Thursday, May 29, 2025

Treasury Sounds Death Knell for Penny Production

One-cent coins are expected to stop entering circulation early next year. Businesses will need to round prices up or down

By Oyin Adedoyin of The WSJ. 

When I was teaching, I used the book The Economics of Macro Issues as a supplemental text. It had a chapter related to this. Even several years ago it was costing more than one cent to produce a penny and more than five cents to produce a nickel.

Excerpts:

"The U.S. Mint, which is the Treasury’s in-house coin producer, projects an annual savings of $56 million in reduced material costs. The penny, though worth only a cent, costs nearly 4 cents to make. The Treasury said it expects savings to grow once it stops using some of the production facilities. 

The Mint will stop making pennies after it runs out of the blank templates used to make them. The final order of blanks was placed this month, according to the statement."

"Americans will still be able to use pennies in cash transactions after production stops."

"the U.S. government lost more than $85 million last year on the roughly three billion pennies it produced."

"Americans throw away up to $68 million in coins a year. They are left in plastic bins at airport security checkpoints and even used in art and home decor."

"Some 60% of actively circulating coins, or as much as $14 billion, sit in coin jars"

"Canada . . . stopped producing the coin in 2012 and eventually started to round cash transactions to the nearest 5 cents. Australia and New Zealand stopped producing one-cent pieces decades ago."

Related post:

What Trump’s Plan to Stop Minting Pennies Means for Consumers (2025)

Wednesday, May 28, 2025

To Gen Z, Everything Is a Recession Indicator

Investors have long turned to offbeat economic gauges like underwear sales and the length of hemlines. Now, the TikTok generation is taking it to the next level.

By Hannah Erin Lang of The WSJ. Excerpts:

"At first, it was higher egg prices, declining demand for cardboard boxes and empty dance floors. Now, it’s low-rise jeans, flash mobs—even Lady Gaga’s return to pop music."

"To the extremely online, the portents of doom also include serif fonts, the popularity of press-on nails, messy buns, Lena Dunham’s latest public departure from New York and Gwyneth Paltrow’s decision to start eating cheese again. Responding to a seemingly innocuous social-media post with the phrase “recession indicator” has become a meme all its own."

"Investors big and small have parsed everything from credit-card delinquencies to shipping containers at the Port of Los Angeles. 

Former Federal Reserve Chairman Alan Greenspan famously followed sales of men’s underwear, which fall when times are tough because, well, who’s gonna know? The Lipstick Effect, meanwhile, posits that women splurge on smaller luxuries when household budgets are tight, making increased sales a sign of economic trouble."

"correlation doesn’t equal causation, as economic data wonks have often griped. One money manager once demonstrated that the production of butter in Bangladesh could technically “explain” much of the variation in the annual returns of the S&P 500."

"Some observers point to emptier bars and nightclubs as evidence that more consumers are cutting back. A skin-care company selling eggs could be a sign that essential goods are becoming luxuries, while the popularity of press-on nails might stem from customers cutting back on manicures. 

Others have observed that declining tips at strip clubs—subject of a viral tweet in 2022—could signal a decline in discretionary income."

"the renewed popularity of formal workwear. One theory is that people feel less secure in their jobs and therefore more pressure to present themselves professionally."

"Armchair economists have long cited the Hemline Index, which dates back to the early 20th century and hypothesizes that women’s skirts get longer when the economy is worse."

"Can cultural shifts—in fashion, film or music—actually predict where the economy is headed? Economists say it’s unlikely. But talk of recession has a habit of turning into a self-fulfilling prophecy" 

Related posts:

Are we going to have a recession soon? (2024)

The Fed is ‘playing with fire’ by not cutting rates, says creator of ‘Sahm Rule’ recession indicator (June 19, 2024)

What Causes Recessions? What Do Recessions Look Like? (2023)

The Sahm rule and recessions (2020) 

"It is named after economist Claudia Sahm, who served as a top economic advisor during the Obama administration and identified a historical indicator of coming recessions in 2019: every time since 1970 that the three-month moving average of the U.S. unemployment rate is more than half a percentage point above the lowest three-month moving average from the previous year, a recession has soon followed."

What ends expansions? (or what causes recessions according to Alan Blinder and Austan Goolsbee) (2019)

Are business cycles imbedded in longer cycles called financial cycles? (2019)

Monetary Policy and the Great Crash of 1929: A Bursting Bubble or Collapsing Fundamentals? (2018)

Some Bad News for Good News — Optimistic Forecasts Create Recessions (2018)

Monday, May 26, 2025

Life is full of tradeoffs: We can have more data centers and local tax revenue or less tourism and a dirtier environment

See Small-Town Locals and Newcomers Unite Against a Common Foe: Data Centers: Residents in Appalachian tourist area band together to keep one of the largest data-center complexes in the world out of their no-stoplight community by Kris Maher of The WSJ. Excerpts:

"residents [of DAVIS, W.Va.] are . . . determined to keep big tech out of one of the most scenic and ecologically diverse stretches of Appalachia."

"Tourists come here for the dark skies, wildflowers, art galleries, trails and Blackwater Falls. The county has one stoplight—16 miles away.

Similar clashes are happening in other states."

"But West Virginia’s new law is unusual. Boasting the “least restrictive regulatory environment in the nation,” it prohibits local officials from having any input into where off-grid data centers go."

it also "sends 70% of microgrid tax revenue to the state, leaving host counties with 30%."

"[residents] raised concerns about noise, light, air quality and the effect on tourism."

"the Ridgeline project could span 10,000 acres across parts of Tucker and Grant counties."

"Thomas Mayor Jody Flanagan wants more details before taking a position on the project. “If it’s going to be polluting and hurting tourism, that’s a con,” he said. “The pro is the revenue that would come.”" 

Related posts:

Life is full of tradeoffs: Seafloor mining could bring us metals used in the making of electric-vehicle batteries at the cost of harming the environment (2025) 

Life is full of tradeoffs: If we want a cleaner environment in Massachuesetts do we have to give up sand used to make concrete? 2024 (this one has another 20 posts on this topic that are not linked here)

Life is full of tradeoffs: If we want a cleaner environment in Minnesota do we have to give up metals needed for green energy? (2024) 

Life is full of tradeoffs: If we want to protect Hawaii's marine life and tuna fisheries we will have fewer rare minerals for defense applications (2024) 

Life is full of tradeoffs: If we want to keep gas prices low we might have to reduce sanctions on Russia (2024)

Life is full of tradeoffs: if we want more "big data" and artificial intelligence then we might have less green energy (2024)

Life is full of tradeoffs: if we want more nickel to make EV batteries we might have to use more coal (2024)

Life is full of tradeoffs: it costs money to keep chemicals out of our water systems (2024)

Life is full of tradeoffs: reaching net zero emissions by 2050 vs. the costs of the transition (2023) 

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

Sunday, May 25, 2025

Meet the ‘Stealthy Wealthy’ Who Make Their Money the Boring Way

The road to riches is paved with cup holders, burgers and miles of elementary school carpeting

By Juliet Chung of The WSJ. Excerpts:

"Derek Olson . . . has made a fortune making machines that rip up flooring, like carpeting in elementary schools."

"But a vast universe of traditional routes focused on providing goods and services has become increasingly central to the accumulation of significant, if less obvious, wealth in the U.S. 

“We call it the stealthy wealthy,” said Owen Zidar, a Princeton University economist who has studied the group with University of Chicago economist Eric Zwick. 

Olson’s annual income running his flooring-equipment company puts him in the top 1% of earners in the U.S., or people who as of 2022 made at least $550,000, excluding capital gains. He expects Minnesota-based National to bring in roughly $50 million in revenue this year, after recently buying an Australian manufacturer. His family’s luxuries include two Land Rovers, private school for the kids and a month-long European summer vacation.

Behind a paycheck, the largest source of income for the 1% highest earners in the U.S. isn’t being a partner at an investment bank or launching a one-in-a-million tech startup. It is owning a medium-size regional business. Many of them are distinctly boring and extremely lucrative, like auto dealerships, beverage distributors, grocery stores, dental practices and law firms, according to Zidar and Zwick."

"The share of income that ownership generates has increased to 34.9% in 2022 from 30.3% in 2014 for the top 1% earners."

"Zidar and Zwick attribute the growth of this group to tax cuts in recent decades for such business owners and low interest rates that have boosted company valuations. The number of such business owners worth $10 million or more, adjusted for inflation, has more than doubled since 2001, to 1.6 million as of 2022."

Related post:

Changing pathways to success for young people and how some high schoolers might be getting there (2025)

Friday, May 23, 2025

No Evidence of Effects of Testosterone on Economic Preferences

From Tyler Cowen.

"There is conflicting evidence on whether testosterone affects economic preferences such as risk taking, fairness and altruism, with the evidence suggesting significant effects coming from correlational studies or small underpowered testosterone administration studies. To credibly test this hypothesis, we conducted a large pre-registered double-blind randomized controlled trial with N = 1,000 male participants; 10–20 times larger than most previous randomized controlled studies. Participants were randomly allocated to receive a single dose of either placebo or intranasal testosterone. They thereafter carried out a series of economic tasks capturing social preferences, competitiveness and risk preferences. We fail to find any evidence of a treatment effect for any of our nine primary outcome measures, thereby failing to conceptually replicate several previous studies reporting positive findings that used smaller sample sizes. In line with these results, we furthermore find no evidence of an association between basal testosterone and economic preferences, failing to also conceptually replicate previous correlational studies.

By Anna Dreber, et.al."

Related posts:

Can Testosterone Help Women Earn More Money? (2009)  

Male sex hormone may affect stock trades (2009)

Women Make Trade-offs When Looking For A Man (2010)

Are Women Better At Investing Than Men? (2010)

What Do Wall Street Traders Need Just The Right Amount Of? (2012)

The Myth Of The Ring Of Gyges And Insider Trading By Congressional Staffers (2010)

Thursday, May 22, 2025

IBM CEO Says AI Has Replaced Hundreds of Workers but Created New Programming, Sales Jobs

The tech company promises higher total employment as it reinvests resources toward roles like software development

By Belle Lin of The WSJ. 

It might seem strange that AI or any new technology can increase employment. But it does happen. Right after excerpts from this WSJ article I repost a blog entry from 2016 called Automation Can Actually Create More Jobs. Then after that are links to other posts on jobs, robots, automation and AI.

First excerpts from Belle Lin's article:

"International Business Machines Chief Executive Arvind Krishna said the tech giant has used artificial intelligence, and specifically AI agents, to replace the work of a couple hundred human resources workers. As a result, it has hired more programmers and salespeople, he said."

"While there haven’t yet been widespread layoffs or downsizing as a result of AI across the economy, some business leaders have said they are holding down head count as they investigate the use of the technology."

"the information-technology workforce has continued to shrink as AI weighs on hiring and some workers leave the field."

"our total employment has actually gone up, because what it does is it gives you more investment to put into other areas,” Krishna told The Wall Street Journal."

Now that blog post from 2016 Automation Can Actually Create More Jobs: 

Automation Can Actually Create More Jobs

Evidence shows increased productivity leads to more wealth, cheaper goods, greater spending power and ultimately, more jobs

By Christopher Mims of the WSJ.

There are four types of unemployment: seasonal, structural, frictional and cyclical.

Structural unemployment is unemployment caused by a mismatch between the skills of job seekers and the requirements of available jobs.

One example of this is when you are replaced by a machine, like bank tellers who were replaced by ATMs. Another example is when there is a fall in demand for your product, so you get laid off, like with typewriters since people now use computers. A third example is geographical, when the jobs are not in your region of the country.

But automation may not be a problem, even in the case of ATMs. Excerpts from the article:
"Since the 1970s, when automated teller machines arrived, the number of bank tellers in America has more than doubled. James Bessen, an economist who teaches at Boston University School of Law, points to that seeming paradox amid new concerns that automation is “stealing” human jobs. To the contrary, he says, jobs and automation often grow hand in hand."

"Sometimes, of course, machines really do replace humans, as in agriculture and manufacturing"

"a long trail of empirical evidence shows that the increased productivity brought about by automation and invention ultimately leads to more wealth, cheaper goods, increased consumer spending power and ultimately, more jobs.

In the case of bank tellers, the spread of ATMs meant bank branches could be smaller, and therefore, cheaper. Banks opened more branches, and in total employed more tellers, Mr. Bessen says.

Some individuals are uprooted and suffer. In 1900, 40% of U.S. workers toiled in agriculture; today, that figure is less than 2%. Manufacturing employment in industrialized countries has declined in recent decades, as fewer people make more goods. But society, on the whole, has come out ahead.
It’s true that technology alters the quality, as well as the quantity, of jobs"

[a study] "found big increases in both low-paying and high-paying jobs. There are more barbers and barkeepers. But there also are more accountants and nurses, reflecting the rising complexity of the modern economy.

Paradoxically, says Mr. Stewart, many of the fields most transformed by technology have produced the biggest increases in employment, from medicine to management consulting. “What we saw was that machines and people were highly complementary,” he says.

Such bifurcated labor markets have ill effects. Disappearing factory jobs have largely been replaced by jobs in the service sector, where highly skilled workers, like doctors and computer programmers, are paid more, while many others see to the comfort and health of the affluent. In the middle, wages have stagnated, helping spawn our current age of populism.

“The era of mass manufacturing employment in the 1960s and 1970s was a good thing,” says Dr. Autor. “It created a lot of good jobs, it needed a lot of hands and eyes, and required some skills but not an enormous skill set. The work was relatively high value added.” But, he adds, that era is for the most part behind us."

"For all the recent advances in artificial intelligence, such techniques are largely applied to narrow areas, such as recognizing images and processing speech. Humans can do all these things and more, which allows us to transition to new kinds of work."

"the problem is not “mass unemployment, it’s transitioning people from one job to another.”"

"Near the end of the 19th century, America’s agricultural states faced the prospect of mass unemployment as farms automated.

In response, they created the “high school movement,” which required everyone to stay in school until age 16. It was hugely expensive, both because of the new schools and teachers, but also because these young people could no longer work on the farm. But it better prepared workers for 20th century factory jobs"

Related posts:

Technological Disruption in the Labor Market (2025)

Why AI Might Not Take All Our Jobs—if We Act Quickly (2025)

Some good news on productivity (2025) (AI is mentioned)

Some economics of A.I. (2025) 

The AI-Generated Population Is Here, and They’re Ready to Work (2024)

Two recent articles on robots and human workers (2024)

Self-service kiosks at McDonald’s are not reducing employment (2024) 

Robots writing science fiction (2024)

Amazon’s New Robotic Warehouse Will Rely Heavily on Human Workers (2024)

Will technology cost artists their job? (2023)

Robots Have Been About to Take All the Jobs for 100 Years (2023)

“Why did the human stare at the glass of orange juice?” “They were trying to concentrate.” (2023) (Partly about AI being used to tell jokes)

The $900,000 AI Job Is Here (2023) 

Prompt engineers chat with generative-AI chatbots (creative destruction and how the economy just keeps creating new types of occupations & professions) (2023)

Are robots writing fake product reviews? (2022)

Answering the Call of Automation: How the Labor Market Adjusted to the Mechanization of Telephone Operation (2022) 

Meet the Army of Robots Coming to Fill In for Scarce Workers (2022)

Warehouses Look to Robots to Fill Labor Gaps, Speed Deliveries (2021)

What if companies can't afford real models for their ads? Use AI generated fake pictures (2020) 

An AI Breaks the Writing Barrier (2020) 

What Econ 101 Can Teach Us About Artificial Intelligence: Here's why advancing technology often leads to more jobs for humans, not fewer (2017)

Can the Robot Revolution Create Enough Jobs? (2017)

Are Robots Going to Steal Our Jobs? Many technologists think so, but economists aren't so easily convinced (2017)

Tuesday, May 20, 2025

Can You Mix Economics With Religion?

The ancient Greeks sure thought you could. They had a god of commerce and a god of wealth. You can read about them at Britannica.

Hermes (commerce)

Plutus (wealth)

The name of Plutus came up in a Wall Street Journal article called The Greek Tragedy That Changed Europe. It is about the debt problems that Greece faces and how they might affect the European Union. It says:

"Plutus, the Greek god of wealth, did not have an easy life. As the myth goes, Plutus wanted to grant riches only to the "the just, the wise, the men of ordered life." Zeus blinded him out of jealousy of mankind (and envy of the good), leaving Plutus to indiscriminately distribute his favors.

Modern-day Greece may be just and wise, but it certainly has not had an ordered life. As a result, the great opportunity and wealth bestowed by European integration has been largely squandered."

Here are links for Wikpedia:

Hermes

Plutus

The following picture shows what Hermes might have looked like


The Freaknomics blog has a good article about people donating more money to their churches if other people can see how much they are donating called “We Pretend We Are Christians”