Some International Inflation Rates

I went to a site from the OECD. Click here to go to that site. I compiled the annual inflation rate for a number of countries each year from 1996-2015. Click here to see that data.

The USA and other large industrial countries that tend to make up the OECD have generally had low inflation rates in recent years. Only once since 2002 has the OECD average been above 3.0%. That was in 2008 (3.7%).

The USA has had only 4 years since 2002 above 3.0% with the high being 3.8%, also in 2008.

Some Information About This Year's Winners Of The Nobel Prize In Economics

They are Oliver Hart and Bengt Holmström.

For more information about them see  Economics Nobel Rewards Theories Worth Building On by Tyler Cowen writing for Bloomberg New. Here is an excerpt from his article:

"Hart, in a series of papers with co-authors, tried to figure out when one company should buy out the assets of another company. Mergers and acquisitions are common, but when do they maximize business value? Hart was able to figure out how ownership transfers influence earlier decisions to invest in the value of company assets. For instance, if Bayer buys out Monsanto, the incentives for the former managers to add value may go up, and for the latter managers the incentives may go down. The success of the merger may depend on whether the gain here outweighs the loss. In a related paper, Hart helped devise a technical language for analyzing when too many potential veto points in a business deal can block progress.

Hart, again with co-authors, also wrote a seminal paper on when we should prefer government over private-sector ownership. Most of us prefer to eat in private rather than government-owned restaurants because we believe we’ll get lower costs, tastier food, and more innovation. At the same time, private prisons may not be such a great idea. Prison companies will try to cut costs, but the result may be facilities that are insufficiently humane. Sometimes the apparently inefficient bureaucracy does a better job helping to meet social goals.

It's a longstanding question why corporate takeovers don’t do a better job in disciplining bad managers. Hart, with Sanford Grossman, wrote the most influential paper on that question. Say a share is selling for $80 but a corporate raider can make the company worth $100 a share.

Shareholders might resist a bid for $90, hoping to hang on for the ride and get the full $100 in value. Maybe not enough people will sell, and so a value-enhancing takeover doesn’t always happen; a similar logic explains why urban renewal, through “buying out a block,” sometimes fails as well.

Holmström has worked on closely parallel issues of contracts and corporations. Let’s say you are designing a contract for a worker or for that matter a chief executive officer. How much should you reward for perceptions of effort and how much should you reward for some measure of successful outcomes, such as measured profit or the success of that worker’s division? Holmström created the technical language that made systematic progress on these questions possible, and he also showed why you might wish to reward on both bases.

A related question is how much risk you should place on the party you are contracting with. Insurance companies face this problem when they try to calculate an optimal deductible. A higher medical-insurance deductible will reduce the number of unnecessary doctor visits, but also lower the value of the insurance by putting more financial risk on the patient. Holmström showed that there isn’t a rigorous way to get this trade-off just right.

Both economists showed us how hard it is to write truly well-functioning contracts, because solving one incentive problem often creates another. Perhaps most importantly, they created the systematic formal language for demonstrating why this has to be the case.

For another specific example, Holmström analyzed why “career concerns” can induce employees to send off false signals of value rather than doing their jobs properly. In other cases, a worker may shirk so that the boss doesn’t discover how talented she is. Revealing one’s full level of talent sometimes just allows the boss to extract more effort."

See also  Oliver Hart and Bengt Holmstrom Win Nobel in Economics for Work on Contracts by BINYAMIN APPELBAUM of the NY Times. Excerpts:

"Economists since Adam Smith have grappled with the conflicts inherent in the relationship between owners and employees. Dr. Holmstrom’s work, beginning in the late 1970s, presented evidence that companies should tie pay to the broadest possible evaluation of an employee’s performance. In later work, he focused on the benefits of simple contracts that mixed base pay with limited incentives.

Dr. Hart’s work begins from the observation that contracts are incomplete instruction manuals. They cannot specify what to do in every case. Instead, they must stipulate how decisions should be made.

“His research provides us with theoretical tools for studying questions such as which kinds of companies should merge, the proper mix of debt and equity financing, and which institutions such as schools or prisons ought to be privately or publicly owned,” the academy said in a summary of his work."

"One implication of Dr. Holmstrom’s work is that it makes sense to withhold some compensation for a time, to evaluate the results of a manager’s work.

Companies have turned increasingly to this kind of deferred compensation, particularly for senior executives.

But his influence on compensation practices is limited. He has argued, for example, that companies should tie such evaluations to the stock market performance of their industry rather than focusing solely on the company’s own stock price. It makes little sense to reward an executive for gains that reflect a broader change in the industry’s fortunes, or to punish executives for setbacks beyond their control. But such advice has not become common practice."

And here is something Tyler Cown wrote on his blog:

"If you are thinking about CEO compensation, you might turn to the work of Holmström,  the Swedes have a good summary of this paper and point:

…an optimal contract should link payment to all outcomes that can potentially provide information about actions that have been taken. This informativeness principle does not merely say that payments should depend on outcomes that can be affected by agents. For example, suppose the agent is a manager whose actions influence her own firm’s share price, but not share prices of other firms. Does that mean that the manager’s pay should depend only on her firm’s share price? The answer is no. Since share prices reflect other factors in the economy – outside the manager’s control – simply linking compensation to the firm’s share price will reward the manager for good luck and punish her for bad luck. It is better to link the manager’s pay to her firm’s share price relative to those of other, similar firms (such as those in the same industry).

That is again a result about how incentives and insurance interact.  When do you pay based on perceived effort, and when on the basis of observed outcomes, such as profits or share price?  Holmström has been the number one theorist in helping to address issues of this kind."

Some Historical U.S. Gas Prices

See Fact #915: March 7, 2016 Average Historical Annual Gasoline Pump Price, 1929-2015 from the U. S. Department of Energy.

They have a timeline chart and a table of the price each year and then the price adjusted for inflation (put in 2015 dollars). The average price over the whole time period is $2.20 (I just added up all the prices and divided by 87 and it is adjusted for inflation). In 2015 it was $2.45. So we were not too far above that last year. The lowest price ever for a single year, adjusted for inflation, was $1.47 in 1998. The next lowest was $1.59 in 1972. The highest was $3.80 in 2012.

Here is the timeline chart

Some International Unemployment Rates

The first link is from the OECD (Organization for Economic Co-operation & Development). It includes the USA, many European countries, Canada, Japan, Australia and South Korea.

Harmonized unemployment rates.

If that link is not working, try International Unemployment Rates

It shows the rates for many countries in each year from 1996-2015. It seems like they apply the same formula or definition of the unemployment rate to all countries. In 2015, it shows the USA with a 5.3% rate. That is what the Bureau of Labor Statistics also shows. The OECD average is 6.8%. You can't see it on that page, but the average for the European Union was 9.4%.

Here are some more links

More harmonized unemployment rates from OECD. It seems like you can decide what type of data you want to look at here, unlike the one above.

A press release from July 2015 with a good timeline graph.

Unemployment rates for all countries from the CIA.

The Economy Of Westeros

See 'Game of Thrones' economics: Austerity, tax and QE by Catherine Boyle on CNBC. From April 2014. Excerpt:

"Littlefinger is Westeros' Master of the Coin, and as the books describe, has "a gift for rubbing two golden dragons together and breeding a third."

Like the modern-day Federal Reserve, it seems as though he has been doing his own version of quantitative easing by injecting more gold dragons into the economy (although in a rather less sophisticated way, by clipping coins to create more money)."

Quantitative easing is a name given to a policy that tries to increase the money supply. The Fed buys long-term bonds. They basically create as much money as they want. This is an attempt to stimulate demand and try to increase output in the economy.

"In ancient times, the Romans clipped coins to increase the money supply. See Central Banks Clipping Coins by Bill Tatro of TownhallFinance.com. Excerpt:

As a form of payment back in those days, Julius Caesar routinely gave silver coins to his troops, and it was clearly understood that the silver coins were indeed 100% silver.  In other words, there was no mixing with other cheaper metals. 

Thus, knowing the Roman coin was 100% silver, the only way to devalue the currency was to take a knife and shave, or “clip,” some silver off the edges of the coin.  Consequently, we now seeRoman coins of antiquity with very odd shapes, all thanks to “clipping.”

For example, 100 coins could be “clipped” in order to create an additional 5 coins"

The ridges on coins might have been a way to prevent this clipping. I suppose you could tell if they were clipped if there were no longer any ridges on the edge of the coin. See also The Westeros Economy: A Financial FAQ for GoT Fans By Caroline Hsu of Investopedia

The San Antonio Spurs And Federal Subsidies

See Study: San Antonio Spurs netted $41 million in federal subsidies for AT&T Center construction: Public makes up for taxes not paid on arena bond interest. By Joshua Fechter of The San Antonio Express-News, September 8, 2016. Excerpts:

"The Spurs received $41 million in federal subsidies to build the AT&T Center with little economic gain for the community due to a quirk in federal tax law, a Brookings Institution study released Thursday shows.

U.S. taxpayers have effectively paid about $3.2 billion to finance the construction of 35 major league sports arenas since 2000, the study says. That’s because the interest earned on municipal bonds issued to finance stadium or arena building is exempt from federal taxes, thus generating the subsidy.

That amount rises to $3.7 billion when windfall tax breaks for high-income bondholders are taken into account, the study shows.

About $169 million in tax-exempt municipal bonds were issued to construct the county-owned AT&T Center, which originally opened in 2002 as the SBC Center, essentially giving the Spurs a $41 million federal tax subsidy, the study says. The arena’s total price was $245 million for construction costs as well as parking and infrastructure improvements, it adds.

Bondholders received $3 million in tax breaks on municipal bonds, costing taxpayers $44 million in lost federal tax revenue, the study shows.

“The justifications for public funding for stadiums are weak, and the justifications for federal government subsidies are even weaker because to the extent the projects confer any benefits, those benefits are local, not national,” the study says.

Spurs Sports & Entertainment officials declined to comment for this report.

Local governments often offer incentives to sports franchises to lure or keep them from moving to another city including bonds, cash payments, tax abatements, infrastructure improvements or coverage of operating costs, leaving teams with only a percentage of costs stemming from stadium or arena costs.

The Spurs shelled out $46.5 million to build the AT&T Center — about 24 percent of the $193 million in total construction costs — and $26 million to cover $111 million worth of improvements to the arena in 2014, including a scoreboard, digital screens, Wi-Fi upgrades and seating improvements among other things."

"multiple studies show major private sports stadiums don’t ultimately produce substantial economic growth relative to the government incentives they receive"

Here is a related story about San Antonio sports: Triple-A baseball falling off back burner: Mayor can’t get financial commitments

Alexander Hamilton And The National Debt

See Lessons from Hamilton by Michael Taylor writing for the The San Antonio Express-News. See also Alexander Hamilton May Rule Broadway, But He Was No Banking Genius by Brian Doherty of Reason Magazine.

Excerpts from Taylor's article:

"The new republic was flirting with financial ruin when President George Washington asked him to be the first treasury secretary of the United States, placing particular weight on everything Hamilton did.

Soldiers in the Revolutionary War had received state IOUs in return for their military service. Years after the end of fighting with the British, many of these debts remained unpaid. In addition, different states had repaid debts to different degrees. Virginia was nearly debt-free for example, while Massachusetts still owed tremendous amounts to soldiers.

Some believed that this new federal government would not, and could not, pay off its debts to soldiers. Chernow writes that these debts traded at 15 cents on the dollar as former solders sold them early, in part because they needed the money and in part because full payment seemed doubtful. Speculators bought the debt at extreme discounts, hoping to make money if the young government could restructure the debt somehow. At that price, even a settlement of 30 cents on the dollar offered a financial windfall to debt-buyers.

What kind of deal would Hamilton, as treasury secretary, offer on the debt? Should he restructure it and offer a lesser amount? Should he seek a way to punish the speculators? Could he track down the former soldiers who had sold their IOUs, to compensate them, instead of the investors? Wait for it …

Let’s pause for a moment and really wallow in the awful optics and politics of Hamilton’s choice. Nobody deserved more respect than the first patriots who suffered and died under Washington, when his “ragtag volunteer army in need of a shower” defeated a global superpower, in Miranda’s purposefully anachronistic phrasing.

But most of the government debt issued to soldiers wasn’t owed to them anymore, but rather to buyers of their debt. These were some of the least sympathetic people. You know, Wall Street-type people.

The most powerful member of Congress, James Madison, and Secretary of State Thomas Jefferson vehemently opposed rewarding the speculators. As Virginians, they also argued that consolidating the debts at the federal level would reward less prudent states at their state’s expense.

Picture, as well, Hamilton’s childhood as a near-destitute orphan in the Caribbean. He was not a natural friend of Wall Street. He’d served as a captain of an artillery company under fire in the Battery in Manhattan and the Battle of Kips Bay; he had personally led a bayonet charge on an entrenched position of redcoats at Yorktown.

Was Hamilton prepared to honor commitments that would enrich these greedy speculators who bought government debt at pennies on the dollar from his fellow soldiers? Wait for it …

He was, and he did. He consolidated the states’ debt into federal debt. On his first and second days after confirmation as treasury secretary in 1789, he took out fresh federal loans from the Bank of New York and the Bank of North America in Philadelphia.

Hamilton understood the value of communicating a policy of honoring one’s debts, a policy that strengthens the nation.

“In nothing are appearances of greater moment than in whatever regards credit. Opinion is the soul of it, and this is affected by appearances as well as realities,” he wrote in his 40,000-word “Report on Public Credit,” delivered to Congress in January 1790.

He further set the precedent that the government does not interfere in private transactions of its public securities, even if the optics and politics would make it expedient to change terms, after the fact.

As Chernow reports, Hamilton reframed the moral issue into one of honoring private property and “security of transfer.” The soldiers were not as heroic as they seemed, nor the speculators as greedy. Investors after all, had risked their capital. The ex-soldiers, in turn, had shown little faith in the government.

That the buyers of soldiers’ debt made extraordinary short-term fortunes was, in the far-seeing perspective of Hamilton, irrelevant to the more important work of establishing a solid financial footing for the country. Meanwhile, Madison and Jefferson fumed.

The U.S. has never defaulted on its debt. Not through the ruin of a burned capital in 1812, nor through a crippling Civil War, nor the world wars and the Depression of the 20th century. Hamilton’s honoring of national debts — against all the political, fiscal and moral pressure of his day — bolstered us as nation. It set us up for national prosperity."

"Hamilton had the foresight to know that once you default on debt — which is what “pay back with discounts” means — you set a precedent for how lenders view your credit in the future. I would even argue that once you even say that out loud — if anyone takes you seriously — you risk submarining your nation’s future ability to borrow."

The percentage of 25-54 year-olds employed decreased in August

One weakness of the unemployment rate is that if people drop out of the labor force they cannot be counted as an unemployed person and the unemployment rate goes down. They are no longer actively seeking work and it might be because they are discouraged workers. The lower unemployment rate can be misleading in this case. People dropping out of the labor force might indicate a weak labor market.

We could look at the employment to population ratio instead, since that includes those not in the labor force. But that includes everyone over 16 and that means that senior citizens are in the group but many of them have retired. The more that retire, the lower this ratio would be and that might be misleading. It would not necessarily mean the labor market is weak.

But we have this ratio for people age 25-54 (which also eliminates college age people who might not be looking for work)

The percentage of 25-54 year-olds employed is 77.8% for August. It was 78.0% in July. It is still below the 79.7% in December 2007 when the recession started. Click here to see the BLS data.The percentage of the adult population employed was 59.742% in July (the civilian noninstitutional population 16 years and over). It fell to 59.725% in August. Click here to go to that data. It also shows that the unemployment rate was 4.9% in August.

Here is the timeline graph of the percentage of 25-54 year-olds employed since 2006. Notice how we had been rising before this year but it seems to be flattening out.

 Now going all the way back to 1948

My Fall Semester Has Started

Welcome to any new students. The entries usually have something to do with a basic economic principle that is related to a recent news story. If you want to learn more about me go to Why is college so hard? (you may have to be patient with this site but the article is not long)

If that link is not working try this one

The surprising link between science fiction and economic history

By Sebastian Buckup Head of Programming, World Economic Forum

Cartels: They're not just for drug dealers and oil producers anymore-maple syrup producers have one, too

See Maple Syrup Cartel Battles a Black Market Rebellion: Canadian production is set to grow 10 percent in a push for market share by Jen Skerritt of Bloomberg. Cartels are producers who get together and all agree to reduce output. That raises the price and profit (more or less, price goes up more in percentage terms than quantity goes down). But the higher price creates incentives for some producers to sell more than their quota or for other businesses or entrepreneurs to enter the market. This has happened with both oil and diamonds.

This is a government sanctioned cartel and they even have a strategic reserve (the U. S. has a strategic petroleum reserve). Excerpts:

"The cartel that produces 72 percent of the world’s maple syrup is starting to crack.

After eight years of tightly limiting output to keep prices high, the Federation of Quebec Maple Syrup Producers next year will boost its quota by 12 percent for 13,500 sap farmers who operate in the Canadian province. The goal is twofold: Reclaim the 10 percent of market share lost to the U.S. over the last decade, and quell a rebellion by producers increasingly turning to black market sales for growth.

Boosting the quota now is “almost perfect timing” as farmers are seeing record output, according to Alan Bryson, 41, who drains sap from 45,000 taps on trees in Notre-Dame-de-la-Merci, Quebec. The prospect of more sales “outweighs the frustration” felt by farmers in the past, he said."

"Bryson wants to add as many as 15,000 taps this year and seeks to expand to 75,000 eventually, he said. Overall, Quebec produced about 148.2 million pounds of maple syrup this year. Under the new quotas, output could grow by 15 million pounds, according to the federation."

"The unanswered question is where all this additional product is going to go. Tappers this year will be paid C$2.88 ($2.20) a pound, based on a weighted average, federation data show. That’s up a penny from the previous two years,

“It’s a lot of new production,” said Matt Gordon, executive director of the Vermont Maple Sugar Makers Association in Waterbury Center, Vt. “There are plenty of examples throughout history of agricultural crops where there’s been increased demand, so production increases. Then suddenly, it’s a little too much.”

U.S. production this year totaled 4.2 million gallons, a 23 percent boost from a year earlier, with Vermont accounting for 47 percent of the total, the U.S. Department of Agriculture said in June. The number of taps rose 5 percent this year, to 12.55 million, after increasing 45 percent from 2007 and 2015, according to the USDA.

That growth frustrated Quebec farmers, who have been urging an end to quotas. While the government-sanctioned cartel kept prices stable by limiting output and maintaining strategic stockpiles, tappers complained that the system imposed a “heavy, inflexible handicap to the province’s performance,” according to a 70-page report commissioned by Quebec Agriculture Minister Pierre Paradis, released earlier this year.

That frustration was leading some farmers to sell on the black market, and some said they felt harassed by the federation, according to the report.

After a formal request from producers last year, Regie des Marches Agricoles et Alimentaires du Quebec, the province’s agricultural marketing board, authorized the cartel to increase quotas as it deems necessary, said Caroline Cyr, a federation spokesman.

The quota increase makes the system more flexible and adaptable to the free market and will curtail black market sales, said Simon Trepanier, executive director of the Federation of Quebec Maple Syrup Producers.

“If we allow producers to add more taps or at sell inside here, they will not be interested in selling on the black market,” Trepanier said in a telephone interview. “It will help to have a clean market, instead of a black market.”"

The American middle class is shrinking because more people are becoming upper middle class and rich

See By Scott Burns. Excerpts:

"A new study, however, suggests something different. It shows that the big growth is in people who are "upper middle class" and "rich." Those who are "middle class," "lower middle class" and "poor or near poor" are actually shrinking as a percentage of the population. More people are moving up than moving down, not more people moving down than up."

"Yet the study comes from the Urban Institute, a think tank more inclined to worry about the poor than celebrate the rich. Stephen J. Rose, the author of the study, is an accomplished labor economist with a Ph.D. from City University of New York."

"Rather than dividing all of us into quintiles and examining income changes in each quintile, Rose starts with a level of inflation-adjusted income and examines how different slices of income have done over time. In this case, he has examined 1979 through 2014, a period believed full of economic duress for most working Americans.

He divides us into five income classes:

--- The Poor and Near Poor, with incomes from $0 to $29,999 in 2014.

--- The Lower Middle Class, with incomes from $30,000 to $49,999.

--- The Middle Class, with incomes from $50,000 to $99,999.

--- The Upper Middle Class, with incomes from $100,000 to $349,999.

--- The Rich, with incomes of at least $350,000."

"The big change is in the middle class. Yes, it shrank in size. It dropped from 38.8 percent of all classes in 1979 to 32 percent in 2014. But the lower middle class and the poor and near poor also shrank in size. Together, they fell from 48.2 percent of all households to 36.9 percent, a drop of 11.3 percentage points.

The big surprise is that the upper middle class and rich more than doubled in size. The rich accounted for only 0.1 percent in 1979 but 1.8 percent in 2014. The upper middle class soared from 12.9 percent to 29.4 percent, a gain of 16.5 percent. Basically, the losses for the middle class were gains higher on the income ladder."

"The more affluent life of the upper middle class is visible everywhere. The group is nearly the same size as the middle class. And the number of people visibly worse off has shrunk."

"Luxury automobiles, Rose points out, now account for 13 percent of all new car sales, compared to only 5 percent in 1979.

But luxury cars are just the tip of the iceberg. Consider the super-sizing of refrigerators, miraculously quiet dishwashers, barbecue grills large enough to cook for a full platoon, 85-inch television sets, McMansions, and the proliferation of mini-luxuries such as Starbucks shops, spas and better dining venues."

Does the top 1 percent earn 85 percent of income? Is it 52 percent? Something Else?

According to the book The Economics of Macro Issues (6e, 2014), the top 1 percent earn 13.4% of income in the USA (p. 81). This came up in a letter to the editor by me in today's San Antonio Express-News. One of their columnists said it was 52 percent but had recently been 85 percent. What I think he got wrong was that there was a year when the top 1 percent got 85 percent of the growth in income, not total income. Anyway, click here to read the letter. It is also below.

But before you read the letter, here is something to keep in mind (it is from a post I did a few years ago)

"It is true that the top 1% of earners have seen their share of income rise. But 57% of those in the top 1% in 1996 were not there in 2005. The incomes of the top 1% fell about 16% from 2007-09 while the median income fell just 1.5%. The number of people making $1 million or more per year fell 40%." (although I posted that myself a few years ago I can't find the source)

But this link from the WSJ in 2013

http://blogs.wsj.com/economics/2013/09/10/some-95-of-2009-2012-income-gains-went-to-wealthiest-1/

Says

"The one-percenters saw their incomes slide 36.3% during the 2007-2009 recession; incomes of the 99-percenters fell 11.6% during the downturn"

And

"All told, average inflation-adjusted income per family climbed 6% between 2009 and 2012, the first years of the economic recovery. During that period, the top 1% saw their incomes climb 31.4%"

Now my letter:

"Income growth


Re: “No revolution if there’s no civilization,” Brian Chasnoff, July 28:

Brian Chasnoff wrote, “(Bernie) Sanders repeated on Wednesday that the top 1 percent earns 85 percent of income, although that claim is outdated; in the past two years, it fell to 52 percent, according to Politifact.”

That claim is actually for the share of growth in income since 2009, not total income at any one point in time. This makes a big difference.

Politifact gets its information on this from a report by the Economic Policy Institute. It says (right in the first full paragraph) that “the top 1 percent captured 85.1 percent of total income growth between 2009 and 2013” (and that share has now fallen to 52 percent).

Notice it says income growth, not income. What it discusses is the share of “new” income going to the top 1 percent. They mean the share of income growth.

When the Census Bureau reports on incomes every year, usually the top 20 percent of households have 50 to 55 percent of the income. So the top 1 percent would have much less than that in total income share. On page 9, it shows that the top quintile in 2014 had 51.4 percent of all income.

Cyril Morong, Ph.D., associate professor of economics, San Antonio College"

Economic benefits from mega-events like the Olympics are often overstated

See Are the Olympics ever worth it for the host city? by Tim Hyde of the American Economic Association. Excerpts:

"A study appearing in the Spring issue of the Journal of Economic Perspectives breaks down the costs and benefits of hosting the Olympic Games and explains why some of the perceived economic blessings of the Olympics are mostly wishful thinking.
 
In Going for the Gold: The Economics of the Olympics (PDF), authors Robert Baade and Victor Matheson consult estimates from academic, public, and media sources on the costs and benefits of hosting the Games. As with any mega-event, costs and benefits can be hard to estimate, but the general story is clear: for most modern Olympics, the costs have far outstripped the benefits.
The direct costs of hosting the Games are probably easier to estimate and tabulate. First there is the non-trivial cost of mounting a bid, which can run into the hundreds of millions of dollars for planning, marketing, and architectural renderings."

"often the bids must include plans for new hotel capacity and dormitories."

"The IOC will tend to favor the city that makes the most lavish offer of gleaming new facilities and infrastructure improvements, so the bidding process can give way to a “winner’s curse” effect. The city that wins tends to be the one that overestimated the value of hosting the Olympics the most, and hence the one that went furthest overboard in their bid. 

Once the Olympics have been assigned, the host city must typically spend billions of dollars building transit and airport improvements, reaching the requisite hotel capacity, and constructing specialized athletic facilities like a swimming facility, a velodrome, or a larger stadium that can accommodate an Olympic track. Disentangling these costs from planned infrastructure improvements that would have happened even in the absence of the Olympics can be difficult, but the best estimates put the cost of hosting at between $5 and $15 billion for most recent events."

"The costs are clear, but the benefits of hosting the Olympics can be substantial as well, even if they are usually overstated by overzealous city officials or self-interested boosters. Host cities receive revenue from ticketing and sponsorships, and local organizing committees receive a share of the proceeds from the sale of television broadcast rights. These benefits are easy to quantify, but don’t add up to a significant fraction of the hosting costs in most cases. Vancouver 2010 produced about $1.5 billion in direct revenues and London 2012 about $3.3 billion; in each case, far less than the costs.

The rest of the benefits are more nebulous. Proponents tout supposed benefits ranging from the economic stimulus provided by construction demand, to increased tourism during and after the games thanks to a worldwide advertising campaign, to increased foreign investment and better trade connections, to an improved sports infrastructure for future generations (this last benefit is most easily debunked). The authors argue that most of these benefits tend to be less than hoped, or only appear in specific situations.

Infrastructure improvements can provide a form of fiscal stimulus to a city with a slack labor market, but if the city’s economy is near full employment anyway in the years leading up to the Games, the extra construction jobs are more likely to come at the expense of other sectors. 

Tourism, meanwhile, can be crowded out by the hustle and bustle of the Olympics themselves – Beijing and London both saw fewer international visitors during the months they were hosting the Olympics in 2008 and 2012 compared to the same months in previous years, and Utah ski resorts noticed a dip in traffic during the 2001-02 ski season that coincided with the Salt Lake City games.

A few cities have had success generating future tourism business with the Olympics...But many other host cities ... have seen limited increases in tourism after their games.

One study did find that countries hosting the Olympics see a 20% increase in export trade in the years after hosting, relative to similarly-situated countries, which might go a long way to justifying the economic expense of hosting the event. But the same study found similar gains for countries where cities unsuccessfully bid for the Olympics. The authors suggest that the very act of bidding for the Olympic Games suggests a government is looking to increase international connections and willing to make infrastructure investments, which can attract foreign interest. 

It is also likely that the types of cities that decide to mount bids are on an economic upswing and poised for growth, and actually winning that bid might be more likely to stunt that growth rather than accelerate it.

The balance of evidence is that the economic costs of hosting the Olympics far outpace the benefits, so why do cities bother to bid at all? One possibility is civic pride or the desire to affirm a city’s status as a “world city.” 

These benefits are hard to translate into economic terms, but two careful studies used contingent valuation survey methods (similar to the techniques economists use to see how much people value maintaining the rainforests or keeping a species from extinction) to measure this benefit in the runup to the 2012 Olympics in London. They found that people across the United Kingdom collectively valued the opportunity to host the Olympics at about £2 billion, still well short of the cost of hosting."

Both numeracy and literacy were invented in the service of finance and commerce

That comes from a book review in the NY Times. See Finance Is the Master Technology — and It’s Funded the World by Felix Martin.

The book reviewed is Money Changes Everything: How Finance Made Civilization Possible by William N. Goetzmann. He is a Professor of Finance and Management Studies at Yale University. Excerpts:

"finance is a “technology of civilization” — a way of thinking about and doing things that has been the central facilitator of the material, artistic and cultural accomplishments that we call civilized life. Indeed finance, Goetzmann argues, is a sort of master technology, from which an astonishing range of our most basic habits of mind derives."

"Autarkic subsistence farming had to be replaced by specialization, the division of labor and coordination on a massive scale. The innovation developed by the clerical bureaucracies to enable this transition was the invention of financial accounting. And it was only as part of this new financial system that writing and abstract numbers — those epochal inventions that so clearly transformed the subsequent history of humanity in so many other fields — were invented."

"finance is responsible for our modern conception of time. Pre-monetary society operated on sacred time, with the day divided up by ecclesiastical offices or prayer times, and the year into high days and holy days that reflected the cycle of the seasons or the phases of the moon. Financial reasoning and, in particular, the calculation of compound interest demanded a more regimented scheme arbitrated by objective mathematical rules rather than clerical authority."

"“financial technology is a time machine” — a set of ideas and practices that enable us to shift economic value backward and forward through time."

"the ancient Sumerians introduced a 360-day year in order to make calculating interest easier.'

"Modern ideas of probability and risk, of ethics and morality, and of appropriate models of commercial and even political organization — all were forged in the furnaces of finance,"

"“Like other technologies,” he writes, finance “developed through innovations that improved efficiency. It is not intrinsically good or bad.”"

"One does not have to be a hard-core Marxist to entertain the idea that finance is not, and did not evolve as, a neutral tool to improve the operation of the free market — itself an ethically colorless state of nature in human relations. This alternative view is in perfect agreement that finance is indeed one of the most powerful tools for the organization of human activity ever invented. But it holds that it arose historically, and continues to be used today, to codify and enforce relationships built on power and luck as much as to facilitate voluntary and rational decision-making."

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

The percentage of 25-54 year-olds employed is 78.0% for July. It was 77.8% in June. But that is still below the 79.7% in Dec 2007 when recession started. Click here to see the BLS data.The percentage of the adult population employed was 59.74% in July (the civilian noninstitutional population 16 years and over). That is up from 59.63% in June. Click here to go to that data.

Here is the timeline graph of the percentage of 25-54 year-olds employed since 2006.


Now going all the way back to 1948

Is It Worth It For Families To Spend Thousands Of Dollars A Year So Their Kids Can Play In Elite Sports Leagues?

See For a child's dreams, are parents going for gold, or broke? by SARAH SKIDMORE SELL, AP Personal Finance Writer. Excerpts:

"A survey released Monday by TD Ameritrade of 1,000 parents whose children are involved in such elite endeavors finds most pay between $100 and $499 a month. For one in five, it's more than $1,000.

Some parents can absorb the cost, but others are working second jobs, depleting their savings or otherwise compromising their own financial well-being to fund the activities. In the survey, 60 percent say the expense has them concerned about their ability to save for the future.

Parents largely say they don't regret the spending because of the physical, mental and emotional benefits for their children. But financial and athletic experts suggest parents make a more objective assessment of at what cost the kids are pursuing these dreams.

Of nearly 8 million U.S. students currently participating in high school athletics, only 480,000 compete at the college level at an NCAA school, according to the organization. Few from that group will move on to compete at the Olympic or professional level.

And parents hoping for a scholarship to offset their sacrifices may be disappointed. NCAA schools awarded more than $2.9 billion in athletics scholarships last year. But a full ride is rare, and a partial scholarship may come to a fraction of what it cost to get a child to that level."

""Parents are coming from a place of love, they want what is best for their kids," said Travis Dorsch, founding director of the Families in Sport Lab at Utah State University. "Unfortunately they are misinformed."

Specializing in just one sport early, common among elite team players, leads to greater burnout and an increased likelihood of injury, Dorsch said. And he found that families who made larger financial investments in a child's athletic participation led to kids feeling more pressure, less enjoyment and a lower commitment to the sport.

Of the families in Dorsch's research, which spanned many income and sport participation levels, more than half invested less than 1 percent of their gross income. But nearly 15 percent invested between 2 percent and 5 percent, and 3 percent invested more than 5 percent of their gross income."

"many people have an economic interest in parents spending more on sports - from elite coaches to the facilities that host the tournaments. So parents may be urged to make decisions that are not based on neutral input."

Beef Prices Come Down As Supply Increases

See Reversal of fortune in cattle country by Lynn Brezosky of the San Antonio Express-News. It seems like high prices in recent years have given ranchers an incentive to increase the size of their herds.

This did not happen over night as the article mentions "it takes roughly three years from the time a heifer is born until her future calf is ready for market." But this is what we discuss in principles of microeconomics on the topic of perfect competition. If firms are making above normal profits that causes supply to increase or shift to the right. So in the long-run prices will fall.

Excerpts:

"Cattle raisers who thought historically high beef prices would stay around for a while have had a rude awakening, as the rush to rebuild herds following years of drought outpaced a market marred by still-sticker shocked U.S. and foreign consumers.

“We just have a whole lot more cattle,” Duane Lenz, an analyst with Denver-based CattleFax, told about 1,800 ranchers gathered for this week’s Texas A&M Beef Cattle Short Course in College Station on Monday, a continuing education and networking opportunity for ranchers.

Cattle prices that had soared above $1.75 per pound in 2014 started what has been a prolonged dive during the second half of 2015, selling as low as $1.17 last week."

"Exports are down because the strong U.S. dollar has made beef prohibitively expensive for many foreign consumers. At the same time, Australian cattlemen flooded U.S. grocery stores with cheap beef as they scrambled to sell off their stock, hurting from a drought there.

The U.S. consumer, as a whole, turned away from beef as an everyday dinner item long ago, finding it too high-priced compared to chicken or pork." [we also say that when the relative price of substitutes falls, the demand for the good in question, in this case beef, will decrease or shift to the left, causing its price to fall]

"The current downturn in commodities prices for cattle hasn’t yet shown up at the butcher’s, with average consumer prices down from highs of about $6 per pound to a still pricey $5.50 per pound. Chicken is selling at about $1.50 per pound, pork is about $4 per pound.

“We hurt demand 10, 20 years ago,” Lenz said in an interview before the presentation. “When prices got so high, consumers looked for different things."

"So as soon as they had water and grass, the ranchers started what has been a very fast herd rebuild.

Since it takes roughly three years from the time a heifer is born until her future calf is ready for market, there’s a lot of cattle is hitting the supply chain now."

"Historically speaking, prices are still high. The January price per hundredweight (100 pounds) was $132, compared with $87.60 in 2010. But they’re not as high as what the producers were thought they would be getting.

“We had record high cattle prices, and now they’re down 30 percent,” said Jim McAdams, owner of McAdams 12 Bar Ranch in New Berlin."

"It’s almost like you’re paying to get out of jail" (paying for a service that lets you avoid TSA lines at the airport)

We all know that time is money and that there are things we would rather do than wait in the TSA line at the airport. So if the opportunity cost of your time is high, and you travel often, you might want to pay to avoid these lines.

See The Airport Security Shortcut That Isn’t PreCheck: Clear, a private trusted-traveler program, is expanding thanks to longer TSA lines and a Delta linkup by Scott McCartney of the WSJ. Excerpts:

"Would you pay $10 to $15 a month for a guaranteed cut to the front of some crowded airport security lines, even ahead of PreCheck members and first-class passengers?

Clear is a private trusted-traveler program sanctioned by the Transportation Security Administration. It has lanes at only 13 airports—San Francisco, Denver and Orlando, Fla., among them.

Once enrolled, members go to Clear’s faster lane instead of TSA and have their identity verified by fingerprint or iris scan. Then they go straight to the X-ray machine."

"Clear doesn’t do background checks. It verifies identity by checking passports or driver’s licenses, plus specific questions on past history similar to credit-application type queries. Enrollment can be done in a few minutes. Clear originally issued cards, but now just identifies members by the fingerprints, iris scans and photographs it collects.

At checkpoints, Clear employees verify identity, check boarding passes through TSA’s system, then carry the Clear member’s bags to the X-ray machine belt. All Clear members still go through physical screening.

The cost of such privilege is $179 a year, but Clear does offer discounts, such as a current $59 Groupon for a nine-month membership. Family members are $50 and children under 18 are free. Delta says it will offer free Clear memberships to its diamond-level frequent fliers shortly and discounted rates for all members of its SkyMiles frequent-flier program."

"Some travelers say the certainty of not having to wait in TSA lines at airports with a Clear station allows them to schedule more meetings on business trips or spend more time at the beach. They can show up at the airport only a few minutes before flights start boarding.

“It’s almost like you’re paying to get out of jail,” says John Ormesher, a Florida-based semiconductor distributor who travels frequently for business and pleasure and signed up for Clear in January 2015. He’s loved it so far. “As PreCheck has gotten more and more crowded, it really is nice, because if there are 25 or 30 or 50 people in a PreCheck line, we jump right ahead of all those folks,” Mr. Ormesher says."

"TSA monitors and inspects Clear but doesn’t share data. The agency says getting cleared by Clear only means you go to front of the travel document check line. At some airports, TSA lets travelers verified by Clear go right to screening. At others, TSA officers double-check boarding passes after Clear."

Who wrote your potential love's online dating profile? (maybe they outsourced it to a professional who specializes in that)

By Danielle Braff of the Chicago Tribune. Output is greater when we all specialize and then trade. So maybe it should not be a surprise that people outsource the writing of their online dating profiles. Why not have an expert do it for you, freeing your time to do something else? Seems like Cyrano de Bergerac was ahead of his time.

"After responding to a Task Rabbit request, Dan Hirsch, a writer who's gay, became an OK Cupid ghostwriter for $55 per week, plus a $10 bonus for each woman who agreed to a date.

Hirsch, who is now an master of fine arts candidate in dramatic writing at Carnegie Mellon University in Pittsburgh, was based in San Francisco at the time. He would sign into his client's profile, message potential matches for him and arrange first dates.

"His whole rationale was that he wanted to get to the part where he could meet in person as quickly as possible and that the messaging was a big time suck," Hirsch said.

It worked: His client met a match, though the relationship fizzled after a month.

At a time when people are outsourcing nearly everything, including putting together Ikea furniture, it's not surprising that they're outsourcing parts of their dating life.

"When my client told his girlfriend about his scheme, she seemed to appreciate him for what he was: a life hacker of sorts," Hirsch said.

But he's not the only one doing it, and if you're looking for a match online, you've probably been reading through plenty of profiles that weren't written by the person in the profile.

If the profile looked too good to be true, it probably was.

It may have been written by Lisa Hoehn, New York-based founder and CEO of Profile Polish, and author of "You Probably Shouldn't Write That: Tips and Tricks for Creating an Online Dating Profile that Doesn't Suck."

After conducting in-depth interviews with her clients and choosing and editing photos for their pages, she creates their profiles. Each week, she does between four and 10 profiles, and work has been steady since she launched her business in August 2013.

"A profile is your way to get your foot in the door with a potential match," Hoehn said. "It's all that you have to entice someone into talking to you.""

"Gandhi's company (Bela Gandhi, Chicago-based CEO of Smart Dating Academy) does complete online profile makeovers but draws the line at taking over the entire account, and it won't message anyone to score potential dates, though people have requested this many times.

She does help her clients learn how to date, though, and encourages everyone to take the process slowly, emailing and speaking with love interests over the phone before meeting them, just in case the person on the other end is a professional posing as a date."