Two Champions Of Entrepreneurship Win The Presidential Medal Of Freedom

They are Noble Peace Prize winning economist Muhammad Yunus and the late congressman Jack Kemp. You can read about this at President Obama Names Medal of Freedom Recipients. Here are the testimonials for these two winners:

Jack Kemp
Jack Kemp, who passed away in May 2009, served as a U.S. Congressman (1971 – 1989), Secretary of Housing and Urban Development (1989 – 1993), and Republican Nominee for Vice President (1996). Prior to entering public service, Kemp was a professional football player (1957 – 1969) and led the Buffalo Bills to American Football League championships in 1964 and 1965. In Congress and as a Cabinet Secretary, Kemp was a self-described "bleeding heart conservative" who worked to encourage development in underserved urban communities. In the years leading up to his death, Kemp continued seeking new solutions, raising public attention about the challenge of poverty, and working across party lines to improve the lives of Americans and others around the world.

Muhammad Yunus
Dr. Muhammad Yunus is a global leader in anti-poverty efforts, and has pioneered the use of "micro-loans" to provide credit to poor individuals without collateral. Dr. Yunus, an economist by training, founded the Grameen Bank in 1983 in his native Bangladesh to provide small, low-interest loans to the poor to help better their livelihood and communities. Despite its low interest rates and lending to poor individuals, Grameen Bank is sustainable and 98% percent of its loans are repaid – higher than other banking systems. It has spread its successful model throughout the world. Dr. Yunus received the Nobel Peace Prize in 2006 for his work.

Dr. Yunus has is own website at Muhammad Yunus.

You can read more about Jack Kemp at PRIVATE SECTOR; Coaching Entrepreneurs for Profit and Jack Kemp: A Champion of Small Business.

Paul Krugman Thinks Like A Small Child

And I mean that as a compliment. A book about how children think was reviewed in the NY Times today and it reminded me of something Krugman wrote in Slate magazine in 1997. So I wrote a letter to the Times book review editor showing the similarity. If it gets printed, I will report that here. The letter is below followed by links to the 1997 Slate article and the book review.

"I read with interest Anthony Gottlieb's review of Alison Gopnik's book "The Philosophical Baby" ("Young Philosophers," p. 9, Aug.9). What most caught my attention was the following passage: "A recurring theme of Gopnik’s is the idea that playful immersion in freely conjured hypothetical worlds is what teaches us how to make sense of the real one. She describes, for instance, how small children’s grasp of “counterfactual” situations enables them to calculate the probabilities of alternative courses of action."

By an amazing coincidence, that same Book Review issue had two reviews by Nobel Prize winning economist Paul Krugman. He wrote something very similar in Slate magazine in 1997. It was "You can't do serious economics unless you are willing to be playful. Economic theory is...is a menagerie of thought experiments--parables...you must play with those ideas in hypothetical settings. Innovative thinkers, in economics and other disciplines, often have a pronounced whimsical streak." Krugman also mentioned how some writers can take their subject "too seriously to play intellectual games. To test-drive an idea with seemingly trivial thought experiments, with hypothetical stories about simplified economies." Maybe we would all benefit from more training in this technique."

The Accidental Theorist

Young Philosophers

Pictures of Ireland

My students asked me to post pictures of my trip. But I have not gotten around to posting some of the pictures my wife took. Her nephew did take some and he posted them to his blog. So click here to see them. Warning: I appear in one of them.

Aging and Entrepreneurship (And The Coming Entrepreneurship Boom)

Below is an article I wrote that was published in the Encyclopedia of Financial Gerontology, (Lois A. Vitt and Jurg K. Siegenthaler, Editors-in-Chief, Greenwood Press, 1996). It is now called Encyclopedia of Retirement and Finance. I examined the psychology of entrepeneurship for older people through the lense of mythology and Erik Erikson's eight ages of man. My article is relevent because the Kaufman Foundation recently released a report called The Coming Entrepreneurship Boom. The report says that the aging population in the USA will actually help this boom. My article discussed how important entrepreneurship can be for people as they age, and not just for economic reasons.

Here it is:

ENTREPRENEURSHIP, the initiation and assumption of the financial risks of a business and its management. The decision to start a business is often complex. Many factors, including the need for achievement, the need for control over one's destiny, the willingness to take risks, the loss of one's job, and other forms of displacement may prompt a person to start his or her own business. While some writers see no link between age and the decision to start a new business, others have found close links. When age is a significant factor, it is often for psychological reasons.

Entrepreneurial opportunities are most likely to be pursued by people with a college education who are in their late thirties and have established careers. Age is relevant to entrepreneurship, and entrepreneurship is important for the aged. Of those who are employed at age 65 or older, 27% are self-employed (Maddox 1985). It is useful to examine the relationship between entrepreneurship and aging through the internal or psychological aspects of a person's decision to become an entrepreneur.

The Entrepreneur and Hero Compared

Joseph Campbell believed that the entrepreneur was the real hero in our society. Although he never systematically compared the entrepreneur and the hero, it is interesting to do so. Heroes and entrepreneurs are called to take part in an adventure that is a simultaneous journey of self-discovery, spiritual growth, and the personal creativity they make possible. An entrepreneur's journey closely resembles the journey of the hero in mythology as outlined in Campbell's book, The Hero 'With a Thousand Faces (1968). There is a strong similarity between the journey that

entrepreneurs take and the adventure of heroes. Entrepreneurs and heroes also have similar personality traits. Myths describe the universal human desires and conflicts we see played out in the lives of entrepreneurs. Ian MacMillan and Rita Gunther McGrath (Wall Street Journal 1992) of the Wharton School's entrepreneurial center found that entrepreneurs, no matter what country they call home, think alike. Campbell found that the basic pattern in the hero's journey is the same in every culture.

Heroes bring change. Campbell (1968) refers to the constant change in the universe as "The Cosmogonic Cycle" that "unrolls the great vision of the creation and destruction of the world which is vouchsafed as revelation to the successful hero." This recalls Joseph Schumpeter's theory of entrepreneurship as creative destruction. A successful entrepreneur simultaneously

destroys and creates a new world, a new way of life. Henry Ford destroyed the horse and buggy age while creating the world of the automobile. Campbell's hero finds that the world "suffers from a symbolical deficiency" and "appears on the scene in various forms according to the changing needs of the race." Changing needs and deficiencies correspond to the changing market conditions or the changing desires for products. The entrepreneur is the first person to perceive changing needs. Campbell believed that people become creative when they engage in an activity, pursue a career or entrepreneurial venture, because it is what one loves to do and because it bestows on one a sense of personal importance and fulfillment. It is not the social system that dictates that it be done; rather, the drive comes from within. It is this courageous action that opens up doors and creative possibilities that did not previously exist.

Relationship of the Hero's Journey to Aging

The hero's goal is now to find a purpose in life. Campbell's and Erik Erikson's (1963) heroes are similar, because the hero's journey is a quest for personal identity that can be found in service to others or to society, or in finding and delivering a boon. During the generativity versus stagnation stage, which comes in the second half of life, in Erikson's eight ages of man, people become willing to take risks in order to be creative or make their mark upon society. Generativity involves establishing and guiding the next generation, but it also includes productivity and creativity, which, along with the willingness to take risks, are essential to entrepreneurship. For Campbell, the act of creating involves the willingness to take a risk and cross a boundary into a new domain of ideas. To be unwilling or afraid to do so is to be controlled by what he calls "the elder psychology," or the unwillingness to strike out on one's own and take risks.

The paradox, then, is that although entrepreneurship may be an important path for people to discover themselves and "do something meaningful for society" as they become older, they must resist this "elder psychology," which Campbell believes blocks risk taking, creativity, and entrepreneurship. When a person is able to champion things becoming, he or she can achieve generativity by making a significant and unique contribution to society. If one is able only to maintain the status quo, he or she will stagnate and will remain self-centered and unable to contribute to society. Almost by definition, entrepreneurs are champions of things becoming.

In counseling and advising the elderly in the area of entrepreneurial activity, it is useful to keep these insights from mythology and psychology in mind. They deal with the deepest of needs and forces in the human psyche. For an older person contemplating a new business venture, it will be helpful to recognize that it is not just the potential financial gains or losses involved that are important. The entrepreneurial act may be a life-defining and self-defining act, one with deep personal and perhaps even spiritual implications for the individual and his or her relationship with society. Entrepreneurs are often seen as having different attitudes toward risk: what a nonentrepreneur might view as a great financial risk, the entrepreneur may see as a cost of learning and adventuring. The venture is an end in itself, more than the profit. People who start new businesses in the second half of life may view risk in this way, because they feel such a strong need to define themselves and contribute to society.


References

Campbell, Joseph. 1968. The Hero With a Thousand Faces. Princeton. NJ: Princeton University Press.

Erikson, Erik H. 1963. Childhood and Society. New York: W. W. Norton.

Jung, Carl G. 1956. Symbols of Transformation. New York: Harper Torchbooks Bollingen Library.

Maddox, George L., et al. 1985. The Encyclopedia of Aging. New York: Springer.

Wall Street Journal. 1992. 6 February; A1.

Yes, You Can Have Too Many Friends

Even Bill Gates says so. Read about that at Bill Gates quits Facebook over 'too many friends'. Here are the key exerpts:

"Microsoft co-founder Bill Gates said he was forced to give up on the social networking phenomenon Facebook after too many people wanted to be his friend.

Gates, the billionaire computer geek-turned-philanthropist who was honoured Saturday by India for his charity work, told an audience in New Delhi he had tried out Facebook but ended up with "10,000 people wanting to be my friends".

Gates, who remains Microsoft chairman, said he had trouble figuring out whether he "knew this person, did I not know this person"."

And

""I read a lot and some of that reading is not on a computer," he said.

Gates, who sought to drive a vision of a computer on every desk and in every home, said the information technology revolution had been "hugely beneficial" but added: "All these tools of tech waste our time if we're not careful.""

So you can use technology too much as well. Notice how he brings in costs and benefits (waste implies cost and he mentions technology as being beneficial). But the more you use something, the less beneficial it is and it can also become more costly. That is, the marginal benefit (MB) falls and the marginal cost (MC) rises. The best result is to keep adding more of something up to the point where MB = MC. I explain all of this at the following site: Allocative Efficiency. This is taken directly from notes I use in one of my lectures. Just think about friends when you read it and look at the graph. At some point, one more friend has less MB than the MC. So it means you can have too many friends because you can have too much of anything.

World's Most Expensive Fast Food (and some game theory)

You can read about it at World's Most Expensive Fast Food. Here is the opening paragraph:

"Dublin is home to Trinity College, the Guinness Storehouse and St. Stephens Green. Here, you'll also find the world's most expensive fast food. In U.S. dollars, a hamburger meal at a medium-priced establishment, as defined by consulting firm Mercer, costs a whopping $9.16."

Here are the top 5:

1. Dublin $9.16
2. Amsterdam $7.88
4. Paris $7.43
4. Brussels $7.43
5. Rome $7.30

In New York it's $5.99. One can only hope that if you are going to Dublin that the cost is worth it, that they have some attractions to see and some fun things to do. I can't see why anyone would go there at those prices:)

Update July 10: World's Most Expensive Cities To Live

This was in the "Peanuts" comic strip once. Charlie Brown is on the mound talking to himself.

Frame 1: "This guy will never be expecting a fastball..."

Frame 2: "With the bases loaded he'll be expecting a curve. But he also knows I know what he's expecting..."

Frame 3: "So if he's expecting me to pitch what I know he knows I know he knows he's expecting..."

Frame 4: "Where was I?"

Slave Redemption in Sudan (Another Dangerous Economist Classic)

In my ECON 2302 class this week we read chapter 8 of the book The Economics of Public Issues. It seeems like a good idea to buy a slave and set him or her free. But the "redeemers" have often wanted to buy large groups of slaves to redeem. This has encouraged people to capture slaves in the first place. Then it puts more money in the hands of the slave traders who buy more weapons. Some people runs scams, selling people that were not really slaves. Below are links to the three articles listed in the book's bibliography.

The False Promise of Slave Redemption

Ripping Off Slave ‘Redeemers’

Fake slaves con aid agencies in Sudanese liberation scam

The following link has links to lots of info on this issue and different views

Policy Debate: Do slave redemption programs reduce the problem of slavery?

Finally, there was a movie made in 1971 that you can read about at the Internet Movie Database called Skin Game. It was about a fake slave being sold over and over again as a scam. Here is the synopsis:

"Quincy Drew and his black friend Jason O'Rourke have pulled off every dodge known for conning a well-heeled sucker, but it wasn't until they hit on the old skin game that they started to clean up. The game is simple. Jason, though born a free man in New Jersey, poses as Quincy's slave as the pair ride through Missouri and Kansas in 1857. Quincy picks a likely mark in each town, sells Jason to him for top money and rides out of town. Then Quincy and Jason get back together on the road to another town, because if Jason can't just run off after dark, Quincy finds a way to spring him loose."

Does It Pay to Host the Olympics?

This was an article in Parade magazine today. You can read it at Does It Pay to Host the Olympics?. It can cost a city $50 million just to go through the bidding process. It is not clear that the benefits always outweighs the costs. Here is an exerpt:

"The 2004 Athens Olympics cost more than $11 billion and brought the city only about $2.8 billion in revenue. China has not released earnings from the 2008 Games in Beijing, but the $43 billion price tag shattered all Olympic records."

Montreal took 30 years to payoff the cost of the 1976 olympics. Chicago could spend up to $5 billion if they are the host of the 2012 summer olympics. Atlanta seems to have put its olympic buildings to good use.

Can Your Student Loan Get a Bailout?

To read about this go to Can Your Student Loan Get a Bailout?. The article says "About two-thirds of the 3 million or so college seniors who donned a cap and gown this year took on an average debt of $22,500 for the privilege of that diploma." The government policies on this limit payments if you're income is low and/or you work in some kind of public service.

Another Dangerous Economist Classic: Dim economy drives women to "donate" eggs for profit

Click on Dim economy drives women to donate eggs for profit to see how much money women can get for an egg.

A Dangerous Economist Classic: Can You Find Virtue by Investing in Vice?

To read this scintillating entry, go to Can You Find Virtue by Investing in Vice?

A Few Extra Pounds Might Bring Extra Years

In my face-to-face class we read a chapter about obesity in the book The Economics of Public Issues. But the article titled A Few Extra Pounds Might Bring Extra Years discusses some research that says that being underweight might be worse than being overweight. Here is an exerpt from the article:

"Compared to normal-weight people, those who were underweight were 70 percent more likely to die and those who were extremely obese were 36 percent more likely to die..."

But "that doesn't mean that people in the normal weight range should try to put on a few pounds," according to one of the researchers. Being obese means your body mass index (BMI) was 30 and above. Here is a Body Mass Index Chart based on height and weight

People Are Saving More Out Of Fear

This may be more of a macro issue, but the Wall Street Journal reported that "personal saving as a percentage of after-tax income rose to 5.7% in April, the Commerce Department said Monday, up from 4.5% in March and well above the zero savings rate reported a year earlier." The article is called Americans Get Even Thriftier as Fears Persist. People are fearful of losing their jobs, so they are saving more than they used to. Here is another exerpt from the article:

"The shift toward a higher saving rate is likely to persist even after the economy recovers, said Christopher Carroll, an economist at Johns Hopkins University who studies consumer behavior.

The low saving rate that persisted until last year was due in large part to an expansion in the availability of credit. On the heels of the financial crisis, credit availability has gone into reverse, making it more difficult for consumers to spend beyond their income.

Just as the Great Depression ushered in a shift in behavior that affected an entire generation, Mr. Carroll said this financial crisis will shock consumers into behaving differently. "People had got the sense that the world was very stable and everything was very predictable and reliable," he said. "That's a hard view to hold onto now.""

Tiger Woods Is Still The Greatest Golfer In History

Okay, he did not win the Masters or the U. S. Open this year. But what is the ultimate yardstick for measuring golfers? It is money won. Woods has been the leading money winner on the PGA tour 8 years. The only other golfer to lead for 8 different years was Jack Nicklaus. Woods's 8th year came when he was 31 years old. When Nicklaus did it for the 8th time, he was 36. So Woods beat him by five years. The next two highest totals for years leading the tour in money are Tom Watson and Ben Hogan, both tied at 5. So it really just comes down to Nicklaus and Woods. Nicklaus was the leading winner 8 times from 1964 through 1977 or 8 out of 13 years. Woods led 8 years from 1997-2007 or 8 years out of 11. So with Woods taking fewer years to do it and doing it at a much younger age, it shows he clearly has the edge. Even if he retired now, it would be a no brainer that he is the greatest.

Source: The ESPN Sports Almanac

Quirky Economic Indicators

You probably know that our economy is going through a recession. Some of my students might recall that one definition of a recession is 2 straight quarters of falling gross domestic product. A quarter is a three-month period. The definition actually uses "real" GDP, which is GDP adjusted for changing prices and is often on a per capita basis (per person). But some other things show that we are in a recession and that is where 10 Quirky Economic Indicators comes in. These other factors, like falling GDP, show that the economy is having problems. For example,

"The National Gardening Association finds that the number of households who will grow their own fruits, berries, vegetables and herbs this year is 19% higher than in 2008.

That makes 43 million gardeners in the United States this year. It's fun and relaxing, no doubt, but 54% of the respondents say the prospect of saving money on groceries motivates them to till the soil."

Other indicators are related to movies, dating and mosquito bites.

Wedding Scams Are On The Rise In China

And it's because of simple economics. Family planning policies which limited couples to one child along with a preference for boys has left a surplus of 32 million marriage aged men. So it is easier for a woman to pretend to want to marry a man. Once she receives a dowry, the scam artist can split. Men are so happy to have found a wife that they are not as careful as they should be. The price of brides has gone up and the savings rate of young men has gone up as they try to have enough money to get married. You can read all about it at It's Cold Cash, Not Cold Feet, Motivating Runaway Brides in China.

This is not a spam blog. I teach economics at San Antonio College in San Antonio, Texas. Click here to see my home page from by school.

Miley Cyrus vs. The Ticket Scalpers

You can read about it at Going 'Paperless' to Thwart Scalpers.

Here is how it works:

"The technology, which Ticketmaster tested last year, is meant to make seats impossible to sell or transfer because they can be redeemed only at the concert, using the credit card with which they were bought. The plan has scalpers and resale sites crying foul.

Tickets for the concerts by Ms. Cyrus, the star of Walt Disney Co.'s popular "Hannah Montana" TV series, will cost $39.50 to $79.50, plus fees. When purchasers arrive at the concert, their credit card will be swiped with a handheld scanner that will print out a "seat locator.""

I guess a scalper could simply walk outside with the seat locator and sell them. But then it makes the scalper's job pretty hard. Maybe for some reason this is not possible anyway.

I never had a problem with scalpers. They would wait in line to buy tickets and then sell them to the highest bidder. You don't have to buy them from scalpers if you don't want to. They perform a service by waiting in the ticket line so you don't have to. Of course, these days computers are used to buy the tickets and scalpers might have automated programs to buy them. But that still saves you the time and trouble of trying to be first in line on the computer.

I don't understand why performers just don't charge a higher price to begin with. Then scalpers would not be an issue. With higher prices you would not have to have people waiting in line to buy tickets or trying to be the first online. People only turn to scalpers because they did not want to wait in line or waited and still did not get tickets (or tried to buy them online when they first came available and still did not get them). If you charge a price that is below equilibrium you create a shortage and shortages cause lines.

Another Journalist Misunderstands Supply And Demand

The article is Oil Is Plentiful, Demand Weak. Why Are Gas Prices Going Up? by VIVIENNE WALT. Here is the opening paragraph which illustrates the problem:

"Storage tankers across the globe may be brimming with oil that no one is buying because of the global economic downturn, but the traditional laws of supply and demand don't always apply to oil prices. Drivers have faced rising prices at the gas pump in recent months, as investors and oil-producing countries hoard supplies in anticipation of a global economic recovery later this year."

Actually, the "traditional laws of supply and demand" do apply. Price is determined by the intersection of supply and demand curves (or lines). But those curves can shift to the right (an increase) or to the left (decrease). One factor that causes a shift is "expectation of future price." Most, if not all, introductory textbooks have this factor. If sellers expect the price of their good will go up in the future (like if there is going to be an economic recovery), then they reduce the amount they offer for sale today. So the supply curve moves to the left and price rises. This is exactly what we teach in principles of economics courses. The graph below illustrates this:



Now the article does discuss the role that OPEC plays. Certainly when cartels are present, and they act like a monopoly, price will be higher. But the basic textbooks predict that, too.

Wall Street Journal Book Review Is Wrong About The Beard Thesis

It was in a review of David S. Brown's book Beyond the Frontier. (April 29). Here is the link:

A Heartland View of History.

Here is the relevant passage:

"The big idea in Beard's (Charles Beard) masterwork, "An Economic Interpretation of the Constitution of the United States" (1913), was that the Founding Fathers were, in his words, "with a few exceptions, immediately, directly, and personally interested in, and derived economic advantage from, the establishment of the new system." At first violently attacked, his thesis came to be widely accepted in the 1930s. "By introducing the idea that self-interest influenced the framers," Mr. Brown writes, "Beard forced students of the American past to consider the Constitution as an economic rather than a merely legal, let alone divinely inspired, text." Nevertheless, Beard's thesis was thoroughly demolished in the 1950s by the Texas-born historian Forrest McDonald and several other scholars -- an accomplishment that Mr. Brown, strangely, neglects to mention. Mr. McDonald argued, for instance, that on close examination, there was "virtually no correlation" between the Framers' actual economic interests and their votes at the Constitutional Convention."

But more recent scholarship (mainly by economist Robert McGuire, whom we will hear from below) using modern statistical techniques supports the Beard thesis. The WSJ actually had a book review which said something similar a few years ago. I wrote a letter to the editor explaining what McGuire had done and that he had published research in many top journals (not to mention a book). But the WSJ did not print it.

McGuire's book is called To Form a More Perfect Union: A New Economic Interpretation of the United States Constitution. New York: Oxford University Press, 2003. xii +395 pp. $24.95 (hardback), ISBN: 0-19-513970-4.

It has received some good reviews which you can read
here and here and here.

McGuire has published several articles on this in The American Economic Review and the Journal of Economic History over the last 20 years. His findings are summarized in his book. To truly understand the data (and the voting behavior of convention delegates), McGuire used a multivariate statistical approach. This allows us to see that slave owners truly were less likely to favor the Constitution than merchants. Simple tallies of votes are not sophisticated enough. All other factors must be held constant when trying to discover the true relationship between two variables.

Here is what professor McGuire wrote to me in an email:

"... an economic interpretation that supports Beard in the broad general sense that economic interests mattered (not necessarily all of Beard's specifics mattered as he claimed) has been the prevailing view among economic historians for nearly three decades. ... these studies used the data that McDonald collected (as well as a host of other data on economic and ideological interests); but these are data that McDonald did not formally analyze in his book according to any modern standard. ... a likely reason that I and others have been ignored by traditional historians is because of the general nature of their methodology; it is quantitative and statistical. (See my reference to John Murray's essay below.) (Farley Grubb has several papers on bankers' rent seeking and the monetary powers included in the Constitution and Heckelman and Dougherty have a couple or so papers that re-examine my work).

McDonald himself never said that economic intetrests did not matter at all; he said they did not matter along Beard's specific dichotomy of realty versus personalty and that the specific interests of the founders could not be aligned on one side of an issue with other specific interests on another side. He felt the interests were too varied and dispersed across supporters and opponents of the Constitution so that patterns could not be indicated. Moreover, McDonald has really been misinterpreted by most of his own supporters to claim that economic interets did NOT matter at all.

John Murray, University of Toledo, ...tried to explain why historians have ignored my work, basically arguing that traditional historians ignore economic historians unless they are forced to pay attention because of a media/publicity
blitz."

Who Was Alex P. Keaton's Favorite Economist? Milton Friedman

Click on the following video link to find out:

Who Was Alex P. Keaton's Favorite Economist?

You will only have to watch a few minutes to find out. It is from the 1980s sitcom "Family Ties." Michael J. Fox played Alex Keaton. In this episode he tells another character that Milton Friedman was his favorite economist.