While I might be convinced this is more than coincidence, correlation is not causation. And while I don't think the author claims that it is, it certainly came across that way to me.
I think it may have more to do with similar cultural values and beliefs (institutions) other than taxation influencing the choices of the inhabitants. What do your students think? Does the author make the case that high taxes can lead to happiness? Are there other routes than through government-provided services?
I look forward to your comments.
This post relates to the following Keystone Economic Principles:
1. We all make choices.
2. There ain’t no such thing as a free lunch.
3. All choices have consequences.
4. Economic systems influence choices.
and
8. Quantity and quality of available resources impact living standards.
Friday, May 15, 2009
Smoot-Hawley Revisited, Again.
While I hope this doesn't play out the same way, this article from yesterday's edition of The Washington Post may be something to be concerned about.
The original Smoot-Hawley Tariff was not expected to have the impact that it actually did. The original bill (as outlined in this article from The Economist) was designed to set tariffs on agricultural products from a small number of countries. The final version suffered from so many add-ons that it effectively injured world trade just as the economy was dealing with a downturn. Bad timing to say the least. Is retaliation something that should be expected when passing this type of legislation? My view says yes, but I may be missing something.
Let's hope thing don't get out of hand, just as we were starting to see "green shoots." I look forward to your comments.
This post relates to the following Keystone Economic Principles:
1. We all make choices.
3. All choices have consequences.
and
6. Do what you do best; trade for the rest.
The original Smoot-Hawley Tariff was not expected to have the impact that it actually did. The original bill (as outlined in this article from The Economist) was designed to set tariffs on agricultural products from a small number of countries. The final version suffered from so many add-ons that it effectively injured world trade just as the economy was dealing with a downturn. Bad timing to say the least. Is retaliation something that should be expected when passing this type of legislation? My view says yes, but I may be missing something.
Let's hope thing don't get out of hand, just as we were starting to see "green shoots." I look forward to your comments.
This post relates to the following Keystone Economic Principles:
1. We all make choices.
3. All choices have consequences.
and
6. Do what you do best; trade for the rest.
Thursday, May 14, 2009
What a Difference 18 Months Can Make: India's Growth & Infrastructure
Yesterday's edition of The Wall Street Journal had an excellent article about problems facing India's growing urban centers. It had links to some informative interactive graphics, a slide show about one urban center - Lucknow, and an informative video. It is a rich resource for a variety of teaching environments including world history, current events, geography and economics, and I strongly recommend it.
That piece also reminded me of another article from the same source that I read about 18 months ago. That one spoke about the then surging Indian economy's positive effects on the poor. After a bit of digging, I found a link to it. It also has an excellent series of interactive graphics, and despite being 18 months old offers some interesting possibilities for discussion.
In the older article, the main point is that economic growth is an engine for social change. Public education was expanding and offering opportunity for many with a subsequent result that the caste system was slowly falling apart. There was a new confidence and a belief that the state may not necessarily be the best director of economic growth. And many of India's rural poor were choosing to move to the cities where they saw greater opportunity.
The more recent article speaks to the result of that movement. While opportunity did exist, much of it has dried up with the slack global economy. But the poor have not returned to their villages. They still choose the potential of the city despite a woeful lack of public services. Part of that shortfall is the result of insufficient funding, but part of it remains competition for use of public funds among overlapping governmental authorities. Large monuments to government officials are touted as "make work" projects. Funds are diverted to build modern roads providing access to monuments, rather than building bridges or water treatment plants, largely as a result of a decision made by government agencies.
In fairness, the rate of population growth would strain the resources of the cities even in the best of times. But the stories, when read together, provide an interesting problem for discussion about pubic goods and services, the role of government, and the productive value of infrastructure in promoting growth and opportunity.
I'm sure there's more to discuss than I've outlined, but the articles are well-written and additional information provides a rich resource for classroom use. I look forward to your comments.
This post relates to the following Keystone Economic Principles:
1. We all make choices.
2. There ain’t no such thing as a free lunch.
3. All choices have consequences.
4. Economic systems influence choices.
and
8. Quantity and quality of available resources impact living standards.
That piece also reminded me of another article from the same source that I read about 18 months ago. That one spoke about the then surging Indian economy's positive effects on the poor. After a bit of digging, I found a link to it. It also has an excellent series of interactive graphics, and despite being 18 months old offers some interesting possibilities for discussion.
In the older article, the main point is that economic growth is an engine for social change. Public education was expanding and offering opportunity for many with a subsequent result that the caste system was slowly falling apart. There was a new confidence and a belief that the state may not necessarily be the best director of economic growth. And many of India's rural poor were choosing to move to the cities where they saw greater opportunity.
The more recent article speaks to the result of that movement. While opportunity did exist, much of it has dried up with the slack global economy. But the poor have not returned to their villages. They still choose the potential of the city despite a woeful lack of public services. Part of that shortfall is the result of insufficient funding, but part of it remains competition for use of public funds among overlapping governmental authorities. Large monuments to government officials are touted as "make work" projects. Funds are diverted to build modern roads providing access to monuments, rather than building bridges or water treatment plants, largely as a result of a decision made by government agencies.
In fairness, the rate of population growth would strain the resources of the cities even in the best of times. But the stories, when read together, provide an interesting problem for discussion about pubic goods and services, the role of government, and the productive value of infrastructure in promoting growth and opportunity.
I'm sure there's more to discuss than I've outlined, but the articles are well-written and additional information provides a rich resource for classroom use. I look forward to your comments.
This post relates to the following Keystone Economic Principles:
1. We all make choices.
2. There ain’t no such thing as a free lunch.
3. All choices have consequences.
4. Economic systems influence choices.
and
8. Quantity and quality of available resources impact living standards.
Wednesday, May 13, 2009
Resources on the Financial Crisis
While I've not had time to review everything on the site, it has enough credibility that I have no qualms forwarding it to you.
The Carnegie Council has put together Essential Resources on the Global Financial Crisis. I have read some of these articles before. There are some that I agree with and others that I don't agree with; but all are well-written, and provide a solid examination of the issues. They are, at the very least, a valuable source of balanced arguments and prescriptions.
I hope you find time to get to theml. It is, after all, almost the end of the school year. But there's still time to put them on that summer reading list. (I suspect that's what I'll be doing.)
This post relates to the following Keystone Economic Principle:
8. Quantity and quality of available resources impact living standards.
The Carnegie Council has put together Essential Resources on the Global Financial Crisis. I have read some of these articles before. There are some that I agree with and others that I don't agree with; but all are well-written, and provide a solid examination of the issues. They are, at the very least, a valuable source of balanced arguments and prescriptions.
I hope you find time to get to theml. It is, after all, almost the end of the school year. But there's still time to put them on that summer reading list. (I suspect that's what I'll be doing.)
This post relates to the following Keystone Economic Principle:
8. Quantity and quality of available resources impact living standards.
Credit Crunch of 1294?
The current recession has been compared to a number of other economic downturns - the early 1990s, the early 1980s, the 1930s (most often used), the 1907 Panic, and even a couple of events in the 19th century. This is the first time I recall it being compared to an event in the 13th century.
This article from the Voxeu blog is a short, interesting read. Like the current situation, part of the problem was an inability of financial institutions to meet short-term obligations by converting long-term assets to cash. This was compounded with an inability to borrow additional amounts in the short-term.
I was interested in the resulting fiscal and monetary policy approaches used by parties to solve the crisis - neither of which seems to have been good for the economies involved. I wonder if there are lessons to be learned here?
This example seem to be an interesting way to link current events to historical ones for those who teach world history; and to provide another historical example for those teaching economics.
At the very least, it would seem to reinforce the old adage that if history doesn't always repeat itself, it sure rhymes.
This post relates to the following Keystone Economic Principles:
1. We all make choices.
2. There ain’t no such thing as a free lunch.
3. All choices have consequences.
and
4. Economic systems influence choices.
This article from the Voxeu blog is a short, interesting read. Like the current situation, part of the problem was an inability of financial institutions to meet short-term obligations by converting long-term assets to cash. This was compounded with an inability to borrow additional amounts in the short-term.
I was interested in the resulting fiscal and monetary policy approaches used by parties to solve the crisis - neither of which seems to have been good for the economies involved. I wonder if there are lessons to be learned here?
This example seem to be an interesting way to link current events to historical ones for those who teach world history; and to provide another historical example for those teaching economics.
At the very least, it would seem to reinforce the old adage that if history doesn't always repeat itself, it sure rhymes.
This post relates to the following Keystone Economic Principles:
1. We all make choices.
2. There ain’t no such thing as a free lunch.
3. All choices have consequences.
and
4. Economic systems influence choices.
Tuesday, May 12, 2009
Place Utility? Time Utility? Conspicuous Consumption?
The quote below is from Phil Mushnick's sports column in The New York Post from a few days ago.
One might be able to make a case that it is somehow more valuable to see the game on June 30 than to see it on August 14. That would involve time utility - the satisfaction gained from a good or service being available a time the consumer prefers. One could also argue the time involved in travelling to Seattle can be used better for another purpose. That also may be true, and it would also be an example of time utility.
This could also be a case of place utility. Place utility is the satisfaction gained from a good or service being in a place the consumer prefers. Clearly, some people are willing to pay a premium to see the game in NY. The number of people willing to do that, given the smaller size of the new Yankee Stadium, may crowd out other Yankee fans, but the choice is up to the individual consumer.
This also can serve as an possible case of conspicuous consumption.
That concept was first introduced by economist Thorstein Veblen in his book, The Theory of the Leisure Class. Veblen pointed to lavish spending as a method of displaying status. There is a certain amount of pleasure one receives from being able to tell others that one can afford Yankee tickets at this level.
What do your students think?
This post relates to the following Keystone Economic Principles:
1. We all make choices.
2. There ain’t no such thing as a free lunch.
5. Incentives produce “predictable” responses.
7. Economic thinking is marginal thinking.
and
9. Prices are determined by the market forces of supply and demand…and are constantly changing.
Reader Gary Cicio, NYC podiatrist, did the research, and asks us to choose one of the two options to see a Mariners-Yankees game this season, and from the very best seats:The question for your students, “Why would anyone pay to see the Yankees play the Mariners in NY?”
Option 1: Two tickets to Tuesday night, June 30, Mariners at Yanks, cost for just the tickets, $5,000.
Option 2: Two round-trip airline tickets to Seattle, Friday, Aug. 14, return Sunday the 16th, rental car for three days, two-night double occupancy stay in four-star hotel, two top tickets to both the Saturday and Sunday Yanks-Mariners games, two best-restaurant-in-town dinners for two. Total cost, $2,800. Plus-frequent flyer miles.
One might be able to make a case that it is somehow more valuable to see the game on June 30 than to see it on August 14. That would involve time utility - the satisfaction gained from a good or service being available a time the consumer prefers. One could also argue the time involved in travelling to Seattle can be used better for another purpose. That also may be true, and it would also be an example of time utility.
This could also be a case of place utility. Place utility is the satisfaction gained from a good or service being in a place the consumer prefers. Clearly, some people are willing to pay a premium to see the game in NY. The number of people willing to do that, given the smaller size of the new Yankee Stadium, may crowd out other Yankee fans, but the choice is up to the individual consumer.
This also can serve as an possible case of conspicuous consumption.
That concept was first introduced by economist Thorstein Veblen in his book, The Theory of the Leisure Class. Veblen pointed to lavish spending as a method of displaying status. There is a certain amount of pleasure one receives from being able to tell others that one can afford Yankee tickets at this level.
What do your students think?
This post relates to the following Keystone Economic Principles:
1. We all make choices.
2. There ain’t no such thing as a free lunch.
5. Incentives produce “predictable” responses.
7. Economic thinking is marginal thinking.
and
9. Prices are determined by the market forces of supply and demand…and are constantly changing.
Friday, May 8, 2009
Home-Ownership as an Institution
Housing is a factor that is often cited as contributing to the current downturn. And because housing is not an isolated sector of the economy, there are a myriad of reasons given for the collapse of the housing sector, from monetary policy to unscrupulous brokers to misinformed investors and uninformed home-buyers.
There are numerous examples of how people in various roles made choices based on incentives they had to act. But how did the incentives get there? Some would have us believe it was a lack of oversight or regulation that allowed incentives to run amok. Others would have us believe that specific incentives put in place by various interested or well-intentioned parties created opportunities for misguided decisions.
But there has not been a lot written about the fundamental idea of home-ownership and how it has impacted choices. We know people respond to incentives. And we know the institutions developed within a system shape the incentives. But we often overlook the history of the institutions. And while the definitive history of home ownership in American society may yet be written, this article from City Journal (HT to Arts & Letters Daily) is a decent start.
The author delves into early 20th-century attempts by the government to increase home ownership and carries through that century to the current situation. For each example, the case is made that legislation reflected a desire to formalize an informal belief - that homeownership was a socially desirable outcome. The idea that homeownership is a desirable outcome is common within our teaching. We tell our students governments provide tax deductions for homeownership, either through mortgage interest or property tax deductions, because owners are "more involved" in their communities. That owners care for property differently than renters. And those owners do things to increase the value of the property, positively impacting the value of other property.
The last few pages get a bit too political for my taste. But this article, while longer than some normally suggested here, is worth your time - whether you are an economics or American History teacher. Either way, I think you will gain insights to share with your students.
I look forward to your comments.
This post relates to the following Keystone Economic Principles:
1. We all make choices.
2. There ain’t no such thing as a free lunch.
3. All choices have consequences.
4. Economic systems influence choices.
and
5. Incentives produce “predictable” responses.
There are numerous examples of how people in various roles made choices based on incentives they had to act. But how did the incentives get there? Some would have us believe it was a lack of oversight or regulation that allowed incentives to run amok. Others would have us believe that specific incentives put in place by various interested or well-intentioned parties created opportunities for misguided decisions.
But there has not been a lot written about the fundamental idea of home-ownership and how it has impacted choices. We know people respond to incentives. And we know the institutions developed within a system shape the incentives. But we often overlook the history of the institutions. And while the definitive history of home ownership in American society may yet be written, this article from City Journal (HT to Arts & Letters Daily) is a decent start.
The author delves into early 20th-century attempts by the government to increase home ownership and carries through that century to the current situation. For each example, the case is made that legislation reflected a desire to formalize an informal belief - that homeownership was a socially desirable outcome. The idea that homeownership is a desirable outcome is common within our teaching. We tell our students governments provide tax deductions for homeownership, either through mortgage interest or property tax deductions, because owners are "more involved" in their communities. That owners care for property differently than renters. And those owners do things to increase the value of the property, positively impacting the value of other property.
The last few pages get a bit too political for my taste. But this article, while longer than some normally suggested here, is worth your time - whether you are an economics or American History teacher. Either way, I think you will gain insights to share with your students.
I look forward to your comments.
This post relates to the following Keystone Economic Principles:
1. We all make choices.
2. There ain’t no such thing as a free lunch.
3. All choices have consequences.
4. Economic systems influence choices.
and
5. Incentives produce “predictable” responses.
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