal-fired electricity plants were called in to make up the shortfall from wind.

Natural-gas prices, already boosted by the pandemic recovery and a lack of fuel in storage caverns and tanks, hit all-time highs. Thermal coal, long shunned for its carbon emissions, has emerged from a long price slump as utilities are forced to turn on backup power sources.

The episode underscored the precarious state the region’s energy markets face heading into the long European winter. The electricity price shock was most acute in the U.K., which has leaned on wind farms to eradicate net carbon emissions by 2050. Prices for carbon credits, which electricity producers need to burn fossil fuels, are at records, too.'

"At their peak, U.K. electricity prices had more than doubled in September and were almost seven times as high as at the same point in 2020. Power markets also jumped in France, the Netherlands and Germany."

"In electricity markets, the cost of generation at the most expensive supplier determines prices for everyone. That means that when countries derive power from thermal plants with comparatively high running costs, it boosts prices for the whole market. Operating costs at fossil-fuel power plants are high right now after a relentless climb in prices for gas, coal and carbon permits."

"Electricity, gas, coal and carbon markets have a way of feeding on one another. High gas prices prompted utilities to burn more coal, so they had to buy more emissions allowances. Expensive carbon permits then prodded energy companies to turn back to gas, whose price rose again because the fuel is in short supply."

"Wind accounted for about a quarter of Great Britain’s power last year, according to the system operator National Grid. After the wind dropped this month, National Grid asked Électricité de France SA to restart its West Burton A coal power station in Nottinghamshire. That won’t be possible in the future: The government has said all coal plants must close by late 2024."

"To be sure, abundant wind power has at times led to periods of cheap electricity. This month, however, U.K. wind farms produced less than one gigawatt on certain days, according to Mr. Konstantinov. Full capacity stands at 24 gigawatts. Maintenance work on subsea cables restricted electricity imports from France."

"The price surge shows the need to have backup power supplies for moments when the wind doesn’t blow and the sun doesn’t shine, said Mark Dickinson, chief executive of Inspired PLC, which advises companies on energy costs and climate change.

Options include reserve thermal power plants, battery storage or cables for importing electricity from other markets."

Is There Economic And Political Meaning In "The Wizard of Oz?"

To get a handle on this, you can read Money and Politics in the Land of Oz By Quentin P. Taylor.  Below is an excerpt from the Taylor paper:

"Dorothy, the protagonist of the story, represents an individualized ideal of the American people. She is each of us at our best-kind but self-respecting, guileless but levelheaded, wholesome but plucky. She is akin to Everyman, or, in modern parlance, “the girl next door.” Dorothy lives in Kansas, where virtually everything-the treeless prairie, the sun-beaten grass, the paint-stripped house, even Aunt Em and Uncle Henry-is a dull, drab, lifeless gray. This grim depiction reflects the forlorn condition of Kansas in the late 1880s and early 1890s, when a combination of scorching droughts, severe winters, and an invasion of grasshoppers reduced the prairie to an uninhabitable wasteland. The result for farmers and all who depended on agriculture for their livelihood was devastating. Many ascribed their misfortune to the natural elements, called it quits, and moved on. Others blamed the hard times on bankers, the railroads, and various middlemen who seemed to profit at the farmers’ expense. Angry victims of the Kansas calamity also took aim at the politicians, who often appeared indifferent to their plight. Around these economic and political grievances, the Populist movement coalesced.

In the late 1880s and early 1890s, Populism spread rapidly throughout the Midwest and into the South, but Kansas was always the site of its most popular and radical elements. In 1890, Populist candidates began winning seats in state legislatures and Congress, and two years later Populists in Kansas gained control of the lower house of the state assembly, elected a Populist governor, and sent a Populist to the U.S. Senate. The twister that carries Dorothy to Oz symbolizes the Populist cyclone that swept across Kansas in the early 1890s. Baum was not the first to use the metaphor. Mary E. Lease, a fire-breathing Populist orator, was often referred to as the “Kansas Cyclone,” and the free-silver movement was often likened to a political whirlwind that had taken the nation by storm. Although Dorothy does not stand for Lease, Baum did give her (in the stage version) the last name “Gale”-a further pun on the cyclone metaphor.

The name of Dorothy’s canine companion, Toto, is also a pun, a play on teetotaler. Prohibitionists were among the Populists’ most faithful allies, and the Populist hope William Jennings Bryan was himself a “dry.” As Dorothy embarks on the Yellow Brick Road, Toto trots “soberly” behind her, just as the Prohibitionists soberly followed the Populists.

When Dorothy’s twister-tossed house comes to rest in Oz, it lands squarely on the wicked Witch of the East, killing her instantly. The startled girl emerges from the abode to find herself in a strange land of remarkable beauty, whose inhabitants, the diminutive Munchkins, rejoice at the death of the Witch. The Witch represents eastern financial-industrial interests and their gold-standard political allies, the main targets of Populist venom. Midwestern farmers often blamed their woes on the nefarious practices of Wall Street bankers and the captains of industry, whom they believed were engaged in a conspiracy to “enslave” the “little people,” just as the Witch of the East had enslaved the Munchkins. Populists viewed establishment politicians, including presidents, as helpless pawns or willing accomplices. Had not President Cleveland bowed to eastern bankers by repealing the Silver Purchase Act in 1893, thus further restricting much-needed credit? Had not McKinley (prompted by the wealthy industrialist Mark Hanna) made the gold standard the centerpiece of his campaign against Bryan and free silver?"

Now an excerpt from a book by Irivin B. Tucker:

"Gold is always a fascinating story: The Wonderful Wizard of Oz was first published in 1900 and this children's tale has been interpreted as an allegory for political and economic events of the 1890s. For example, the Yellow Brick Road represents the gold standard, Oz in the title is an abbreviation for ounce, Dorothy is the naive public, Emerald City symbolizes Washington, D.C., the Tin Woodman represents the industrial worker, the Scarecrow is the farmer, and the Cyclone is a metaphor for a political revolution. In the end, Dorothy discovers magical powers in her silver shoes (changed to ruby in the 1939 film) to find her way home and not the fallacy of the Yellow Brick Road. Although the author of the story, L. Frank Baum, never stated it was his intention, it can be argued that the issue of the story concerns the election of 1896. Democratic presidential nominee William Jennings Bryan (the Cowardly Lion) supported fixing the value of the dollar to both gold and silver (bimetallism), but Republican William McKinley (the Wicked Witch) advocated using only the gold standard. Since McKinley won, the United States remained on the Yellow Brick Road."

But not everyone agrees with this. Economist Bradley Hansen wrote an article titled The Fable of the Allegory: The Wizard of Oz in Economics in the Journal of Economic Education in 2002. Here is his conclusion:

"Rockoff noted that the empirical evidence that Baum wrote The Wonderful Wizard of Oz as an allegory was slim, but he compared an allegorical interpretation to a model and suggested that “economists should not have any difficulty accepting, at least provisionally, an elegant but controversial model” (Rockoff 1990, 757). He was right—we did not have any difficulty accepting it. Despite Rockoff’s warning, we appear to have accepted the story wholeheartedly rather than provisionally, simply because of its elegance. It is as difficult to prove that The Wonderful Wizard of Oz was not a monetary allegory as it is to prove that it was. In the end, we will never know for certain what Baum was thinking when he wrote the book. I suggest that the vast majority of the evidence weighs heavily against the allegorical interpretation. It should be remembered that no record exists that Baum ever acknowledged any political meanings in the story and that no one even suggested such an interpretation until the 1960s. There certainly does not seem to be sufficient evidence to overwhelm Baum’s explicit statement in the introduction of The Wonderful Wizard of Oz that his sole purpose was to entertain children and not to impress upon them some moral. The Wonderful Wizard of Oz is a great story. Telling students that the Populist movement was like The Wonderful Wizard of Oz does seem to catch their attention. It may be a useful pedagogical tool to illuminate the debate on bimetallism, but we should stop telling our students that it was written for that purpose."

I found a review of the book in the NY Times from 1900 and it does not mention anything about OZ having political or economic meaning. The book was also made into a musical a few years later and none of the reviews of the musical mention any political or economic meaning.

U.S. Population Growth, an Economic Driver, Grinds to a Halt

 

Covid-19 pandemic compounds years of birth-rate decline, puts America’s demographic health at risk

By Janet Adamy and Anthony DeBarros of the WSJ. Excerpts:

"America’s weak population growth, already held back by a decadelong fertility slump, is dropping closer to zero because of the Covid-19 pandemic.

In half of all states last year, more people died than were born, up from five states in 2019. Early estimates show the total U.S. population grew 0.35% for the year ended July 1, 2020, the lowest ever documented, and growth is expected to remain near flat this year."

"What concerns demographers is that in the past, when a weak economy drove down births, it was often a temporary phenomenon that reversed once the economy bounced back."

"Yet after births peaked in 2007, they never rebounded from the nearly two-year recession that followed, even though Americans enjoyed a subsequent decade of economic growth.

With the birthrate already drifting down, the nudge from the pandemic could result in what amounts to a scar on population growth, researchers say, which could be deeper than those left by historic periods of economic turmoil, such as the Great Depression and the stagnation and inflation of the 1970s, because it is underpinned by a shift toward lower fertility."

"This year, the U.S. will record at least 300,000 fewer births because the uncertain economy and the pandemic dissuaded women from having babies, according to projections by economists Melissa S. Kearney and Phillip Levine. Provisional government data already show births in the first three months of 2021 declined compared with 2020."

"Extended financial insecurity among young adults and women’s rising educational attainment are among factors overlapping with the pandemic year’s health and financial shocks"

"The declining rate of Covid deaths will also help ease the problem, but the U.S. still faces other pressures on mortality. A sharp rise in drug-overdose deaths and an increase in fatalities from homicides and some chronic diseases last year helped drive down U.S. life expectancy by 1.5 years, the largest drop since at least World War II."

"Every type of U.S. county, from the most urban to the most rural, on average saw a decrease in the number of births per death in the second half of the 2010s compared with the first half"

"Historically, nearly half of the country’s economic growth has been driven by the expansion of the working-age population, including immigrants, said Neil Howe, an economist, demographer and managing director at Hedgeye Risk Management, an investor-oriented research company. Recent federal-budget projections suggest the potential labor-force growth rate will hover just above zero for years to come, down from a range of 2.5% starting in the mid-1970s to 0.5% from 2008 through last year.

The shifts will make the U.S. more reliant on immigration to grow the workforce, economists say, although that faces its own pressures. Mexico’s fertility rate has steadily declined, while China and India—two other top suppliers of immigrants to the U.S.—face talent shortages of their own, along with China’s own flattening population growth."

"Among the industries most affected are retail and hospitality, because they rely on younger workers who turn over quickly, said Rob Sentz, who until last month was chief innovation officer at the labor-market data firm Emsi. Sectors such as healthcare, engineering and information technology will struggle to replace senior management as millions of baby boomers retire.

Over time, a lower fertility rate will lead to a higher ratio of retired beneficiaries to taxpaying workers, which is expected to raise the cost of Social Security and Medicare.

The Biden administration hopes to support family growth through its proposed $1.8 trillion American Families Plan, which includes paid parental leave, subsidized child-care and free preschool. Such policy approaches have had a mixed record of lifting fertility rates in other countries, researchers say."

Related posts:

The Economy Affects The Birth Rate (2010)

Did The Recession Help Lower The Birth Rate? (2011)

U.S. Fertility Rate Hits Lowest Level on Record (2012) 

A number of women who put off having babies after the 2007-09 recession are forgoing them altogether; more educated women and student debt also contribute to decline in birth rates (2018)

Births in U.S. Drop to Levels Not Seen Since 1979 (2021)

The percentage of 25-54 year-olds employed rose in July

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 78.0% in Aug. It was 77.8% in July. It was 80.5% in Jan. 2020 and 69.6% in April 2020.  Click here to see the BLS data. The unemployment rate was 5.2% in July. Click here to go to that data. The % of those 16 and older employed went from 58.38% up to 58.54%.

Here is a good graph from the St. Louis Fed. It shows that there are 126,125,000 people in the 25-54 year old group. So since we are 2.5 percentage points below the 80.5% of Jan. 2020 (the high point since the previous recession), that is still 3,153,125 fewer jobs (Hat tip: Vance Ginn of the Texas Public Policy Foundation). 

Also, we are up 8.4 percentage points since April 2020 (78.0 - 69.6). That is 77% of what we lost from Jan. 2020 to April 2020 (10.9 percentage points or 80.5 - 69.6). Then 8.4/10.9 = 77%. So we have gotten about 3/4ths of the jobs back. Good, but a significant amount of ground has still has to be made up.  

Here is the timeline graph of the percentage of 25-54 year olds employed since 2011.

 

Now since 1948

Another Semester Has Started

 Welcome to any new students. The entries usually have something to do with a basic economic principle that is related to a recent news story.

Here is something I wrote for The Ranger (the school paper of San Antonio College where I used to teach) back in 2011 titled "Why is college so hard?"

Students might wonder why college, and SAC in particular, is hard. This might sound trite, but I think the faculty at SAC want students to achieve success in life and that means that classes have to be hard if you are going to learn and understand the concepts which provide a foundation for that success.

I think my own experience as a community college student over 30 years ago helps me understand this. My teachers took their subjects seriously and maintained high academic standards. They got me excited because of the expertise they brought to their teaching. Now that I have been a teacher for over 20 years, I can see how important that was.

After finishing my A.S. degree at Moraine Valley Community College (MVCC) in Palos Hills, Ill., I transferred to and graduated from the University of Chicago with a degree in economics. But it was my community college teachers prepared me to handle the rigors of the U. of C.

Later, I got a Ph. D. in economics from Washington State University. But I've accomplished some other things I never could have dreamed of when I began taking classes at MVCC and I think my teachers there paved the way for me.

In 2005, I had a letter to the editor published in The Wall Street Journal (I have now had five published there, three in The New York Times and three op-eds in the Express-News). This one was several paragraphs long, nearly as long as some of their op-ed pieces. It was the first letter in the letters section that day, and I got the top headline. It dealt with NAFTA and trade agreements.

As nice as that was, I got a big shock a few days later when I got a letter in the mail, on official stationery, from Richard Fisher, the president of the Federal Reserve Bank of Dallas. He complimented me on my letter and said it was superb. I had never even met him or ever tried to contact him before.

Wow. I graduated from high school with a 2.7 GPA, and when I started at MVCC, I had no idea what I would do with my life. If you had told me then that someday I would have a letter in the WSJ and get that kind of compliment, I doubt I would have believed you.

Then an adjunct professor at the business school at the University of Chicago contacted me a few years ago and wanted to know if it was OK for her to assign a paper I wrote on entrepreneurs for a class she was teaching on innovation. (Of course, I said yes).

That professor was Nancy Tennant Snyder. She has a Ph. D. from George Washington University and is a vice president at Whirlpool. Business Week magazine has called her one of the leading innovators in the world. She also cited two of my papers in one of her books.

Then I got an email from John Joseph, a professor at the University of Edinburgh. He is an expert on language and politics. He wanted to know if he could include an essay I wrote in a four-volume work he was planning. I again said yes and it was published last year (and it is called Language and Politics).

It is a collection of essays. Mine is titled "The Intersection of Economic Signals and Mythic Symbols." Other contributors include Jeremy Bentham and George Orwell. When I was a community college student, I never imagined being included along with the likes of those great thinkers.

The co-authors of the book The Economics of Public Issues have thanked me in each of the last three editions for my helpful suggestions. Almost all of the people they thank are from big universities. One of the co-authors of this book, Douglass North, is a Nobel Prize winner. Never imagined someone like that would value my input when I started out as a community college student.

Getting such recognition in cases like this gives me a sense of achievement. I know I have made a scholarly contribution to the world. And I want all SAC students to have a chance for this same kind of success (as an academic or any in line of work). I think all SAC faculty do. That is why school is hard, and that is why I'm thankful that my community college teachers were experts who maintained high academic standards.

Is Storytelling Important For The Economy?

"It's the economy, stupid"-James Carville, strategist for Bill Clinton in the 1992 presidential campaign

"The human mind is a story processor, not a logic processor."-from the book The Righteous Mind: Why Good People Are Divided by Politics and Religion by social psychologist Jonathan Haidt.

Wouldn't it be great if there was a blog that looked at the intersection of the economy and storytelling or mythology? Well, there is! See Dollars and Dragons.

Here is one example of how storytelling and economics come together. See Giving Your Brand Primal Power Through Storytelling by Nick Nanton & JW Dicks. Excerpt:

"At our agency, we make what we call “story-selling” an essential component of our branding efforts with our clients. We’ve seen firsthand that, when you create the proper story, you’ve done most of the heavy lifting required to build a successful brand.

The question, though, is why--why do stories have such “primal power” when it comes to influencing an audience?

It turns out there’s a perfectly good scientific explanation: Stories affect us on both on an incredibly deep intellectual and emotional level that we are just beginning to understand.

That quest began when scientists discovered that fictional stories affected the same region of the brain that reacts when we ourselves are engaged in real-life drama. Stories create a bonding empathy which causes us to strongly identify with the made-up protagonist, as if we were, in fact, that person. In other words, stories have such impact because our brains actually get a little mixed up as to what’s real and what’s not."

There is also a great book out there called The Storytelling Animal: How Stories Make Us Human by Jonathan Gottschall. Here is the review I wrote at Amazon:

"If you liked "The Moral Molecule" by Paul Zak, "The Righteous Mind" by Jonathan Haidt or "The Power of Myth" by Joseph Campbell, you will probably like this book, too. It would be worthwhile if only for the anecdotes. The explanation about how a scientist proved that cats dream. Or that going to an opera greatly influenced Hitler. You want to keep reading. You never grow tired of it. How stories are a deeply inherent part of our nature is entertainingly explored. Stories affect business and economics because CEOs and brands need to tell a story. The role that evolution played in making stories important is explained. His theories and conclusions are supported by science. But it is still enjoyable. Gottschall himself is a good story teller. I love the line about stories being the flight simulators for life. The moral and socials role of stories are also explored. But stories are personal, too. We each have a story we tell ourselves. As Jung said, we should all try to discover what myth we are living by. Books like this should help us out on that quest."

A related post is Economists Love Fables And Parables (Or, What Is The Essence Of Economic Analysis?)

The ariline industry looks competitive

See Air Travel Prices Have Barely Budged in 25 Years. (It’s True.) by Scott McCartney of The WSJ. Excerpts: 

"In the first quarter of 1996, the average domestic airline ticket cost $284, according to the Transportation Department’s Bureau of Transportation Statistics. Twenty-five years later—the first quarter of this year—the average domestic ticket cost? $260.

Adjusted for inflation, air travel in the U.S. has gotten much cheaper. That 1996 ticket in today’s dollars would be $482"

"But history suggests that inflation in airline tickets ends quicker than your last vacation. Over time, prices have fallen, even after the industry consolidated to four giant airlines commanding a large share of the marketplace.

Competition is a constant in the airline business. If prices in markets get high, another airline swoops in, sensing opportunity. Technology has helped airlines cut costs on a massive scale over the past two decades. It’s also made it easy for consumers to comparison-shop, keeping prices down.

Even pre-pandemic, when demand for air travel was strong, prices were a bargain. Domestic tickets in the fourth quarter of 2019 were 26% cheaper than the same period of 1995 in today’s dollars."

"add-on fees now generate a lot of airline revenue that might have previously been priced into tickets. In 2019, baggage fees totaled $5.8 billion for U.S. airlines, according to BTS. Those fees were 2.9% of operating revenue. And that doesn’t count fees for seat assignments, early boarding and other services.

John Heimlich, chief economist at Airlines for America, the industry’s Washington, D.C., lobbying organization, says even if fees were included, “the trajectory is the same. There is not a big difference between the average fare with or without fees. A lot of people don’t pay fees.”"

"Cheap airline tickets have driven a boom in air travel. Far more people travel today than in past decades.

Those tickets have also, in the eyes of many travelers, cheapened airline service to barely acceptable levels. Many feel compelled to pay extra for adequate legroom or even first-class seats—and that’s exactly the strategy airlines have pursued."

"Because competitors match prices, the impact of Spirit and other ultra-low-cost carriers like Frontier, Allegiant and Sun Country extends to travelers who never fly them.

“They have pricing power way beyond what their size would project,” says Scott Nason, a former American Airlines pricing and technology executive who now is president of SDN TT&H Consulting, based in the Dallas area."

"the share of domestic passengers carried by the ultra-low-cost carriers increased from 4% in 2009 to 11% in 2019."

"Those carriers were up to 15% market-share in 2020."

"After the big airline mergers—Delta and Northwest combined in 2008, United and Continental in 2010, Southwest and AirTran in 2011, and American and US Airways in 2013—the remaining large carriers enjoyed record profits. The four had 80% of the U.S. market, and capacity—or, the number of available seats around—was stable.

As demand rose, so did prices. From $302 in the second quarter of 2009, the average domestic ticket price jumped to $402 in the same period of 2014. Then airfares started descending again. By the second quarter of 2018, the average price was down to $349. The comfort zone big airlines had found was already eroding."

Related posts:

Is The Airline Industry An Oligopoly? (from 2014)

It seems like airlines are not passing along all of the increased fuel costs to consumers (from 2018)

People seem to like watching videos of fake morality plays on the internet

See The Internet Demands Uplifting Videos. So He Stages Them. by Robin Kaiser-Schatzlein writing for The NY Times. Excerpts:

"Dhar Mann and other “wholesome” channels combine the high-definition slickness of today’s YouTube content with the feel of a corporate-training video."

"Mann makes short sketches that deliver positive messages. In one recent video, “RICH Kid WON’T TIP Pizza Boy, He Lives to Regret It,” we see three teenagers playing video games when the doorbell rings, announcing the arrival of the titular pizza boy. One boy’s mother gives him $20 to pay. The dead-eyed son answers the door; finding that the pizza has pineapple on it, he derisively rejects it. The pizza boy — earnest, apologetic, saintly — races away and returns with yet another pizza the son takes umbrage with. Only on the third trip does the son, grudgingly satisfied, take the pizza and leave an eight-cent tip. His mother tells him he wouldn’t be so callous if he’d ever had a job and issues an ultimatum: He won’t get his birthday present (a BMW) unless he works for a month. In a slow-motion montage set to sad oboes, we watch the son deliver pizzas to his own assortment of rude customers. Back home, he orders dinner, and when the original pizza boy appears, the son apologizes and leaves a $5.08 tip. The acting is wooden, but the apology is weirdly affecting; it is, even against the viewer’s will, satisfying to see the sneering jerk from two minutes ago contrite."

"These clips combine the high-definition slickness of today’s YouTube content with the feel of a corporate-training video you would watch alone in your manager’s office on the first day of work. The sets seem hastily decorated, denuded of all but the most obvious props. The acting is either overexaggerated or barely there, and Mann’s subtlety-free writing broadcasts characters’ motivations as loudly as possible. (“Don’t waste your time with poor-looking people,” the dirtball realtor says.) His videos also exude a child’s dreamlike grasp of life’s finer details. The spoiled son still pays for pizza with cash on delivery; the dirtball realtor completes a multimillion-dollar loan application in minutes; the Mexican American son is bafflingly hostile about his mother’s Cinco de Mayo decorations and, incredibly, revolted by the smell of enchiladas. Some stories are built with such broad strokes that they insult the viewer’s intelligence; others are so surreal that they verge into great, if accidental, comedy."

"To some extent, their vagueness works. These videos sit neatly in a long lineage of short-form moral education, from religious parables to fairy tales to the sentimental moralizing of some serialized Victorian literature. Even the dramatic presentation is familiar, recalling everything from the clunky “social guidance” filmstrips of the 1950s to ABC’s “After School Special.” This sort of content was once part of an inescapable monoculture — a part it was easy to assume that the internet, with its tendency toward the niche, was destined to eradicate. Yet it recurs not only in Mann’s videos but in the growing supply of “wholesome” content that resembles, more than anything, the kind of mass-market, chicken-soup-for-the-soul material that thrived decades ago."

"Parents sometimes comment on Mann’s videos to say they intend to show the clips to their kids; like training films, the videos exist in part for one person to foist upon another."

"he also comforts us by ensuring that the antagonists always get their comeuppance, the smooth conclusion we are denied in the real world. And he flatters us by making the problematic characters so obviously wrong that we have no choice but to identify with goodness — and, often, to feel bizarrely moved by the uplifting outcome we always knew was coming."

"They are hermetically sealed re-enactments of real events: situations we have already made up our minds about yet crave to safely relive as fiction."

Related posts:

Are sellers paying Amazon customers to delete negative reviews?

Fake Reviews and Inflated Ratings Are Still a Problem for Amazon 

Photos show China's most surreal tourist spot— a fake Instagram-worthy town full of pretend farmers and phony fishermen

The Myth of Authenticity Or The Story Behind Products 

Fake Authenticity

Students: Make a mistake on purpose, its good for you!

A fake job reference can be just a few clicks away.

Fake Economist Fools Portugal.

Slave Redemption in Sudan. (Fake slaves are sold to those who buy slaves and then give them their freedom)

Can A Product Work Just Because It's Expensive?. (fake medicine)

If It Pays To Have Friends, Can You Pay To Have Friends?. (you can hire fake boyfriends)

Study: Half of American Doctors Give Patients Placebos Without Telling Them.

Saudis grapple with fake street sweepers .

Rent a White Guy: Confessions of a fake businessman from Beijing (by Mitch Moxley in The Atlantic Monthly, excerpts below)

Can adding a phantom third story to their homes help families find a wife for their son?

Why do employers pay extra money to people who study a bunch of subjects in college that they don’t actually need you to know? Signaling

Mexicans buy fake cellphones to hand over in muggings
 
Conspicuous Consumption, Conspicuous Virtue, Thorstein Veblen (and Adam Smith, too!)

How does a company selling used luxury goods spot fakes? (signalling and conspicuous consumption).

Why do stores sometimes pay people to be fake shoppers? 

What if companies can't afford real models for their ads? Use AI generated fake pictures 

Excerpts from "Rent a White Guy"

"Not long ago I was offered work as a quality-control expert with an American company in China I’d never heard of. No experience necessary—which was good, because I had none. I’d be paid $1,000 for a week, put up in a fancy hotel, and wined and dined in Dongying, an industrial city in Shandong province I’d also never heard of. The only requirements were a fair complexion and a suit.

“I call these things ‘White Guy in a Tie’ events,” a Canadian friend of a friend named Jake told me during the recruitment pitch he gave me in Beijing, where I live. “Basically, you put on a suit, shake some hands, and make some money. We’ll be in ‘quality control,’ but nobody’s gonna be doing any quality control. You in?”

I was.

And so I became a fake businessman in China, an often lucrative gig for underworked expatriates here. One friend, an American who works in film, was paid to represent a Canadian company and give a speech espousing a low-carbon future. Another was flown to Shanghai to act as a seasonal-gifts buyer. Recruiting fake businessmen is one way to create the image—particularly, the image of connection—that Chinese companies crave. My Chinese-language tutor, at first aghast about how much we were getting paid, put it this way: “Having foreigners in nice suits gives the company face.”

Six of us met at the Beijing airport, where Jake briefed us on the details. We were supposedly representing a California-based company that was building a facility in Dongying. Our responsibilities would include making daily trips to the construction site, attending a ribbon-cutting ceremony, and hobnobbing. During the ceremony, one of us would have to give a speech as the company’s director. That duty fell to my friend Ernie, who, in his late 30s, was the oldest of our group. His business cards had already been made."

"For the next few days, we sat in the office swatting flies and reading magazines, purportedly high-level employees of a U.S. company that, I later discovered, didn’t really exist."