Interesting New Journal: Religion, Brain & Behavior

It looks like it will start next year. You can read about it at Religion, Brain & Behavior. It will be very interdisciplinary. Here are the aims and scope:

"The aim of Religion, Brain & Behavior (RBB) is to provide a vehicle for the advancement of current biological approaches to understanding religion at every level from brain to behavior. RBB unites multiple disciplinary perspectives that share these interests. The journal seeks empirical and theoretical studies that reflect rigorous scientific standards and a sophisticated appreciation of the academic study of religion. RBB welcomes contributions from a wide array of biological and related disciplines, including cognitive science, cognitive neuroscience, evolutionary psychology, social psychology, evolutionary anthropology, social neuroscience, neurology, genetics, demography, bioeconomics, neuroeconomics, physiology, developmental psychology, psychology of religion, moral psychology, archaeology, mimetics, behavioral ecology, epidemiology, public health, cultural evolution, and religious studies. In summary, RBB considers high quality papers in any aspect of the brain-behavior nexus related to religion.

RBB publishes high quality research articles and target articles with about ten solicited commentaries and an author response. Issues are published three times during 2011, and four times annually from 2012 onwards."

It will be published by Institute for the Biocultural Study of Religion. There vision is:

"The leadership of the Institute for the Biocultural Study of Religion (IBCSR) has an immodest vision for transforming current and future religion-science interactions, a transformation powered by the clarity of its ideas and the quality of its research. Our ultimate aim is to contribute to a revolution in the cultural understanding of religion through rigorous research-based knowledge of its nature and functions in individuals and groups."

I heard about this from anthropoligist Richard Sosis. You can read about some of his incredible research in the fascinating NY Times article called Darwin’s God.

Adam Smith vs. Muhammad Yunus

In 2006, economist Muhammad Yunus won the Nobel peace prize (not the economics prize). What did he do? "He invented microcredit, the practice of lending tiny amounts of money to the poor." That is from a NY Times review of a new book by Yunus. To read the review, go to Microcredit? To Him, It’s Only a Start. In this book, Yunus proposes some ideas that seem to conflict with Adam Smith. I post some exerpts on this below, but first something about microcredit from the article:

"It was a revolutionary idea. Until then, bankers figured that such borrowers were worthy of neither credit nor trust. Along came Dr. Yunus, who demonstrated that lending to the needy could be a profitable business and transform their lives. Indeed, many of Grameen’s clients used these small sums to start small businesses and to escape the clutches of poverty."

The people who get the loans work together and make sure that they all work hard and pay back their loans. The loans are often very small, like just enough for a woman to buy a sewing machine so she can make clothes or become a seamstress.

But what does he say that might conflict with Adam Smith?

"...he calls for creation of an alternative economy of businesses devoted to helping the underprivileged."

"...they would invest leftover money in expanding their humanitarian efforts rather than paying dividends to shareholders."

"People “will be delighted to create businesses for selfless purposes,” Dr. Yunus predicts. “The only thing we’ll have to do is to free them from the mind-set that puts profit-making at the heart of every business, an idea that we imposed on them through our flawed economic theory.”"

"“You don’t need to know ‘how to do business,’ ” he writes a bit too facilely. “Much more important is your desire to solve a social problem."

In his book The Wealth of Nations, Adam Smith wrote about how self-interested people were led by the "invisible hand" to make society better off:

"But the annual revenue of every society is always precisely equal to the exchangeable value of the whole annual produce of its industry, or rather is precisely the same thing with that exchangeable value. As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestick industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the publick interest, nor knows how much he is promoting it. By preferring the support of domestick to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the publick good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it."

From the Online Library of Liberty.

So Yunus is suggesting that people start businesses to intentionally try to help society while Adam Smith thought society benefited more if people pursued their own self-interest.

Of course, Smith is more complex than this. Adam Smith's "other" book was called The Theory of Moral Sentiments. One point he made there was that we are able to sympathize with other people by trying imagine what they are going through. I wrote about that in a post last year called Science Proves That Adam Smith Was Right Over 200 Years Ago (sort of)

The Economy Affects The Birth Rate

Our discipline assumes that economic factors influence behavior. Here is a good example. Read Older Moms' Births Still Up in U.S. Here is an exerpt:

"The new report on births was issued Tuesday by the Centers for Disease Control and Prevention. It's based on a review of more than 99 percent of birth certificates for the year 2008 — the first full year of the recession. Overall, about 4.2 million babies were born that year, a 2 percent drop from 2007. It's the first annual decline in births since the start of the decade.

Experts say the most likely explanations are the recession and a decline in immigration to the United States, which has been blamed on the weak job market.

Some early birth information for the first six months of 2009 indicates a continuing decline of about 3 percent in total births, CDC officials said."

But

"The one exception to the trend was the birth rate among women in their 40s, who perhaps felt they didn't have the luxury of waiting for better economic times.

The birth rate for women in their early 40s rose a surprising 4 percent over the previous year, reaching its highest mark since 1967. The rate for women in their late 40s also rose, slightly."

Are Speculators Heroes?

Maybe. This past week in my macro courses I talked about the money demand motives. One of them is the speculative motive, so I explained what a speculator is. Very often speculators are maligned. But sometimes they perform a valuable service by figuring out a resource will be more scarce in the future and then bidding up the price of that resource today. That sends a signal to markets that we all need to economize on that resource or try to provide more of it. That doesn't mean that everyhting speculators do has a good result, just that it can.

It was said that speculators are heroes in the NY Times article titled Those Wall Street Gamblers Might Not Be Bad After All. From the 3-21-10 edition, p. WK 5. It was by NELSON D. SCHWARTZ. Exerpts:

"“If there are heroes in the financial system, these are the heroes,” said Frank Partnoy, a professor of law and finance at the University of San Diego. “They’re the people who bet against Enron, who bet against Lehman and warned it was insolvent.”

It’s not just academics who are coming to the defense of speculators. Earlier this month, BaFin, the regulatory agency that oversees financial markets in Germany, concluded that speculators weren’t behind Greece’s problems. A more likely cause was that investors were simply wary of lending the Greek government any more money following years of heavy borrowing and widening budget deficits."

"“Every time the market goes down, they blame short-sellers and speculators,” said Jim Chanos, a famous short-seller who manages more than $6 billion and was among the earliest voices to warn about Enron as well as the credit crisis. But his trades aren’t gambles at all. “We do as much fundamental research as anybody,” he said.

If that’s the case, speculators are far from being a plague on the markets. Instead, they help reduce risk by taking on the other side of popular trades, resisting the herd mentality that creates bubbles in the first place."

"The speculator “loves freedom, detests cant and abhors restrictions,” Edward Chancellor wrote in his 1999 book, “Devil Take the Hindmost: A History of Financial Speculation.”

According to Mr. Chancellor, a financial strategist in Boston, speculators aren’t motivated by greed, after all. Instead, idealism fuels their trades.

“The essence of speculation remains a utopian yearning for freedom and equality which counterbalances the drab rationalistic materialism of the modern economic system with its inevitable inequalities of wealth,” he argued in his book."

"Victor Niederhoffer, a legendary hedge fund manager and self-described speculator..." said “But when my daughters ask me if my job is as important as the butcher’s, the doctor’s or the scientist’s, I answer that the speculator is a hero, and has been throughout history.”"

My New York Times Letter

You can read it at A Consumption Tax, Revisited. It also contains a link to the article that my letter addressed. What got printed in the paper on Sunday was cut down from what I actually sent. Here is my originla letter:

"On balance, Robert Frank’s proposal for a consumption tax on high income families may be a good idea (“Hey, Big Spender: You Need a Surtax,” March 21). But there may be some potential downsides that we should keep in mind. He suggests that reduced future consumption spending (as a result of the tax) won’t cause a fall in total spending in the economy because investment spending will rise to pick up the slack. But if businesses know that consumers will be cutting back, they have less of an incentive to build new plant and equipment. There will also be reduced incentives for people to earn, since, if they cross the threshold, they will start paying these consumption taxes (which are also progressive, exacerbating the problem). The rich might turn, as they often do, to smart lawyers and accountants to help them hide their income. This would waste talent in our economy. Finally, a luxury surtax in the early 1990s failed to generate the expected revenue while at the same time causing layoffs for workers."

Why Are Some Private Colleges And Universities So Expensive?

It seems that they have something everyone wants: prestige. Who wouldn't want to go to Harvard or Yale, for example? And then these schools seem to know what everyone is willing to pay and then they charge it. This is all explained in the WSJ article Why Top Colleges Squeeze You Dry by ANDREW MANSHEL. Here is an exerpt:

"I learned that the most prestigious and desirable institutions have a good deal of information about the shape of the demand curve for the families seeking to obtain elite higher education for their offspring. These schools have the capacity to estimate with some precision how many applicants will go elsewhere for each additional dollar they charge in tuition and fees. Each sets its tuition so as to produce a targeted "yield"—the percentage of accepted students who actually enroll there. If in any year we over- or under-estimated the price changes made by the other schools, and we had moved up or down in rank, we corrected the following year by raising or lowering tuition by more or less to compensate. We essentially followed the price leadership of the wealthiest, most prestigious institutions."

There is some financial aid. But that amounts to basically charging different students different prices based on their ability and willingess to pay. Economists call this price discrimination.

Why price discrimination raises profits

1. If a firm can get a higher price from some customers than others they increase their profits.
2. If a firm can lower the price for others who might not have bought the product to begin with, they also increase their profits.

Necessary Conditions for Price Discrimination

1. The firm must face a downward sloping demand. Monopolies do but firms in perfect competition do not (their demand, also their MR line, is flat).

2. The firm must be able to readily (and cheaply) identify buyers or groups of buyers with predictably different elasticities of demand (senior citizens have a more elastic demand and will shop around more since they have more time so restaurants might give them a discount).

3. The firm must be able to prevent resale of the product or service. If a student can buy a movie ticket for $6 while everyone else pays $8, the firm will lose money if the students turn around and sell their tickets for $7. So the theater can prevent resale by checking student IDs to make sure people holding the lower price ticket really are students.

What do the schools do with all the money they get? It mainly goes to the faculty and administrators. 60%-75% goes to salaries and benefits. Schools also spend alot of money on "...the "arms race," the constant effort to refurbish and build new physical facilities."

Does Everyone Pay Taxes?

No, not exactly. Everyone pays some kind of taxes, but many people don't pay any federal income taxes. See Nearly half of US households escape fed income tax: Recession, new tax credits have nearly half of US households paying no federal income tax. It is possible that "...a family of four making as much as $50,000 will owe no federal income tax for 2009..." Also, "...the top 10 percent of earners -- households making an average of $366,400 in 2006 -- paid about 73 percent of the income taxes collected by the federal government."

And

"The bottom 40 percent, on average, make a profit from the federal income tax, meaning they get more money in tax credits than they would otherwise owe in taxes. For those people, the government sends them a payment."

How does the family of four making $50,000 eliminate their income tax liability?

"The family was entitled to a standard deduction of $11,400 and four personal exemptions of $3,650 apiece, leaving a taxable income of $24,000. The federal income tax on $24,000 is $2,769.

With two children younger than 17, the family qualified for two $1,000 child tax credits. Its Making Work Pay credit was $800 because the parents were married filing jointly.

The $2,800 in credits exceeds the $2,769 in taxes, so the family makes a $31 profit from the federal income tax. That ought to take the sting out of April 15."

Economy's Excess Capacity Keeps Inflation Low

See the WSJ article titled Economy's Excess Capacity Reins In Prices: Latest Data Give Fed Room to Maintain Rock-Bottom Interest Rates; Initial Jobless Claims Decline for Third Straight Week. Here are the first three paragraphs:

"The vast economic slack left over from the recession continues to keep inflation in check, leaving companies and workers with little leeway to ask for price or wage increases.

Consumer prices were flat in February—and even with volatile food and energy removed from the equation, the needle barely moved: Prices ticked up a scant 0.1%, the Labor Department said Thursday. Over the past year, prices have increased 2.1%, or 1.3% omitting food and energy, the smallest rise in six years.

Behind these numbers stands a huge excess—of workers, factory space and homes. Until more of the nation's productive capacity comes into use and starts pulling workers off the unemployment line, the sellers of everything from golf clubs to paving machines have little ability to raise prices. The problem is exacerbated by continued tightness in credit, which makes it harder to rev up economic growth through bank lending to soak up the economy's lingering slack."

We can see how this works in the following graph:



A GDP of $9 trillion is the "full-employment" GDP (QF). That gives us the lowest rate of unemployment compatible with "price stability" (price stability is an an annual inflation rate of 3% or less). As GDP increases, more workers are hired, so unemployment falls. But if GDP is below QF, firms cannot raise prices, as the article states. There is slack or "excess capacity" in the economy. That means that there will be very little pressure on prices. Resources are not very scarce and product prices don't have to be increased (or increased very much) to call them back into service.

But as GDP increases, resources become more scarce as more bidders want them. The more GDP increases, the faster prices increase. Also, less efficient resources get called into service and less efficiency means greater cost. The higher costs get passed along to the consumer in higher prices. But the graph and the article suggest that as GDP increases and the unemployment rate falls, we will not see much inflation soon.

Also, interest rates won't have to be increased since there is little danger of AD going past QF. Sometimes the FED will raise interest rates to slow down private spending (both consumption and investment) to keep AD from moving too far to the right. But the article suggests that this will not happen.

Has The Recession Been Hard On College Graduates?

Yes. But it has been hard on many people. This issue came up in a recent WSJ article titled College Grads' Outlook Grim: Students Begin the Search Early, Look to 'Plan-B' as Campus Recruitment Falls. Here some key exerpts:

"Companies have cut back hiring and when they do have jobs, they have plenty of experienced applicants to pick from. College graduates typically need further training and seasoning, so many employers are skipping college career fairs this year or tapping former interns if they need fresh talent."

"But there are some bright spots: The unemployment rate for people ages 20 to 24 with a bachelor's degree was 7.2% in March, down from 7.6% a year earlier and below the 21.9% jobless rate for those in the same age group with high-school degrees only.

Preliminary data from a spring poll of employers by the National Association of Colleges and Employers show college-graduate hiring could rise 3% to 5% this year after falling 22% last year."

"... business and technical majors are likely to see the most demand, particularly as Wall Street resumes hiring."

So it looks like things will be better this year than last year. Also, things are much worse for people without college degrees, as the above figures indicate. High-school only people had an unemployment rate nearly 3 times that of those with college degrees from ages 20-24. I looked at something similar a few months ago with How Recessions Affect Young People. One thing that post mentioned is that those who graduate during recessions see their lifetime incomes cut quite a bit.

Obama To Pitch For The White Sox

April first 2010 will go down in history. Click White Sox Sign Obama For Left-handed Bullpen Support to read all about it.

Women Make Trade-offs When Looking For A Man

There is no perfect man, a woman has to give up one quality if she wants more of another, just the kind of thing that economics would predict. That is one thing mentioned in the Wall Street Journal article Why Women Don't Want Macho Men: New research suggests that women from countries with healthier populations prefer more feminine-looking men. Here are some interesting exerpts:

"In countries where poor health is particularly a threat to survival, women leaned toward "manlier" men. That is, they preferred their males to have shorter, broader faces and stronger eyebrows, cheekbones and jaw lines."

"To a person unfamiliar with the field of evolutionary psychology, this may sound a little far-fetched. How is it even possible to link a woman's masculinity preferences to the health of her nation? The answer begins with the theory of sexual selection. It goes that women are the choosier sex because they take on most of the risk and burden of reproduction and child rearing."

"But what does health have to do with masculinity? The link is testosterone, the hormone behind manly muscles, strong jaws, prominent eyebrow ridges, facial hair and deep voices. Testosterone is immunosuppressive. This means a man must be healthy and in good condition to withstand its effects on his development. Testosterone is also linked to other traits related to strength: fitness, fertility and dominance."

"Masculinity, however, can come at a high price. Women often think of high-testosterone types as uncooperative, unsympathetic, philandering, aggressive and disinterested in parenting. In fact, there is evidence that they really do have more relationship problems than other men."

"...men with testosterone levels one standard deviation above the mean were 43% more likely to get divorced than men with normal levels, 31% more likely to leave home because of marital problems, 38% more likely to cheat on their wives, and 13% more likely to admit that they hit or hurled things at them."

"But if health comes at the expense of fidelity and good parenting, how much does masculinity really matter?

The apparent answer is not so much—if you're a woman living in a country with a decent health-care system and few harmful pathogens. While a masculine father's "good genes" may confer health advantages to children, so do good medical attention and a clean environment. In the Face Lab study, women with the weakest masculinity preferences tended to live in some of the healthiest countries."

"Women with the weakest masculinity preferences of all lived in Belgium, a country considered to have one of the best publicly funded health-care systems in Europe..."

"...women with the strongest masculinity preferences tended to hail from the countries with higher disease and mortality rates and some of the poorest scores on the health-care index..."

"...researchers found that a nation's health index explained more of the variation in women's masculinity preferences than did many culture-specific female norms..."

"Is it possible that modern medicine—and by extension modern life—inadvertently devalues masculinity?"

"As the social environment shifts, so may women's mate preferences. While Stone Age forces once wired women to associate strong cues of masculinity with their children's chance of survival, times are changing. The promise of improved health care in America could be one example of a shift.

Another is women's financial freedom. In 1970, women represented only 43.3% of women of the labor force, compared to 55.8% today. Moreover, the recession in America has been a tremendous blow to men in traditionally masculine jobs such as construction and manufacturing; 82% of job losses affect men."

" No longer as reliant on men's genes or jobs to ensure the health and wealth of their children, women may come to value other qualities in a mate. It may become evolutionarily adaptive to prefer men who are cooperative, communicative, caring and better parents over traditional "manly men.""

"...beautiful women (as determined by averaged ratings of eight teams of male and female interviewers) want it all in a partner: masculine, physically fit, loving, educated, desirous of home and children, a few years older than themselves and with a high income potential.

While exceptionally attractive (or wealthy) women may indeed capture this ideal male, most are forced by circumstance to settle for the best combination of traits. Some husband-seekers trade off masculinity for companionship and good parenting. Others forfeit compassion in exchange for wealth."

"To secretly have it all, some women adopt a "dual mating" strategy—marrying a solid, faithful guy and enjoying trysts with hunks. As a result, up to 10% of babies born in some populations have fathers who are presumed to be their biological dads but aren't."

"...as women's level of "resource control" increases—that is, they become more financially independent—their preference for good-looking men increases. So will it be considered progress if women start pursuing "metrosexuals"..."

Should We Pay People To Adopt A Healthy Lifestyle?

That is what a New York Times article called Carrots, Sticks and Lower Premiums suggests. The article says:

"...the one thing that could really reform health care is you, collectively speaking: People living healthier lives."

"The statistical evidence has been clear for years, but it bears repeating. Studies show that 50 percent to 70 percent of the nation’s health care costs are preventable. Much of that expense goes to treat a few chronic conditions that are closely linked to behavior, including cardiovascular disease, diabetes, obesity and cancer. Bad genes and bad luck matter, of course. But behavior — exercise and choice of diet — matters most.

So why not pay people to live healthier lives? In fact, a fledgling “pay for prevention” industry is beginning to emerge, offering employers ways to reward workers with cash or reduced insurance premiums for exercising more and eating wisely."

So companies are paying their employees not to smoke or charging them less for health insurance if they are in good health.

Are Women Better At Investing Than Men?

That was the idea in How Men’s Overconfidence Hurts Them as Investors, from the New York Times, 3-14-10. Here are some interesing exerpts:

"All else being equal, men traded stocks nearly 50 percent more often than women. This added trading drove up the men’s costs and lowered their returns. The economists found that while both sexes reduced net returns through trading, men did so by 0.94 percentage points more per year."

"Selling volatile stocks in a down market — as male I.R.A. investors did more often than women, according to the Vanguard data — might seem to protect a portfolio. But that isn’t necessarily so. Selling before the market falls and buying after it falls is the smart move. For long-term investors, though, the best strategy may be to ignore short-term market movements (perhaps rebalancing a diversified portfolio every so often)."

"Gender differences appear to extend to other financial behavior. For example, women who are C.E.O.’s and company directors tend to pay a lower premium in corporate takeovers, saving their shareholders a bundle..."

"Researchers have found that activating the nucleus accumbens — a brain region that is stimulated when you eat delicious food or look at an attractive person — can affect financial risk-taking. When young Stanford men were shown pictures of partially clothed men and women kissing, he said, that region of their brains was activated. And when they were then given financial tests, the men became more likely to “make high-risk gambles.” Women didn’t respond much to the same pictures..."

"Others studying the effects of hormones on financial behavior have found correlations between testosterone and risk-taking."

"It’s also possible...that evolutionary psychology accounts for some of them. Before the dawn of history, aggressive risk-taking might have given men an advantage in finding mates, she said, while women might have become more risk-averse to protect their offspring."

I have had posts on related topics before. They were:

Can Testosterone Help Women Earn More Money?

Male sex hormone may affect stock trades

I also had a post on how genes can affect the way you invest. See

Is Your Investing Personality in Your DNA?

Crime and Punishment: Required Reading in My Economics Class

Okay, it is not the book Crime and Punishment by Fyodor Dostoevsky (this is a link to the entire book online). I will come back to this book. My students are required to read a chapter by this name from the book The Economics of Public Issues. It is only 5 pages long while the famous book is over 500.

One of the interesting things mentioned in this chapter is research by Steven Levitt. It deals with the question of whether or not more police officers means less crime, everything else being held constant. The problem is that cities with high crime rates will have to hire more police officers (it is the opposite for low crime cities). So it is hard to find a meaningful correlation. But this paragraph from the book shows how he got around that problem:

"In the case of police, Levitt has found that election cycles tend to have a strong independent effect on the size of police forces, enabling him to identify the impact of police on crime rates. Because crime is such a hot political issue, both mayors and governors have strong incentives (and the ability) to push for more police funding in election years. The result is that even though police forces in major cities tend to remain constant in nonelection years, they grow by about 2 percent in an average election year. Although this may sound small, it is (1) large enough to have a significant impact over several election cycles, and thus (2) large enough to detect clearly in the data."

So we can see that crime goes down when more police get hired in election years. Each city gets compared to itself, so the problem mentioned above is avoided.

Now back to the Dostoevsky book. Below are two passages that relate to economics and one sounds like the invisible hand.

"But Mr. Lebeziatnikov who keeps up with modern ideas explained the other day that compassion is forbidden nowadays by science itself, and that that's what is done now in England, where there is political economy." (economics used to be called political economy)

"if I were told, 'love thy neighbour,' what came of it?" Pyotr Petrovitch went on, perhaps with excessive haste. "It came to my tearing my coat in half to share with my neighbour and we both were left half naked. As a Russian proverb has it, 'Catch several hares and you won't catch one.' Science now tells us, love yourself before all men, for everything in the world rests on self-interest. You love yourself and manage your own affairs properly and your coat remains whole. Economic truth adds that the better private affairs are organised in society--the more whole coats, so to say—the firmer are its foundations and the better is the common welfare organised too. Therefore, in acquiring wealth solely and exclusively for myself, I am acquiring, so to speak, for all, and helping to bring to pass my neighbour's getting a little more than a torn coat; and that not from private, personal liberality, but as a consequence of the general advance."

More online versions of the book.

Adam Smith vs. Bart Simpson

Last week I attended a lecture by Paul Zak, a neuro-economist from Claremont Graduate University, at the the Mind Science Foundation. He has studied how our behaviors are affected by the presence in our brains of a chemical called oxytocin, which can affect how generous we are. The more oxytocin you have have, the more generous and empathic (or sympathetic) you are. So he calls oxytocin "the moral molecule." It helps us identify with others and understand their feelings and situatons. Oxytocin can also increase when people trust you or are generous to you.

What does this have to do with Adam Smith? He wrote a book called The Theory of Moral Sentiments. One point he made there was that we are able to sympathize with other people by trying imagine what they are going through. This is directly related to oxytocin. Last September I had a post on this called Science Proves That Adam Smith Was Right Over 200 Years Ago (sort of). That will provide you with more details.

Where does Bart Simpson come in? Professor Zak showed a video clip from the "The Simpsons" that illustrated sympathy, a concept that Adam Smith wrote about in the above mentioned book. To watch a lecture by professor Zak (very similar to the one he did here in San Antonio), go to The Moral Molecule. The Bart Simpson clip starts at the 7:40 mark. Bart's mom tells him to look at his sister and try to feel what she feels. Exactly the kind of thing Adam Smith talked about.

Oxytocin also facilitates trust. Economies need trust because not everything can be put into a law, a contract or be monitored. Your boss can't watch you every second to make sure you don't slack off on the job. We trust banks and our pension funds not to take the money and blow it all in Vegas. We trust our government officials not to accept bribes. Yes, we have rules and regulations against these things. But if we had to have a rule for everything and if everyone was being watched constantly, it would be too costly to our economy. Trust helps quite a bit.

Here are two articles about professor Zak's lecture from the San Antonio Express-News:

Emerging field offers insight into human virtues

Humans release ‘niceness' chemical

More information about neuroeconomics can be found at:

Neuroeconomics Explained, Part One

Neuroeconomics Explained, Part Two

As college costs rise, sticker shock eased by student aid

That is the title of an article that you can read by clicking here. The idea is that the listed price is very high by grants and scholarships actually lower the cost. The thing is, is that collegs don't give aid. They just charge students different prices and this is called price disicrimination.

Here are some notes on it:

Price Discrimination = Selling a given product at more than one price, with the price difference being unrelated to differences in marginal cost.

Examples include when senior citizens get discounts at restaurants or students get discounts at theaters. Firms do this because it increases their profits.


Why price discrimination raises profits

1. If a firm can get a higher price from some customers than others they increase their profits.
2. If a firm can lower the price for others who might not have bought the product to begin with, they also increase their profits.

Necessary Conditions for Price Discrimination

1. The firm must face a downward sloping demand. Monopolies do but firms in perfect competition do not (their demand, also their MR line, is flat).

2. The firm must be able to readily (and cheaply) identify buyers or groups of buyers with predictably different elasticities of demand (senior citizens have a more elastic demand and will shop around more since they have more time so restaurants might give them a discount).

3. The firm must be able to prevent resale of the product or service. If a student can buy a movie ticket for $6 while everyone else pays $8, the firm will lose money if the students turn around and sell their tickets for $7. So the theater can prevent resale by checking student IDs to make sure people holding the lower price ticket really are students.

Free Can Be Deadly

On the first day of each semester, I define a scarce good as one for which there is not enough to go around when it is given away for free. A tragedy occurred in India this week when free food and clothes were given away at a religious compound. The event was publicized more this year than in the past and many more people showed up than expected. People started gathering a few hours before the event and a stampede ensued. 63 people died, mostly women and children. Here is an article about it:

Dozens killed in India temple stampede for free clothes and food.

This kind of tragedy has happened before:

Freebies led to stampede in '04 too

The Depression Is Over!

So said an enthusiastic character in the 1934 movie Stand Up and Cheer!. We watched a video about the Great Depression in my macro classes. Here is the video clip of the man getting worked up about how everything has turned around. The text is below the clip in case the sound is not good enough.



Here is a link to the video file: We're out of the red!

Mr. Cromwell, I've got great news for you.
The depression is over.
Over, do you realize that.
Factories are opening up.
Men are going back to work by the thousands.
Our farm products are being sold the world over.
Savings accounts are heaping up.
The banks are pouring out new loans.
There is no unemployment.
Fear has been banished.
Confidence reborn.
Poverty has been wiped out.
Laughter resounds throughout the nation.
The people are happy again.
We're out of the red.

Here is the movie's IMBD synopsis: "President Franklin Roosevelt appoints a theatrical producer as the new Secretary of Amusement in order to cheer up an American public still suffering through the Depression. The new secretary soon runs afoul of political lobbyists out to destroy his department." I guess they were trying to make people feel better. Unemployment was 25% in 1933. This was one of the first big roles for Shirley Temple.

Deadweight Loss & Who Won The Olympics

After the last post, my students might wonder what "deadweight loss" is. It is the loss of social welfare caused by that dreaded demon, inefficiency. Examples are monopoly and externalities. It can also be caused by taxes. To learn more, go to the following links (which are all different)

Deadweight_loss
Deadweight_loss
Deadweight_loss

Who won the Olympics? Go to

Canada Wins The Olympics! (based on the market value of the medals

There Is A Funny Economist Out There

No, really, there is. My students will find this hard to believe after the groaners I tell in class. But Yoram Bauman, who has a Ph. D. in economics from the University of Washington, calls himelf a "stand up economist." He performs all over the country. Here is a link to his site:

Stand Up Economist

I wonder if he is related to Comicus, the first stand up philosopher? (who said the Christians are so poor, they can only afford to have one God) Anyway, the site has a video which you can watch.

Bauman also has a site called

You might be an economist if….

My students will find it rewarding to look at. For example, it says "you might be an economist if you refuse to sell your children because you think they’ll be worth more later."