"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."

The Unfairness of Unattractiveness

See The Unfairness of Unattractiveness by Julian Savulescu. He is the Uehiro Chair in Practical Ethics Director, Oxford Uehiro Centre for Practical Ethics, University of Oxford. Excerpt: 

"In the job market being attractive is advantageous. According to economist Daniel Hamermesh, an attractive man can earn, over a life time, $230,000 more than an unattractive one[1]. Attractive solicitors raise more money for charities[2].  Very attractive individuals are less likely to engage in criminal activities, whereas unattractive ones have higher propensity for crime[3]. Attractive criminals are punished less severely than unattractive ones[4].

Both children and adults judge attractive people to be more helpful, more intelligent, and more friendly than their unattractive counterparts[5].

Cute infants elicit stronger motivation for care-taking than less cute ones[6]. Moreover, cute infants are rated as most adoptable[7].

Adults have higher expectations of attractive kids compared to non attractive ones[8] and mothers of attractive infants tend to be more affectionate, playful, and attentive when interacting with their children than mothers of less attractive infants[9]. Teachers expect better performances from attractive students[10]. Transgressions of unattractive children are judged more negatively than transgressions of attractive ones[11].

Being attractive is also an advantage in romantic relationships[12] as there is a positive correlation  between physical attractiveness and dating [13][14]."

Here are some related posts:

Better Looking Real Estate Agents Make More Money
 
Do looks matter?
 
Do Good Looking People Get Better Loan Terms?
 
Do Looks Help In The Job Market? 
 
From The Life Is Not Fair Category: Better Looking, Tall, Thin People Make More Money

The unemployment rate rose to 4.9% in June from 4.7% in May (but other stats show no bad news)

See U.S. Job Growth Roars Back in June: The nation adds 287,000 jobs, the strongest month of hiring since last October, after a disappointing May. From the WSJ.

The percentage of 25-54 year olds employed is 77.8% for June. No change from May. It was 79.7% in December 2007 when the recession started. See Employment-Population Ratio - 25-54 yrs. from the BLS.

The percentage of the population (16 and up) employed is 59.6546% in June and was  59.6286% in May. So that was down slightly. See A-1. Employment status of the civilian noninstitutional population 16 years and over, 1981 to date from the BLS

Odysseus Started The Industrial Revolution

Factory work may have been a commitment device to get everyone to work hard. Odysseus tying himself to the mast was also a commitment device. Dean Karlan, Yale economics professor explains how commitment devices work:

"This idea of forcing one’s own future behavior dates back in our culture at least to Odysseus, who had his crew tie him to the ship’s mast so he wouldn’t be tempted by the sirens; and Cortes, who burned his ships to show his army that there would be no going back.

Economists call this method of pushing your future self into some behavior a “commitment device.” [Related: a Freakonomics podcast on the topic is called "Save Me From Myself."] From my WSJ op-ed:

Most of us don’t have crews and soldiers at our disposal, but many people still find ways to influence their future selves. Some compulsive shoppers will freeze their credit cards in blocks of ice to make sure they can’t get at them too readily when tempted. Some who are particularly prone to the siren song of their pillows in the morning place their alarm clock far from their bed, on the other side of the room, forcing their future self out of bed to shut it off. When MIT graduate student Guri Nanda developed an alarm clock, Clocky, that rolls off a night stand and hides when it goes off, the market beat a path to her door."

 See What Can We Learn From Congress and African Farmers About Losing Weight?

Something like this came up recently in the New York Times, in reference to factory work and the Industrial Revolution. See Looking at Productivity as a State of Mind. From the NY Times, 9-27. By SENDHIL MULLAINATHAN, a professor of economics at Harvard. Excerpts:

"Greg Clark, a professor of economics at the University of California, Davis, has gone so far as to argue that the Industrial Revolution was in part a self-control revolution. Many economists, beginning with Adam Smith, have argued that factories — an important innovation of the Industrial Revolution — blossomed because they allowed workers to specialize and be more productive.

Professor Clark argues that work rules truly differentiated the factory. People working at home could start and finish when they wanted, a very appealing sort of flexibility, but it had a major drawback, he said. People ended up doing less work that way.

Factories imposed discipline. They enforced strict work hours. There were rules for when you could go home and for when you had to show up at the beginning of your shift. If you arrived late you could be locked out for the day. For workers being paid piece rates, this certainly got them up and at work on time. You can even see something similar with the assembly line. Those operations dictate a certain pace of work. Like a running partner, an assembly line enforces a certain speed.

As Professor Clark provocatively puts it: “Workers effectively hired capitalists to make them work harder. They lacked the self-control to achieve higher earnings on their own.”

The data entry workers in our study, centuries later, might have agreed with that statement. In fact, 73 percent of them did agree to this statement: “It would be good if there were rules against being absent because it would help me come to work more often.”"

The workers, like Odyssues, tied themselves to the mast to resist the temptation of slacking. This made it possible for factories to generate the large output of the Industrial Revolution.

Maybe ‘regime uncertainty’ slowing the recovery

This was my response to an article by columnist Catherine Rampell. It was printed in the San Antonio Express-News. Click here to read it. Or read it below.

Catherine Rampell says the assessment of our economy having the worst recovery after a deep recession since World War II is highly misleading ("Economic recovery better than you think," June 14). But her column itself may also be misleading.

She does acknowledge the slow growth rates in real GDP since the recession ended. Obama may be the first president not to have at least one year with a real GDP increase of at least 3%.

But in one sense, even though the GDP has grown (however slowly), the economy has not recovered. Right now, only 77.8% of 25-54 year olds have a job, still below the 79.7% in December of 2007, when the recession started.

If we give Rampell the benefit of the doubt, and agree that there has been some recovery, we can focus on why she says it has been so slow. It is because the recession was caused by a financial crisis and such recessions usually result in recoveries with less growth than other recessions.

She gets that from a paper by two respected economists, Carmen M. Reinhart and Kenneth S. Rogoff. They "examined the aftermath of 100 financial crises spanning the past century-and-a-half."

But other economists have looked at this issue and are at least somewhat skeptical that recoveries after financially caused recessions are different from others. Christina and David Romer wrote a paper on this in 2015.

They said, of financially caused recessions, "we find that output declines following financial crises in modern advanced countries are highly variable, on average only moderate, and often temporary."

Christina Romer was Obama’s first chief economic advisor and is now back teaching at the University of California (Berkeley). She is also an acknowledged expert on the Great Depression. David, her husband, is a recognized expert on economic growth.

Ms. Rampell has probably heard of them yet she failed to mention their research on this subject. And the Romers are not the only skeptics of this thesis.

Michael Bordo (of Rutgers University) and Joseph Haubrich (of the Federal Reserve) wrote a paper last year on the topic and concluded that "recessions associated with  financial crises are generally followed by rapid  recoveries." Again, this is not mentioned by Rampell.

If it was not the financial crisis, then what might make our current recovery so weak? It could be a result of economic historian Robert Higgs' concept of "regime uncertainty," the idea that with so many new regulations being enacted, businesses may be afraid to invest, not knowing what initiatives they will be allowed to continue with in the future or what their profit rate might be.

Back in 2011, Scott Baker and Nicholas Bloom at Stanford University and Steven Davis at the University of Chicago analyzed "regime uncertainty" and found it to be a valid thesis. They created an index to quantify uncertainty and concluded "When businesses are uncertain about taxes, health-care costs and regulatory initiatives, they adopt a cautious stance."

If business becomes cautious, that means less investment spending. Which, in turn, can reduce the growth of GDP.

None of this conclusively proves that Rampell is wrong. Showing cause and effect in economics is difficult since there are so many uncontrolled variables and each recession can have its own peculiarities.

But I think that Rampell was wrong to base her opinion only on the research of two economists (Reinhart & Rogoff), even though they are well respected. We need to be open to other valid causes of the slow recovery.

Domino's & T-Mobile discover there is no such thing as free pizza. Too many took advantage of offer. They ran out

See T-Mobile Ends Free Pizza Promotion as Domino’s Runs Out of Dough by Saad Chandna of Bidness Etc. Why the give away in the first place? Competition: "With AT&T having launched a similar thank you service for its customers, T-Mobile needs to keep the ante up as rival carriers initiate methods to keep their own customers hooked."

Here is the definition of a scarce good I use in my classes:

Scarce-A good or resource is scarce when the amount available is less than the amount people would want if it were given away free of charge.

So pizza is scarce!!

Excerpt from article:

"T-Mobile Tuesdays has provided the un-carrier’s customers with a lot of free goods, but free Domino’s Pizza will not be one of those promotional items anymore

Domino's Pizza, Inc. (NYSE:DPZ) has had to back out of a T-Mobile promotion owing to a demand-supply discrepancy. The un-carrier recently launched its T-Mobile Tuesdays app on iOS and Android in a bid to say thank you to its customers for their loyalty. Among other freebies, T-Mobile offered coupons entitling customers to a free Domino’s medium pizza with toppings. The restaurant chain, however, has been unable to handle the surge in demand every Tuesday, and has now discontinued the service.

T-Mobile US Inc. (NYSE:TMUS) promotions tend to create quite a bit of a brouhaha, and T-Mobile Tuesdays was no exception. The app crashed soon after it launched, as customers rushed to get their hands on free goods. Demand has been so high that it put a strain on Domino’s stores, as they tried to cater to the orders. T-Mobile CEO John Legere acknowledged this in an internal Domino’s memo, saying that the promotion would not be renewed unless a viable solution was found.

The T-Mobile CEO noted in his tweet that the promotion will not be valid on the next Tuesday, June 21. Mr. Legere was appreciative of Domino’s efforts to facilitate the extra orders. According to his tweet, Domino’s sales went up by around three to four times the sales accrued on any given Tuesday, as a direct result of the T-Mobile promotion.

According to TechCrunch, Domino’s appreciated the number of T-Mobile customers who are fans of the pizza chain. However, the restaurant giant had already started capping the number of free pizzas per store, while some T-Mobile Tuesdays coupons were not accepted altogether. This understandably left a lot of customers unhappy."

Criticizing the selling of Ali's memorial service tickets ignores economic reality

I submitted this to the San Antonio Express-News

At first glance, it might seem awful that some people were selling free tickets they had gotten to Muhammad Ali's memorial service Friday (June 10) in Louisville ("Some trying to profit off funeral," sports, June 9).

An Ali family spokesman said he was "personally disgusted" by this and that Ali "wanted this to be a free event, an event that was open to all."

Another person, who wanted to attend the service, said "The Greatest wanted his funeral to be accessible to everyone." Another fan, who was lucky enough to be given a ticket by someone else who had waited in line said "I'm glad that somebody has a heart out there" (as opposed to those who sold their tickets).

But the arena holding the service only seats 15,000. People started lining up the night before tickets were given out and thousands left empty handed.

That also seems heartless, to have people wait so long and come up empty handed. If tickets were sold for money, that would have been avoided.

Luckily the high temperature in Louisville was only 77 that day. But the next day it was supposed to be 85 and the day after 92. Just imagine what might have happened if people had waited hours in the heat and gotten nothing.

Anytime we don't allow a product to be sold (or sold for its market price)  some other mechanism will allocate goods and services. It could be on a first come, first serve basis, like in this case. That is, who waits the longest gets it.

Or, as happened in Rhode Island in 2006, two police officers used their badges to cut in line to buy the Playstation3 video game. The selling price was not high enough on the first day, so, like in the case of Ali's memorial service, people waited in line all night.

We should not be surprised when people sell "free" tickets. This happened in 2009 when comedian Jay Leno gave away free tickets to unemployed workers in Detroit. Some sold them.

Leno was not happy about this. But he required no proof from recipients that they were actually unemployed. And if a truly unemployed worker sold a ticket, maybe they needed the money more than Leno's jokes.

Free items can end in tragedy. This happened in India in 2004 when a stampede occurred while free saris were being given away. Twenty-one women and children (mostly poor) were killed.

Mr. Ali may have had a noble sentiment by insisting that tickets to his memorial service be free. But "free" items cause problems.

Some people were paid to stand in line. Although tickets might not be sold in those cases, it violates the spirit of what Mr. Ali wanted. But detecting such activity might be difficult.

Paying people to stand in line is common. Lobbyists have paid people to wait in line for them to get a good seat at Congressional hearings. Kathleen Elkins of Business Insider reported last year that there are companies that employ professional line sitters.

This happened up in Austin. People got paid to wait in line at Franklin Barbecue.

Calling the profiteering (selling free tickets) despicable, deplorable and heartless just ignores reality. Supply and demand set a price and when that is ignored, strange things happen.

Right now price controls are causing a human tragedy in Venezuela. The government mandates low prices and businesses can't make a profit. So they have shortages of food and medicine and other essentials. If they only allowed some "disgusting" profiteering, things might be better. 

Here are some related links:

People are paying up to $1,500 for someone else to take their place in line
 
Franklin Barbecue bans professional line-sitters
 
Cops in Trouble for PS3 Line-Cutting
 
Stampede for free saris kills 21 in India
 
Some looking to profit from free tickets to Ali services

Licensing Laws Are Shutting Young People Out Of The Job Market

By Ben Casselman of 538. Excerpt:

"A week ago, however, the Bureau of Labor Statistics released a trove of new data on licenses — who has them, how much they earn and how they compare to other workers. The numbers are based on a new set of questions added to the monthly Current Population Survey in 2015, so there is no historical information available, but the new evidence is broadly consistent with what the White House and other economists have found: Close to a quarter of workers, 22.4 percent, have a government-issued license, and 25.5 percent have either a license or a privately issued certification. Unsurprisingly, licenses were concentrated in the medical field, where mistakes can cost lives, but even in nonmedical occupations, nearly one in five workers had a license in 2015.¹

Licensing rules are a particular problem for young workers trying to break into the job market, especially those without a college degree. The unemployment rate for adults ages 18 to 35 with neither a license nor a college degree was 9.9 percent in 2015; for those with a license (but still no degree), it was 5.2 percent.² Those who do manage to find full-time jobs earn 13 percent less than those with a license. Good jobs that don’t require a license are scarce, particularly for women: Nearly two-thirds of young women without a license or a degree earn less than $540 a week, roughly two-thirds of the median wage for full-time workers. (For women with a license, about half earn at least $540 a week, in part because women dominate many medical occupations.) Licensing rules don’t explain all or even most of that gap — there are likely other differences between people who have licenses and those who don’t — but they probably do play a role. The earnings gap shrinks, but doesn’t disappear, after controlling for education, occupation and other factors.

Young workers aren’t the only ones affected. Among older workers, the earnings disparities between those with licenses and those without aren’t as stark,³ likely because they have had more time to find their way into a career (and perhaps also because occupational licensing wasn’t as widespread when they entered the workforce). But when older workers lose jobs, licensing requirements can make it hard for them to get back to work, especially if they need to change careers. Workers over 45 consistently face longer spells of unemployment when they lose jobs compared with younger workers; unemployment lasts more than 40 percent longer for those without a license.⁴

One solution, of course, is for workers without licenses to get them. But state licensing programs are often long and expensive, which can deter low-income workers or those who aren’t yet sure what career they want to pursue. And licenses can be barriers in other ways as well, making it hard for people to move to other states, where their license may not be valid, or to pursue entrepreneurial ideas, which may not fit with licensing requirements.

Both Democrats and Republicans have spoken out against excessive licensing in recent years. But the problem is that the winners from licensing laws are clear, as Josh Zumbrun noted this week in The Wall Street Journal. Particularly for workers without a college degree, a license brings higher earnings and a reduced risk of unemployment. The losers, even though there are probably more of them, are harder to identify. Someone who avoids becoming a hairdresser because of the mandated training, for example, may not think of herself as being a victim of licensing, even if she is. As a result, supporters of licensing have a stronger incentive to defend their interests, making it hard to roll back the laws once they’re in place."

Are Millennials Buying Cars Again?

See Millennials are finally arriving in the car market by DEE-ANN DURBIN of AP. Excerpt:

"DETROIT (AP) — Millennials were once a source of panic in the auto industry. Dubbed the "go nowhere" generation, they weren't getting driver's licenses, never mind buying cars. Headlines declared it was "The End of Car Culture."

New data suggests at least some of that worry was misplaced. Millennials — especially the oldest ones — are these days buying cars in big numbers. They just had a late start.

Now the largest generation in the U.S., millennials bought 4 million cars and trucks in the U.S. last year, second only to the baby boomers, according to J.D. Power's Power Information Network, which defines millennials as those between 21 and 38 in 2015. Millennials' share of the new car market jumped to 28 percent. In the country's biggest car market, California, millennials outpaced boomers for the first time.

Industry watchers say it's been hard to get a read on millennials because the generation is big and diverse, ranging from recent college graduates to settled-down suburbanites. Automakers were also unsure about the impact of new transportation choices, like ZipCar and Uber, which helped millennials delay car buying. But as they got jobs and started families, millennials headed into car dealerships just like previous generations.

"This whole idea that they're not going to need cars is absolutely ridiculous," said Steven Szakaly, the chief economist for the National Automobile Dealers Association. "The new car buyer age is just happening much later."

It's a very different story from 2010, when millennials — who make up around 30 percent of the population — bought just 17 percent of new cars. Auto executives wondered aloud if the trend would be permanent.

In 2011, a University of Michigan study showed a steady decline in the number of young people getting their driver's licenses. In 1983, the survey found, 87 percent of 19-year-olds had a license. By 2010, that had fallen to 69 percent. Millennials told the study's authors that they were too busy to get licenses and were happy to hitch rides from others.

But there was more to the story. The advent of graduated licensing laws — which make teens practice driving in stages before granting a full license — was one reason millennials were getting their licenses later. An even bigger reason? The economy.

For many millennials, the Great Recession hit just as they were getting their first job or graduating from college. By 2010, millennials' unemployment rate reached 13 percent — four percentage points higher than the national average — according to a report by the White House Council of Economic Advisers. For teens, things were even worse. The teen unemployment rate rose from 15 percent to 26 percent between 2006 and 2012.

Millennials' unemployment rate has improved to around 8 percent. Add low interest rates and low gas prices to the mix and the car market suddenly looks more enticing to young buyers."

Another interesting article is The baffling reason many millennials don’t eat cereal by Roberto A. Ferdman of The Washington Post.

Anxious? High Strung? You Might Be The Ideal Worker

There was an interesting article a few years ago in the New York Times magazine called Understanding the Anxious Mind by ROBIN MARANTZ HENIG. It discusses a study of anxiety that looks at subjects from birth as they age. Here is one interesting excerpt:

"LOOKING AT THE neurology of anxiety raises the inevitable question of why a trait that causes so much mental anguish would have evolved in the first place. For the species as a whole, it is most likely an advantage to have some group members who are hypervigilant and who see everything as a threat, always ready to sound an alarm and leap into action. For the individual, though, being inhibited can mean having fewer mating opportunities, not to mention the psychic burden, wearing yourself ragged with a brain that’s always on high alert.

In the modern world, the anxious temperament does offer certain benefits: caution, introspection, the capacity to work alone. These can be adaptive qualities. Kagan has observed that the high-reactives in his sample tend to avoid the traditional hazards of adolescence. Because they are more restrained than their wilder peers, he says, high-reactive kids are less likely to experiment with drugs, to get pregnant or to drive recklessly. They grow up to be the Felix Ungers of the world, he says, clearing a safe, neat path for the Oscar Madisons.

People with a high-reactive temperament — as long as it doesn’t show itself as a clinical disorder — are generally conscientious and almost obsessively well-prepared. Worriers are likely to be the most thorough workers and the most attentive friends. Someone who worries about being late will plan to get to places early. Someone anxious about giving a public lecture will work harder to prepare for it. Test-taking anxiety can lead to better studying; fear of traveling can lead to careful mapping of transit routes.

Kagan told me that in the 40 years he worked at Harvard, he hired at least 200 research assistants, “and I always looked for high-reactives. They’re compulsive, they don’t make errors, they’re careful when they’re coding data.” He said he would bet that when the United States sends people up in space, the steely, brave astronauts were low-reactive as infants, and the mission-control people down on the ground, doing the detail work that keeps the craft aloft, were high-reactive.

An anxious temperament might serve a more exalted function too. “Our culture has this illusion that anxiety is toxic,” Kagan said. But without inner-directed people who prefer solitude, where would we get the writers and artists and scientists and computer programmers who make society hum? Kagan likes to point out that T. S. Eliot suffered from anxiety, and that biographies indicate that he was a typical high-reactive baby. “That line ‘I will show you fear in a handful of dust’ — he couldn’t have written that without feeling the tension and dysphoria he did,” Kagan said."

Here is the link to the letters about the original column

This was a commercial back in 1986. It paints a bleak picture of America in the future, presumably caused by the growing national debt ($2 trillion then, it will be about $19.43 trillion when the fiscal year ends on Sept. 30, according to the White House Office of Management and Budget). I think this thing is way over the top but there may be some real dangers from the debt that I mention below. You might have to watch a brief commercial for some product first. We have been covering the deficit and debt this week in my macro classes. If the embedded video does not appear, use the link below it.

Ridley Scott - W. R. Grace Deficit Trials

Real problems the national debt might cause
1. About 34% of the debt is owed to foreign citizens. When they get paid back, they come and buy American goods. That leaves fewer goods for Americans (who can't afford to buy as much due to higher taxes that were needed to pay back the debt). BUT THIS MIGHT NOT BE A CONCERN IF WE ORIGINALLY BORROWED THE MONEY FOR A GOOD PURPOSE.

People borrow money all the time to buy houses and cars. Then they pay it back to a person outside of their family or household. We don’t consider this a burden since the money was put to good use. Right after World War II, the national debt was 120% of the GDP. This was much higher than it is now and we survived. No one complains that we borrowed to win the war.

2. Raising taxes might hurt economic incentives. At higher tax rates, people might want to work and invest less. Fewer businesses might expand and fewer new ones created since you will get to keep less profit. But again, THIS MIGHT NOT BE A CONCERN IF WE ORIGINALLY BORROWED THE MONEY FOR A GOOD PURPOSE. Also, if taxes only go up a little, and the debt is slowly paid off each year (like after WW II), it may not hurt too much.

3. We may have fewer government services in the future if we pay back the debt by lowering government spending. But this means that we are trading more government services today for fewer in the future. THIS IS NOT NECESSARILY A BAD THING IF THE MONEY IS SPENT WISELY (which everyone not might not agree on).

If taxes and interest rates are higher in the future due to the debt, that will lower our future economic growth rate. We will still probably grow, but not as much.

Should your company or insurer reward you for meeting exercise goals?

See Let your boss track your fitness, get an Apple Watch by ANICK JESDANUN of the Associated Press.

This reminds me of what economists call "asymmetric information." This is a situation in which the seller knows more about a product than the buyer (sometimes the buyer knows more about something important like how healthy or risky they are as it relates to insurance). These markets do not operate optimally. If insurance companies don't know how healthy or risky you are, they can't be sure of how much your premiums should be. But with fitness tracking, they learn more about you. My students might recall I discussed this after we played the supply and demand game in class. A good example is the used car market. Sellers usually know alot more about the product than the buyers.

Excerpts from the article linked above:

"You know you need to exercise more, but there's always next week, or the week after. To entice you to stop procrastinating, your company or insurer might soon reward you for wearing a fitness device to track your steps, heart rate and more.

For instance, in one program announced Wednesday, some workers can buy a $350 Apple Watch for just $25 by meeting exercise goals for two years. Miss goals, and see your discount shrink. Vitality, a provider of disease-prevention and lifestyle programs, is initially bringing the offer to U.S. employees at three companies, along with John Hancock life-insurance customers. It has been testing the program in South Africa since December.

Other programs let you redeem points from fitness activities for gift cards and other rewards. Submit to biometric screenings and nutrition classes, and in some cases you can earn insurance discounts."

"Adrian Gore, CEO and founder of Vitality parent company Discovery Group, says that for many people, the benefits from exercise might not be apparent for a few decades. Reward programs make the payoff more immediate."

"On Tuesday, health insurer UnitedHealthcare started offering up to $1,460 a year in credits toward deductibles for meeting daily goals while wearing a custom tracker. Oscar, which sells health insurance directly to consumers, has been giving out free Misfit trackers for opportunities to earn up to $100 a year in Amazon gift cards. Fitbit works with employers such as Indiana University Health and Emory University in Atlanta to subsidize fitness trackers for their staff."

"These programs are typically voluntary, but you must be willing to share data to earn the most rewards and insurance discounts.

Sound creepy? Program officials say that data from fitness trackers typically go to outside administrators, such as Fitbit or Vitality. Employers and insurers get only broad totals to verify eligibility and not details on heart rate and sleep. But participants need to trust that these systems won't get hacked.

Mike Doughty, president and general manager of John Hancock Insurance, says premiums won't rise if a screening uncovers higher blood pressure or other risks. Rather, he says, wellness incentives are about promoting longer lives — and collecting life-insurance premiums longer.

There's no proof that providing fitness trackers directly lowers health care costs, but there's plenty of evidence that exercise leads to better health, which in turn can improve productivity and reduce absences. Michael Staufacker, Emory's director of health management, describes the thinking as a "value of investment and not a hard-dollar return on investment as it relates to medical or pharmacy costs.""

"Programs from Vitality and others typically won't let you earn insurance discounts simply by exercising. You'll need to earn additional points by completing questionnaires and getting flu shots. You sometimes get bonus points simply by staying within recommended limits for cholesterol, blood pressure and other measures. Smokers can also get points for joining programs to help them quit.
"You change one thing about your behavior, and you can be more motivated to work on these other aspects," says Tammy Smith, who manages the employee wellness program at IU Health.

DaVita HealthCare Partners says health care spending by its employees slowed significantly after it offered tracker-based incentives through Vitality. But DaVita also increased the deductible on claims and started such initiatives as Fresh Fruit Wednesday. That makes the effect of the fitness program difficult to isolate.

With the Apple Watch program, you must pay back Vitality each month you miss your fitness goals, which typically call for four substantial workouts a week. The goals are meant to be achievable, but tough enough to change habits."

Some research shows that if the reward is not delayed, people are put in groups where only those succeeding get rewarded (since people hate to see others get a prize they could have had) and if the participants lose money if they don't meet the goal (called loss aversion), the policy is more successful. See Paying Employees to Lose Weight.

Older posts on similar topics:

Should Overweight People Pay More For Health Insurance?

Should We Pay People To Adopt A Healthy Lifestyle?

The more we build our human and financial capital, the more prepared we are when a downturn comes or to capitalize on other opportunities

See Oil layoffs are not because companies are greedy. From The San Antonio Express-News, by Christopher E. Baecker, who manages fixed assets for Pioneer Energy Services and is an adjunct lecturer of economics at Northwest Vista College in San Antonio. Excerpts:

"Our employment is at-will — meaning we are as free to leave the company as it is to eliminate our position or terminate our employment. It works both ways, and many people forget that when bemoaning “big evil corporations interested only in making a buck.”

Our labor market flexibility is one thing that makes the U.S. economy better than most, with fewer regulations on freedom of movement and deployment of resources. It’s a big reason we typically have a lower unemployment rate than other countries.

After the first such round of workforce reductions a year prior, the same daughter (the most inquisitive of my four) asked if I had a backup plan. I pointed to my efforts to sharpen my Spanish, among other things. I’ve had the pleasure of knowing many individuals who are proactive in that regard.

In addition to her speech pathology work, my sister, whose husband works in our industry, recently started selling cleaning supplies. One friend with whom I work is now an Uber driver in her free time. Another colleague at a previous job saved enough to open her own haircutting franchise. Many of the people working in the field have commercial driver’s licenses and experience in construction.

The more we build our human and financial capital, the more prepared we are when a downturn comes or to capitalize on other opportunities. Such behavior and farsighted use of spare time makes this possible — that’s why the best job security is job insecurity.

I have found that differentiating between cyclical unemployment (shifts in the business cycle from growth to downturn and back) and frictional unemployment (voluntary movements) is not terribly difficult for my college students to grasp in the abstract. But when it happens to you in real life, it naturally tends to have an adverse emotional impact.

There are various forms of temporary assistance available to people who find themselves swept up by large macroeconomic forces. Many companies offer severance packages. As a society, we have deemed it appropriate to offer unemployment insurance funded by taxes levied on employers. There’s COBRA and Medicaid for those qualifying to help with health expenses.

In December, the government helped by possibly flipping the script on the other type of unemployment — structural — when Congress and President Barack Obama lifted the ban on crude oil exports." 

"Also in the budget is a proposal to enhance unemployment insurance.

Assistance for workers who can prove they lost their job as a direct result of liberalized trade has always had support. It helps smooth acceptance of changes that will benefit our country as a whole. The proposed changes would pay a person a portion of the difference between the job lost and a lower-paying new job.

These modifications, however, would numb the incentives of the good habits spurred by job insecurity.

Current Federal Reserve policies don’t help, as they discourage folks from saving, a cruel irony given that those very same policies play a role in the boom and bust nature of our industry.

There have actually been a few calls to “bail out” the oil industry, but that’s the last thing that needs to happen.

We should be bailing out fewer companies, not more. What those employed in our industry, and likely laborers in general, would probably appreciate more than anything is stable policy from Uncle Sam, so they can shape and direct their lives on their own terms."

Do Some Sellers on eBay Have an Edge Over Other Sellers?

See Male Sellers on eBay Have an Edge Over Women, Study Finds. By PAM BELLUCK of the NY Times. Excerpts:

"on average, when men and women with equal selling reputations sold the same products, women received lower prices than men."

"The difference was far less pronounced for used items: Women sellers received about 97 cents for every dollar men received. But with new items, where the authors say direct comparison is easier, women received about 80 cents on average for every dollar men sellers received."

"“The basic point — that people have different expectations of women versus men and so we treat them very differently in the world — it’s fascinating and depressing,” said Linda Babcock, an economics professor at Carnegie Mellon University, who was not involved in the study."

"The study did not paint a universally negative picture for women. For some items, like toys and pet products, women received somewhat higher prices than men. And women tended to have better reputations as sellers, although they tended to have less selling experience.

Nor did the study, which controlled for seller reputation, experience, number of photos, use of bold lettering and other elements, indicate that buyers were actively or even consciously discriminating. Male and female buyers appeared to treat women sellers the same, the authors said."

"We actually think that most of it is unconscious,” said Tamar Kricheli-Katz, a professor of law and sociology at Tel Aviv University, who conducted the study with Tali Regev, an economist at IDC Herzliya."

"the researchers conducted an experiment to see if people could tell the gender of sellers from user profiles. People guessed correctly in 1,127 of 2,000 cases, wrong in 170 and did not know the rest.

In another experiment, the researchers asked people to place value on a $100 Amazon gift card sold by someone named either Alison or Brad. On average, Alison’s gift card was valued at $83.34, while Brad’s was valued at $87.42.

Claudia Goldin, a Harvard economist and expert on gender wage gaps, said the study was intriguing but needed more analysis. “Just perceiving that somebody’s a woman, what exactly does it mean?” she asked. “It’s got to mean something about the quality of the good or service or something that’s not captured in the data that they have.”"

Amusement Park Changes Its Pricing Strategy

See Disneyland 'demand pricing' will cost you $5 less on slow days and $20 more when it's busy.  I'm skeptical about Disney saying this not being about maximizing profits. Everything firms do is about profits, especially if they see demand being different on different days. When demand increases, price goes up. Excerpts:

"Walt Disney Co. is adopting a new pricing policy at Disneyland and other U.S. theme parks that would reduce ticket costs on low-demand days and boost entrance fees for more popular times.

Starting Sunday, anyone willing to drop in on a typically slow day — maybe a Wednesday in September — will pay a few dollars less than previously. But for most days of the year, expect to spend more for a daily ticket.

Disney is portraying the move to peak pricing as a crowd-management technique rather than a push to maximize profits.

Airlines and hotels do it during spring break and other high-demand times; Uber and Lyft also charge more when the need for ride-hailing services surges, such as New Year's Eve.

"The demand for our theme parks continues to grow, particularly during peak periods," Disneyland spokeswoman Suzi Brown said. "In addition to expanding our parks, we are adopting seasonal pricing on our one-day ticket to help better spread visitation throughout the year."

Disneyland and Disney California Adventure have been charging $99 for a one-day ticket. Under the new policy, each day on the calendar will be designated a "value" day, a "regular" day or a "peak" day. The new price will be $95 for a value day, $105 for a regular day and $119 for a peak day."

Okun's Law

In my macro classes when I talk about how the unemployment rate falls when GDP increases (because greater output usually requires more workers), I usually say something like "but we probably need at least some minimum increase in GDP to see the unemploymet rate go down." This where Okun's Law might come help out. See Mr. Okun Saw This One Coming: Jobs Report Follows His 'Law'.

This is the key passage:

""Okun's Law," as it came to be known, has been tweaked over the years, and now states that for every two percentage points the economy grows above its long-term trend annually, unemployment falls by a percentage point.

Most economists peg the economy's long-term trend rate at about 2.5%, which is roughly where economists polled by The Wall Street Journal estimate growth stands in the current quarter.That means, according to Okun's Law, that the economy isn't growing fast enough to bring down unemployment."

See also Arthur M. Okun from the Library of Economics and Liberty.

And Is Okun’s Law Really Broken? By JUSTIN WOLFERS.

This was a post from December, 2010. Here are the growth rates in real GDP for the years 2011-2015

1.60%
2.22%
1.49%
2.43%
2.38%

Now here are the unemployment rates for the years 2010-2015

9.6%
8.9%
8.1%
7.4%
6.2%
5.3%

So unemployment has fallen quite a bit despite sluggish growth. But the employment picture might not be that great. We see a drop in the unemployment rate of 4.3 percentage points but the increase in the percentage of 25-54 year olds employed was much smaller.  Only 2.26 percentage point increase or only about half of the fall in unemployment. Here are the numbers for the percentage of 25-54 year olds employed for the years 2010-2015.

75.08%
75.13%
75.73%
75.89%
76.71%
77.24%

Federal Reserve Economists May Have Discovered Another Cause Of Bankruptcy

See Why You Might Go Bankrupt If Your Next-Door Neighbor Wins the Lottery by Ben Leubsdorf at The Wall Street Journal blog. In case that link does not work, try Here’s why winning the lottery makes your neighbors go broke by the same author in The New York Post. Excerpts from the WSJ blog:

"Winning the lottery can be hazardous to your neighbors’ financial health.

Research released this month by the Federal Reserve Bank of Philadelphia found a significant jump in bankruptcies among households living near someone who won a big lottery jackpot. The economists theorized that people may have seen the good fortune next door and felt pressure to accumulate more assets of their own, especially flashy purchases like cars, that they simply could not afford.

“Income inequality induces poorer neighbors to consume more visible (rather than invisible) commodities to signal their abilities to ‘keep up with the Joneses’ to their richer neighbors,” economists Sumit Agarwal, Vyacheslav Mikhed and Barry Scholnick wrote. “This tendency can lead to additional and unsustainable borrowing among the relatively poor to finance this additional conspicuous consumption, which can eventually result in financial distress and bankruptcy.”"

"The headline finding: For every $1,000 increase in the lottery prize, there was a 2.4% increase in bankruptcy filings by the winner’s neighbors over the next few years. “These results are more pronounced for low-income neighborhoods and high income-inequality areas,” they wrote.

Why would someone winning the jackpot cause someone living down the street to go bankrupt a year or two later? The economists argued that people who feel they are poorer than their peers may spend more in a conspicuous fashion, financing their purchases with debt. But that debt will need to be repaid, potentially leading to financial difficulties and even bankruptcy.

Messrs. Agarwal, Mikhed and Scholnick analyzed the Canadian bankruptcy data and found “evidence that those who filed for bankruptcy after a larger lottery win of a close neighbor have significantly larger holdings of visible assets (e.g., cars, motorcycles, houses) relative to the holdings of these same visible assets by those who filed for bankruptcy after smaller lottery wins of a close neighbor,” they wrote. There was no similar difference for “invisible assets” like cash or pensions, they said.

In other words, when someone wins a big lottery prize, neighbors appear more likely to buy cars and remodel their houses to show that they can keep up—and go broke in the process."

I put conspicuous consumption in red because that is a well known term in economics and sociology. See Thorstein Veblen and What is Conspicuous Consumption .Veblen first coined the term over 100 years ago. The idea is that rich people buy things just to show how rich they are.

Adam Smith may have beaten Veblen to the punch. In The Wealth of Nations, he wrote:

"With the greater part of rich people, the chief enjoyment of riches consists in the parade of riches, which in their eyes is never so complete as when they appear to possess those decisive marks of opulence which nobody can possess but themselves. In their eyes the merit of an object which is in any degree either useful or beautiful, is greatly enhanced by its scarcity, or by the great labour which it requires to collect any considerable quantity of it, a labour which nobody can afford to pay but themselves. Such objects they are willing to purchase at a higher price than things much more beautiful and useful, but more common." (the entire book is online)

See also an earlier blog post I did called Conspicuous Consumption, Conspicuous Virtue, Thorstein Veblen (and Adam Smith, too!) . See also Doctoral Thesis Says Rich People Spend More on Conspicuous Things

A Special Valentine's Message On Romantic Love

The first one is Researchers at AAAS Annual Meeting Explore the Science of Kissing. The following quote gives you an idea of what it is all about: "Kissing, it turns out, unleashes chemicals that ease stress hormones in both sexes and encourage bonding in men, though not so much in women." I guess economists call this "interdependent utility functions." Meaning that what brings one person pleasure brings brings the other person pleasure, and vice-versa.

The other is Cocoa Prices Create Chocolate Dilemma. The article opens with "Soaring cocoa prices are creating a Valentine's Day dilemma for chocolate makers. They don't want to raise retail prices when recession-weary consumers are trying to limit their spending." The problem is crop diseases in Ivory Coast and Ghana. You might need to be a WSJ subscriber to read the whole article.

Here is a new article from yesterday's San Antonio Express-News (2-13-2011). Romance in bloom at workplace: Survey indicates 59% have taken the risk-filled leap. It seems like many people admit to having a romance at work and/or meeting their spouse at work. So what starts out as economic activity leads to some other needs being met.

Now the economic definition of romantic love.

 Abstract: "Romantic love is characterized by a preoccupation with a deliberately restricted set of perceived characteristics in the love object which are viewed as means to some ideal ends. In the process of selecting the set of perceived characteristics and the process of determining the ideal ends, there is also a systematic failure to assess the accuracy of the perceived characteristics and the feasibility of achieving the ideal ends given the selected set of means and other pre-existing ends.

The study of romantic love can provide insight into the general process of introducing novelty into a system of interacting variables. Novelty, however, is functional only in an open system characterized by uncertainty where the variables have not all been functionally looped and system slacks are readily available to accommodate new things. In a closed system where all the objective functions and variables must be compatible to achieve stability and viability, adjustments in the value of some variables through romantic idealization may be dysfunctional if they represent merely residual responses to the creative combination of the variables in the open sub-system."

The author was K. K. Fung of the Department of Economics, Memphis State University, Memphis. It was from a journal article in 1979. More info on it is at this link. The entire article, which is not too long, can be found at this link.

Then there was this related article: Love really is blind, U.S. study finds. Here is an exerpt:

"Love really is blind, at least when it comes to looking at others, U.S. researchers reported on Tuesday.

College students who reported they were in love were less likely to take careful notice of other attractive men or women, the team at the University of California Los Angeles and dating Web site eHarmony found.

"Feeling love for your romantic partner appears to make everybody else less attractive, and the emotion appears to work in very specific ways in enabling you to push thoughts of that tempting other out of your mind," said Gian Gonzaga of eHarmony, whose study is published in the journal Evolution and Human Behavior.

"It's almost like love puts blinders on people," added Martie Haselton, an associate professor of psychology and communication studies at UCLA."

More links:

How to Be a Better Valentine, Through Economics by economist Paul Oyer.

Here’s what science says is the secret ingredient to making your love spark 

Can Giving Up Money And Material Things Lead To More Love?

What Do Men In China Need To Get A Bride?

Adam Smith, Marriage Counselor

A Special Valentine's Message On Romantic Love

Can You Put A Price Tag On Love?

Do Opposites Attract? Not Usually, Except Maybe When It Comes To Money

Return of the Love Headhunters

eHarmony To Provide Personal Counselors To Help You Find Mr. Or Ms. Right

Economist Paul Zak, aka Dr. Love (he studies the brain with "neuroeconomics")

This is your brain on love   (brain scans and biology seem to confirm the economic definition given above)

Dollars & Sex: The Blog of Marina Adshade

U.S. Economy Added 151,000 Jobs in January; Unemployment at 4.9%

See Click here to read the NY Times article.

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.

We could look at the employment to population ratio. 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.

But we have this ratio for people age 25-54 (which also eliminates college age people who might not be looking for work). Click here to see this data from the BLS.

The percentage of 25 to 54 year olds employed went from 77.4% in Dec. to 77.7% in Jan. It was 79.7% in Dec. 2007, the month the recession started. So there might still some catching up to do. But it was good to see a 0.3% increase in one month

Who Is Most Likely To Default On Their Student Loans?

See Should Anyone Be Eligible for Student Loans? by Josh Mitchell of The Wall Street Journal. Excerpt:

"For decades, the federal government has imposed no underwriting standards in its student-loan program. Just about any American can borrow as much as $57,500 for college—and essentially unlimited amounts for graduate school—with little regard for the person’s ability to repay. Everyone taking out federal loans in a given year pays the same interest rate.

Supporters of that no-questions-asked policy say it guarantees every American a shot at a degree and a secure middle-class income. Imposing underwriting standards would deny a higher education to many poor people who can’t get loans from private lenders, they argue.

But a sharp rise in delinquencies in the $1.2 trillion federal student-loan program is drawing comparisons to subprime mortgage lending, which added to the housing crisis. It is also stirring debate on other ways to allot student aid.

New research shows a preponderance of the millions of borrowers who have defaulted on student loans in recent years are poor, were unprepared for college, and attended troubled schools that offered little hope of leading to a decent job.

“It’s not a gift to a poor person who is not going to be able to complete a degree program to give them a loan,” said Caroline Hoxby, a Stanford University economics professor, who calls the soaring load of student debt “a self-inflicted wound on the part of the federal government.

As of Sept. 30, just over 7 million borrowers had gone at least a year without making a payment on their federal student loans, Education Department figures show.
 
The student-loan delinquency rate has jumped to around 12%, roughly double its level before the recession, according to the New York Federal Reserve. When excluding borrowers still in school, roughly a quarter of all student debt is at least 90 days behind on payments. The comparable number for home-mortgage debt never exceeded 9% after the housing crash.

A recent Brookings Institution study by Treasury Department economist Adam Looney and Stanford’s Constantine Yannelis attributes the rise in both borrowing and defaults since the recession largely to “nontraditional students” who enrolled at for-profit schools and community colleges. Those schools typically have low or no academic standards for enrolling.

Such students made up more than two-thirds of defaults among those who left school in 2011, the study found, analyzing government tax records and student-loan figures. The defaulted borrowers tend to be older, from lower-income families, and more likely to be first-generation college-goers compared with students who attend four-year schools.

Likewise, an October paper by Federal Reserve researchers linked defaults to those who had weak credit scores. About 30% of those who had credit scores of between 500 and 599 a year before they left school eventually became delinquent on their loans. But among those with a score of 680 to 729, only 9% became delinquent, according to the paper, by Fed economists Alvaro Mezza and Kamila Sommer."

Another 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