A Birthday Observation

Today is the anniversary of the birth of Thorstein Veblen. He is not well-known now, and he wasn't particularly well-known when he was alive.  Nevertheless, his idea of "conspicuous consumption" is something that many of us understand.  Think of it as "signalling". 

You and I often buy products to send information to others about our status, our class, our likes and dislikes. We do this because it adds value (or at least we think it does).  And it's a concept your students understand.  When they make purchases because something is in, hip, cool or whatever the current term is...conspicuous consumption.

Conditional Cash Transfers

The new edition of The Economist contains a pair of articles that are worth your time. (You can find them here and here.) They're short and they address issues of incentives, income distribution, productive resources and economic development.

The focus of the articles is a relatively new idea in economic development programs, conditional cash transfers (or CCTs). The idea is that the poor are paid for certain activities: getting their children vaccinated or making sure their children are in school. It appears to be successful in many areas, although it is more successful in rural areas than in urban areas.

While I'm not sure to what extent you address economic development (that's an "end-of-the-course" topic that too frequently gets left out, either for lack of time, lack of interest, or lack of understanding); I do suspect you discuss incentives, and possibly income distribution or productive resources. I would be interested in your assessment of these articles.

Americans Cut Back ... The Power of Price

Today's edition of The Wall Street Journal has an article (free content at this writing) that deserves your attention. Amid all of the discussion about health care, one aspect seems to be lost. What incentives are put in place for the consumer (patient) when a third-party payment system (whether private or public) stands between the consumer and the provider? To the extent that the "cost" of service is disguised, either by elimination or drastic reduction, what is the effect on the demand for service? If a more "realistic" price is available, do consumers change their demand for the service? If so, how? If not, why not?

It is possible that the recession is providing some answers. According to the article, Americans have begun cutting back on spending for healthcare. As a greater share of the cost is being transferred to consumers in a way that is immediately apparent, the demand curve may be shifting.

I would suggest you take a look at the article and see if there's anything you can use in your classes. I would be surprised if there isn't.

Comparative Advantage and Tradeoffs

When discussing comparative advantage, students will often ask if it's possible for a nation to gain a comparative advantage where there originally is none. The answer of course lurks in that basic concept opportunity cost. Don Boudreaux at Cafe Hayek gives a good explanation while discussing the idea of energy independence.

I would suggest you could even use a production function to help with the explanation. What do you think?

“New” Podcast Source

For those of you looking for podcast sources, I just ran across InfectousTalk on the Kauffman Foundation site. It is only a couple of months old and it focuses on entrepreneurship.

It looks like it will be the site for some quality discussions.

Wealth Transfer and Credit Cards

National Public Radio's Planet Money program had this story on credit card reward programs, yesterday. It's about who uses credit cards, who pays for the benefits, and who receives them. The piece is based largely on this paper from the Federal Reserve Bank of Boston.

My question is "Is this news?" We learn in Economics 101, "There's no such thing as a free lunch." The fact that using credit cards has a cost is something that should be understood by all students, whether in an economics or personal finance course.  Many people don't understand just how significant the revenues from these fees are to card-issuing banks.

This is why some stores will try to charge different prices for cash and for credit from time to time. Those stores are trying to properly allocate the cost. (A quick search indicated a cluster of stories on this back in 2008 when gas prices spiked.)  And it's why retailers have tried repeatedly to get legislation to limit the fees.

As always, I welcome your comments.

Not Really Much More to Say