Rich and Lost: Learning about the Economy

I just finished reading an interesting piece of economic fiction.Rich and Lost in Prosperia by Doramas Jorge-Caleron is a fanciful exploration of basic economics set in the mythical tropical island of Prosperia. The two main characters have different views of the role of business. One of them seeks guidance from a renowned economics professor who, during the course of the book, teaches him the fundamentals.

The setting and character names are just fanciful enough to be corny. But this is part of the charm of the book. Those of us who teach and have taught high school know that corny often works with students - especially if the corn intellectually nutritious.

And this book has that merit. The economics lessons provide the brain food in an appetizing way. Through a series of meetings, one of the characters is given a crash course in economics. But the lessons are not boring, dry discussions of theory. Rather they are set in "real life" examples that illustrate the points - each morsel is something to mentally chew on. And the menu is diverse. There are discussions of prices, scarcity and value. But they also cover economic systems, globalization and even the environment.

I see this book as a useful ancillary to a basic economics course at the high school level. You should read it and consider it as such. I don't think it can be the "stand alone" text - I don't think it's meant to be. You can read it and decide for yourself. It's one dish for the meal that is your course.

Possible Rent-Seeking? Captain Renault Is Shocked

USA Today provides this story.  This is a good time to discuss coincidence, correlation and causation.  Regardless, Captain Renault is shocked...shocked.

On the Grinch, Pigouvian Taxes, Externalities and the Coase Theorem

Forbes magazine has this wonderfully entertaining take on a classic by Dr. Seuss. (Big HT to Greg Mankiw for this one.)

I'm going to share it with students. I hope you do, as well.

Choices and Opportunity Cost

Can information be too perfect? Can you have too much information when making a decision?  At what point does making the decision become an opportunity cost?


And this one is clearly about choice, but it's a groaner.

Measures of Growth

This can be filed under "old news" for some of you, but for others it may be helpful information. Hans Rosling, who developed Gapminder, has a new presentation linking economic growth to health over 200 years. (HT to Mark Perry because his blog is where I ran into it first. Since then I've seen it many times, many blogs.) When you talk about measures of progress in the early part of your macro classes, you might want to offer this as a way of explaining how economic progress affects in social progress. It also offers an entre for discussion of coincidence, correlation and causation. Regardless of how or even if you use this presentation, imagine a not too distant future when you can do something like this in your classroom.

This May Not Help...Much

There was a useful article in Monday's edition of The Wall Street Journal (free content at this writing) that discussed a pending deal in Congress. It would trade a temporary extension of the Bush era tax cuts temporarily for an extension of unemployment benefits. On the surface, this would seem to be a great example of classical Keynesian economic policy.

However, there are a number of additional directions you can go with this. One can use the fact that the extension of tax rates is temporary and that people know this. Essentially, they are being told that taxes will go up in the not too distant future. Consequently, what is the likelihood that people will spend the extra money vs. saving it to offset future tax increases? Does it make a difference that we are in a recession? Does the incentive to save differ for those who are still struggling - perhaps with part-time work because they can't find a full-time job? If you're still unsure about your job going forward, how will that impact your decision to spend vs. save?

As for the extension of unemployment benefits, there has been research that indicates the length of time the benefits are available has a connection to duration of unemployment - the longer the benefits period, the longer the duration of unemployment. Other economists believe that people who are unemployed try to seek employment quickly - even at lower wages or positions that would previously have been unattractive.

For either tool, a case can be made that passage will help the economy. And a counterargument can be made that it won't. At the moment, the discussion is basically academic because nothing has been passed. But that makes it a perfect intellectual exercise – lots of room to play. And as neither side is planning on cutting other programs to pay for what being proposed, it will add to the deficit. You can even begin discussion of "crowding out." What do you think?

PNC 12 Days of Christmas Price Index

If you have followed this blog for more than a year, you probably know about the PNC Wealth Management 12 Days of Christmas Price Index.  The index is based on the old Christmas carol wherein a true love showers the target of his or her affections with an assortment of presents – each corresponding to the 12 days of Christmas. I highlight it every year during the holiday season. I think it's a fun and interesting way to introduce economics and economic measurement.

As usual the folks at PNC have done a great job, providing explanations and teacher resources. My only concern this year is that those of you with slower systems or who lack certain computer capabilities in your classroom won't be able to enjoy it.

Nevertheless, I hope you enjoy it as much as I did.  I suspect you will be surprised by many aspects of the index this year. I know I was.