tag:blogger.com,1999:blog-175014402024-03-07T16:08:01.920-05:00Walker Economics BlogA blog for my AP Economics class to discuss economics-related current issues and news.Michael Arjonahttp://www.blogger.com/profile/06189327401592258439noreply@blogger.comBlogger197125tag:blogger.com,1999:blog-17501440.post-16050993885611880802007-05-08T09:33:00.000-04:002007-05-08T09:37:57.764-04:00HiatusWith the AP Exam and Graduation approaching, I will not be posting on the blog for awhile (maybe until August).<br /><br />Here are links to a few very good economics blogs to read in the meantime:<br /><br /><a href="http://www.marginalrevolution.com/">Marginal Revolution</a><br /><br /><a href="http://gregmankiw.blogspot.com/">Greg Mankiw's Blog</a><br /><br /><a href="http://www.economist.com/debate/freeexchange/">Free Exchange</a><br /><br /><a href="http://www.freakonomics.com/blog/">Freakonomics Blog</a>Michael Arjonahttp://www.blogger.com/profile/06189327401592258439noreply@blogger.com2tag:blogger.com,1999:blog-17501440.post-72851857217559806532007-04-27T15:30:00.000-04:002007-04-27T15:36:50.610-04:00Why Are There So Many Reality Shows?<a href="http://www.nytimes.com/2007/04/26/business/26scene.html?ex=1335240000&en=93ec2a0f5c622931&ei=5090&partner=rssuserland&emc=rss">Economist Austan Goolsbee has an article in the NY Times that looks at the economics of reality shows.</a> He starts with a question of why there are so many reality shows (in particular, shows like American Idol), and comes up with the following initial answer:<br /><blockquote><p>Some say it’s just that people now lack the attention span for old-style television or that our tastes have changed.</p><p>Most insiders point out that reality shows cost much less to make than scripted shows, and, they argue, this is just a profit play by the broadcast networks. </p></blockquote><br />However, he astutely points out that if reality shows are popular because they are cheap to make, why weren't they popular 20 years ago. As Goolsbee says, "Surely the broadcast networks wanted to save money back then, too."<br /><br />Goolsbee then cites Harvard economist Richard Caves, who comes up with the explanation that reality shows are popular because there are so many TV choices with the proliferation of cable and satellite:<br /><blockquote><p>He points out that such incentives depend on the size of the potential market. The programming is a fixed cost — networks pay for the programs even if nobody watches. If paying an extra $1 million to get a star onto a show, for example, raises every customer’s love of the show by the equivalent of $1, the investment more than pays off if there are 10 million potential viewers. But the $1 million investment would be a terrible flop if there were 10,000 potential viewers.</p><p>So the increase in reality programming is not just a matter of broadcasters wanting to save money. It’s that a shrinking potential market gives the networks less incentive to spend money. They can’t recoup it with enough viewers.</p></blockquote>Any opinions on this question of reality show popularity?<br /><br /><em><span style="font-size:85%;">(Source: Marginal Revolution)</span></em>Michael Arjonahttp://www.blogger.com/profile/06189327401592258439noreply@blogger.com5tag:blogger.com,1999:blog-17501440.post-66219199395943175032007-04-26T09:35:00.000-04:002007-04-26T09:43:32.969-04:00Fascinating Predictions<a href="http://www.yorktownhistory.org/homepages/1900_predictions.htm">Here is a list of predictions of what the world will be like in the year 2000, made for a magazine in the year 1900.</a> It is a really interesting list. Here are a few of the most interesting to me:<br /><blockquote><p>Mosquitoes, house-flies and roaches will have been practically exterminated.</p><p>Strawberries as Large as Apples will be eaten by our great-great-grandchildren for their Christmas dinners a hundred years hence.</p><p>There will be No C, X or Q in our every-day alphabet. They will be abandoned because unnecessary.</p><p>There will be no wild animals except in menageries.</p></blockquote>Those are some of the ones that sound ridiculous, but there are actually plenty of others that sound familiar. For instance:<br /><blockquote>Ready-cooked meals will be bought from establishments similar to our bakeries of today.</blockquote>Any that you find particularly interesting? Be sure to explain why.<br /><br /><em><span style="font-size:85%;">(Source: Marginal Revolution)</span></em>Michael Arjonahttp://www.blogger.com/profile/06189327401592258439noreply@blogger.com7tag:blogger.com,1999:blog-17501440.post-58140711304724686372007-04-26T09:27:00.000-04:002007-04-26T09:32:01.153-04:00Which Countries Supply the Most to Wal-Mart?<a href="http://www.benjaminedwards.net/Writings/walmart.htm">Benjamin Edwards spent a day driving to as many Wal-Marts as he could</a> (he went to 8) and writing down where each product he picked up came from (he picked up 727 items).<br /><br /><a href="http://www.benjaminedwards.net/Writings/walmart%20map.htm">Here is a map showing where the most goods came from </a>(the relative size of the country on the map indicates how many goods came from that country).<br /><br /><em><span style="font-size:85%;">(Source: Marginal Revolution)</span></em>Michael Arjonahttp://www.blogger.com/profile/06189327401592258439noreply@blogger.com5tag:blogger.com,1999:blog-17501440.post-64293255367692910442007-04-26T09:18:00.000-04:002007-04-26T09:23:46.819-04:00Explaining Income Inequality Through Harry Potter<a href="http://www.marginalrevolution.com/marginalrevolution/2007/04/harry_potter_an.html">Economist Alex Tabarrok argues that the way to explain why incomes are becoming less equal</a> in the world and in the United States is to look at why some writers, like JK Rowling are making tons of money. Basically, it comes down to the fact that everyone is staying about the same, while a few top-earners are making a lot more than they used to because they have larger global markets than they used to. So Tabarrok's explanation is not that the poor are getting poorer, but rather, the richest few are pulling away from the pack.<br /><blockquote>I do not disparage Rowling when I say talent is not the explanation for her monetary success. Homer, Shakespeare and Tolkien all earned much less. Why? Consider Homer, he told great stories but could earn no more in a night than say 50 people might pay for an evening's entertainment. Shakespeare did a little better. The <a href="http://en.wikipedia.org/wiki/Globe_theatre">Globe theater</a> could hold 3000 and unlike Homer, Shakespeare didn't have to be at the theater to earn. Shakespeare's words were leveraged.</blockquote><em><span style="font-size:85%;">(Source: Marginal Revolution)</span></em>Michael Arjonahttp://www.blogger.com/profile/06189327401592258439noreply@blogger.com4tag:blogger.com,1999:blog-17501440.post-26481533963699856342007-04-18T16:25:00.000-04:002007-04-18T16:31:36.853-04:00The Height TaxHere is the abstract of a new paper by Greg Mankiw:<br /><blockquote>Should the income tax system include a tax credit for short taxpayers and a tax surcharge for tall ones? This paper shows that the standard utilitarian framework for tax policy analysis answers this question in the affirmative. This result has two possible interpretations. One interpretation is that individual attributes correlated with wages, such as height, should be considered more widely for determining tax liabilities. Alternatively, if policies such as a tax on height are rejected, then the standard utilitarian framework must in some way fail to capture our intuitive notions of distributive justice.</blockquote>The paper's interesting tax suggestion is due to the well-documented finding that tall people tend to have higher wages. Any ideas on why that correlation may exist? Here is a <a href="http://www.economics.harvard.edu/faculty/mankiw/papers/Optimal_Taxation.pdf">link to the full paper</a>.<br /><br />What do you think? Should tall people be taxed more to even out the playing field? I may be biased, but I would be a strong supporter of tax credits for the short...Michael Arjonahttp://www.blogger.com/profile/06189327401592258439noreply@blogger.com4tag:blogger.com,1999:blog-17501440.post-45684804795542844222007-04-17T09:38:00.000-04:002007-04-17T10:02:43.004-04:00Irrational Taxi Drivers?There is high demand for taxi cabs in NYC when it is raining, of obvious reasons. However, taxi drivers tend to work fewer hours on rainy days.<br /><br />The first perspective on this phenomenon is that the taxi drivers are behaving irratioanlly. According to a paper by behavioral economists:<br /><blockquote>They speculated that cab drivers have a particular income level they target each day. When they hit that target, the cabbies go off duty. The increased cab demand in bad weather increases the number of fares per hour, so cab drivers reach their target sooner, and go off duty. Economists consider such a strategy irrational. After all, if each hour of work is more lucrative, shouldn't cabbies work more hours?</blockquote>However, on the Free Exchange blog, <a href="http://www.economist.com/blogs/freeexchange/2007/04/the_supply_of_cabs.cfm">the author proposes another idea that brings the taxi drivers behavior back into the realm of the rational</a>:<br /><blockquote>They claimed the reason they stop work early on rainy days is the dangers associated with driving in such conditions. Rain makes the roads slick and encourages irrational behaviour from pedestrians. As one cab driver put it, “The people become crazy; they walk right in front of oncoming traffic to get out of the rain.” Assuming high costs associated with getting into an accident or hitting a pedestrian, it may be very rational to work fewer hours at the higher wage. When you subtract the cost of getting into extra accidents, the wage may not be as high as it seems.</blockquote>Any thoughts on which side is more likely?<br /><br /><em><span style="font-size:85%;">(Source: Free Exchange)</span></em>Michael Arjonahttp://www.blogger.com/profile/06189327401592258439noreply@blogger.com10tag:blogger.com,1999:blog-17501440.post-49827423921865616012007-04-13T14:27:00.000-04:002007-04-13T14:34:13.269-04:00Out-of-Town SpeedersAt the beginning of the year, there was a test question that asked you to discuss the economics behind the decision to speed on the highway. Well, <a href="http://www.theatlantic.com/doc/200705/primarysources/2">a study cited in The Atlantic Monthly reveals another aspect that should be added to the marginal analysis</a>. They confirm what many suspect, which is that people from out-of-town get speeding tickets more often than locals.<br /><blockquote>An out-of-town driver stopped by a police officer in any given area has a 51 percent chance of getting slapped with a fine, versus 30 percent for a local, and the average fine for an out-of-towner is $5 higher.</blockquote>In fact,<br /><blockquote>The poorer the town (in terms of property-tax receipts), the more likely its cops are to target drivers passing through; fines also increase the farther away drivers live, since distance makes them less likely to contest the ticket.</blockquote>Any guesses at the reasons for this?<br /><em><span style="font-size:85%;">(Source: Cafe Hayek)</span></em>Michael Arjonahttp://www.blogger.com/profile/06189327401592258439noreply@blogger.com3tag:blogger.com,1999:blog-17501440.post-68505479165472413932007-04-12T12:43:00.000-04:002007-04-17T10:03:15.162-04:00Timbaland can teach you EconomicsThere is a new blog that discusses <a href="http://www.divisionoflabour.com/music/">teaching economics through music</a>. They take music from popular song lyrics and then ask questions on the economics behind the song lyrics.<br /><br />Here are links to a few interesting ones:<br /><a href="http://divisionoflabour.com/music/2007/03/luxurious_gwen_stefani.php">Luxurious by Gwen <span class="blsp-spelling-error" id="SPELLING_ERROR_0">Stefani</span></a><br /><a href="http://divisionoflabour.com/music/2006/06/the_way_it_is_changes.php">The Way It Is / Changes by <span class="blsp-spelling-error" id="SPELLING_ERROR_1">Tupac</span> <span class="blsp-spelling-error" id="SPELLING_ERROR_2">Shakur</span> (sampling Bruce <span class="blsp-spelling-error" id="SPELLING_ERROR_3">Hornsby</span>)</a><br /><a href="http://divisionoflabour.com/music/2007/03/the_taxman.php">Taxman by The Beatles</a> (<span class="blsp-spelling-corrected" id="SPELLING_ERROR_4">relevant</span> to the <span class="blsp-spelling-error" id="SPELLING_ERROR_5">Laffer</span> curve discussion to continue with our theme in the last few posts)<br />And because it's <span class="blsp-spelling-error" id="SPELLING_ERROR_6">Weezer</span> -- <a href="http://divisionoflabour.com/music/2006/07/beverly_hills_weezer.php">Beverly Hills by <span class="blsp-spelling-error" id="SPELLING_ERROR_7">Weezer</span></a><br /><br />Are there any songs you're currently listening to on your <span class="blsp-spelling-error" id="SPELLING_ERROR_8">iPod</span> that include some economics in the lyrics? Bonus points for good song suggestions with the <span class="blsp-spelling-error" id="SPELLING_ERROR_9">relevant lyrics listed</span>.<br /><br /><em><span style="font-size:85%;">(Source: Tim Schilling)</span></em>Michael Arjonahttp://www.blogger.com/profile/06189327401592258439noreply@blogger.com7tag:blogger.com,1999:blog-17501440.post-86502792491616851952007-04-12T11:15:00.000-04:002007-04-17T10:07:52.891-04:00The Current State of Supple-Side EconomicsIn a recent NY Times article, <a href="http://www.nytimes.com/2007/04/06/opinion/06bartlett.html?ex=1333512000&en=e1edba097b4845f7&ei=5090&partner=rssuserland&emc=rss">Bruce Bartlett discusses how the ideas of supply-side economics have become more and more popular</a>. However, he also argues that the ideas are being taken too far:<br /><blockquote>Today, supply-side economics has become associated with an obsession for cutting taxes under any and all circumstances. No longer do its advocates in Congress and elsewhere confine themselves to cutting marginal tax rates — the tax on each additional dollar earned — as the original supply-siders did. Rather, they support even the most gimmicky, economically dubious tax cuts with the same intensity.</blockquote>A particularly interesting part of the article shows how high the marginal rates were in the 1950s - 1970s:<br /><blockquote>Kemp-Roth was intended to bring down the top statutory federal income tax rate to 50 percent from 70 percent and the bottom rate to 10 percent from 14 percent. We modeled this proposal on the Kennedy-Johnson tax cut of 1964, which lowered the top rate to 70 percent from 91 percent and the bottom rate to 14 percent from 20 percent. </blockquote>Another interesting note is that supply-side economists of the 1970s and 1980s did <em>not</em> believe that tax revenue would actually increase when taxes were cut, they just believed that the loss of tax revenue would be smaller because of the greater incentive to work:<br /><blockquote><p>Thus, contrary to common belief, neither Jack Kemp nor William Roth nor Ronald Reagan ever said that there would be no revenue loss associated with an across-the-board cut in tax rates. We just thought it wouldn’t lose as much revenue as predicted by the standard revenue forecasting models, which were based on Keynesian principles.</p><p>Furthermore, our belief that we might get back a third of the revenue loss was always a long-run proposition. Even the most rabid supply-sider knew we would lose $1 of revenue for $1 of tax cut in the short term, because it took time for incentives to work and for people to change their behavior.</p></blockquote><em><span style="font-size:85%;">(Source: Greg Mankiw's Blog)</span> </em>Michael Arjonahttp://www.blogger.com/profile/06189327401592258439noreply@blogger.com1tag:blogger.com,1999:blog-17501440.post-28779960796400191452007-04-12T09:22:00.000-04:002007-04-12T09:28:06.061-04:00Another perspective on CEO payThere are two posts on Free Exchange that give another perspective on why CEOs are paid so much.<br /><br />The first discusses how CEOs may not have been paid as much in the 1960s and 1970s, but that was because <a href="http://www.economist.com/blogs/freeexchange/2007/04/are_the_rich_really_different.cfm">they gained the benefit of huge expense accounts</a>. So when you account for the lack of the extravagant expense accounts now, the compensation has not gone up, it has just changed forms. As a bonus, the post includes discussion of the Laffer curve, which we just finished talking about.<br /><br />The second <a href="http://www.economist.com/blogs/freeexchange/2007/04/why_so_high.cfm">discusses some reasons for the increased CEO pay</a>:<br /><blockquote>Better explanations have to do with changes in the tax code, the rise of stock-based compensation, foreign competition (which makes the choice of CEO seem much more important), and the massive increase in the market capitalisation of the biggest firms, which roughly tracks the increase in CEO pay.</blockquote><br />Make sure you include these considerations in your answer to the previous post.<br /><em><span style="font-size:85%;">(Source: Free Exchange)</span></em>Michael Arjonahttp://www.blogger.com/profile/06189327401592258439noreply@blogger.com1tag:blogger.com,1999:blog-17501440.post-77066549035052448152007-04-12T08:25:00.000-04:002007-04-12T09:22:42.613-04:00High CEO PayIn recent years, there has been a lot of criticism concerning the salaries of Fortune 500 CEOs. The graph below from <em>The Economist</em> shows how much CEO compensation how grown relative to the average wage in the United States:<br /><img id="BLOGGER_PHOTO_ID_5052521844883128226" style="DISPLAY: block; MARGIN: 0px auto 10px; CURSOR: hand; TEXT-ALIGN: center" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjlcyL7TbqcfVbwZCGPHAXARZyx4z48o0P-dWFxUBSsQRWQEOmtgoAVEUZKhSY3cROQHSDERhSGIhaNdnQNcV1OZqiy-Qce4Fgm7qNE20M0NokYDC3O_G2D97wFvzIufdRl8BobtQ/s320/ceo+pay.gif" border="0" /><br />As you can see, the compensation for executives in major US corporations was around 30-40 times the wages of the average worker up until the late 1980s. Now, executives make over 100 times the average wage. You could also look at the largest compensation packages for US CEOs on <a href="http://www.forbes.com/2006/04/17/06ceo_ceo-compensation_land.html">this Forbes site</a>, noting that the highest paid CEOs make a couple hundred million dollars for the year (this of course includes bonuses and stock compensation).<br /><br />Some are particularly aghast at what CEOs make when their performance is poor. <a href="http://www.economist.com/surveys/displaystory.cfm?story_id=E1_RVTPJQJ">For example</a>,<br /><blockquote>The Corporate Library, an American corporate-governance consultancy, last year identified 11 large and well known but poorly governed companies, including AT&T, Merck and Time Warner, where the chief executive had been paid at least $15m a year for two successive years even as the company's shares had underperformed. Robert Nardelli received a $210m pay-off when he lost his job earlier this month even though the shares of his company, Home Depot, fell slightly during his six years in charge. Carly Fiorina, ejected from Hewlett-Packard almost $180m better off—including a severance payment of $21.6m—after a lacklustre tenure as chief executive</blockquote>What do you think about the increase in executive pay? Is it an outrage or is it fair? Should there be restrictions on how much a CEO can be paid? You may want to remember our discussion of labor markets and how marginal revenue product was the basis for how much someone should be paid.Michael Arjonahttp://www.blogger.com/profile/06189327401592258439noreply@blogger.com5tag:blogger.com,1999:blog-17501440.post-82121668075255552252007-03-28T11:59:00.000-04:002007-03-28T12:21:31.775-04:00How Much Would You Pay to Drive in the HOV Lane?<a href="http://www.usatoday.com/money/autos/2007-03-25-hybrid-carpool-stickers_N.htm">Here</a> is an example of the unintended consequences that arise when the government imposes quotas and price controls.<br /><blockquote><p>Californians appear willing to pay $4,000 more for used gasoline-electric hybrid vehicles that have state-issued carpool stickers than for hybrids that don't, according to a sampling of prices by Kelley Blue Book for USA TODAY.</p><p>The stickers allow low-polluting hybrids to use less-crowded, faster-moving carpool lanes, even if the driver is alone in the car. The state quit issuing stickers to hybrids last month after hitting a self-imposed cap of 85,000. Those already issued are valid through 2011 and stay with the car when it's sold, benefiting subsequent owners.</p></blockquote><em><span style="font-size:85%;">(Source: Marginal Revolution)</span></em>Michael Arjonahttp://www.blogger.com/profile/06189327401592258439noreply@blogger.com10tag:blogger.com,1999:blog-17501440.post-88579226056689769332007-03-27T15:15:00.000-04:002007-03-28T11:40:47.509-04:00Resale Price MaintenanceThe Supreme Court is examining a longstanding law in the United States banning resale price maintenance. Resale price maintenance is when a manufacturer requires a retailer to sell their products above a minimum price. An example would be if Apple required stores to sell iPods for at least $400. The practice was banned to increase competition, but there are doubts as to whether it serves its purpose.<br /><br /><a href="http://gregmankiw.blogspot.com/2007/03/resale-price-maintenance.html">Greg Mankiw discusses the court case and his take on the practice on his blog</a>. Here is a <a href="http://www.nytimes.com/2007/03/27/business/27bizcourt.html?ex=1332648000&en=81cfddb05d845f7b&ei=5090&partner=rssuserland&emc=rss">NY Times article on the concept</a>.<br /><br />Do you think resale price maintenance should be allowed? Make sure you read the articles before responding to keep the discussion informed.<br /><br /><em><span style="font-size:85%;">(Source: Greg Mankiw's Blog)</span></em>Michael Arjonahttp://www.blogger.com/profile/06189327401592258439noreply@blogger.com4tag:blogger.com,1999:blog-17501440.post-19291929329628345612007-03-26T14:45:00.000-04:002007-03-28T11:42:17.966-04:00Why Recording Artists Don't Make All The MoneyStories about musicians always seem to end with them being broke at some point. Then there are also statistics about how little money the artist makes from each $15 CD. Many people point to the recording industry as the reason why recording artists don't makemuch money: that musicians are being taken advantage of. There is a post on Free Exchange that discusses <a href="http://www.economist.com/blogs/freeexchange/2007/03/cui_bono_1.cfm">the reasons that this is probably not true</a>:<br /><blockquote><p>But more generally, the problem that artists have is not the recording industry. The main problem musicians face is other musicians. There are too many of them.</p><p>Pardon me while I make a simplistic, Economics 101 argument here, but it seems to me that the reason almost no musician ever makes much money is that there is a huge excess supply of people who want other people to listen to them sing or play an instrument. When all the primates are vying to get up on stage to impress the other primates, there's little reason to pay the primates much. Get rid of the recording industry and there will still be a huge oversupply of people trying to occupy a limited space on stage, the radio, or your iPod. The market power currently enjoyed by the recording industry will instead pass to the owners of those scarce resources.</p></blockquote>This is also why I don't tend to feel bad for the winners of American Idol that sign their career away to Simon Cowell. There are 100,000 people lined up to take their place, but there are only a few people who have the influence/experience/skill to successfully market a recording artist; therefore, why shouldn't the person marketing them get more of the profit.<br /><br />As we learned from David Ricardo: bargaining strength comes from scarcity.<br /><br /><em><span style="font-size:85%;">(Source: Free Exchange)</span></em>Michael Arjonahttp://www.blogger.com/profile/06189327401592258439noreply@blogger.com3tag:blogger.com,1999:blog-17501440.post-12257224344557517892007-03-26T14:28:00.000-04:002007-03-26T14:32:54.489-04:00Economic Effect of the Final Four in AtlantaHere is a question from Carrie:<br /><blockquote>Normally, hosting a national event benefits a city's economy: out-of-towners patronize local hotels, restaurants, and stores. But when Atlanta hosted the NBA All-Star game four years ago, the overcrowding was terrible and traffic was awful for days; Las Vegas had some similar problems with the game this year. How will Atlanta's hosting of the Final Four next week be different? Should the city take any precautions to prepare for such a big crowd?</blockquote>There is a lot of debate on how much hosting big sporting events benefits cities. These supposed benefits are used to justify public funding of stadiums and arenas. What do you think about the effect of having the Final Four in Atlanta this weekend? Give specific ideas on the economic effects.<br /><br /><em><span style="font-size:85%;">(Source: Carrie S.)</span></em>Michael Arjonahttp://www.blogger.com/profile/06189327401592258439noreply@blogger.com2tag:blogger.com,1999:blog-17501440.post-62098269118381716262007-03-22T08:35:00.000-04:002007-03-22T08:51:34.551-04:002 Stories on InflationFirst, <a href="http://www.nytimes.com/2007/03/18/world/americas/18venezuela.html?_r=3&hp&oref=slogin&oref=slogin&oref=slogin">Venezuela is trying to combat inflation by revaluing the bolivar</a> (the Venezuelan currency). The new currency, the boliver fuerte, will be worth 1,000 of the old bolivars. The inflation rate in Venezuela recently reached 20%. The problem with this policy is that it will not have much effect unless the underlying causes of the inflation (like increases in public spending) are taken care of. In fact,<br /><blockquote>Gastón Parra, the president of the central bank, went on television this week to emphasize that the effect of these measures on the value of Venezuela’s currency would be neutral, neither increasing or decreasing salaries, debts nor the price of consumer goods. Private economists, however, say the changes, combined with inflation, could heighten confusion over prices.</blockquote><a href="http://www.theage.com.au/news/world/zimbabwes-inflation-may-hit-4000-by-year-end/2007/03/18/1174152881641.html?page=2">An extreme case of inflation problems is Zimbabwe</a>. The World Bank estimates that inflation in that country will reach 4,000% by the end of the year. That means that a t-shirt that cost $10 in January will cost $410 by December. It has reached the point where "Business deals can only be negotiated a few hours ahead because prices are rising so rapidly." The article also mentions that the printing of money by the Zimbabwean government was temporarily stopped because the government "ran out of foreign currency to pay for the paper and ink it needed for the bank notes."<br /><br /><span style="font-size:85%;"><em>(Source: Free Exchange)</em></span>Michael Arjonahttp://www.blogger.com/profile/06189327401592258439noreply@blogger.com6tag:blogger.com,1999:blog-17501440.post-60574817933075720722007-03-22T00:22:00.000-04:002007-03-22T00:36:18.561-04:00Get Rich or Die Tryin' as an EconomistIf you are wondering whether economics majors can make a lot of money without working on Wall Street, <a href="http://online.wsj.com/public/article/SB117426729190341036-uV848VEWNL_0FjfAvuWltVqY5K8_20070327.html?mod=blogs">here is the example of David Teece</a>, who runs an economic consulting firm called LECG.<br /><br />Economic consulting firms provide economic expert witnesses for court cases and are becoming increasingly valuable. Teece earns just under $3 million a year as head of LECG and as an expert witness, and he has this to say about the prospects of working in an economics consulting firm:<br /><blockquote>"I won't get many thank-you notes for this, but we've given economists the chance to earn investment bankers' incomes," Prof. Teece says. "If you're successful with us, it isn't hard to make half a million dollars a year." He estimates that 60 LECG experts topped the $500,000 mark last year. </blockquote>So if I don't show up on Monday, you'll know why...<br /><br /><em><span style="font-size:85%;">(Source: Freakonomics Blog)</span></em>Michael Arjonahttp://www.blogger.com/profile/06189327401592258439noreply@blogger.com5tag:blogger.com,1999:blog-17501440.post-84004446776317575452007-02-28T10:50:00.000-05:002007-03-01T09:14:13.419-05:00What Makes a Good Company Name?Companies, of course, put a lot of thought into what to name their company. It may seem like a simple task, but it can be harder than you think to come up with an original, concise name that people will remember.<br /><br /><a href="http://www.thenameinspector.com/10-name-types/">This post discusses the 10 types of company names and the pros and cons of each.</a> It gives some insight into what you need to think of when naming a company.<br /><br />When I was a senior in college, I started an educational technology company with a couple of friends of mine from Walker. Our product was a website that would help all parts of a school community to communicate with each other efficiently (students, parents, teachers, etc.). The name we chose for the company was "learnection." It fits under the "Blends" category from the blog post I link to above -- like Microsoft and Netscape, it is a blend of two words: "learning" and "connection."<br /><br />At the time, it seemed like a good, simple name that was halfway creative. However, there were several problems with the name after we looked back on it. First, it does not really roll off your tongue, and people were not always sure how to pronounce it when they read it the first time. When you think of the successful internet companies, it is abundantly clear how to pronounce Microsoft, eBay, Google, Apple and Amazon. Also, when writing "learnection" in certain fonts, the lower-case "L" at the beginning of the name would look like an upper-case "I" and that would <em>really</em> confuse people. Now, those considerations are not why the business did not last more than a couple of years, but it probably would have helped our marketing to have a simpler, catchier name.<br /><br />What do you guys think makes a good company name? Can you think of any companies that succeed <em>despite</em> having an awkward or confusing name?<br /><br /><em><span style="font-size:85%;">(Source: Guy Kawasaki's Blog)</span></em>Michael Arjonahttp://www.blogger.com/profile/06189327401592258439noreply@blogger.com9tag:blogger.com,1999:blog-17501440.post-43233420502183385732007-02-27T14:44:00.000-05:002007-02-27T14:48:58.153-05:00Efficiency Wages at CostcoIn AP Micro, we discussed efficiency wages, where a company pays wages that are above the market wage as a way of reducing turnover and because happy, appreciated workers are more productive. <a href="http://abcnews.go.com/2020/Business/story?id=1362779">Here is an article that suggests that Costco pays efficiency wages</a> relative to other warehouse stores:<br /><blockquote><p>And Sinegal says he's also built a loyal work force. In fact, Costco has the lowest employee turnover rate in retailing. Its turnover is five times lower than its chief rival, Wal-Mart. And Costco pays higher than average wages — $17 an hour — 40 percent more than Sam's Club, the warehouse chain owned by Wal-Mart. And it offers better-than-average benefits, including health care coverage to more than 90 percent of its work force. </p><p>Costco doesn't have a P.R. department and it doesn't spend a dime on advertising. There's a real business advantage to treating employees well, Sinegal said. "Imagine that you have 120,000 loyal ambassadors out there who are constantly saying good things about Costco. It has to be a significant advantage for you," he explained.</p></blockquote><em><span style="font-size:85%;">(Source: Greg Mankiw's Blog)</span></em>Michael Arjonahttp://www.blogger.com/profile/06189327401592258439noreply@blogger.com4tag:blogger.com,1999:blog-17501440.post-73053192486556494972007-02-27T14:29:00.000-05:002007-02-27T14:34:07.465-05:00Beauty in the Eye of the ComputerBeauty is thought to be subjective and ideas of beauty can change over time, but there is some general consensus on what makes someone beautiful. <a href="http://www.israel21c.org/bin/en.jsp?enDispWho=Articles%5El1543&enPage=BlankPage&enDisplay=view&enDispWhat=object">Researchers in Tel Aviv have written a computer program</a> (called the Beauty Function) that scans an image of your face and makes small adjustments to the picture to make you look more beautiful.<br /><blockquote>Some 250 measurement points were taken into account and once formulated, researchers developed an algorithm that could let them apply some of the desired elements of attractiveness - as mathematical equations - to a fresh image.</blockquote>The article mentions that one practical application of the software could be for plastic surgeons. Any other commercial applications you can think of?<br /><br /><em><span style="font-size:85%;">(Source: Marginal Revolution)</span></em>Michael Arjonahttp://www.blogger.com/profile/06189327401592258439noreply@blogger.com4tag:blogger.com,1999:blog-17501440.post-30729556257359306482007-02-27T14:11:00.000-05:002007-02-27T14:24:39.639-05:00Confirmatory BiasLast semester, we discussed biases and irrationalities that violate the rationality assumption in economics. Another common bias is <a href="http://en.wikipedia.org/wiki/Confirmation_bias">confirmatory bias</a>. This describes the tendency of people to look for information that confirms their preconceived notions or a decision they made.<br /><br />An example used by Tyler Cowen on his blog is how people eagerly read advertisements for a car after they have already bought the car: they do it as a way of confirming that they made the right decision. Another example that is a little different is when people notice or comment on a piece of jewelry or an expensive piece of clothing on a Walker student because they believe that all students from private schools are all rich. In that case, they are looking for information to confirm their preconceived notion.<br /><br />Any other examples you can think of?<br /><br /><em><span style="font-size:85%;">(Source: Marginal Revolution)</span></em>Michael Arjonahttp://www.blogger.com/profile/06189327401592258439noreply@blogger.com5tag:blogger.com,1999:blog-17501440.post-65247512629229243072007-02-20T09:52:00.000-05:002007-02-20T09:59:50.989-05:00Shortcomings of GDPWe recently talked about the shortcomings of GDP as a measure of economic well-being. One of our points was how GDP does not account for environmental effects. Chip suggested <a href="http://articles.moneycentral.msn.com/Investing/JubaksJournal/HowLongCanChinaPolluteForFree.aspx?GT1=9114">this article that discusses that very issue with China</a>. The overall point is that China is growing very fast, but you should decrease that growth rate to account for the effects of its high levels of pollution.<br /><br />The article discusses the example of the Shanxi province:<br /><blockquote><p>These are boom times for Shanxi province in northern China. The province produced 25% of the country's coal in 2005 at a time when coal prices were soaring. Shanxi's economy grew by 12.5% in 2005, well ahead of even the astonishing 10% growth for China's economy as a whole. Or maybe not.</p><p>The province is home to Linfen, Yangquan and Datong, the three most polluted cities in China. Life expectancy in Linfen is 10 years below the Chinese national average. Unchecked coal mining -- the province closed 4,800 illegal mines in 2005 -- and the drilling of illegal wells for water have created a chronic water shortage and a steady loss of farmland as it subsides into underground mine shafts and drained aquifers.</p><p>If you subtract the costs of air and water pollution from Shanxi's growth rate, local officials have told Deutsche Bank, the province's real economic growth rate is close to zero.</p></blockquote>The article also references research that applies that method to the country as a whole and argues that Chinese economic growth should be revised to be closer to 7% or maybe even as low as 0%, as opposed to the current figure of 10%. The author is a little too Malthusian in some of his predictions for my taste, but he still discusses the point that just looking at GDP figures does not give you the whole picture of how well a country is doing.<br /><br /><em><span style="font-size:85%;">(Source: Chip B.)</span></em>Michael Arjonahttp://www.blogger.com/profile/06189327401592258439noreply@blogger.com4tag:blogger.com,1999:blog-17501440.post-27534098661605971282007-02-19T10:29:00.000-05:002007-02-19T10:57:23.794-05:00Live Classes & Guest SpeakersTwo related questions from <a href="http://www.marginalrevolution.com/marginalrevolution/2007/02/speaker_fees.html">Marginal Revolution</a> and <a href="http://gregmankiw.blogspot.com/2007/02/cheaper-than-ec-10.html">Greg Mankiw</a>:<br /><br /><p><strong><em>1.</em></strong> Why do people pay exorbitant amounts of money to see a guest speaker at a conference when they could see them on TV or read their book for significantly less?</p><p>Similarly, people are willing to pay a lot more to see someone speak live than a videotape of a speech. Tyler Cowen suggests that it is a signalling problem: "The quality of the speaker signals the quality of the event, and most of all the quality of the other attendees. Wealthy people and successful people don't want to go to an event full of losers, why should they? So the organizers seek quality speakers, so as to attract quality participants."</p><p><strong><em>2.</em></strong> You can buy mp3's or CDs of economics lectures by talented economics professors <a href="http://www.teach12.com/ttcx/coursedesclong2.aspx?cid=550&id=550&d=Economics%2C+3rd+Edition&pc=Business%20and%20Economics">here</a> for a few dollars per lecture. On the other hand, tuition at highly-ranked private universities is about $30,000 a year, which works out to a lot more than a few dollars per lecture. Why is there such a discrepancy? Why not just pay for the lectures and save thousands? <em>(Note: this is not a suggestion, just a question for thought)</em></p><p>What are your thoughts on either of these questions? Why are live performances worth so much more?</p>Michael Arjonahttp://www.blogger.com/profile/06189327401592258439noreply@blogger.com8tag:blogger.com,1999:blog-17501440.post-34552183160907444222007-02-15T08:36:00.000-05:002007-02-15T08:40:46.303-05:00Super Bowl Losers' GearHave you ever wondered what happens to all of the t-shirts and hats that say "Chicago Bears: 2007 Super Bowl Champs" after they lose the game? They have the hats and t-shirts available right after the game so they have to produce them for both teams without knowing who the eventual winner will be. <a href="http://thesportseconomist.com/2007/02/losers-caps.htm">Here is the answer</a>:<br /><blockquote><p>By order of the National Football League, those items are never to appear on television or on eBay. They are never even to be seen on American soil.They will be shipped Monday morning to a warehouse in Sewickley, Pa., near Pittsburgh, where they will become property of World Vision, a relief organization that will package the clothing in wooden boxes and send it to a developing nation, usually in Africa.</p><p>This way, the N.F.L. can help one of its charities and avoid traumatizing one of its teams."Where these items go, the people don’t have electricity or running water," said Jeff Fields, a corporate relations officer for World Vision. "They wouldn’t know who won the Super Bowl. They wouldn’t even know about football."</p></blockquote><em><span style="font-size:85%;">(Source: The Sports Economist)</span></em>Michael Arjonahttp://www.blogger.com/profile/06189327401592258439noreply@blogger.com10