Which Weighs More

It's always interesting to hear the "but we don't make anything anymore" argument when it comes to economic activity. But this article from the BBC (HT to Cafe Hayek) makes a case that can be summed up as “a dollar is a dollar is a dollar.” (Or a pound is a pound is a pound if you prefer.) Maybe the biggest concern is change. (See next post on "creative destruction." I was reminded of the great children's riddle, "which weighs more, a ton of bricks or a ton of feathers?"

Supply, Demand, Interdependence, Inflation

Last week, we were discussing inflation. Later, outside of class, one of my students brought this article in Slate to my attention. It talks about rising food prices and some underlying factors. It gets into basics of supply and demand and provides opportunities to review whether you shift the curve or move along curve.

It also talks about the impact of government price policies and the interdependence that comes with a global marketplace. I think you’ll find it a useful addition to the discussion with your students on a number of levels. Let me know if you agree.

Beef...It's What's for Dinner...and So Much More

Some of you may remember the tag-line spoken by Robert Mitchum in a long series of commercials. But look at this article in today's edition of The Wall Street Journal (subscriber content at this writing - but put the article title in your browser and you may find an ungated version). The slideshow alone is very helpful and that is open access.

According to the article, beef is a normal good; an indicator of rising prosperity and economic growth; and a subject of globalization.

I think you'll find it interesting and I hope you find it useful.

U.S. - China Currency Rap

You will want to watch this before using in class (HT to the folks at Chartporn). It may not be appropriate in some settings. I'm thinking high schools and lower will have more problem with it than colleges. There are also some oversimplifications; but I think it can be good discussion starter. I'm not going to embed it for now, but I may change my mind.

China Isn't Solely a Major Exporter

When it comes to international trade, your students could get the idea from many media stories that China is strictly an exporting power. But this graphic (HT Chartporn) shows some interesting import flows. See if your students can account for them.

On Markets, Globalization and the Chilean Miners

Last week, Mark Perry at Carpe Diem put up this post with a video. The point was that globalization, capitalism (and trade) helped save the Chilean miners. I'm not one to say they were doomed without the forces of economics. But economic forces certainly helped. And it was capitalism in the best way - the way that Adam Smith intended when he wrote both The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations.

But, it was a profit motive that developed the technology. And it was also the idea that we best serve ourselves by serving others that led many firms in many nations to make the technology available. The idea was brought home, yet again over the weekend when this article appeared in my local newspaper, The Richmond Times-Dispatch.

It's just something to think about and discuss with your students. As always, I welcome your comments.

Doug Irwin on Smoot-Hawley, Tariffs and Trade

About a week ago, I posted on why economic educators are needed to help educate the young about the importance and value of trade. I mentioned that a recent poll showed just over half of Americans feel free trade is detrimental to the economy.

This past weekend, one of my favorite economics authors, Doug Irwin at Dartmouth had a long and informative piece in The Wall Street Journal. I like Irwin because he is an engaging writer on what many consider to be an esoteric topic. His arguments are clear and his examples are always well-chosen. If you're an economics teacher looking for a piece to have your students dissect when you discuss trade, or if you're an American History teacher looking for something that relates the long tariff debate in the U.S. to current events, you could look a long time before you found anything as pertinent as Dr. Irwin's piece.

I welcome your thoughts.

Globalization and Growth

Today's edition of The Wall Street Journal has an article (subscriber content at this writing) that really links growth to globalization. Here's the video that accompanies the article.



You might want to put the title of the article in your browser to see if you can find an ungated version of the whole story somewhere. But the video explains the salient points. And when you teach macro, this can provide a good insight.

As I've pointed out to my students, looking a net trade can be deceiving. One gets a much clearer sense of the importance of trade to the U.S. economy if you look at the absolute value (add the value of imports and exports).

The Globalization of an American Export

In my opinion, one of the best definitions of globalization is found in the first paragraph of this page of the Globalization 101 web site.

When I was teaching a course on Globalization for the Powell Center for Economic Literacy, I would start off the course with that paragraph. I would ask the students about the various parts of the paragraph and what they thought was meant by each part, or if they could give me an example.

The Wall Street Journal had an excellent example of how globalization drives cultural and economic decision-making recently. The story is about how movies are pitched, written and produced in the U.S. as a result of the global marketplace. The short explanation is that proposals for Hollywood films need to be translatable (and I'm not talking about language) to foreign audiences. To truly understand what I mean, check out the graphics that are part of the article.

And please share your thoughts.

More Greece (No, I'm not Talking about Cooking)

First, a double HT to Chartporn for these links.
First from The New York Times, comes this simple and easy to understand graphic which focuses on the main players in this financial disturbance.

Next from Flickr, we see this more original and visually appealing take on the European debt crisis. And it's downloadable in a variety of sizes. I especially like the "Debt Trip" and "Debt Trap" visualization in the upper right hand corner. I think that has general application for use with students.

I would welcome you to share your thoughts on these charts as well as your possible uses for the classroom.

Neat but Incomplete

I ran across this interactive from the Brookings Institute on the global economic recovery (HT to the folks at Chartporn). While it is incomplete (most economies that I would consider developing are not included - and a number of economies that are grabbing headlines are missing as well); for those that are included, there are charts and data that could be used for reports or project or end-of-year discussions.  It's even fun just to poke around.  It's worth a look, in my opinion.

This Is Funny...and a Bit Unnerving

We teach that deficit spending is appropriate in times of trouble.  So where did things go wrong?

More on Greece

The German periodical Der Spiegel has this very good article with some very handy graphics (HT A&L Daily). You can use them in conjunction with the ones mentioned in my post from a couple days ago. What I (and others) like about these is they show that the money is not owed to other nations (implying governments) but to banks and financial institutions. This makes the role of private financial markets clearer, and should bring home the potential for a possible banking crisis.

Graphics on Greek Debt Crisis and Larger Implications

I don't know how many of you have students asking about the Greek debt crisis. I know I was pleased when one of my students asked me to explain why it was relevant. But I ran across a few graphics (HT to the folks at Chartporn once again) that can help your students understand the ties that bind.

This first one is from The Guardian in the U.K. It uses a domino metaphor to show how Greek default would ultimately affect Britain.

This second one is from The New York Times. It's labeled "interactive." Frankly, I don't see it. But it does include all of the countries with major debt problems (Greece, Ireland, Italy, Portugal and Spain). It does remind me of a graphic one of my undergraduate history professors distributed showing the web of alliances in Europe prior to World War I. You should note that Europe's Big Three (Britain, France and Germany) are the most exposed as it is.

The third, also from The New York Times, is interactive and illustrates the debt levels of various European countries a number of ways. 

These can be used to illustrate concepts like fiscal policy, role of government, globalization and interdependence quite well.

Agriculture, Choices & Poverty

I really enjoy it when one resource becomes even more relevant due to another item popping up.

The topic for this post is agriculture, choices and poverty. My first recommendation is this research article on the Voxeu web site. It's a basic study of the effect on agricultural trade barriers on global poverty. The imposition of trade barriers is a choice, frequently a political one, which has far-reaching economic effects. There are often domestic benefits for the country imposing the barriers. And there are often foreign costs that are not considered.

The authors of the study feel that the costs to global poor are significant. Their conclusion states that removal of agricultural trade barriers could lower global poverty by 3%. While that may not sound like much, in absolute terms it is more impressive.

According to their research, removal of agricultural trade barriers will increase demand for the produce of the global poor who live in rural areas and depend on agriculture for their livelihood. The study recognizes that increased demand also can raise the price of staple foods these same poor need to survive. But it also posits that removal of global barriers, while providing higher prices for food for export can have beneficial effects on food prices within the various countries, and on wages. Overall, the Voxeu piece is a worthwhile read.

The second resource also deals with agriculture, poverty and choice. It deals with the "buy local" choice. This article in Foreign Policy magazine (HT to Division of Labour) shows how decisions to "buy local" can have an impact on global agriculture markets, again affecting the poor in other countries. It has some amazing photographs, as well.

This third article, from today' edition of The Wall Street Journal gets into the definition of a farmer's market. In my opinion, it also talks about how market drive competition and how competition reduces costs. If you’ll pardon the pun, it’s just some "food" for thought. Please share yours (not your food, your thought).

Comparative Advantage, Interdependence & Volcanoes

Take a look at this story from National Public Radio's Planet Money blog. While many of us are aware of the economic problems related to air travel caused by the volcano in Iceland; I suspect few even considered this aspect. I know I didn't. But it's an excellent example of the concepts of comparative advantage (Kenya's advantage in growing and providing flowers); and interdependence (Kenya's exports and GDP are impacted by sale of flowers to Europe). More posts later today.

This Is Globalization

Long-time colleague, Dr. William Polley at Western Illinois University offers this post. Although the link seems to require payment to access the story, Dr. Polley sums up the relevant point - an excellent example of globalization.

To make the point clearer, take a map of the world. Start at Duluth, MN, and draw lines to all the other parts of the world that are affected or will be affected (according to the story) by the transaction of the ship taking on grain.

Peace and Trade

And second, here's an interesting piece on the Voxeu web site.

If you read The World Is Flat by Thomas Friedman, particularly the first edition, you are familiar with the idea that globalization reduces conflict. Friedman states that no two countries with McDonalds had ever gone to war. That no longer holds, I believe. But the idea is that trade promotes peace. The economic gains from trade outweigh the potential losses from warfare. Therefore it is in the interest of the countries to find a different channel to resolve conflicts.

While noting that political and historical benefits may be stronger motivators for trade agreements (bilateral and regional) than the economic benefits, the authors point out that they are not substitutes but can be viewed as complements. I'm not really doing the article justice, but I hope you will find it interesting.

Interdependence and Consequences

The next time your students ask what some issue has to do with another, go to this neat interactive graphic (HT to Chartporn). It truly demonstrates how one any part of larger world can impact others. And it provides an equally interesting opportunity to "connect the dots" between seemingly unrelated issues or events.

Let me know what you think.

Some Interesting Charts...

courtesy of our friends at Chartporn. The first is a graphic from The New York Times. It shows how large and small banks are dominant in various parts of the country. I may be getting forgetful as maturity sets in, but I seem to remember from my days at the Federal Reserve Bank of Chicago, that smaller banks held a smaller proportion of deposits than is shown in this graphic. That may be a consequence of where the line between large and small is drawn, but the patterns look similar to what we knew about in the Seventh District.

The second is a graphic on outsourcing. The chart does a good job of explaining how outsourcing affects the domestic economy, and really lends itself well to discussions about structural unemployment. I do wish some of the negatives at the bottom of the chart were a bit more prominent, as they need to be part of the discussion when studying the role of government in managing aggregate supply and aggregate demand.

I'd be interested in your comments.