Monday, December 12, 2011

Saturday, December 10, 2011

Two Items of Interest

First, I'm a bit late with this, but for those of you who haven't sought it out already, PNC Bank has it's CPI (Christmas Price Index) up and running, showing the price changes in the gifts from the carol, The Twelve Days of Christmas.  As always, it's an interesting way to explore how an index works and how the various components fit together to provide a single measure. What's particularly interesting is how many of the components showed no change this year.

Second, today's edition of The Wall Street Journal had a great micro-parody of a macro-event (the recent financial crisis). It's well worth a look and good for a chuckle.

All of my classes are entering their last week of the semester. I suspect the same applies to many of you. So in case I don't get another chance to post before the new year, I wish you happy holidays and more good economic resources.

Thursday, November 24, 2011

The Invisible Hand and Thanksgiving

I suspect many of you are busy today.  Our family had our dinner yesterday because one of my sons is working on Thanksgiving Day. But when you get a chance, you might want to review this column by Jeff Jacoby of The Boston Globe. (HT to Carpe Diem for the reminder.)

The market works wonders. And if you're thinking "but turkey was relatively expensive this year"; the market explains that, as well.  Here's an item from Bloomberg.

Happy Thanksgiving.

Tuesday, November 22, 2011

Putting Things in Perspective ... Thanksgiving Edition

As we approach year's end and the traditional holiday season, and with the failure of the Supercommittee to achieve anything of substance beyond finger-pointing, here is something courtesy of XKCD to fill those odd classroom moments.

Sunday, November 13, 2011

Happiness Can Make You Miserable

Here is a link to a Luann comic strip that offers a chance to really explore choices, trade-offs, opportunity cost and even psychic income.

Behavioral Economics and Tax Cuts

Here is a piece from Bloomberg Businessweek (HT Arts & Letters Daily) on how behavioral economists may have shaped a tax policy. The summary of the research is that the plan didn't work. However, the study is based on survey data, which is not as reliable as actual expenditure data. It's a worthwhile read if you are entering the section of fiscal policy or spend time discussing behavioral economics. 

Wednesday, November 9, 2011

Thursday, November 3, 2011

Taxes and Halloween Candy

Here's a funny video (HT Econlog) with a comedian explaining how to use Halloween candy to explain taxes. It's a great visual, although the last line is over the top.

Wednesday, October 26, 2011

Voting, Externalities and an "Invisible" Hand?

I've been too busy lately. I've found some time to read, but precious little to blog.  So this is about a week overdue. This article (HT to Marginal Revolution) is really a wealth of opportunity. You can connect all kinds of economic concepts to voting. The author makes some excellent arguments for voting and not voting. It is the latter that are most intriguing. In some instances, the author seems to be relying on normative judgments about what is a good policy.  In other instances, the argument of common good runs up against rational self-interest.

Do you agree with the author?

Saturday, October 8, 2011

Dual Mandate

It deals with the dual mandate faced by the Federal Reserve. For those of you who are unfamiliar with the term, the Federal Reserve is obliged by law to consider “maximum employment, stable prices, and moderate long-term interest rates.” The kicker is that first part. Many other central banks around the world are focused on stable prices only. This makes sense if you subscribe to the idea that money is neutral and understand the relationship in the equation of exchange M * V = P * Q  (or P * Y as many prefer).

But the author points out that it complicates monetary policy when fiscal policy is ineffective.  I even wonder if fiscal policy-makers are generally unwilling to face hard choices, hoping that monetary policy can solve the problem alone. If true, the tools in the monetary policy toolbox may not offer the solution that is being sought.  This is not the time to use the old adage, “when all you have is hammer, treat everything like a nail.”

I look forward to your comments.

Tuesday, October 4, 2011

Sunday, October 2, 2011

Productivity, Structural Unemployment & Creative Destruction

As we know, cyclical unemployment can become structural if prolonged. And as labor costs rise, there is an incentive for firms to increase the capital/labor ratio rather than hire workers. This can be part of the process of creative destruction. It's all explained rather well in this blog post at The Wall Street Journal.

What I like about the post is that it is short yet very clear. I would think you might want to use with your students as a discussion starter at the beginning of the period or to summarize a day's activity.

Trade Politics of Middle Earth

This may have been more appropriate as an exam question in an earlier age; nevertheless, it is clever - even with the problems with details. (HT to Marginal Revolution)

Wednesday, September 21, 2011


Russ Roberts at Cafe Hayek has generously made an essay available.  It is a visual explanation of how markets use knowledge. For those of you teaching AP Micro or Principles courses, this will be very handy. For those of you teaching more traditional courses or who feel it might be beyond student reading ability, it might be good background for you to integrate into your lesson. Either way, it is worth your time.

Tuesday, September 20, 2011

Happy Birthday to MV=PQ

It seems that today is the sixth birthday of this blog. Six years ago today, the first post went up.  I can only guess at how many people have visited over the years. The current counter does not include the almost two years it ran under the auspices of the Chicago Fed. And it does not cover all of the time I was at the Powell Center for Economic Literacy, or since then. And I've gained a co-author since then.

Regardless, I thank all of you who are regular (or even irregular visitors). It's been great.  

Monday, September 19, 2011

The Rule of 72

When teaching about interest, it’s always useful to make an aside and familiarize students with the rule of 72.  The rule allows for a rough approximation of doubling time once a rate of growth is known.  One merely takes 72 and divides it by the rate; the result is a rough estimate of doubling time. Thus something that grows at 4% should take about 18 years to double in size. Something that grows at 6% will take 12 years, etc.

It is usually used when talking about compound interest. I’ve even heard it used when discussing inflation. The power of growth working on growth is impressive, when you start to talk about larger numbers. Conversely, small numbers make you wonder why you should bother, as seen in this XKCD cartoon.

However even smaller numbers, left on their own over long periods of time, can result in truly astronomical sums.  Here’s a story from Lapham's Quarterly (HT to Arts & Letters Daily) on that very topic that can be used to wind up class when you have time.
And the government thinks it has troubles with the debt now….