When Money Is No Object

Sure, using a credit card is easy, but paying with invisible money makes saving harder and spending easier. People behaved differently when they saved—and spent—cold, hard cash.

By Jason Zweig of The WSJ. Excerpt:

"Nowadays, zooming through with digital toll technology like E-ZPass, you may have no idea how much you just paid. Once money is dematerialized, using it doesn’t feel like spending.

“As we move away from paying with those gross motor movements,” says Kathleen Vohs, a marketing professor at the University of Minnesota, “we lose that sense of its being an exchange, the gravity of using money.”

Dozens of studies have shown that consumers using credit cards rather than cash are less likely to remember how much they spent, take less time deciding what to buy, are more willing to pay high prices and make a greater number of purchases. They also exert less self-control, buying more junk food, luxury goods and other impulsive items.

Studies on debit cards and mobile payments show similar results. A recent neuroscience experiment found that spending with credit cards, rather than cash, activates the same reward centers of the brain that are triggered by cocaine and other addictive drugs. If spending cash hurts, perhaps using credit makes you high.

Of course, it’s hard to say whether people are spending more and saving less because cash is dying—or whether cash is dying because people are spending more and saving less.

For most of the second half of the 20th century, Americans saved roughly 10% of their disposable personal income. In the late 1980s, U.S. consumers began to save less until, by 1995, they saved only 3% of available earnings. That number rebounded in the 2000s and 2010s, then shot up during the pandemic as the economy locked down and people received government stimulus payments.

One of the main factors driving the long-term decline of savings in the U.S. is the fall in interest rates since the early 1980s, says Jonathan Parker, a financial economist at the Massachusetts Institute of Technology. Lower interest rates reduce the return on bank accounts, cut the cost of borrowing, and raise the value of stocks and real estate, making people feel they can spend more."

Does drinking after work work? (that is, does it lead to higher salaries)

By Paul J. Zak. Excerpt:

"Employees who drink after work have higher salaries.  Drinkers make 20% more than abstainers--an huge effect.  This effect is thought to come from the social connections one makes by socializing with work colleagues.  The original research was based on a survey of U.S. adults. 

But, is it really true that hanging out with your work buds will get you a salary bump?"

Dr. Zak did a controlled study but concluded there is no causation. 

Other posts about economist Paul Zak:

Adam Smith vs. Bart Simpson.

Great New Book On Neuroscience By Economist Paul Zak

What Do Wall Street Traders Need Just The Right Amount Of?

Can The Way You Tell A Story Affect How Willing People Will Be To Donate Money To Charity?

Adam Smith, Marriage Counselor

U.S. Population Growth, an Economic Driver, Grinds to a Halt

Covid-19 pandemic compounds years of birth-rate decline, puts America’s demographic health at risk

By Janet Adamy and Anthony DeBarros of the WSJ. Excerpts:

"America’s weak population growth, already held back by a decadelong fertility slump, is dropping closer to zero because of the Covid-19 pandemic.

In half of all states last year, more people died than were born, up from five states in 2019. Early estimates show the total U.S. population grew 0.35% for the year ended July 1, 2020, the lowest ever documented, and growth is expected to remain near flat this year."

"What concerns demographers is that in the past, when a weak economy drove down births, it was often a temporary phenomenon that reversed once the economy bounced back."

"Yet after births peaked in 2007, they never rebounded from the nearly two-year recession that followed, even though Americans enjoyed a subsequent decade of economic growth.

With the birthrate already drifting down, the nudge from the pandemic could result in what amounts to a scar on population growth, researchers say, which could be deeper than those left by historic periods of economic turmoil, such as the Great Depression and the stagnation and inflation of the 1970s, because it is underpinned by a shift toward lower fertility."

"This year, the U.S. will record at least 300,000 fewer births because the uncertain economy and the pandemic dissuaded women from having babies, according to projections by economists Melissa S. Kearney and Phillip Levine. Provisional government data already show births in the first three months of 2021 declined compared with 2020."

"Extended financial insecurity among young adults and women’s rising educational attainment are among factors overlapping with the pandemic year’s health and financial shocks"

"The declining rate of Covid deaths will also help ease the problem, but the U.S. still faces other pressures on mortality. A sharp rise in drug-overdose deaths and an increase in fatalities from homicides and some chronic diseases last year helped drive down U.S. life expectancy by 1.5 years, the largest drop since at least World War II."

"Every type of U.S. county, from the most urban to the most rural, on average saw a decrease in the number of births per death in the second half of the 2010s compared with the first half"

"Historically, nearly half of the country’s economic growth has been driven by the expansion of the working-age population, including immigrants, said Neil Howe, an economist, demographer and managing director at Hedgeye Risk Management, an investor-oriented research company. Recent federal-budget projections suggest the potential labor-force growth rate will hover just above zero for years to come, down from a range of 2.5% starting in the mid-1970s to 0.5% from 2008 through last year.

The shifts will make the U.S. more reliant on immigration to grow the workforce, economists say, although that faces its own pressures. Mexico’s fertility rate has steadily declined, while China and India—two other top suppliers of immigrants to the U.S.—face talent shortages of their own, along with China’s own flattening population growth."

"Among the industries most affected are retail and hospitality, because they rely on younger workers who turn over quickly, said Rob Sentz, who until last month was chief innovation officer at the labor-market data firm Emsi. Sectors such as healthcare, engineering and information technology will struggle to replace senior management as millions of baby boomers retire.

Over time, a lower fertility rate will lead to a higher ratio of retired beneficiaries to taxpaying workers, which is expected to raise the cost of Social Security and Medicare.

The Biden administration hopes to support family growth through its proposed $1.8 trillion American Families Plan, which includes paid parental leave, subsidized child-care and free preschool. Such policy approaches have had a mixed record of lifting fertility rates in other countries, researchers say."

Related posts:

The Economy Affects The Birth Rate (2010)

Did The Recession Help Lower The Birth Rate? (2011)

U.S. Fertility Rate Hits Lowest Level on Record (2012) 

A number of women who put off having babies after the 2007-09 recession are forgoing them altogether; more educated women and student debt also contribute to decline in birth rates (2018)

Births in U.S. Drop to Levels Not Seen Since 1979 (2021)

COVID-19’s Economic Impact around the World

By Juan M. Sánchez. He is an economist and assistant vice president at the Federal Reserve Bank of St. Louis. 

He presents a good overview with informative charts. Excerpt:

"KEY TAKEAWAYS

• Although the COVID-19 pandemic affected all parts of the world in 2020, low-, middle- and high-income nations were hit in different ways.
• In low-income countries, average excess mortality reached 34%, followed by 14% in middle-income countries and 10% in high-income ones.
• However, middle-income nations experienced the largest hit to their gross domestic product (GDP) growth, followed by high-income nations."

Does the U.S. have a firefighter shortage?

There are several fires that have been in the news lately. The Forest service has more than 100 openings for firefighters that it does not seem to be able to fill.

Normally, in a shortage, the price (in this case wages) would get pushed up until there are no more openings. But the government does not work by market forces. Someone has to make a policy decision to raise wages. If that does not happen, the shortage will persist.

The article also mentions how potential firefighters can get better pay and benefits elsewhere. That is something I talk about when I cover labor markets. How many people offer their services in one market depends partly on how much they can get paid somewhere else.

See As the Dixie Fire and Others Burn, the U.S. Struggles to Find Enough Firefighters: Low pay and a booming economy leave U.S. Forest Service struggling to hire the personnel it needs in a dangerous fire season by Alicia A. Caldwell of The WSJ. Excerpts:

"Amid a drought-fueled fire season where blazes are behaving unpredictably because of extreme weather, Forest Service officials say they are struggling to effectively respond to all the fires burning and likely to come in the West. The federal agency currently has about 10,000 wildland firefighters on staff, about 3,000 of whom are seasonal employees, combating just over 100 active fires. Nationwide, roughly 2.2 million acres have burned so far this year, 1 million more than at the same time last year according to the National Interagency Fire Center.

There are more than 100 open forestry technician positions, the job title given to federal wildland firefighters, according to a government hiring website. The U.S. Department of Agriculture, which oversees the U.S. Forest Service, said its current staffing levels match those of the past few years but the agency needs more personnel to deal with the growing wildfire threat."

"The Forest Service said it is working to raise the starting base pay for wildland firefighters to a minimum of $15 an hour this year and add retention bonuses. The Biden administration is pushing Congress to make the pay raise permanent and add other incentives, including benefits."

The shortage of wildland firefighters reflects a nationwide shortage of workers at nearly every level of the economy. Starting salaries are rising, and incentives like hiring bonuses are being instituted at many private-sector jobs that carry significantly less risk than firefighting.

Another challenge for the Forest Service is that many of its firefighting jobs are only for fire season, typically from late spring to mid-fall. State and local fire agencies generally pay better and routinely keep firefighters employed year-round. At the California Department of Forestry and Fire Protection, or Cal Fire, firefighters also receive overtime and health benefits.

“Cal Fire salaries and, more importantly, benefits, have evolved over the years,” said Ken Pimlott, a former Cal Fire director. At the federal level, he said, “the pay structure and such just hasn’t evolved.”

State firefighters also work more palatable shifts, he said—typically three straight days followed by several days off, compared with 14-day rotations for federal firefighters, who routinely deploy around the country."

Are sellers paying Amazon customers to delete negative reviews?

Suppose you are not sure of a product's quality. It might seem like a good idea to read the reviews at Amazon (or eBay and other sites) to learn more about it. But it is possible that the reviews are not completely authentic if people have been bribed to change them somehow or just delete them.

Life is full of fake information, fake products and fake people (see the list of related posts for countless examples below which includes another post about Amazon). Also, the issue is explained in a graphic by the famous psychiatrist Dr. Van Pelt.

See When Amazon Customers Leave Negative Reviews, Some Sellers Hunt Them Down by Nicole Nguyen of The WSJ. Excerpts: 

"Ever wonder how cheap, no-name products on Amazon can amass hundreds, sometimes thousands, of nearly perfect star ratings, with just a handful of negative reviews?

Here’s one way: Some sellers are reaching out to unhappy buyers to revise or delete their negative reviews, in exchange for refunds or gift cards. With fewer disgruntled shoppers, the overall average star rating rises.

Sellers who ship products via Amazon aren’t supposed to reach out to customers outside of Amazon’s official channel—in fact, it’s a violation of the terms they agree to on the retail platform."

"Sellers are permitted to communicate with buyers through Amazon’s built-in messaging platform, which hides the customer’s email address. Amazon’s terms of service also prohibit sellers from requesting that a customer remove a negative review or post a positive one.

“We do not share customer email addresses with third-party sellers,” an Amazon spokesman told me."

"Sellers and brands sometimes find ways to reach customers away from Amazon’s watchful gaze."

Related posts:

Fake Reviews and Inflated Ratings Are Still a Problem for Amazon 

Photos show China's most surreal tourist spot— a fake Instagram-worthy town full of pretend farmers and phony fishermen

The Myth of Authenticity Or The Story Behind Products 

Fake Authenticity

Students: Make a mistake on purpose, its good for you!

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, excerpts below)

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

Mexicans buy fake cellphones to hand over in muggings
 
Conspicuous Consumption, Conspicuous Virtue, Thorstein Veblen (and Adam Smith, too!)

How does a company selling used luxury goods spot fakes? (signalling and conspicuous consumption).

Why do stores sometimes pay people to be fake shoppers? 

What if companies can't afford real models for their ads? Use AI generated fake pictures 

Excerpts from "Rent a White Guy"

"Not long ago I was offered work as a quality-control expert with an American company in China I’d never heard of. No experience necessary—which was good, because I had none. I’d be paid $1,000 for a week, put up in a fancy hotel, and wined and dined in Dongying, an industrial city in Shandong province I’d also never heard of. The only requirements were a fair complexion and a suit.

“I call these things ‘White Guy in a Tie’ events,” a Canadian friend of a friend named Jake told me during the recruitment pitch he gave me in Beijing, where I live. “Basically, you put on a suit, shake some hands, and make some money. We’ll be in ‘quality control,’ but nobody’s gonna be doing any quality control. You in?”

I was.

And so I became a fake businessman in China, an often lucrative gig for underworked expatriates here. One friend, an American who works in film, was paid to represent a Canadian company and give a speech espousing a low-carbon future. Another was flown to Shanghai to act as a seasonal-gifts buyer. Recruiting fake businessmen is one way to create the image—particularly, the image of connection—that Chinese companies crave. My Chinese-language tutor, at first aghast about how much we were getting paid, put it this way: “Having foreigners in nice suits gives the company face.”

Six of us met at the Beijing airport, where Jake briefed us on the details. We were supposedly representing a California-based company that was building a facility in Dongying. Our responsibilities would include making daily trips to the construction site, attending a ribbon-cutting ceremony, and hobnobbing. During the ceremony, one of us would have to give a speech as the company’s director. That duty fell to my friend Ernie, who, in his late 30s, was the oldest of our group. His business cards had already been made."

"For the next few days, we sat in the office swatting flies and reading magazines, purportedly high-level employees of a U.S. company that, I later discovered, didn’t really exist."