Wednesday, February 01, 2006

If You are Looking for a Lucrative Summer Job...

...try scavaging for whale vomit, which apparently can net you $20,000 per kilogram due to its use in perfumes.

(Source: Newmark's Door)

Monday, January 30, 2006

Edward Lazear is the new CEA head

Edward Lazear, an economist at Stanford University, will be the new head of President Bush's Council of Economic Advisors.

The part of Lazear's work that I am most familiar with is his research on labor markets. One of his particularly interesting insights is an explanation for why companies are willing to pay ridiculous salaries to their CEOs and pay a lot less (in relative terms) to other VPs and executives that are probably just as important to the company's success. Lazear argues that the million-dollar salaries are not based on the productivity of the CEO, but rather serve as an incentive for all of the executives below the CEO to work harder to try and become the CEO one day. As Lazear himself explains: "The CEO gets to enjoy the money, but it's making everybody else work harder."

This article gives a good summary of his argument about CEO salaries, and Tyler Cowen gives a great overview of Lazear's research with this Marginal Revolution post.

Measuring Economic Growth With Sears

Here is an interesting post by an economist named Don Boudreaux where he gives a sense of how much our standard of living has improved in the past 30 years (since 1975).

He does so by comparing the prices in a 1975 Sears catalogue to current prices listed on the website. However, the problem, as you know is that you cannot just compare prices between the two years because of the effect of inflation during that time. So instead, Boudreaux uses the common teachnique of measuring how much each good would have cost in hours of labor in 1975 versus hours of labor in 2006 for the average American. This method allows a simple comparison and he explains in the post where he gets the data and the simple calculation he makes.

The most drastic reduction in real prices that he found was for Sears' cheapest answering machine. It cost 20.43 hours of work in 1975 and 1.1 hours of work in 2006.