When Self-Interest Isn’t Everything

It might seem surprising to see an economist write an article with this title, but it was in the New York Times a few days ago by Robert Frank which you can read here. One thing he says is

"Self-interest is surely an important human motive, perhaps even the most important motive much of the time. But it is never the only important motive."

Another famous economist, Frank Knight, wrote in 1934:

"Life is at bottom an exploration in the field of values, an attempt to discover values, rather than on the basis of knowledge of them to produce and enjoy them to the greatest possible extent. We strive to 'know ourselves,' to find our real wants, more than to get what we want."

You Are What You Spend

That is the title of a very interesting New York Times article which you can read here. It is by two economists who work at the Federal Reserve bank in Dallas. They show that the level of consumption between rich and poor in this country is not as big as the difference between income. The poor often have resources that the government does not count, like capital gains. Here is one really interesting quote:

"At the average wage, a VCR fell from 365 hours in 1972 to a mere two hours today. A cellphone dropped from 456 hours in 1984 to four hours. A personal computer, jazzed up with thousands of times the computing power of the 1984 I.B.M., declined from 435 hours to 25 hours. Even cars are taking a smaller toll on our bank accounts: in the past decade, the work-time price of a mid-size Ford sedan declined by 6 percent."

Studies Warn Biofuel Crops Could Accentuate Global Warming

That is the title of an article you can read here. In one of my classes this week, we read about ethanol in the book The Economics of Public Issues. This article talks about the environmental problems that biofuel crops might cause. Here is the first paragraph:

"Just one month ago, a study conducted by a team of American researchers concluded that there was nothing more environmental-friendly than the biofuel crops, that could reduce the greenhouse gas emissions by 94% and produce five times more energy. New studies however warn that by transforming the various ecosystems into biofuel crop fields would only accentuate the global warming phenomenon rather than reducing it. According to the latest estimations, converting natural ecosystems into biofuel crop fields is likely to release up to 420 times more carbon."

United Air to Charge Some Fliers for 2nd Checked Bag

That is the title of an article you can read here. Doing this will encourage people to bring fewer suitcases or pack their suitcases more efficiently. It could mean less weight on the plane, which is important with higher fuel costs. It makes sense that those with more bags pay more since they use more fuel. But people might just get a bigger suitcase. That one suitcase could carry all that they want and would mean no extra charge. You say the airlines should weigh everyone and charge people partly based on their weight. But that would mean weighing everyone. That would mean buying scales and taking the time to weigh everyone. So the suitcase policy is easier to carry out. It will work as long as people just don't go out and buy one big suitcase.

Amazon.com Sells Book For Less Than The Publisher

I got an email from Amazon.com the other day offering to sell me a book for abut $14. It is a baseball book by Bill James, the well known stat guru. The book is published by ACTA Sports. A couple of hours later I get an email from ACTA sports wanting to sell it to me for $21.95 and they charge more for shipping than Amazon.com. So, of course, I ordered it from Amazon. It made me wonder, does ACTA sports know that I could by it for alot less at Amazon? Maybe not everyone gets that offer from Amazon. Maybe I got it because I have ordered other books from them and people who have not ordered much from Amazon before would not get the offer.

One way this might make sense for ACTA is that their email might simply alert me and others that a book is available. They might even know that some of us will head over to Amazon to buy it, but some won't and they will get a few extra bucks from them. In any event, the email might be a pretty cheap way to advertise.

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.