Will You Be Able To Compensate?

It's inevitable that the Congress will one day modify Social Security as we know it. Many are increasingly skeptical that the system will survive under its present form yet no one seems to be in a hurry to adapt. The burden will undoubtedly grow on an individual's savings if the trust fund is releaseing a diminishing amount to retirees. The sooner a worker starts saving and the more pessimistic an individual is on Social Security's supplemental powers the better off he will be.

Golden Parachutes

This is an interesting chart describing the biggest corporate payouts in history.

Eye On Obesity Reduces Anti-Smoking Efforts

In a classic trade-off, America's health policy priorities are shifting pulling money away from anti-tobacco programs and directing it toward the obesity issue. The consequences may be a compromise that slows the momentum of declining loyalists to nicotine. Should the federal government be involved in these personal choice matters to begin with? Or, is this the front line of defense against runaway healthcare costs?

Bring Back The Draft

1. Wheelan proposes a modified draft. In what ways is his proposal like the deductible on your auto insurance policy? Do we need another conscription tax to put a check on our troop commitments in times of humanitarian crisis?

2. How is deficit financing (issuing government bonds instead of collecting taxes) like the moral hazard problem surrounding foreign intervention and invasion by the U.S. military?

3. In what way is Wheelan's proposal subject to the same criticism Friedman leveled against the draft nearly 40 years ago?

4. Despite enlistment bonuses and aggressive recruiting, the U.S. military has had difficulty increasing manpower during the Iraq war. Politicians and the electorate cannot decide to invade or intervene if would-be soldiers won't enlist. Do you think the free market for military labor that Friedman championed provides enough of a check on the moral hazard of a volunteer army? Or do you agree with Wheelan that some form of conscription is needed to discourage hazardous decision making?

22 Reasons Why The Middle Class In America Is Disappearing

1. 83 percent of all U.S. stocks are in the hands of 1 percent of the people.
2. 61 percent of Americans "always or usually" live paycheck to paycheck, which was up from 49 percent in 2008 and 43 percent in 2007.
3. 66% of the income growth between 2001 and 2007 went to the top 1% of all Americans.
4. 36 percent of Americans say that they don't contribute anything to retirement savings.
5. A staggering 43 percent of Americans have less than $10,000 saved up for retirement.
6. 24% of American workers say that they have postponed their planned retirement age in the past year.
7. Over 1.4 million Americans filed for personal bankruptcy in 2009, which represented a 32 percent increase over 2008.
8. Only the top 5 percent of U.S. households have earned enough additional income to match the rise in housing costs since 1975.
9. For the first time in U.S. history, banks own a greater share of residential housing net worth in the United States than all individual Americans put together.
10. In 1950, the ratio of the average executive's paycheck to the average worker's paycheck was about 30 to 1. Since the year 2000, that ratio has exploded to between 300 to 500 to one.
11. As of 2007, the bottom 80 percent of American households held about 7% of the liquid financial assets.
12. The bottom 50 percent of income earners in the United States now collectively own less than 1 percent of the nation’s wealth.
13. Average Wall Street bonuses for 2009 were up 17 percent when compared with 2008.
14. In the United States, the average federal worker now earns 60% as much as the average worker in the private sector.
15. The top 1% of U.S. households own nearly twice as much of America's corporate wealth as they did just 15 years ago.
16. In America today, the average time needed to find a job has risen to a record 35.2 weeks
17. More than 40% of Americans who actually are employed are now working in service jobs, which are often very low paying.
18. For the first time in U.S. history, more than 40 million Americans are on food stamps, and the U.S. Department of Agriculture projects that number will go up to 43 million Americans in 2011.
19. This is what American workers now must compete against: in China a garment worker makes approximately 86 cents an hour and in Cambodia a garment worker makes approximately 22 cents an hour.
20. Despite the financial crisis, the number of millionaires in the United States rose a whopping 16 percent to 7.8 million in 2009.
21. Approximately 21 percent of all children in the United States are living below the poverty line in 2010 - the highest rate in 20 years.
22. The top 10% of Americans now earn around 50% of our national income.

Why Starbucks Lost Its Mojo

Why Starbucks lost its mojo - CSMonitor.com
This article addresses the motives behind the purchases we make. More often then not we buy things for what they say about us, not because we necessarily have a craving. Starbucks sold an image, but now their logo is so ubiquitous that it is no longer trendy. They same thing happened to Nike. The "swoosh" became so commonplace and thus mainstream, killing the coolness. Both companies had a nice run, though.

A Holiday Case Of Supply And Demand

Click on the title above to explore a classic conundrum that baffles economists and shoppers every December. Why are there shortages of the items we want? This article focuses on the X-Box, but also addresses some memorable frustrations in shopping history.

Making the Case for Cap-and-Trade - Business - The Atlantic

Making the Case for Cap-and-Trade - Business - The Atlantic
As the latest attempt to pass an energy bill goes up in smoke, there is one thing for certain, a lot of ignorance surrounds this issue. Click on the link above to get an understandable description of the cap and trade system. Every economist worth his salt would tell you that the answer to global warming has to be disincentives to produce the causes of global warming. A pigouvian tax, for instance, increases the private cost of the action to equate or surpass the social cost. The cost of polluting is currently not a deterrant.

Flatulence Tax

Aplia Econ Blog: News for Economics Students: Bovine Intervention
In an extreme case of externalities, farmers in Europe are levied a tax on their cows because of the methane released when the bovine...uh, you know...fart. Cows are considered significant contributors to the greenhouse gases that impact our atmosphere, but this pigovian maneuver has farmers steamed.

Greatest Econ Rap Of All-Time

Keynes vs. Hayek. The link takes you to the video as well as the lyrics so your students can follow along. Very factual and hits on some broad themes.

Comparative Advantage

Paradox Of Choice

If you can get past this guy's outfit, you'll find this to be a very relevant and intriguing presentation.

Where Do Currency Symbols Come From?

A Recession Like No Other

Staring Into The Abyss

Come On Rich People, Pick It Up!!!

How Much Would Your Social Conscience Allow You To Pay?

In a previous post I offered an article describing the race to the bottom for wages in the garment industry. This article describes an unusual factory in the Dominican Republic that is bucking the trend and paying a living wage to its workers while freely allowing for unions. The factory makes t-shirts and sweatshirts for over 400 colleges and universities in the U.S., but because of higher labor costs has to charge a premium price for their garments. Many universities have grown uncomfortable with the knowledge that their items are produced in what are perceived to be "sweatshop" conditions. Thus, they applaud the efforts occurring in the Dominican. Many consumers might consider paying extra to support these fair labor practices, but how often does one know the origin of the product? Without effective marketing, many consumers may pass over the unfamiliar brand for the more recognizable logos. Thus, some see this as a noble experiment that will eventually fail. Meanwhile, many garment workers are realizing lifestyles they never thought imaginable.

The Evolution Of Economic Policy In The U.S.

History Now. The Historians PerspectiveThis is a thoughtful essay on the tangle over the years between Classical and Keynesian Economics. The origins of both are discussed as well as the favor for each that's been passed back and forth throughout the twentieth century. In the midst of the recent crisis a debate rages again as some perceive a failure in the markets and the need for government intervention. As the worst seems past, the balance in our economy between the two theories continues to be a contentious issue.

Free Speech As An Economic Stimulant

Iceland was one of the major victims of the 2007-08 global financial crisis betting the proverbial farm on the derivatives market and losing badly. Now, in an attempt to remake itself, the country's Parliament is proposing sweeping reforms to establish a safe haven for free speech in an attempt to draw the world's media organizations to headquarter in this tiny island nation. The legislation known as the Icelandic Modern Media Initiative is meant to attract organizations into publishing online from Iceland, by adopting the strongest press and source protection laws from around the world. This could be especially debilitating to Britain where the laws make it quite easy to bring suit against journalists and publications.

Race To The Bottom

It has often been referred to as "the race to the bottom", the constant pursuit of lower labor costs throughout the world especially in the textile industry. The southeastern U.S. was at one point the epicenter of cheap clothing and towels. Following WWII, many of those jobs migrated to the lower cost labor pool in a recovering Japan. In more recent years, the opportunities have been more profitable in China. Now pressure in Chinese labor markets has created an opening for workers in Bangladesh who are willing to part with their labor for less. History will chase those jobs away eventually, but Chinese textile workers are now beginning to understand the feelings their brothers in the Carolinas felt not too long ago.

The War On Drugs

Via: Medical Coding Certification

Energy Subsidies Black, Not Green

Click on the title above and you'll access confirmation of something you probably already knew. Government subsidies over the last decade have inordinately favored the oil and carbon emitting industries and under supported the greener alternatives. Not only does that not bode well for the environment but might it also be ignoring a potential source for jobs in this transitional time?

In Plain English

Click on the link above and you'll access a video production from the Fed that effectively illustrates the functions of the central bank. This used to only be available in hard copy DVD, but this is a much more convenient way to offer the content.

Markets Interact

One of the most difficult concepts for students to grasp is the chain reaction that occurs throughout an economy when the interdependence becomes evident. This article is a terrific example of the impact the Gulf disaster is having on markets thousands of miles from its shores. People who never had a clue there was a connection are discovering the extensive reach of this calamity. According to the journalist, it all starts with the simple oyster. The impact on the cullers, captains, and shuckers is obvious but what of the fate of workers in the burlap bag factories in Mississippi? In Minnesota, oyster shells are ground to produce an ingredient in chicken feed. The restaurants in New York, Los Angeles, and Las Vegas are having to strike the delicacies from their menus.

Tech Behemoths

Here is an interesting comparison of the big three tech giants Microsoft, Google, and Apple. There are interactive graphics that allow exploration of the different levels of competition they wage.

Plagarism? Keep Your Shirt On!!!

The viral nature of plagarism at the collegiate and high school levels has relegated the educator to performing detective work. More frequently than ever, students will construct assignments from existing passages cutting and pasting their way to what many perceive as a legitimate outcome. Education has become training where you get from point A to B as efficiently as possible, with little regard for development of the mind. Studies have proven the detrimental effects of cheating as a strategy and it doesn't bode well for the quality of our future leaders.

There's No Such Thing As Free

You can save money by cancelling your cable and DVR subscriptions because you've heard that many of your favorite programs are "free" on hulu.com or clicker.com. But are they truly "free" when you consider the time spent searching for those episodes? An economist would say you always pay one way or another.

The Economics Of Obesity

Should the government give away free Krispy Kreme doughnuts and cigarettes as a cost saving measure? If people don't reach retirement missing out on Social Security and Medicare, does that leave more for the rest of us? This article contains a fascinating interview evaluating the costs of our modern lifestyle. Though obesity is expanding rapidly, the average American has lower blood pressure and cholesterol levels than our more physically taxed ancestors. The market has contributed to our unhealthy existence and is profiting by developing responses. Brilliant.

Economist In The Closet

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The Fleeting American Dream

Click on the title above to access a sobering article on the prospects for today's millenials. 18-29 year olds find themselves moving back in with their parents with alarming frequency and the optimism of America has faded for them. This article is interesting because it incorporates multi-generational views of the father and grandfather as they struggle with their memories of this country in it's age of decline.

Pew Center Survey

Two Ways To Measure GDP Give Us Two Okun Results

As the last two posts suggest, Okun's famous law appears to be broken. Depending on the definition you trust, Okun's Law claims that every 1% increase above the natural unemployment rate is the result of a reduction in the GDP of 2-4%. The recent independence attributed to the unemployment rate despite growth in the GDP has led some to speculate that the law is obselete. But the fact that the GDP can be measured as spending or income raises the question over which is more accurate. The graphs in the article suggest the income approach to be more accurate and Okun's Law to still be relevant.

Okun's Law And Unemployment

A Falling Unemployment Rate Can Be Misleading

The unemployment rate fell in June to 9.5% from 9.7%, reaching its lowest point since last July. But the decline wasn’t due to improvement in the labor market. Instead, jobless Americans dropped out of the labor force in droves.
June’s decline in the civilian labor force of 652,000 was the sharpest one-month decline in 15 years in the Labor Department’s survey of households. Some people could be frustrated with their job searches, choosing to take time off or pursue other options like school. Some could be experiencing the end of their unemployment benefits, which required them to maintain an active job search. Whatever the cause, over the past two months almost one million people simply stopped looking for work. And over those two months, the U.S. population grew by 361,000 — with more than half of that gain coming in June.
The drop of 125,000 jobs in the monthly payroll report, which is compiled from a separate survey of employers, should have led to an increase in June’s jobless rate. The economy generally needs to add at least 100,000 jobs a month — often more — just to keep up with growth in the labor market and keep the unemployment rate steady. In June, people giving up hope and leaving the job market offset that need for more jobs to keep the jobless rate even.
What happens when all those people return? The unemployment rate is a measure of the total number of unemployed people — defined as those out of work but looking for work — as a share of the overall labor force. Once the economy improves, many of those people will restart their job searches and expand the labor force again.
If employers aren’t producing enough jobs to satisfy all that available labor — they probably won’t be — then the overall unemployment rate will rise again. The recent drops in consumer confidence and the recent pace of hiring suggests many Americans won’t be rushing back into the job market soon. That will mean continuing downward pressure on wages — and little underlying inflation.

News Flash: Economists Agree

The recent debate over the stimulus bill has lead some observers to think that economists are hopelessly divided on issues of public policy. That is true regarding business cycle theory and, specifically, the virtues or defects of Keynesian economics. But it is not true more broadly.

Here is the list, together with the percentage of economists who agree:

1. A ceiling on rents reduces the quantity and quality of housing available. (93%)

2. Tariffs and import quotas usually reduce general economic welfare. (93%)

3. Flexible and floating exchange rates offer an effective international monetary arrangement. (90%)

4. Fiscal policy (e.g., tax cut and/or government expenditure increase) has a significant stimulative impact on a less than fully employed economy. (90%)

5. The United States should not restrict employers from outsourcing work to foreign countries. (90%)

6. The United States should eliminate agricultural subsidies. (85%)

7. Local and state governments should eliminate subsidies to professional sports franchises. (85%)

8. If the federal budget is to be balanced, it should be done over the business cycle rather than yearly. (85%)

9. The gap between Social Security funds and expenditures will become unsustainably large within the next fifty years if current policies remain unchanged. (85%)

10. Cash payments increase the welfare of recipients to a greater degree than do transfers-in-kind of equal cash value. (84%)

11. A large federal budget deficit has an adverse effect on the economy. (83%)

12. A minimum wage increases unemployment among young and unskilled workers. (79%)

13. The government should restructure the welfare system along the lines of a “negative income tax.” (79%)

14. Effluent taxes and marketable pollution permits represent a better approach to pollution control than imposition of pollution ceilings. (78%)

If we could get the American public to endorse all these propositions, I am sure their leaders would quickly follow, and public policy would be much improved. That is why economics education is so important.

Note that the proposition about fiscal policy (#4) does not distinguish between taxes and spending as the best tool for purposes of macro stabilization. Maybe that question should be added in a future poll. I doubt, however, that the answer would make it onto this list of widely agreed upon propositions.

Too Early To Pull-back?

Paul Krugman bemoans the movement toward austerity among the world's legislators before the global economy recovers.

Structural Unemployment In Manufacturing

Click on the title to go to a great article depicting the mismatch that exists between the demands for labor and the supply of workers in manufacturing. Continued automation and the evolution of manufacturing means that employers are looking for workers with sophisticated skills but the pool is apparently shallow. This is frustrating recovery in that sector.

Latin America Surges As Most Of The World Flounders

A combination of pragmatism and a blooming relationship with Asia has allowed many Latin American economies to buck the trend currently plaguing the developed world. The article points out lessons that the U.S. should have adopted in retrospect such as, when the going is good....save!!!