Average Consumer Expenditures

Creditloan.com has an interesting graphic (HT TO Chartporn) on how the average consumer spends their income. It's based on Department of Labor data. I would think it closely resembles the CPI market basket. Nevertheless, it's a good graphic to have around if you're teaching personal finance and could be used as an introduction to budgeting.

Something to Kick-off a Class

Regular reader, Dr. Mark, sent a link to this video. I thank him most whole-heartedly.



It features the late Milton Friedman engaged in a debate with a young man identified as Michael Moore - yes, that Michael Moore. I haven't seen anything to confirm that part, but Dr. Friedman's explanation to the young man (whoever he was) is great. I'm sure this will stir things up in an economics class, or even an ethics class.

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.

For the Budding Young Video Producers...

For those of you teaching at the college level, the Federal Reserve Bank of St. Louis has this contest for students who are interested in making a video. There's prize money, and the video will be used to help high school students. I think it would be great if some of your students won.

The Standup Economist

As long as we're on a video theme, I have to thank Greg Mankiw for pointing to this great video

Economists Do It with Models

EconGirl (Jodi Beggs) has some great new videos on Economists Do It With Models. They deal with taxes and, in my humble opinion, they are very good. There are two explaining the tax wedge and two explaining general rules about taxes.

I really enjoyed the first two. They provide clear explanation without shifting the supply and demand curves around. I found that makes it much easier for students to understand. I strongly recommend these to you if you need to brush up, or even to give to your AP students if they were absent the day of your stimulating presentation.

EconGirl has a whole series of videos. Check them out.

Why Economic Education

The answer lies in this article from today's edition of The Wall Street Journal. It seems that as high unemployment lingers in this period of slow growth, people are becoming increasingly skeptical about the benefits of trade. And the skepticism cuts across all job, income and party affiliation brackets.

People are increasingly unaware of or unconvinced about the benefits of trade. They appear to be more concerned about job security than the corresponding impact on prices. In fact, I am reminded of a line from the musical play 1776. At a critical point of the debate, John Dickinson, a delegate from Pennsylvania, is reminded by his fellow delegate, Ben Franklin, that those who would sacrifice freedom for a little security can end up losing both. In the play, Franklin speaks of political freedom. But the same can be said for economic freedom. By sacrificing the freedom to trade to gain job security, we may sacrifice the benefits of competition that come with trade, and face a reduced number of jobs in the long-run.

This brings me to a related opinion piece in today's Journal. In it, the author uses a doomsday clock analogy to argue for renewing the Bush tax cuts and moving forward on free trade. I'm not about to discuss the tax cuts in this post. But his discussion about trade agreements is relevant. He likens the increasing calls for protectionism in various guises to the Smoot-Hawley Tariff that was a contributing factor to the Great Depression.

The analogy is not quite perfect, but the result could be. By cutting trade, we stand not only to face higher consumer prices, but to put ourselves at a disadvantage as world markets pull out of the slowdown and kick into high gear. If the U.S. isolates itself from the growing world market, we shouldn't be surprised if potential customers shop elsewhere.

So this brings us back to the topic of today's post. As economic educators, we need to be sure that students understand all sides of the trade issue. There are not just costs of trade, but benefits from trade. And the benefits can have long-term implications. I'd welcome your thoughts.