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!!!