Mexicans buy fake cellphones to hand over in muggings

By Mark Stevenson of AP. This reminds me of "signaling" in economics. Here is Wikipedia says about it:

"In contract theory, signalling (or signaling; see spelling differences) is the idea that one party (termed the agent) credibly conveys some information about itself to another party (the principal). For example, in Michael Spence's job-market signalling model, (potential) employees send a signal about their ability level to the employer by acquiring education credentials. The informational value of the credential comes from the fact that the employer believes the credential is positively correlated with having greater ability and difficult for low ability employees to obtain. Thus the credential enables the employer to reliably distinguish low ability workers from high ability workers." 

 Here are excerpts from the AP article:

"Armed robberies have gotten so common aboard buses in Mexico City that commuters have come up with a clever if disheartening solution: Many are buying fake cellphones, to hand over to thieves instead of their real smartphones.

Costing 300 to 500 pesos apiece — the equivalent of $15 to $25 — the “dummies” are sophisticated fakes: They have a startup screen and bodies that are dead ringers for the originals, and inside there is a piece of metal to give the phone the heft of the real article.

That comes in handy when trying to fool trigger-happy bandits who regularly attack the buses, big and small, that ferry people from the poorer outlying suburbs to jobs in the city center."

"Now, many people carry a device worth hundreds of dollars in their pocket, and one that may also hold their bank or credit card information.

That’s where “dummy” vendors like Axel come in. Axel says he sells three or four dummy phones a week out of his stall in a downtown electronics marketplace"

"But Axel admits the victim would be in trouble if a thief caught them handing over a “dummy” phone.

“Obviously there are problems, because if the criminals search it or find out … there is going to be a problem.”

Because of that, some try a different strategy, spending a little more to buy a cheap but real second phone."

"the dummy trade started about 14 years ago, but for different reasons: Phone shops would buy dummies for their exhibition cases to protect against another type of crime, the so-called “sledgehammer crews” who can clear out a jewelry or electronics store in seconds by breaking windows."

Related posts:

A fake job reference can be just a few clicks away.

Fake Economist Fools Portugal.

Slave Redemption in Sudan. (Fake slaves are sold to those who buy slaves and then give them their freedom)

Can A Product Work Just Because It's Expensive?. (fake medicine)

If It Pays To Have Friends, Can You Pay To Have Friends?. (you can hire fake boyfriends)

Study: Half of American Doctors Give Patients Placebos Without Telling Them.

Saudis grapple with fake street sweepers .

Rent a White Guy: Confessions of a fake businessman from Beijing (by Mitch Moxley in The Atlantic Monthly)

Can adding a phantom third story to their homes help families find a wife for their son?

Why do employers pay extra money to people who study a bunch of subjects in college that they don’t actually need you to know? Signaling

The Phillips curve is alive and well (unless it's dead)

See Post from Harvard professor Greg Mankiw. He shows that over the last 30 years, when percentage of 25-54 year olds employed increased (similar to the unemployment rate going down), inflation was higher than when the percentage of 25-54 year olds employed decreased.

If the Phillips Curve is right (at least in the short-run), this is what we would expect: inflation to be higher when unemployment is lower.

According to today's WSJ, Fed. Vice Chair said the economy is not beyond full-employment even with unemployment at 3.6%, so high inflation in the near future is not a concern. Inflation does not seem to respond to low unemployment the way it used to.

See also The Economy Is Strong and Inflation Is Low. That’s What Worries the Fed. by Jeanna Smialek of The NY Times. Excerpts: 

"Inflation rose a scant 1.6 percent in the year ending in March, well short of the central bank’s 2 percent target. The Fed’s policymakers are worried about the continuing sluggishness, and President Trump has repeatedly cited low inflation as a reason for the central bank to start cutting interest rates.

“We are doing very well at 3.2% GDP, but with our wonderfully low inflation, we could be setting major records &, at the same time, make our National Debt start to look small!” Mr. Trump said in a recent tweet.

The Fed, for its part, is wrestling with how to respond to persistently low inflation amid what appears to be the weakening of a foundational economic relationship. Unemployment is at its lowest level since 1969, which should spur higher wages as companies compete for workers. Climbing labor costs should eventually get passed along to customers, driving inflation up. Instead, it is moderating."

"The breakdown leaves the Fed staring down an uncomfortable question. If officials can’t get that old chain reaction to work 10 years into an economic expansion, against a backdrop of tax cuts and high government spending, and with exceptionally low joblessness, will they ever?

The Fed’s chairman, Jerome H. Powell, has called weak inflation “one of the major challenges of our time.” In part to address it, he has led the Fed to embark on a yearlong review of its communications, tools and strategy. A major goal is determining what is reining in price gains and what can drive inflation back to the Fed’s target in a sustainable way.

Extra labor supply is one obvious culprit. Since 2016 at least some Fed officials have declared the labor market “at or near full employment.” But the job market keeps surprising them. Prime-age workers are hanging onto their positions for longer.

That’s provided an unexpected source of new employees, enabling brisk hiring to persist without a run-up in wages and prices. Average hourly earnings have shown progress without rocketing up.

Officials have repeatedly lowered their estimates of sustainable unemployment as a result, and Richard Clarida, the Fed’s vice chairman, has suggested that the jobless rate is “not far below many estimates” at that revised level.

Neel Kashkari, the president of the Federal Reserve Bank of Minneapolis, goes a step further. He thinks that the Fed, which has raised interest rates nine times since 2015, began doing so too early and that the economy remains below full employment. Premature tightening has convinced the public that inflation won’t rise to 2 percent this business cycle, he thinks, and now consumers and businesses are acting accordingly.

Beyond slack in the labor force and expectations, forces like technology and globalization may be restraining pricing power. Consumers with Amazon and Yelp in their pockets can easily avoid overpaying."

Related posts:

Is There A Neutral Interest Rate? If So, How Much Is it?

Is The Phillips Curve Dead In Japan? Maybe not

Is The Phillips Curve Not Holding Up Well Because The Service And Goods Sectors Are Behaving Differently?

Has the Fed Flattened the Phillips Curve?

Nobody knows what the natural rate of unemployment is today

More on the natural rate of unemployment

How Central Banks Differ In Their Methods Of Calculating Inflation.

Fed Officials Disagree On Threat Of Inflation (from 2009)

Fed Chair Janet Yellen: "there remains considerable slack in the economy" (from 2014)

E-Commerce Might Help Solve the Mystery of Low Inflation

 
Fed officials disagree on how much inflation the current low unemployment rate might cause 

Fed Looks for Goldilocks Path as Jobless Rate Drops  

These Are the Highest Paying Jobs for the Class of 2019

By Shelly Hagan of Bloomberg.

Data Scientist	95,000
Software Engineer	90,000
Product Manager	89,000
Investment Banking Analyst	85,000
Product Designer	85,000
UX Designer	73,000
Implementation Consultant	72,000
Java Developer	72,000
Systems Engineer	70,000
Software Developer	68,000

 
See Highest Paying Jobs With a Bachelor’s Degree from Payscale.com to see alot more information.

Mark Twain, Free Trade and Tariffs

Twain supposedly said that "free traders win the arguments and the protectionists win the votes."

Tariffs are in the news again. See Stocks tumble as Trump threatens to hike tariffs on China by Emily McCormick of Yahoo Finance. Also, I covered tariffs in some of my classes recently (see link below).

Marc-William Palen, a lecturer in imperial history at the University of Exeter, wrote an article titled How Mark Twain Became a Free Trader. Click here to go to Palen's page.

Here is an excerpt, where Palen discusses a part of A Connecticut Yankee in King Arthur’s Court. After that, I have another quote from the book that also shows Twain's support for free trade.

"The culture of free trade also manifested itself in the writing of Mark Twain.

Famed satirist Twain had been a supporter of the Republican protectionist policy up until Cleveland’s 1887 tariff message. It was at this point that Twain became a convert to free trade and gave Cleveland his endorsement.

Twain’s newfound antipathy for protectionism found outlet in A Connecticut Yankee in King Arthur’s Court (1889).

In it, Twain’s protagonist, Hank Morgan of Hartford, Connecticut, awakens to find himself transported to sixth-century England.

As Hank traipses across the land, he comes across a smith by the name of Dowley. Hank and Dowley immediately begin discussing “matters of business and wages” over dinner.

The sixth-century tributary kingdom in which Dowley abides appears at first glance quite prosperous in comparison to Hank’s Hartford.

“They had the ‘protection’ system in full force here,” Hank explains, “whereas we were working along down toward free-trade, by easy stages,” a veiled reference to Cleveland’s speech and the Democrats’ proposed lower tariff bill of 1888.

The others at the Dark Age dinner table listened “hungrily” as Dowley began to question Hank on the rate of wages in Gilded Age America.

“In your country, brother,” asked Dowley, “what is the wage of a master bailiff, master hind, carter, shepherd, swineherd?”

Upon hearing Hank’s reply of a quarter cent, “the smith’s face beamed with joy…. ‘With us they are allowed the double of it!…. ‘Rah for protection—to Sheol with free-trade!’”

To which Hank, unmoved, “rigged up” his “pile-driver” to drive the smith “into the earth—drive him all in—drive him in till not even the curve of his skull should show above ground.”

Hank replies to Dowley that, while the wages in the smith’s land were indeed double those of Connecticut, late-19th-century Americans could buy goods at prices well less than half what Dowley and his countrymen paid, making the high wage argument superfluous.

Hank thought he had scored a point against the blacksmith and had “tied him hand and foot.”

But Dowley “didn’t grasp the situation at all, didn’t know he had walked into a trap… I could have shot him, from sheer vexation. With cloudy eye and a struggling intellect,” Dowley admitted he did not understand Hank’s argument. At which point their dinnertime discussion only deteriorated further.

Twain’s Hank was a literary representation of late-19th-century America’s free traders. These were men who prided themselves on their intellectual superiority and the economic soundness of their arguments.

They were, however, frustrated time and again by what they perceived as pernicious protectionist propaganda that nevertheless struck a chord in the heart of the ignorant American worker.

Twain’s extreme language hints as well at how fierce the tariff debate had become within the presidential election of 1888 – the “Great Debate” between Democratic free trade and Republican protectionism."

In a discussion of how the government raises revenue, Hank says:

"In my day, in my own country, this money was collected from imposts [a tariff or import duty], and the citizen imagined that the foreign importer paid it, and it made him comfortable to think so; whereas, in fact, it was paid by the American people, and was so equally and exactly distributed among them that the annual cost to the 100-millionaire and the annual cost to the sucking child of the day-laborer was precisely the same"

To see why it might work this way, click here.
 
Related posts:

Chapter 33 Of Mark Twain's A Connecticut Yankee in King Arthur’s Court Is Titled "SIXTH CENTURY POLITICAL ECONOMY" And Deals With "Money Illusion"

Mark Twain On Work And Pay

Mark Twain On Labor Markets And How Wages Should Be Decided-By Government Fiat Or By Markets?

Mark Twain Understood That It Is The Purchasing Power Of Wages That Matters

Some Companies Offer To Pay All College Expenses For Their Workers

See Now Hiring, With Attractive New Perk: Free College Degree: Companies say benefits of a happy, better-educated staff outweigh the costs of paying for workers’ college education by Kelsey Gee of The WSJ.

Offering a good benefit in a tight labor market that leads to retention of workers reminds me of the "efficiency wage theory" that says that companies pay above market wages to lower worker turnover. This cuts hiring and training costs. Workers might also work harder so that they can keep a job that offers so many benefits.

There also might be economies of scale involved. That is when average cost falls as quantity increases (think of a factory that produces thousands of cars compared to producing only one car-the average cost is lower the more cars you produce, up to a point, since you spread the fixed cost of the factory over more cars).

If the broker firm can deliver thousands of student at once to a school, that lowers their average cost and the college might want to offer a lower tuition to get that many students so easily.

Also, if the broker acts as a single buyer or monopsony, then they can get a lower price. Monopsonies pay less than what would be the price if there was competition or many buyers in the market.

Excerpts:

"Some of America’s largest companies are proposing that a good job can lead to a free college education, reversing the norm that requires workers to get the degree before launching a career.

Walt Disney Co. DIS 3.08% , Discover Financial Services DFS 4.93% and Yum Brands Inc.’s YUM 2.60% Taco Bell are among the high-profile employers sending front-line workers back to school, often paying the cost of tuition, fees, books and other expenses upfront and in full. The companies say the benefits of a content and potentially better-trained staff outweigh the costs.

Many large employers have long offered limited tuition-assistance perks to staff, reimbursing up to the federal tax-exempt maximum of $5,250 a year—after the student successfully completes course work. For most people, though, paying out-of-pocket and then waiting for the company benefit to kick in later proved too much of a barrier, said Jon Kaplan, Discover’s vice president of training and development.

Even so, Mr. Kaplan said, with around 80% of Discover’s 7,000 call-center and field staff lacking a college degree, the company saw a good return on every dollar invested in tuition, as participating employees stayed with the firm longer and moved into more senior positions at a higher rate."

"To secure new corporate partners, Brandman pays an undisclosed fee to Guild Education, a Denver startup that brokers deals between companies and colleges."

"The cost of a bachelor’s degree from a four-year U.S. institution averages $33,000 a year, according to the Education Department. Guild said that by providing schools a large number of part-time and full-time students, it can negotiate the total price down to between $6,000 and $10,000 in some cases"

"Some companies, including Walmart, pay 100% of those costs directly to the school, according to Guild, with minimal or no expense for workers."

"Other companies, including Taco Bell, cover up to $5,000 or so a year in costs up front and negotiate deals on textbooks and other student services for employees."

"the company now offers the college benefit to all 210,000 employees, after a pilot version last year boosted retention among participants by one-third to 98%."

"In the tightest labor market in decades, Disney, Discover and other companies say covering the full cost of college can help them hold on to valuable talent that has become more expensive to attract."

What ends expansions? (or what causes recessions according to Alan Blinder and Austan Goolsbee)

See The Obama-Trump Economic Boom: The current expansion may soon be America’s longest, and neither inflation nor tariffs are likely to stop it by Alan S. Blinder. He is a professor of economics and public affairs at Princeton University and a former vice chairman of the Federal Reserve. Excerpts:

"A common answer in the modern era is that the Federal Reserve clamps down to fight inflation. But today inflation remains quiescent despite extremely low unemployment. That the Fed didn’t raise interest rates in January, even with the federal-funds rate barely above inflation, suggests that Jerome Powell may be an even more dovish Fed chair than Janet Yellen. It sure doesn’t look as if an overzealous Fed will squelch the expansion.

Another common expansion killer, though not lately, is a spike in the price of oil. Predicting the price of oil is a fool’s errand, and I won’t try. But a jump to, say, $90 or $100 a barrel doesn’t look likely any time soon."

Lots of people are fretting about a full-scale trade war with China. That remains possible—and a threat to the world trade system. But would it derail the U.S. expansion? Not unless it’s a whopper. Exports to China are only about 1% of U.S. gross domestic product. Even if they fell by half—well, you can do the math. America’s total exports to all countries are vastly larger. But lately, our bellicose president doesn’t sound inclined to declare trade war on Canada. Let’s hope it stays that way.

According to legend, stock-market crashes often end booms, but that’s an exaggeration. A crash may have to coincide with some other financial calamity, as in the banking, bond and mortgage disasters of 2008-09. In contrast, the U.S. economy sailed right through the megacrash of 1987. The current expansion has already survived a market “correction” in December without much apparent damage. So while I never predict stock prices, a market crash ranks low on my expansion worry list.

Last but certainly not least, expansions are sometimes killed by sudden drops in either consumer or business confidence—or rather by the declines in spending that such drops engender. Might that happen in the next few months? I suppose so, but recent economic data don’t point in that direction.

Recent political “data” are a different matter. It is certainly possible that the U.S. will find itself in a full-fledged constitutional crisis in the coming months, precipitated by, say, the “national emergency” over immigration. What then? If business managers and market traders behave like Mr. Trump’s base, they’ll shrug it off: Constitution, shmonstitution. But if threats to democracy shake confidence, look out.

A low probability, you say? I agree. My bet is that the current expansion will sail through June, setting a new record."

See also You Never Know When a Recession Will Sneak Up on You by Austan Goolsbee. He a professor of economics at the University of Chicago’s Booth School of Business and was an adviser to President Barack Obama. Goolsbee seems to think a recession is more likely than Blinder and that an unforseen event that hurts confidence is more likely. Excerpts:

"recessions don’t come only from large, foreseeable events. Modest, unpredictable incidents can cause economic downturns if they lead businesses or consumers to freak out."

Seemingly small events can cause enormous problems. Think back to 2001 and the last recession of a “normal” size. (The recession that started in December 2007 was, by far, the deepest and longest since the Great Depression — about as far from normal as a recession can be.)

The 2001 recession developed when the internet bubble popped, or at least that’s how we tend to remember it. But go back and check the numbers. The internet accounted for, at most, about 2 percent of the economy then. If we use the logic we’ve been applying to trade wars and government shutdowns, it would seem that popping the internet bubble shouldn’t have been enough to cause a recession. But it did.

The reason it did was that the pop freaked out people outside just the internet sector. Consumer confidence plunged, and businesses stopped investing. The recession spread far beyond its origin.

In this sense, virtually every recession in the last 40 years coincided with a signal of fear, like a significant drop in consumer confidence. Sometimes confidence fell and didn’t spiral into recession, but all recessions have started with a confidence spiral."

"Another government shutdown could spiral into something far more damaging than the small decline in workers’ share of the economy that the simple math suggests. An escalating trade war with China could ignite a recession, even if the numbers show that trade isn’t a large share of the United States economy. These events just need to spook consumers or businesses into putting off spending, and then more dire consequences can start to snowball."

"If something scares people enough, it can start a recession, and you probably won’t know until it’s too late.

That’s because recessions are hard to recognize at the start. Looking back, for example, we know that a recession officially began in April 2001, yet scarcely anyone understood that then. In June 2001, only 7 percent of economists in the monthly Blue Chip survey believed a recession was underway. In the months before that 2001 recession began, only 16 percent of economists expected that a recession would start within the next year. Now, 25 percent of economists in a Wall Street Journal survey say they expect a recession within the next year, and anxiety seems to be growing."

What Did The Justice Department warn the Academy of Motion Picture Arts and Sciences about?

See Justice Department Warns Academy Over Potential Oscar Rule Changes Threatening Netflix by Ted Johnson of Variety. This relates to anti-trust laws, something I covered in my classes recently. Excerpts:

"The Justice Department has warned the Academy of Motion Picture Arts and Sciences [AMPAS] that its potential rule changes limiting the eligibility of Netflix and other streaming services for the Oscars could raise antitrust concerns and violate competition law.

According to a letter obtained by Variety, the chief of the DOJ’s Antitrust Division, Makan Delrahim, wrote to AMPAS CEO Dawn Hudson on March 21 to express concerns that new rules would be written “in a way that tends to suppress competition.”

“In the event that the Academy — an association that includes multiple competitors in its membership — establishes certain eligibility requirements for the Oscars that eliminate competition without procompetitive justification, such conduct may raise antitrust concerns,” Delrahim wrote.

The letter came in response to reports that Steven Spielberg, an Academy board member, was planning to push for rules changes to Oscars eligibility, restricting movies that debut on Netflix and other streaming services around the same time that they show in theaters. Netflix made a big splash at the Oscars this year, as the movie “Roma” won best director, best foreign language film and best cinematography."

"Delrahim cited Section 1 of the Sherman Act that “prohibits anticompetitive agreements among competitors.”

“Accordingly, agreements among competitors to exclude new competitors can violate the antitrust laws when their purpose or effect is to impede competition by goods or services that consumers purchase and enjoy but which threaten the profits of incumbent firms,” Delrahim wrote.

He added, “if the Academy adopts a new rule to exclude certain types of films, such as films distributed via online streaming services, from eligibility for the Oscars, and that exclusion tends to diminish the excluded films’ sales, that rule could therefore violate Section 1.”"

As Costs Skyrocket, More U.S. Cities Stop Recycling

With China no longer accepting used plastic and paper, communities are facing steep collection bills, forcing them to end their programs or burn or bury more waste.

By Michael Corkery of The NY Times. In one of my classes, we are reading the chapter on recycling in The Economics of Public Issues. So I thought this recent NY Times article would be relevant. Excerpts:

"Philadelphia is now burning about half of its 1.5 million residents’ recycling material in an incinerator that converts waste to energy. In Memphis, the international airport still has recycling bins around the terminals, but every collected can, bottle and newspaper is sent to a landfill. And last month, officials in the central Florida city of Deltona faced the reality that, despite their best efforts to recycle, their curbside program was not working and suspended it.

Those are just three of the hundreds of towns and cities across the country that have canceled recycling programs, limited the types of material they accepted or agreed to huge price increases."

"China, which until January 2018 had been a big buyer of recyclable material collected in the United States. That stopped when Chinese officials determined that too much trash was mixed in with recyclable materials like cardboard and certain plastics."

"recycling companies are . . . charging cities more, in some cases four times what they charged last year."

"many waste companies had historically viewed recycling as a “loss leader,” offering the service largely to win over a municipality’s garbage business."

"While there remains a viable market in the United States for scrap like soda bottles and cardboard, it is not large enough to soak up all of the plastics and paper that Americans try to recycle. The recycling companies say they cannot depend on selling used plastic and paper at prices that cover their processing costs"

How 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.

Is There Economic And Political Meaning In "The Wizard of Oz?"

To get a handle on this, you can read Money and Politics in the Land of Oz By Quentin P. Taylor.  Below is an excerpt from the Taylor paper:

"Dorothy, the protagonist of the story, represents an individualized ideal of the American people. She is each of us at our best-kind but self-respecting, guileless but levelheaded, wholesome but plucky. She is akin to Everyman, or, in modern parlance, “the girl next door.” Dorothy lives in Kansas, where virtually everything-the treeless prairie, the sun-beaten grass, the paint-stripped house, even Aunt Em and Uncle Henry-is a dull, drab, lifeless gray. This grim depiction reflects the forlorn condition of Kansas in the late 1880s and early 1890s, when a combination of scorching droughts, severe winters, and an invasion of grasshoppers reduced the prairie to an uninhabitable wasteland. The result for farmers and all who depended on agriculture for their livelihood was devastating. Many ascribed their misfortune to the natural elements, called it quits, and moved on. Others blamed the hard times on bankers, the railroads, and various middlemen who seemed to profit at the farmers’ expense. Angry victims of the Kansas calamity also took aim at the politicians, who often appeared indifferent to their plight. Around these economic and political grievances, the Populist movement coalesced.

In the late 1880s and early 1890s, Populism spread rapidly throughout the Midwest and into the South, but Kansas was always the site of its most popular and radical elements. In 1890, Populist candidates began winning seats in state legislatures and Congress, and two years later Populists in Kansas gained control of the lower house of the state assembly, elected a Populist governor, and sent a Populist to the U.S. Senate. The twister that carries Dorothy to Oz symbolizes the Populist cyclone that swept across Kansas in the early 1890s. Baum was not the first to use the metaphor. Mary E. Lease, a fire-breathing Populist orator, was often referred to as the “Kansas Cyclone,” and the free-silver movement was often likened to a political whirlwind that had taken the nation by storm. Although Dorothy does not stand for Lease, Baum did give her (in the stage version) the last name “Gale”-a further pun on the cyclone metaphor.

The name of Dorothy’s canine companion, Toto, is also a pun, a play on teetotaler. Prohibitionists were among the Populists’ most faithful allies, and the Populist hope William Jennings Bryan was himself a “dry.” As Dorothy embarks on the Yellow Brick Road, Toto trots “soberly” behind her, just as the Prohibitionists soberly followed the Populists.

When Dorothy’s twister-tossed house comes to rest in Oz, it lands squarely on the wicked Witch of the East, killing her instantly. The startled girl emerges from the abode to find herself in a strange land of remarkable beauty, whose inhabitants, the diminutive Munchkins, rejoice at the death of the Witch. The Witch represents eastern financial-industrial interests and their gold-standard political allies, the main targets of Populist venom. Midwestern farmers often blamed their woes on the nefarious practices of Wall Street bankers and the captains of industry, whom they believed were engaged in a conspiracy to “enslave” the “little people,” just as the Witch of the East had enslaved the Munchkins. Populists viewed establishment politicians, including presidents, as helpless pawns or willing accomplices. Had not President Cleveland bowed to eastern bankers by repealing the Silver Purchase Act in 1893, thus further restricting much-needed credit? Had not McKinley (prompted by the wealthy industrialist Mark Hanna) made the gold standard the centerpiece of his campaign against Bryan and free silver?"

Now an excerpt from an economics textbook by Irivin B. Tucker:

"Gold is always a fascinating story: The Wonderful Wizard of Oz was first published in 1900 and this children's tale has been interpreted as an allegory for political and economic events of the 1890s. For example, the Yellow Brick Road represents the gold standard, Oz in the title is an abbreviation for ounce, Dorothy is the naive public, Emerald City symbolizes Washington, D.C., the Tin Woodman represents the industrial worker, the Scarecrow is the farmer, and the Cyclone is a metaphor for a political revolution. In the end, Dorothy discovers magical powers in her silver shoes (changed to ruby in the 1939 film) to find her way home and not the fallacy of the Yellow Brick Road. Although the author of the story, L. Frank Baum, never stated it was his intention, it can be argued that the issue of the story concerns the election of 1896. Democratic presidential nominee William Jennings Bryan (the Cowardly Lion) supported fixing the value of the dollar to both gold and silver (bimetallism), but Republican William McKinley (the Wicked Witch) advocated using only the gold standard. Since McKinley won, the United States remained on the Yellow Brick Road."

But not everyone agrees with this. Economist Bradley Hansen wrote an article titled The Fable of the Allegory: The Wizard of Oz in Economics in the Journal of Economic Education in 2002. Here is his conclusion:

"Rockoff noted that the empirical evidence that Baum wrote The Wonderful Wizard of Oz as an allegory was slim, but he compared an allegorical interpretation to a model and suggested that “economists should not have any difficulty accepting, at least provisionally, an elegant but controversial model” (Rockoff 1990, 757). He was right—we did not have any difficulty accepting it. Despite Rockoff’s warning, we appear to have accepted the story wholeheartedly rather than provisionally, simply because of its elegance. It is as difficult to prove that The Wonderful Wizard of Oz was not a monetary allegory as it is to prove that it was. In the end, we will never know for certain what Baum was thinking when he wrote the book. I suggest that the vast majority of the evidence weighs heavily against the allegorical interpretation. It should be remembered that no record exists that Baum ever acknowledged any political meanings in the story and that no one even suggested such an interpretation until the 1960s. There certainly does not seem to be sufficient evidence to overwhelm Baum’s explicit statement in the introduction of The Wonderful Wizard of Oz that his sole purpose was to entertain children and not to impress upon them some moral. The Wonderful Wizard of Oz is a great story. Telling students that the Populist movement was like The Wonderful Wizard of Oz does seem to catch their attention. It may be a useful pedagogical tool to illuminate the debate on bimetallism, but we should stop telling our students that it was written for that purpose."

I found a review of the book in the NY Times from 1900 and it does not mention anything about OZ having political or economic meaning. The book was also made into a musical a few years later and none of the reviews of the musical mention any political or economic meaning.

The World Is Getting Quietly, Relentlessly Better

By Greg Ip of The WSJ.

"As recently as 1980 nearly half the world lived in “extreme poverty,” that is, consuming less than the basic necessities, which the World Bank values at $1.90 a day in 2011 dollars, adjusted for the differing costs of goods and services between countries. The proportion of people in extreme poverty was projected to fall to an estimated 8.6% last year and, given the correlation between growth and poverty, is almost certain to drop further this year.

Rising incomes alone cannot capture how much better life has gotten. “Nathan Rothschild was surely the richest man in the world when he died in 1836,” economists Max Roser and Esteban Ortiz-Ospina wrote in 2017. “But the cause of his death was an infection—a condition that can now be treated with antibiotics sold for less than a couple of cents. Today, only the very poorest people in the world would die in the way that the richest man of the 19th century died.”

"The world first eradicated a disease, smallpox, in 1980. It could soon eradicate a few more: 2016 saw just 46 new cases of paralytic polio recorded; in 2017, there were just 25 new infections of Guinea worm, a painful and disabling parasitic infection. These victories come not through laboratory breakthroughs but the meticulous application of tried-and-true tools, such as vaccination and improved sanitation."

"As with disease, poverty is being eradicated not through technological miracles but basic rules of growth: Invest more in your human and physical capital, open yourself to markets and trade—that’s right, globalization is good—and incomes will rise."

"As of September, more than half the world—3.8 billion people—are middle-class or rich, Homi Kharas of the Brookings Institution and Kristofer Hamel of World Data Lab found. They define middle class as consuming between $11 and $110 a day, in 2011 dollars adjusted for varying costs between countries."

Related post:

The short history of global living conditions and why it matters that we know it