I'm not referring to the school year, although for some it may have ended already. Others may have a week, two, or even more to go. Regardless, I suspect it's going to be difficult to think about next fall, much less get your students to do so. However, I ran across something that might be useful if you are inclined to focusing on the future and/or trying to get your students to do the same.
This piece was in a recent issue of The Wall Street Journal. It goes beyond the traditional "two consecutive quarters of negative GDP growth" that we often hear when some try to define a recession. The article points to different economic data that might indicate the recession is bottoming or has bottomed. And because a lot of things can change in two or three months, this might make an interesting item for teacher edification, or to share with students that you know you'll see in the fall. Hopefully, some of them share your enthusiasm and excitement about economics. This will give that energy some focus.
Have them chart/journal the data. Or if they think of other bits and pieces of data that might be a precursor to the economic turnaround, have them cite it and explain the connection. They can even throw in anecdotal observations from their summer jobs and/or vacations. It won't be easy, but worthwhile things rarely are. And think of all the possible grist for discussion you'll have after call the first roll in September (or August as the case may be).
I will continue blogging through the summer. If you currently receive my emails at school and want to redirect them to your home, just let me know and we'll change the notification list. That will avoid an "overfull" inbox when you return, or our dropping you from the mail list because your full inbox bounces back to us.
As always, I look forward to your comments - even in the summer.
This post relates to the following Keystone Economic Principles:
1. We all make choices.
3. All choices have consequences.
and
4. Economic systems influence choices.
Thursday, May 28, 2009
Friday, May 22, 2009
Rock Stars
A couple years ago, when I first read The World is Flat, I was struck by one of his statements.
I couldn’t help but be reminded of it when I saw this commercial.
Here are some questions for your students:
8. Quantity and quality of available resources impact living standards.
"In China today, Bill Gates is Britney Spears. In America today, Britney Spears is Britney Spears - and that is our problem."
I couldn’t help but be reminded of it when I saw this commercial.
Here are some questions for your students:
Who affects the overall quality of life more, engineers, entrepreneurs or entertainers?This post relates to the following Keystone Economic Principle:
Are things changing?
Is “Britney Spears still Britney Spears”, or is the current economy changing our priorities?
8. Quantity and quality of available resources impact living standards.
Wednesday, May 20, 2009
What's in the (Credit) Cards?
There is a flurry of stories in the media this morning regarding a bill passed by the U.S. Senate yesterday regarding credit card reform. It is reported that the House of Representatives will now take up the bill, and if passed it could be on President Obama's desk by next week. The Wall Street Journal, The Washington Post and The New York Times all have major stories (and all free content at this writing), many of them with very good graphics and even some video that outline the major changes.
Many of the changes highlighted in the stories run along the line of what's good about the proposed legislation, i.e. what will benefit consumers. And there is a lot in the Senate bill that stands to benefit consumers. (The final bill will have some changes, so it's worth following the progress.) Issues like interest rate restrictions, how payments are to be handled, grace periods, fine print, and credit cards for minors are part of the bill. Many, if not all of these, are covered in some of the graphics in the story. The graphics alone are worth taking a look at.
The downside of these proposed changes is a bit more complex and the explanations are not easily explained by graphic presentation, evidently. But as we know from studying economics, there's the TANSTAAFL principle. (There Ain't No Such Thing As A Free Lunch.) The consequences range from the intended - the cost of credit being shifted to people who pay their balance in full - to the unintended - less credit available for people with poor credit. Some of these discussions have been fleshed out more on a number of blogs such as this one and this one, both at The Wall Street Journal.
However, I would recommend a book that, while not talking exclusively about credit cards, does explain our fascination with credit and the evolution of credit availability from a privilege (only those who can afford it get it) to a right (everyone is entitled to access to credit). It's title is Money of the Mind and it's by James Grant. The book is 15 years old and, as a consequence, only takes us up through the 1980s. However, the pattern of bringing more and more credit to more and more people provides some insight into what happened through the 1990s and into this decade, and the resulting consequences.
As to what all this means for your students, while the bill has not taken its final shape, the intent is for it to go into effect early next year. One of the things you can do now is discuss the ramifications of the legislation along these lines:
Please share your thoughts or encourage your students to share theirs.
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.
7. Economic thinking is marginal thinking.
and
9. Prices are determined by the market forces of supply and demand…and are constantly changing.
Many of the changes highlighted in the stories run along the line of what's good about the proposed legislation, i.e. what will benefit consumers. And there is a lot in the Senate bill that stands to benefit consumers. (The final bill will have some changes, so it's worth following the progress.) Issues like interest rate restrictions, how payments are to be handled, grace periods, fine print, and credit cards for minors are part of the bill. Many, if not all of these, are covered in some of the graphics in the story. The graphics alone are worth taking a look at.
The downside of these proposed changes is a bit more complex and the explanations are not easily explained by graphic presentation, evidently. But as we know from studying economics, there's the TANSTAAFL principle. (There Ain't No Such Thing As A Free Lunch.) The consequences range from the intended - the cost of credit being shifted to people who pay their balance in full - to the unintended - less credit available for people with poor credit. Some of these discussions have been fleshed out more on a number of blogs such as this one and this one, both at The Wall Street Journal.
However, I would recommend a book that, while not talking exclusively about credit cards, does explain our fascination with credit and the evolution of credit availability from a privilege (only those who can afford it get it) to a right (everyone is entitled to access to credit). It's title is Money of the Mind and it's by James Grant. The book is 15 years old and, as a consequence, only takes us up through the 1980s. However, the pattern of bringing more and more credit to more and more people provides some insight into what happened through the 1990s and into this decade, and the resulting consequences.
As to what all this means for your students, while the bill has not taken its final shape, the intent is for it to go into effect early next year. One of the things you can do now is discuss the ramifications of the legislation along these lines:
Given the current state of the economy, and the circumstances that helped to bring it about, I find the method and the timing on credit card reform interesting. In some ways it is predictable, and maybe even overdue. In others, it would seem to be counterproductive.1. What will be the impact on size of the credit market - how many people will be eligible to get credit cards - based on some of the proposed changes?
2. If demand (the number of customers) changes, what happens to the price of credit?
3. If banks cannot cover risk or make a profit at a given price, what can they do to the supply of credit to change the price?
4. If people (consumers) get less (fewer benefits) and are charged more, are they likely to change their spending patterns?
5. Given that using credit is usually a choice, what incentives to use or not use are created by the changes?
6. Do these changes create externalities (costs or benefits that accrue to parties outside the transaction) that will complicate the pricing of the service?
Please share your thoughts or encourage your students to share theirs.
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.
7. Economic thinking is marginal thinking.
and
9. Prices are determined by the market forces of supply and demand…and are constantly changing.
Tuesday, May 19, 2009
Global Trade and Supply Chains
The process of producing goods and services tends to be longer and more complicated than our students think, and certainly longer than even many adults know. Consequently, it's good to find a short article that illustrates the various stops in a "supply chain", while also providing an excellent example of globalization and interdependence when discussing trade. Yesterday's edition of The Wall Street Journal contained this article (free at time of writing) which can do all of that.
Superficially, the article is about Zoran, a California chip-maker. The firm has to deal with reduced orders in a time of "lean manufacturing" and "just-in-time (JIT)" inventory management. Those concepts, while helpful in helping larger manufacturing firms control costs when properly implemented, can be problematic on the smaller firms farther up the chain.
However, the article contains a graphic titled "Life of a DVD Player “that does an excellent job of connecting the dots that link basic materials to final product made available to the consumer. It shows how such far-flung locales as Minnesota, Japan, China, Taiwan and California are all involved in one component. (That would not be an example of JIT, which was based on fairly close proximity of suppliers.) It can be used to demonstrate how falling consumer demand ripples throughout the world economy for an example of globalization and interdependence. I also like the fact that it can be used to illustrate one of the key problems with trade data - point of origin.
Because markets are multi-layered and interlinked, it is virtually impossible for any nation to track where imported goods actually originate. The easiest way is to ascertain what the last stop was before it got to the final destination. If we use the graphic, chances are the Toshiba DVD player at Best Buy was probably counted as an import from China, even though the nameplate is for a Japanese firm. But one can easily see that is a gross oversimplification. The production of one specific chip involved a number of countries and workers in those countries. Chances are other components, from the case to the wiring, involved numerous others. From that standpoint alone, one should be able to demonstrate that trade barriers can easily have a negative impact on many countries, including the country imposing the barriers.
Another interesting resource is this flash presentation at the YaleGlobal online site. It examines the television industry - not program production but actual manufacturing. It does NOT connect to the 'lean manufacturing' theme of the WSJ article, but still provides an interesting example of globalization over time.
Please share your reaction.
This post relates to the following Keystone Economic Principles:
4. Economic systems influence choices.
6. Do what you do best; trade for the rest.
and
7. Economic thinking is marginal thinking.
Superficially, the article is about Zoran, a California chip-maker. The firm has to deal with reduced orders in a time of "lean manufacturing" and "just-in-time (JIT)" inventory management. Those concepts, while helpful in helping larger manufacturing firms control costs when properly implemented, can be problematic on the smaller firms farther up the chain.
However, the article contains a graphic titled "Life of a DVD Player “that does an excellent job of connecting the dots that link basic materials to final product made available to the consumer. It shows how such far-flung locales as Minnesota, Japan, China, Taiwan and California are all involved in one component. (That would not be an example of JIT, which was based on fairly close proximity of suppliers.) It can be used to demonstrate how falling consumer demand ripples throughout the world economy for an example of globalization and interdependence. I also like the fact that it can be used to illustrate one of the key problems with trade data - point of origin.
Because markets are multi-layered and interlinked, it is virtually impossible for any nation to track where imported goods actually originate. The easiest way is to ascertain what the last stop was before it got to the final destination. If we use the graphic, chances are the Toshiba DVD player at Best Buy was probably counted as an import from China, even though the nameplate is for a Japanese firm. But one can easily see that is a gross oversimplification. The production of one specific chip involved a number of countries and workers in those countries. Chances are other components, from the case to the wiring, involved numerous others. From that standpoint alone, one should be able to demonstrate that trade barriers can easily have a negative impact on many countries, including the country imposing the barriers.
Another interesting resource is this flash presentation at the YaleGlobal online site. It examines the television industry - not program production but actual manufacturing. It does NOT connect to the 'lean manufacturing' theme of the WSJ article, but still provides an interesting example of globalization over time.
Please share your reaction.
This post relates to the following Keystone Economic Principles:
4. Economic systems influence choices.
6. Do what you do best; trade for the rest.
and
7. Economic thinking is marginal thinking.
Institutions Affect Choices
In this case from the Luann comic strip, one might argue for an informal and voluntary institution in the form of a basic human response.
This post relates to the following Keystone Economic Principles:
1. We all make choices.
and
5. Incentives produce “predictable” responses.
This post relates to the following Keystone Economic Principles:
1. We all make choices.
and
5. Incentives produce “predictable” responses.
Monday, May 18, 2009
Buy High, Sell Low?
When teaching students about investing, one of the first adages we tell them is "buy low, sell high." What often follows is an explanation of the fact that many investors do the opposite - sometimes out of necessity - but also as a result of some basic emotions like greed or fear.
But because we each have different risk profiles, our timing may be off when it comes to investing. When a market is growing, we may put off getting in, depending on our fear/suspicion/concerns about whether or not the market is really going to continue growing. Likewise, our inability to let go of the bad or our overconfidence in our ability to pick the winners, may keep us from selling in the early stages of a market decline.
There are other reasons that we may act this way, of course. But the fact is that many of us do act contrary to the basic wisdom. There is an article (free content at this writing) in today's edition of The Wall Street Journal that illustrates what happens when investors get the timing wrong. You can certainly make a case that the selling should have been done before February 2009. But, to borrow and overuse another old aphorism ,“Hindsight is 20-20.”
Do you think this article would be worth sharing with your students? Is there value in illustrating what many consider to be self-evident? Does this open other opportunities? Another adage is "don't try to time the market." But is that another important lesson for another day, or a continuation of this lesson?
I look forward to your comments.
This post relates to the following Keystone Economic Principles:
1. We all make choices.
and
3. All choices have consequences.
But because we each have different risk profiles, our timing may be off when it comes to investing. When a market is growing, we may put off getting in, depending on our fear/suspicion/concerns about whether or not the market is really going to continue growing. Likewise, our inability to let go of the bad or our overconfidence in our ability to pick the winners, may keep us from selling in the early stages of a market decline.
There are other reasons that we may act this way, of course. But the fact is that many of us do act contrary to the basic wisdom. There is an article (free content at this writing) in today's edition of The Wall Street Journal that illustrates what happens when investors get the timing wrong. You can certainly make a case that the selling should have been done before February 2009. But, to borrow and overuse another old aphorism ,“Hindsight is 20-20.”
Do you think this article would be worth sharing with your students? Is there value in illustrating what many consider to be self-evident? Does this open other opportunities? Another adage is "don't try to time the market." But is that another important lesson for another day, or a continuation of this lesson?
I look forward to your comments.
This post relates to the following Keystone Economic Principles:
1. We all make choices.
and
3. All choices have consequences.
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