Wednesday, September 30, 2009

What Makes a Good Economist?

It's an interesting question. But I don't think we could arrive at consensus. Nevertheless, there's a good article in Standpoint magazine (HT to Arts&Letters Daily) that explores the question. (Standpoint is a monthly magazine of culture and politics. It looks interesting.)

One of the things I found most interesting was the importance the author placed on the great economist's range of interest and experience. (Add to that the fact that Alfred Nobel seemingly didn't like economists.) To that, I can only add my own curiosity about what he would say about the ongoing debate in the profession regarding the "failure to predict" the current economic downturn.

I hope you find the article of interest. I think it relates to the post of a couple days ago (and subsequent discussion in 'comments'). Perhaps the use is in making our students a bit broader in outlook, or helping them expand what they bring to the economics table.  Beyond that, I'm not sure the article has many uses in the classroom. Just an interesting comment on the state of the profession.

Tuesday, September 29, 2009

Productivity, Cell Phones and Global Development

One of the things we try to teach our students is that it's not about wages but about productivity. Worker productivity drives the price of labor and, ultimately, the product of labor. This past week, there is a special report on the mobile telecom revolution in The Economist. The main idea is that this relatively small and inexpensive piece of technology is having a significant impact on the lives of people living in less developed economies. Cell phones can even work as small, mobile banks.

The story is not unlike the one I posted on back in February of this year, or this article from The Quarterly Journal of Economics.

There are many things that make the cell phone valuable and significant. But what I find most interesting is its ability to add time and place utility where previously there was none. By connecting people to information in remote areas and at almost any time, they are empowered and can make better decisions. And it makes them more productive by allowing them to match their resources to outside markets, and to get better returns on those resources.

These stories are worth looking at, both for you and your students.

Monday, September 28, 2009

Using Current Events

A colleague and reader of this blog sent in a question. The gist was "How might I integrate more current events (such as some of the stories highlighted here) into the classroom?"

For the record, the course is AP Micro and AP Macro. I gave it some thought and came up with these three ideas.

The first suggestion is to set up a mini-debate. For those of you who don't remember the early days of Saturday Night Live, Dan Akroyd and Jane Curtain spoofed what used to be a regular part of 60 minutes. It was a quick debate on a given issue. Each side had one minute to outline their main points.

In a classroom, you could assign an article. After the students are done with the article, either select two students you suspect might have differing views on the topic, or ask who agrees and who disagrees and select one of each. Tell the opposing students they each have one minute to state their case. Start with the student who agrees with the article (they generally have an easier position because they have the article to lean on).

After both have had their opportunity, throw the discussion open to the class, reminding them to keep their criticisms positive and to address the statements made. Hopefully, that keeps them from going off-base. Alternatively, if the article has generated a lot of pro-con, ask the remaining students who has DIFFERENT cases to make on either side, and continue as before. I would think this would help students develop some skills for the “free-response” portion of the test.

Graph secondary effects
The second suggestion is to graph the market effects. Many of the articles discuss the price of an item and talk about policy that might affect or has affected the market. Using the old reliable supply and demand graph set up the original market and ask the students, what the likely initial effect of the policy is.

Does a price change affect the quantity supplied, the quantity demanded? Is there a change in either or in the supply or demand itself? (Does either curve shift right or left?) Once you've done that, ask about secondary effects? How does this new market condition affect other choices? (Do we suspect the item has many substitutes? Compliments? Do we suspect demand is elastic? Inelastic? What is the impact of the policy on supply?) By exploring possible secondary effects, students should see the value of economic thinking. It also helps them get used to graphing a problem for analysis.

Next question
My last suggestion arises from something I used to encourage my students to do. And while it can take you off topic, you can still use it to advantage. After reading the article, ask students "what is the next question?" Or, alternatively, "what else do we need to know?" Most stories, regardless of source, have a slant or a bias. Or information is being used selectively. And many stories rely heavily on anecdotes.

Now, I often say anecdotes are not data, but I just learned a counter to that: the plural of anecdote is data. Either way, this encourages students to think about what's missing in a full analysis; or to consider carefully how their desire to look farther afield needs to relate to what is or is not presented.

I'm sure many of you have other ways of using current issues, and I ask you to share. That way we all benefit.

Thursday, September 24, 2009

A Clear-Cut Example of Choice....

that hits just below the wallet. Today's issue of The Washington Post has this story. The choice we make has implications that will clearly affect each of the end.

Reminds me of the days I taught consumer economics and told my students to consider generic brand over name brand.

Please share any reactions you get to the story.

More on Trade

We no sooner get past talk about trade and chickens, and another example of trade barriers appears to help us explain the issue to our students.

According to this article from Forbes, a number of companies and a union are asking the U.S. government to seek relief from foreign competition. (Tariff? Other barriers?) The firms and their workers are having a tough time. Oddly enough, a number of the issues they charge are not uncommon in the U.S. I would be interested to know about how the paper industry is run in the U.S.  I can't believe it receives no government benefits/subsidies/incentives, either specifically or in generally. However, a larger problem remains. The current worldwide slump has caused more protectionist measures around the globe. Revival of trade will be important to any subsequent turnaround in the national and global economy.

To that end, here are a number of links to short pieces on the site examining trade barriers. The first compares trade losses in the current downturn to (I know, it's overused) the Great Depression. The second addresses the G-20 (timely) about the need to work toward dropping trade barriers. The third is a podcast interview with the author of the second study. The podcast is relatively short (13 minutes) and a transcript is also available if you don't have the technology to do podcasts in your classroom.

I hope these are useful. I'd appreciate any feedback.

Wednesday, September 23, 2009

The Ultimate Statement of Economic Optimism

Let's Give Them Something to Talk About

The title is from an old song by Bonnie Raitt.  And although the new Federal Open Market Committee (FOMC) announcement doesn't seem to presage anything drastic, there's still a teachable moment here. 

If you draw your students attention to the last half of the statement, it states that the Fed will be slowing the pace of purchases of various froms of debt.  Essentially easing off the heretofore accomodating policy stance.  This is not tightening.  And that's the issue that's worth discussing with students.  How will the markets react?  (Currently they're up, but...)  More importantly, how will the economy in general react?  That's the bigger and more important question.  Much will depend on whether we another slowdown, or whether we fear an overheated economy.  If fears are balanced, who knows. 

Just one more thing to "talk about."

An Honor, to Be Sure

The Online Universities Weblog has included MV=PQ on its list of 100 Best Blogs for Econ Students. I thank them for the honor. I hope the students feel the same way.

John Taylor Is Blogging

John Taylor of the Taylor Rule is blogging. I'm adding his blog to my link list.

HT Cafe Hayek.

Tuesday, September 22, 2009

Tariffs and Dead Weight Loss

Today's issue of The Wall Street Journal has an interesting little story (free content at this writing) about how a 46-year old tariff spat has an auto company (Ford) partially dismantling imported vehicles to avoid a stiff tariff. The result is almost laughable. (I especially enjoyed the auto exec who claimed "we're free trade." But I won't pursue that.)

The dead-weight loss is very clear. And, as a colleague of mine points out, it can even be used to illustrate the "broken window" fallacy of job-creation.

I hope you enjoy it.

Monday, September 21, 2009

Speaking of Keynes

Today's issue of The Wall Street Journal included a review of a new book (free content at this writing) on John Maynard Keynes. The book is by Robert Skidelsky who wrote a masterful three-volume biography of Keynes (link is to the second volume) a few years back. I have it and it holds a prominent place on my "biographies" shelf. The new book, Keynes: The Return of the Master, deals more with Keynesian economics than with Keynes, according to reviewer Greg Mankiw. Mankiw's review addresses the polarizing effect Keynes has on many. But it also discusses what he considers a critical shortcoming of the book - that of the author's lack of familiarity with economics.

Another broader review of Keynes is found in this week's Economicprincipals blog by David Warsh. Warsh points out that, despite the revolutionary aspects of Keynes's work, there is still much disagreement - not just about the theory but its implications. Warsh works his way through a comprehensive bibliography about Keynes and Keynesian economics. He points out some of the main problems with Keynes's work, and some of the main problems Keynes had with the conventional wisdom of his day. For those wishing to know the strengths and weaknesses of the Keynesian school, this might be an interesting starting point.

Picking Up the Slack

One characteristic of a slowing economy is the increase in unused resources. From unemployment numbers that tell us of workers not being used, to capacity utilization numbers that speak of idle factories, to excess carrying capacity reflected in idled trucks, trains, and airplanes, there are things sitting idle that could be cranking out "stuff."

Today's issue of The Wall Street Journal has an excellent story (free content at this writing) about slack - the unused resources in the economy - putting it in the context of the Federal Reserve's next move. When will improvements in resource markets start signaling an upturn, and the possibility of renewed inflation? The article does have a link to some minimally interactive graphics. It's an opportunity to discuss productive resources and how they are priced (supply and demand). By focusing on the graphs provided, students can discuss how they reflect larger aggregate demand issues in the economy. They might even want to suggest how the first signs of inflation would manifest themselves in the various industries illustrated.

Sunday, September 20, 2009

Econ in Literature - Upper Grades

I don't often recommend literature to integrate economics at the upper grades. I suspect I tend to see the curriculum as too segmented at that stage, and less able to be integrated. Not that the subject matter doesn't lend itself to integration, I just think many upper grade teachers, myself included quite often, tend to think of "our subject areas". Consequently, the idea of interdisciplinary or cross-disciplinary activity doesn't come up frequently enough.

Let me make an exception. While working on another project (integrating economics to values and character education), I came across Make Lemonade by Virginia Euwer Wolff. (I'm not linking to it because I'm adding to my carousel at left.) The book is for upper grades (7-12) and should be pre-screened. It has some mature themes. And while I don't think there's anything students should be shielded from, parents, administrators, etc. may think otherwise.

The story is about a 14-year old inner city high school student with aspirations to college. She has a supportive mother and is trying to earn good grades and enough money to get to college and out of her neighborhood. She takes a job babysitting two young children. Their mother is a 17-year old working a dead-end job. Unfortunately, things get worse quickly.

I won't go into the plot. Suffice it to say there are a number of opportunities to discuss scarcity, choice and opportunity cost on a very real, very basic level. And Wolff's writing style is engaging. There are 66 chapters in a 200 page book. That should tell you something. It's easy to read and extremely engaging.

And if you're looking for something to engage students on a different level, particularly if you want to bring decision-making and choices to basic issues, this book may be the way to do it. It may be that someone in your English department is already using it. This could be your opportunity to meet some people in that other wing and suggest a “cross-disciplinary” adventure. It would be worth doing.

I hope someone is familiar with the book and I welcome comments.

Friday, September 18, 2009

A Resource for the Lower Grades

I suspect a lot of the elementary teachers use The Courage of Sarah Noble. The book was written in 1954, and as such, has certain phrases and terminology that might be different from what's used today (“indians” instead of “Native Americans”, etc.). But it's still a good story for the early elementary grades, especially for those students starting the transition to chapter books.

There are a number of opportunities to discuss some very basic concepts, like scarcity, choice and available resources. There are some important decisions made in the story, as well, so there is an opening to discuss the choices made and identify the "opportunity cost" as well as the costs and benefits behind each option.

If you're looking for a resource that can help introduce this part of our nation's history, and still give you some spots to slip in some economic concepts, this classic piece of children’s literature may be worth looking into, or if you're already using it, give it another look to try some new things.

I look forward to comments.

Thursday, September 17, 2009

Talkin' 'bout Trade Barriers

Economics is always more interesting when current events reinforce what we teach. Recent events on the trade front only give another example.

Here is a list of resources relating to the most recent trade dust-up with China. Many of them are from The Wall Street Journal, with a couple links to blogs, The New York Times, The Washington Post, and The Economist thrown in. Any of all of these can be used to discuss price distortions, comparative advantage, and the role of government in the economy. One of the WSJ links also includes a video.

The first link (free content at this writing), from WSJ is to an opinion piece that compares President Obama to President Hoover. It's an interesting idea that has me thinking. I'm not sure I agree yet, but...

Another link, this time from The Economist magazine, questions the President's commitment to free trade.

Next we have an article (free content at this writing) from WSJ that looks at protectionist measures more broadly. It contains a video, but the graphic was of greater interest to me. It looks at the number of protectionist measures that have been passed around the world and industries impacted.

This fourth piece, (free content at this writing) also from WSJ,  is just a straight piece on the tariff on Chinese tires. It's very basic and can be used as an introduction to the topic.

Fifth is a very good article from The New York Times on China's reaction to the tariff. It raises an important question regarding China's reaction and its role as a significant holder of U.S. debt. While the debt overhang is significant, it's not as large as many people believe.  Still, do you want to anger someone who is lending your money? That topic is delved into further with this piece from The Washington Post.

Finally, here are two blogs of interest. The first is from Realtime Economics, one of The Wall Street Journal's blogs. It discusses the reaction of various economists to the tariff.

And  by using links to other news stories, Greg Mankiw posits an interesting timeline. One of the things we like to ask our students to think about is coincidence, correlation and causation. I think it could provide some interesting opportunities for discussion.

Please let me know if you discover other links that we can share.

Line Up All the Economists

There's an old economist joke that says something to the effect of "if you line up all the economists end to end, you still couldn't reach a conclusion."

Now there's an interesting paper in the most recent issue of Econ Journal Watch. (HT to Greg Mankiw.)
It's a poll of members of the American Economic Association on key policy issues. While the profession holds a wide range of opinions on various policies, it is very interesting to see the topics that command majorities and even, in some cases, strong assent or dissent (more than 2/3 majority).

It might be fun to run a similar poll in your class as a pre-test post-test for the semester, and see how student opinions change as a result of your course. (This could be especially fun for an AP or IB course where you go into topics a bit deeper.)

Just a thought. I'd be interested in your comments.

Wednesday, September 16, 2009

Financial Advice from Abigail Adams

Okay, as an unabashed Adams fan, I don't know how I missed this from The Washington Post this past July. It is interesting and full of financial advice. Granted, as the author states, some of the investments were a tad unsavory. And I am a bit surprised. But as we know, people do strange things in strange times. No excuses, merely explanation.

One More Thing to Keep You Awake Nights

If you worry about national debt, now you can worry about lots of national debt.
(HT from RealTime Economist blog.)

Economics of Video Rental

There's an interesting story (subscriber-only content) about Blockbuster Video in today's edition of The Wall Street Journal. Unfortunately it's subscriber-only content. (But browse around, you might find most of it.)

The summary is that Blockbuster, after having previously announced the closing of some 1,000 locations is raising the number to 1,560 - almost 40% of its total. What’s the reason? Things change.

Specifically, the market has changed. New competitors (specifically Netflix and Redbox) can deliver the same product cheaper. And substitutes (online viewing and on-demand films) are becoming more widespread.

There are a number of interesting concepts that can be teased out of the basic story: entrepreneurship, economic growth, and utility.

For entrepreneurship, I would direct you to Schumpeter's five entrepreneurial activities: new products, new production methods, new sources of resources, new markets, and new forms of organization. Ask your students how firms like Netflix and Redbox fit the definition and, by extension, become competitors to firms like Blockbuster.

For economic growth, I would again refer you to Schumpeter. His idea of 'creative destruction' was meant to be an explanation of economic growth. New products and services replace old ones. But you may also look at growth as providing new goods and services to consumers or existing goods and services at a lower cost (thus increasing real income).

Finally, the idea of utility is something we frequently skip or skim over. But it is the measure of usefulness that a product provides to the consumer: essentially how does something satisfy wants? I was taught that there were three types of utility: form, place and time. Form utility means the product has a form that the consumer finds satisfying; place utility means it's available where it can satisfy the consumer's wants; and time utility means it's available when the consumer wants it. First ask students "what forms of utility did Blockbuster provide to consumers?" Then ask them to identify the utility added by firms like Netflix and Redbox.

I'm sure there are more concepts you can link to this story.  Please share your ideas and your comments.

Monday, September 14, 2009

The Man behind the Man

I've been meaning to do this post for a while but keep putting it off. But, there is no time like the present.

Last month The Economist reviewed a new biography of Friederich Engels (HT to Arts & Letters Daily). Long-time readers of this blog know I’m interested in the history of economics - the ideas and lives of the theorists who shaped the field. And while most are familiar with Karl Marx, fewer know his collaborator and backer, Friederich Engels.

One of the more interesting aspects of Engels life is that he was the son of a successful German capitalist. He was sent to England to run the family business, in the hope that exposure to the hurly-burly of everyday commerce would spark his interest and draw him away from some of the more radical ideas about he had picked up. To say the least, it didn't work.

Friederich arrived in Manchester on the heels of one of the more significant downturns of the 19th century. He not only saw the dark side of the industrial revolution, he saw the pitiable effects of a global financial crisis as it played through England. His book, The Condition of the Working Class in England was an assigned reading in my graduate days. I strongly recommend it to those interested in the period, but with the caveat that they keep in mind the context in which it was written.

While I've not read this biography, I am adding it to my list of books to read. In the interim, I am adding both it and The Condition of the Working Class to my carousel at left. If you are moved to purchase either, please consider doing so through the carousel to help support this blog.

I welcome any comments or insights by those of you who have read either book.

Sunday, September 13, 2009

Norman Borlaug Has Died

A Nobel Prize agronomist has died.  Norman Borlaug has been described by many as the father of the green revolution.  Whether he is or isn't, my first exposure to Norman Borlaug was a 2000 interview in Reason magazine

I particularly remember this exchange:

REASON: What do you think of organic farming? A lot of people claim it’s better for human health and the environment.
BORLAUG: That’s ridiculous. This shouldn’t even be a debate. Even if you could use all the organic material that you have—the animal manures, the human waste, the plant residues—and get them back on the soil, you couldn’t feed more than 4 billion people. In addition, if all agriculture were organic, you would have to increase cropland area dramatically, spreading out into marginal areas and cutting down millions of acres of forests…If people want to believe that the organic food has better nutritive value, it’s up to them to make that foolish decision. But there’s absolutely no research that shows that organic foods provide better nutrition. As far as plants are concerned, they can’t tell whether that nitrate ion comes from artificial chemicals or from decomposed organic matter. If some consumers believe that it’s better from the point of view of their health to have organic food, God bless them. Let them buy it. Let them pay a bit more. It’s a free society. But don’t tell the world that we can feed the present population without chemical fertilizer. That’s when this misinformation becomes destructive.

A Couple of Interesting Resources via Chicago

The first is not actually via Chicago, it's via The Council on Foreign Relations in New York. But the content is strictly from Chicago.

The CFR recently hosted the President of the Federal Reserve Bank of Chicago, Charlie Evans. I know Charlie from my days in Chicago, and I have immense respect for him. Naturally, I was excited to learn that he had given a speech at the CFR. I was more excited to learn that it's available as audio and video and transcript here.

Charlie's talk was titled "The Great Inflation Debate" and he thoroughly discussed the back and forth about the Fed's actions in the recent recession and whether those actions might lead to inflationary pressures. As always, Charlie was very thorough, and very thoughtful. His comments make excellent follow-up to the Krugman article highlighted in previous posts. At the very least, I would use this presentation with any students involved in any kind of policy competition (such as the Fed Challenge) or project. It provides a number of perspectives, and his answers to a wide range of questions provide further insight into current conditions.

The second resource is courtesy of the Center for International Studies at the University of Chicago. This past summer, the Center hosted a teacher institute, "Understanding the Global Economy: Bringing the World Market to Your Classroom." About six weeks ago, they had all the readings and PowerPoint presentations from the institute on their website. (Click on the "Resources" tab on the home page.)

I had a chance to look at most of them, and they were quite good. Mind you, I didn't agree with all of them. But the presentations balanced each other out quite well, in my opinion. (There were one or two that were more normative than positive, but we can leave that.) Since then, CIS has added videos of the presentations and some lesson plans.

The lesson plans are good, although they are old stand-bys that have been updated, for the most part. Nevertheless, they work. It is also important to note that there are lessons for all grade levels, which is not always the case with this topic. The videos are good quality, so they should be of help. I'm not sure I'll have the time to go through them all, but there are two or three that I will make a point to look at, because I've already borrowed from the assigned readings for those sessions.

I know you're all busy, but I hope you get a chance to look at these, and I hope you'll share your thoughts.

Friday, September 11, 2009

Do Events Change How We Think (and Choose)?

I think the answer is an obvious "yes." However, others (including some who don't buy into "rational expectations") might choose to disagree.

However, even if you don't agree with that school of thought, I would think that if the experience is deep enough and wide enough to become part of the national identity, it should have some impact on personal choice. Those of us with parents or grandparents who lived through the Great Depression (and World War II), or even those of us who remember the 1970s inflation and/or stock market "crash" of 1987 have those events and lessons learned floating around in our memory. Consequently, I believe they become part of our informal institutional structure, shaping our choices in subtle ways.

There's an interesting article in The Atlantic that asks what the effect of The Great Recession will be on our lives and our lifestyles. I've not had time to do more than react to it, but I think it makes an interesting point. Things won't be the same. They won't be "better" or "worse." That's a matter of opinion. They'll just be different. It can't help but be different.

I hope you share your thoughts.

Thursday, September 10, 2009

Economists and the Crisis

I suspect most of you are already aware of Paul Krugman's piece in the most recent New York Times Magazine. It is well written and is an example of why he is a popular economist as well as an accomplished one.

But you may not be aware of the wide range of comment the piece has generated in the blogosphere. I was only somewhat aware until I ran across a post in The Wall Street Journal's Realtime Economics blog.

All the ones listed are in that piece are quite good, but some of the ones that I think are especially worthy your time (something to read on Sunday after you're done with the newspaper) are these:
Scott Sumner at TheMoneyIllusion
Philip Lane at the Irish Economy blog (HT to Mark Thoma @ Economists View)
Brad DeLong at Grasping Reality with Both Hands
Andrew Samwick at Capital Gains and Games
Diane Lim Rogers at EconomistMom

The others at the WSJ link are good, too. I just found these the most engaging. As to using this information in the classroom, I think it might be overwhelming for many students. But I think it could be an interesting exercise for IB or AP classes in examining the different schools of thought in economics.

Personally, I agree with Krugman that economics has become too model-driven. I also agree that some of the research in behavioral economics is valuable when explaining and understanding things like bubbles and otherwise "irrational" behavior. But to accept that and dismiss ideas like "rational expectations" seems short-sighted. I happen to think the two are related. And that behavior that some think "irrational" comes from not understanding that the macro is made up thousands and millions of micros, each with their own set of values (institutional constraints) and goals (incentives).

Do you think your students would find these resources helpful or interesting? I look forward to your comments.

One more to add to the pile, even though it wasn't mentioned in the Wall Street Journal's blog,
Barry Eichengreen at The National Interest.

And a rebuttal by
John Cochrane at The University of Chicago

Wednesday, September 9, 2009

Think Outside the Box

One of the things I challenge my econ students to do is to use their understanding and knowledge (not just of economics) to look beyond the headlines, to ask "Is there more?" Here are three articles that go the extra step and, in the course of doing so, ask those additional questions.

The first comes from The Wall Street Journal. There are a number of reasons behind the push for alternative energy. One is energy independence, but another is that green energy is better for the environment. But it seems that at least one of these alternatives, wind-generated electricity, is having an impact on bird populations. Some may have expected that, but the number of birds killed by windmills is quite significant. And according to the article, in some cases it is larger than that from more traditional energy sources. (I expect some selection was involved in the information, but I digress.) In economics, we would call this effect a negative externality - a cost born by those outside the transaction (the producers and consumers of energy). The standard economic response is to "internalize the externalities," to somehow put a cost (either through fines or correction of the problem) on the activity and pass it on to the producers and consumers of the good or service.

But it appears that wind-generated electricity is not being held to the same standard as more traditional energy sources. I expect the cost to reduce this externality could be significant. That could really hurt the claim that this source of energy is "cheap."

The second article is from an article by the Associated Press, available here at ( is a great source of current topics for integration in social studies.) One of the hot financial topics lately is the role of speculators in commodity price volatility. Specific attention is usually drawn to the wild swings in oil prices over the past couple of years. And there are calls to curb speculation in basic commodities because the price volatility in the commodities eventually works its way to the consumer.

But this article presents a good argument that speculators can actually reduce volatility. After all, many of them (like the individual spotlighted in the article) want to buy low and sell high. If they're successful, they will be acting at the bottoms and highs in ways that break trends - their selling helps find the top and end the upward trend. Their buying helps to determine the bottom and brings the downward slid to an end. And isn't that how prices are supposed to work?

While the third article doesn't have quite the same level of economic content, it still fits the theme of thinking beyond. And it also comes courtesy of, although the original story is from the Los Angeles Times.
Also, my original training was in history, so I find that angle interesting. According to this article, a previous period of global warming actually had some positive effects - for the Incas. It seems that the negatives of climate change in one place may have benefits elsewhere.

I do not maintain that these articles reveal great truths and should be taken as the last word on the issues they address. But they do represent "taking the next step" and thinking outside the box. What do you think?

An article in the new issue of The Economist seems to provide more fodder for discussion on the issue of speculators, at least in the oil market.

Monday, September 7, 2009

How to Split the Bill

Staying with the incentives ideas, this post from Economists Do It with Models presents an old problem that I think would make for an interesting discussion when you develop the concept of incentives.

What is the "best" way to split the bill when you and your friends go to a restaurant. What constitutes "fair"? What incentives are inherent in each method of splitting the bill?

Anyone ever done this in class?

People Respond to Incentives...

even when they create the incentive system. We create the institutions and then deem it newsworthy (HT to Carpe Diem for the link) when we react in ways that economics would tell us is predictable. I don't blame anyone for taking advantage of different institutions and incentives. Nevertheless, Captain Renault is shocked.

Sunday, September 6, 2009

Benefits and Costs: From NIMBY to BANANA

First of all, there was an interesting article (free at this writing) in The Wall Street Journal just a few days ago. The article discussed how alternative energy projects, despite being seen as integral to developing "energy independence" are running into the NIMBY - "not in my back yard" - effect. This is a great discussion topic for economics classes. As a society, we often desire or need a variety of services - free clinics, homeless shelters, waste conversion, even prisons. Unfortunately, too often we think we can get the benefit and foist the cost off on someone else.

Wind turbines represent an interesting example. They seem to be a no-brainer, especially in parts of the country where there are consistent winds. But to put them near homes, cities, or even offshore near beaches runs into problems - noise, visual obstructions, not to mention potential obstruction for migrating animals. What is the result? We want it, but "not in my backyard." Unfortunately, if we all get our way, it leads to another phenomenon mentioned by Thomas Friedman in this interesting lecture (audio podcast, video adn presentation available) delivered at the London School of Economics - BANANAs - a term favored by developers of various projects which stands for "Build Absolutely Nothing Anywere Near Anything."

Sometimes we forget economics is about choices. And the choices are not easy. That may be why many choose to have others choose for us. But I don't think abdicating (or designating) the responsibility is the answer.

I look forward to your comments.

Beer & Anti-trust

This article may not be useful to your classrooms, on the other hand, it may. It was in this morning's Washington Post and examines the recent decision by two major brewers to raise the price of their products, despite the recession and falling sales. The tone seems to beg for anti-trust action, arguing market concentration. But a counter-argument would be that such a move makes microbrews and alternative beverages more competitive, thus encouraging substitution and the risk of a resulting permanent loss in market share. Perhaps you can use the information to set up a "hypothetical" without naming the product or the companies. Just a suggestion.

An Interesting Site for GDP per Capita

Last of all, here's an interesting site (HT to the Carpe Diem blog)that provides easy comparison of GDP per capita and groups countries in various ways (economically, geographically, even religiously). I wouldn't go so far as to use it to make sweeping generalizations. Particularly because it only provides a snapshot. But it would make a very good jumping-off point to discuss institutional constraints, resource curse, and a number of other topics that lend themselves to analysis.

I hope you find it interesting.  Feel free to suggest some uses.

Friday, September 4, 2009

Cup of Joe

If you're one of those people whose day just seems to go better if you can start it out with a cup of coffee, you might find these two items of interest.

The first is from the web site. Two economists used coffee prices as a method of examining real income gains prior to the industrial revolution. Their reasoning is interesting; although I'm not sure I totally buy into it. What I do find compelling is their conclusion that real incomes (and hence standard of living) increased during the period of study. This seems to go along with some of the work done by others, including Gregory Clark in A Farewell to Alms (previously reviewed and recommended on this blog).

The second article, while not as deep provides some interesting facts suitable for classroom use. It's from the Globalization 101 web site and focuses on the global market for coffee. I know most of us are aware that coffee comes from "somewhere else." But I suspect most of us don't know the complex structure of production, markets and treaties that allows us to enjoy the hot brew.

I hope you find these of interest. I also hope you find them useful and I'd be interested to hear how you used them.

Wednesday, September 2, 2009

Something on the Light Side

Prickly City

HT to Greg Mankiw.

Cash Register Receipts

An unusual article caught my eye this morning. It's below the fold on the front page of The Wall Street Journal. It's about the length of cash register receipts.

It's nice to know I'm ahead of the curve occasionally.

I welcome your comments.

Global Expansion

In my post yesterday, one of the links was to a piece about the current recession and how it compares to the Great Depression. It's a good read and worth your time. The Wall Street Journal has a similar story in today's issue (subscriber only content), titled "Global Economy Gains Steam." You may be able to find bits and pieces of it elsewhere on the web.

But while the article is subscriber content, you can access an interesting interactive chart that allows you to compare activity across several countries. It has some potential for illustrative purposes.  You can also view this video.

I look forward to your comments.

Disney + Marvel = New Levels of Fantasy?

Finally, as dad to three boys, I would be remiss if I didn't at least acknowledge yesterday's story in The Wall Street Journal (free content at this writing) about Disney's buyout of Marvel comics.

Again, it includes some neat graphics, slideshows and video that make for some interesting "cost-benefit" analysis exercise. And for those of you who have students playing any kind of stock market exercise, the big reaction has already passed, but look for bumps as the new owners begin to bring projects to the fore (this will likely happen over the next couple years - not the next semester). Now if only the Disney parent can arrange for Marvel superheroes to provide commentary on ESPN.

I can hear it now:
Spiderman: "Nothing but Net."
Incredible Hulk: Any reference to the Green Monster
X-Men: Hosting the X-Games?
Iron Man: References to the old Pittsburgh 'Steel curtain' defense.
Fantastic Four: Tennis doubles.

The possibilities are Marvelous. Any more you can think of?

Tuesday, September 1, 2009

Lots of Fun Stuff

I've run across several links, each leading to something you might find useful for your students.

First, Don Boudreaux at Cafe Hayek quotes Arthur Seldon on some foundations of economics. I like the basic ideas, but I like citing the appropriate economist just as much.

Second, a case of gasoline arbitrage on the Columbian/Venezuelan border, as reported by the BBC. HT to Marginal Revolution.

Third, A Tale of Two Depressions on has been updated by the authors, Barry Eichengreen and Kevin O'Rourke. We need to see the trends play out, but it looks like this recession is not going to reach the level of the 1930s. I propose we have a new name waiting for when the NBER calls the end. My suggestion is "The More-Severe-Than-Average-But-Still-Not-Great" Recession.

Fourth and fifth are two items from National Public Radio's Money Planet blog. The first attempts to explain how a health-care system (health insurance) that lacks pricing discipline changes the quantity demanded. My major criticism is that it likens health insurance to an all-you-can-eat buffet. The problem: I don't know of many health insurance plans that are open-ended. So the example is not really a true comparison.

The second provides an argument for universal health care. The major criticism I have with this one is that it compares health care to other services that we usually classify as public goods. What makes them public goods is the fact that many of them (police, fire) are items that the market won't provide effectively until it's too late - if then.

Others (water, utilities) are items that are usually cost-prohibitive for markets to provide on small scale, and would benefit from some form of granted monopoly to provide scales of production large enough to be profitable.

Perhaps the only valid comparison is education. But the argument there may be normative - it is something we should do because it 'benefits' society. The problem there is, in many locales, you will find debate about the efficacy of providing the good through public channels.

I hope you find them helpful. Your comments or opinions on use in the classroom are welcome.