Monday, December 31, 2007

How Much Will You Put on the Line for Your New Year’s Resolution?

As anyone who has made New Year’s resolutions knows, making them is easy but sticking to them is difficult. One method to keep resolutions is to offer yourself a reward if you stick to them. However, that does not seem to work either. Dean Karlan an economist at Yale came up with a method that works for him, if he did not meet his goal of losing a pound of weight a week he paid his friend $1,000 (link). He lost the weight and kept the cash. While, Tim Harford the, Undercover Economist, continue his regiment of 200 sit-ups and pushups under threat of the $1,000 loss.

Let me know if you need me to hold any $1,000 checks. Or you could sign up with Karlan’s new company to enforce these types of goals.

hat tip and further discussion on marginalrevolution.

Friday, December 21, 2007

Ending the Year

I'll be taking the next week off from all things Econ to clear my head. I know there is still a lot of room to grow on the blog, but thanks for reading. Check back after New Years.

Some year end awards:

In the category of best upward sloping demand curves: The Washington Post
"The company cited a decline in the paper's circulation and advertising revenue as the reason for the increase."

In the category of most bills it takes to purchase a beer (From Center for Global Development: Zimbabwe

In the category of place to get cheapest meal without nutrition constriants: The Bodega.

Thursday, December 20, 2007

A Game Theorist Take on No Snitches

There is a classic economics example called the prisoner’s dilemma. Picture an episode of Law and Order or the Wire, two criminals in separate interrogation rooms. They are asked to confess to a crime, if they confess they’ll get less jail time, but if somehow they can both manage not to confess both will be better off.

The example is used to show that confessing is better for each individual, but when they both do confess they are worse off. In response to this situation a “stop snitchin’” movement has started up (basically snitchin’ is implementing others in crime). In an economic sense if the “stop snitchin’” movement is powerful enough then confessing may no longer be best for a given individual. The movement includes t-shirts and DVDs. Including the recently released Stop Snitchin’ 2 video, which is being critized by the media and police, here is a link to a youtube preview (the video contains adult language).

Unfortunatly the stop snitchin' movement has a negative effect on members of the community too (article).

Wednesday, December 19, 2007

Blogging for Beer

Other then opportunity cost this blog is free for you. Other then an occasional link or a kind word from a friend I do not receive any payment from the blog. Basically I use it as a tool to work on my thinking as an economist, and next semester I’m going to try to integrate some post with my classes.
I was thinking the other day about money and blogging, as Trent over at Thesimpledollar has decided to remove Google ads from his blog. Thesimpledollar is an excellent basic personal finance and frugal living blog, and I have watched it grow and it now receives something like 16,000 hits a day (a few thousand times more than my blog). Trent’s decision to remove ads was based on their conflict with his advice for example he discusses the problems with payday loans and there are ads for them put up by his advertising service.

Some websites have moved to donation buttons. I’m particularly fond of this one, which asks readers to buy them a beer or coffee with a link to a $3 PayPal donation. Will asking for donations actually provide a decent amount of income? This blog entry says only if you already have a loyal readership and continue to provide an excellent product.

Just like people make money writing for magazine and newspapers, I think there will continue to be opportunities for people to earn a living blogging. However, given how writers are typically paid through subscriptions or ads, donations are likely not a sustainable way. Donations will probably only work for some or those who do not need a full time income.

Tuesday, December 18, 2007

Make Your Own?

Over the weekend I brewed a clone of a 60 minute Dogfishhead beer. I purchased the ingredients and recipe from Xtremebrewing. The brew supply company was started by the brewers of Dogfishhead so that homebrewers like myself could brew their own versions of Dogfishheads own products. Although, I doubt in a blind taste test my brew will taste better than the original, I still brew anyways. It is slightly cheaper so that is one reason, but really the savings is only about $5-10 for fifty beers and about 4 hours of my time.

As the Freakonomics blog pointed out a while back there is a rise in knitting, gardening and other similar hobbies that produce something of use. The rise in part is due to the fact we work fewer hours. Another reason might be an evolution of the hobby industry, making it relatively easy for someone like me with little expertise and $100 worth of equipment to brew tasty beers. As our hobbies become more productive in terms of their output we want to do them more.

Now can I wait 6 weeks until my brew is ready?

Monday, December 17, 2007

How to Interview At a Non-Research 1 School

This is the second installment in my advice to job market candidates. For background information I got my PhD from Wisconsin in the Ag & Applied Economics department. I was on the job market twice. The first year I landed a visiting position at Beloit College and now I have a tenure track job at Towson. I think non-research school interviews are a bit different. Some helpful hints that are not in the Cawley piece or need to be emphasized

1. The interviewers are probably tired of being stuck in a room and traveling. Imagine they are your students who are little tired, because last night was pub night. Be enthusiastic and excited. But not manic or your students or interviewers will not take you seriously. You will also get bored with talking about your dissertation. Pretend you are the guy from the movie Memento, erase your memory each time and think instead “have I told you about my condition” --- “have I told you about my dissertation”
2. Open with some small talk. Do not be afraid to talk about the weather, the conference, your travel. Try to keep it positive so you put people in a good mood.
3. Practice explaining your research to other grad students particularly outside your field. As my father who has been at a small liberal arts school for nearly 30 years, points out smaller departments might not have someone in your area and that is why they are hiring you.
4. Talk about what classes you can teach. Make an argument if you have not TA’d or taught them you could do either intermediate micro/macro or econometrics. Give some thoughts to what might be a good text book or key concepts. This is particularly key in the class you would teach your field.
5. Try to convince them you love to teach, particularly if you are worried they might think you are not interested in a non R1 job.
6. At small liberal art schools creating your own class is encouraged. I thought up a couple of ideas like the Economics of Ebay and the Economics of Immigration. I tried to show how it would be interesting for an interdisciplinary audience.
7. The set up of the room will be weird no matter what. Try to make sure you talk to everyone even if there are 5 people. Make sure to take a quick glance at CVs of the people who are interviewing you, this also helps create better small talk.
8. Small liberal arts and other non-R1 do care about research. They might also worry about you making the transition away from grad school, discuss projects with co-authors other than your advisor or potential collaborators you may know if you are moving across the country.

Good luck in New Orleans job market candidates. If you are interviewing with Towson, I’m sure you’ll have a good time.

Take the Money and Run to Punjab and Back

England is trying something a little outside the box to decrease the number of immigrants in the country, paying them to return to their home country. As described in this article, the British government is providing free plane tickets and cash incentives of £500 ($1000) when the immigrant gets on the plane, and £500 ($1000) when they return to help start a business. The government points out this is cheaper then £11,000 on average it costs to forcibly deport someone.

The problem is that people are gamin the system from the article “… asylum seekers were playing the system. I met several asylum seekers who had applied for the IOM’s financial assistance programme and were already planning their return to Britain once they got their business established in their country of origin.”

This type of program would seem to have little potential in the United States particularly for Mexican migrants, since about ½ of migrants to the US return to Mexico anyways within the year and there is lots of going back and forth between the border.

Friday, December 14, 2007

Exams are Over Except for Professors

I gave an exam yesterday in Principle of Microeconomics. For the first question I asked to students to name an opportunity cost. The most common answer was by taking this exam my opportunity cost is sleeping, watching tv, and playing guitar. I also asked my students for an example of an externality. In class I gave an example of a dog food factory that produces a terrible smell that bothers non-dog owners. This actually happens in real life too, Muslims protest over pet food factory that could 'rain down' pork.

Another problem I gave was on pollution permits at London Heathrow airport. Due to noise and CO2 emissions there is a call to reduce the number of flights (link).
Now unfortunately the opportunity cost of me providing more on the blog today is grading exam

Thursday, December 13, 2007

The Economics of Homebrewing

This weekend I’m extremely excited to brew a 60 minute Dogfishhead IPA clone. The beer is known for its awesome amount of hops. A couple of thoughts on homebrewing and beer economics. My Vanilla Porter also just matured and it is one of the best I have brewed.

1. In DC even with shipping cost homebrewing saves you about 0.20 a beer over similar store brand beer. To brew 50 beers you have to purchase $30 worth of ingredients, plus some bottle caps and sanitizing supplies. There is also an initial fixed cost of about $100 for a fermenter. To recoup the $100 fixed cost for equipment you would have to brew 500 beers. I’m actually getting close to that after 6 years of brewing. We might also think about the opportunity cost of the time spent brewing, but I have too much fun brewing to worry about that.

2. In my intro to economics class, I often give an example that some product is found to prevent cancer, which increases demand for that product. It appears hops help prevent cancer, I just learned that the day I prepare to make the most hop filled beer I have tried.

3. I think I have finally figured out how to allocate my brewing resources so that I never run out of home brew beer. I can drink and give away about a 6 pack a week, so I brew a batch of 50 every two months.

Wednesday, December 12, 2007

Economist Job Market

Yesterday our department met and sent out invitations for interviews for two tenure track positions. For those of you have not had the pleasure of being on the economics job market. Here is how it works.

1. By December 1st applications are received, this year we received about 200 for 2 positions.
2. In early December the department selects its top 25 to interview at the Econ national meetings just after new years.

Now a bit about how this selection goes. Personally to pick my votes, I looked at publications and research potential based on letters of rec. Teaching awards or high evaluations went a long way. I was surprised to see how few people had done anything other than change a name to their cover letter to distinguish there letter to Towson from another letter. This may be because many econ PhD’s apply to 75-100 schools (I applied to about 30 both times I was on the market).

To sort out the noise of 200 applications the American Economics Association also lets candidates send out two signals to jobs they want. These signals are sent to the search chair. Since candidates only have two signals not receiving one does not really provide information. Receiving one tells you they are seriously considering your job, but feel their application might need another look to stand out among 200. For what is worth I and few other people signaled Towson last year. Signals did make me give candidates a second look, but only in one case did I recommend a person to interview who I would not.

After my colleagues interview 25 people, we will select a handful of candidates to fly out sometime in February. All I can say is it is much more fun to be on the other side of the market.

To Those Applying for a Job at Towson

First, let me say I have only been at Towson for 3 months. So far I have found the department to be extremely collegial, there is a good mix of pre-tenure and older faculty. People seem really willing to help me. I also already have begun collaborating on a research project with one other faculty member.

In terms of the college. There is a 3/3 teaching load, but classes are generally 30-35 for intro (you will have two sections) and 25 for upper level classes. Teaching schedule is flexible you can even teaching an evening or two. With the smaller class sizes and one night class I have had reasonable amount of time for research. Also given our proximity to DC, I have also been able to continue some work at the World Bank.

I’m really happy here so far and would highly recommend Towson to any job candidate. As the process goes on if you are a candidate feel free to e-mail me with your questions.

Tuesday, December 11, 2007

IMF layoffs

I have been a bit busy with finals week and the end of the semester. I’m surprised I have not seen much discussion of the proposed layoffs at the International Monetary Fund. In short, the IMF will face yearly deficits of 400 million dollars a year. So the director has proposed cutting around 15% of the Funds work force. Although it is unclear if part of this press release is to allow the IMF to sell off some of its gold reserves.

Why is the fund running deficits? Well as best I can tell it is making fewer loans with many developing countries now having their own sovereign wealth funds they no longer need the help of the IMF.

Monday, December 10, 2007

Tigers made in Venezuela

Over at DailyKos a posts ask today why are Major League Baseball (MLB) jerseys and hats made abroad. The author, Mooncat, points out that although the uniforms worn by the players are made in the USA the same merchandise sold to the public is made in China, Honduras, and Vietnam.

The author then points to several outfits that several similar hats and shirts without baseball logos made in the USA sell for similar amounts and would only raise the price of a hat a few dollars. If the US is capable of making these jersey for only a few dollars more, why wouldn’t MLB have everything made in the US…..simple profits. The author of the post is suggesting that readers make their voice heard that they prefer American made jerseys and hats, which would suggest to MLB that more profits might be possible if they made some or all items in the US. This raises some questions in my mind.

1.Suppose that MLB closed all Chinese apparel factories and opened up new factories in the US. Is it really better to put those Chinese workers out of a job at the expense of giving Americans jobs.

2.How much are the Dailykos readers willing to pay for the privilege of purchasing made in America goods?

3.Could having American made jersey sold as a more expensive product (sold separately), actually make MLB more money?

4.If some of my favorite Detroit Tigers were made in Venezuela (Miguel Cabrera, Magglio Ordonez, and Carlos Guillen) are they taking away American baseball jobs, should MLB move to systems where the number of foreign players are limited as was/is the case in some soccer leagues.

Saturday, December 8, 2007

We want a buyers market

As someone who is currently saving for a down payment for a house. I was pleased to see this article in the Washington Post about how some of those like me who have avoided the risk of the real estate market and are working to save a down payment might be hurt by the recent proposed sub prime bail out.

Actually the housing market won't really determine when I buy, just like I do not try to time the stock market. I have been given the advice that now is a great time to buy since the market is at a low. As an economist I know the future of the market is a known unknown.

Thursday, December 6, 2007

Feeding Your Inner Economist at the Tapas Bar

Yesterday Tyler Cowen over at Marginal Revolution linked to a NY Times article about the death of the entrée. Not only is Prof. Cowen a prolific blogger/economist he is also known locally as the author of a local DC dining ethnic guide. In his recent book, Discovering Your Inner Economist, Prof. Cowen suggests some ways to maximizing your dining experience. Including “appetizers are often better than main courses (145)” and “order more dishes than you plan to eat (146)”

My wife and I have often noted the first, as we often prefer to order 3-4 appetizers instead of an entrée or go to one of Jose Andrés tapas joints such as Oyemel or Jaleo. As the New York Times article point out you can avoid diminishing returns to one entrée and get lots more variety while ordering more types of food.

Suggestion 2 is a risk averse strategy, if you order 3-4 dishes just enough to eat perhaps one will dish will not be good. I’m not big on leftover food from restaurants though so I’m not as sure it is worth the money. Although I have been having success with the strategy at restaurants where I’m not as familiar with their menu.

I support the death of the giant entrée, but unfortunately the article suggests it is at the expense of the massive salad or appetizer. I hope you will join me in going to restaurants with properly sized delicious portions. See you at Oyemel!

Tuesday, December 4, 2007

Economists' Chanuka

I wrote a song for all those Economists Out There Who Celebrate Chanuka
The Econ Chanukah Song: (With Apologies to Adam Sandler)

Put on your yarmulke
Here comes Chanukah
Lots of Economica
Celebrates Chanukah
Chanukah is the festival of lights
Avoid diminishing returns with eight crazy nights

When you feel like the only kid in town without Christmas utility
Here’s a list of economists who are jewish just like you and me
Paul Samuelson lights the menorah in the evenin’
So do Solow, Stiglitz and the late Milton Friedman

Guess who eats together at the Fed reserve deli
Alan Greenspan and Chairman Ben Bernanke
Akerlof’s part jewish, Herb Simon’s part too
Bundle them together, what a fine econ jew

You don’t need jingle bell or a yule log
cause you can spin a dreidel at the Becker/ Posner blog- both jewish

Put on your yarmulke
It's time for Chanukah
the author of Freakonomikah
Celebrates Chanukah

Robert Mugabe, not a jew! Or an economist!
But guess who is? Nobel prize winners Ken Arrow and Simon Kuznets too
We got Herb Stein and his son’s Ben’s money
David Ricardo was born jewish- but went Quaker for his honey

Some people know that Paul Krugman is
He hasn’t won a Nobel prize
but three others did --- This YEAR!
So many jews are econ wiz kids
Greg Mankiw isn’t, but I heard his book agent is

So study your Economica
It's time to celebrate chanukah
I hope I get published in Econometrikah
Oh this lovely, lovely chanukah

So find your equilibriah
And check your heteroskedisticas
If you really, really wannakah
Have a happy, happy, happy, happy chanukah
Happy chanukah!


Monday, December 3, 2007

Fertilizer in Malawi

Developing countries like Malawi are beginning to turn away US aid, (previously discussed here). In part because much of it comes in the form of free food that makes it harder for farmers within the country to make enough to live, since they compete with free food.
To address mass hunger issues Malawi has gone against the advice of the World Bank and other economists and reinstated a fertilizer subsidy program. The program seems to have been a success (according to this NY Times article). The $70 million investment yielded an extra $120 million in corn production, although the returns may have been helped by good weather conditions.

I think the article might be a bit hard on the World Bank here. I tried to find places where the World Bank recommended ending the subsidy program, but all I found is a positive review of the program (here) and a report (here) that suggests some success, but problems with distribution to the poorest farmers.

Are subsidies a long term solution to development? Perhaps not if development require moving away from agriculture. But the described impact against hunger makes it hard to argue with the results.

Friday, November 30, 2007

Why Burger King Should Not Pay More For Tomatoes

Eric Scholosser, the author of Fast Food Nation, penned an OP ED piece in the New York Times yesterday (link) about how Burger King should pay more for its Florida tomatoes. He argues that paying a penny more a pound for tomatoes could be directed right to the migrant workers, making their lives better.

Funny enough as he points out in the column that these farms in Florida are having a hard time keeping wages up as they have to compete with MEXICAN farms. So the impact of the extra penny would make it harder for Mexican farms to compete, thereby encouraging more migration to the United States, where being a day laborer may be more difficult.

Is this the best way to improve the lives of these workers?

Thursday, November 29, 2007

Is that your bag?

The NY Police department is leaving purses around the city with a little bit of cash, a couple of credit cards, and an ID to have it returned (link). Don’t return the bag, and you get arrested. Although laws state people have 10 days to return lost property, it seems the NYPD are being a little bit over zealous in their prosecution of those who pick up the bags.

The idea behind the operation is that criminals are more likely to pick up bags and not return them, so this “sting” helps flush them out of public areas.

As the article discusses though, about ½ of those who pick them up and do not return them had no prior criminal record. More importantly what is the opportunity cost of this sting?

Wednesday, November 28, 2007

Solar Google

Yesterday Google announced it would work on increasing the amount alternative energy it would use (link). The company is investing “hundreds of millions” of dollars in working on technologies, particularly solar, that will be more cost effective than coal. Google will work on the project mainly in California, which is the place for solar technology as it is sunny and offers tax rebates to those who install solar.

This raises some interesting questions, is this something smart for Google, can an internet company branch out into energy technology?

Should the government offer incentives or help for such a bold initiative? If Google can find technologies that work for its business, then those technologies could be implemented throughout the grid.

Tuesday, November 27, 2007

What next for the World Bank?

The news might be a few months old, but today in class I will be discussing the role of the World Bank in the future of economic development. With the transition of leadership this summer how best should the World Bank move forward. Yesterday I was reviewing the opinions of Jeffery Sachs and William Easterly, two well known development economists, on the future of the World Bank. I found it funny while the two men disagree on many points their main recommendation was for more oversight and evaluation of the World Bank.

I’m still not sure exactly how this would function. Could it be done internally or should an external review board be created? Who would chose such a review board?

After a short term consultancy at the World Bank, it seems there is a lot of evaluation being performed on the programs implemented. Due to the nature of development economics it is sometimes difficult to enact change once problem areas are identified.

Monday, November 26, 2007

More on Free Wireless

Hope everyone had a Happy Thanksgiving. To pick through some leftovers of what is in my head a couple of thoughts.

One of my readers asked two questions that might be of interest. First how many oysters did my wife and I eat at the Oyster Riot. My guess is about 50 each, somewhere toward the end of the evening we reached diminishing returns.

The same reader would like to know as another blogger pointed out that some hotels charge $10 or more for wireless, while it is free at others. Steve Landsburg at slate provides a great explanation of the economics behind this pricing. Basically it depends on the makeup of your customers. It is best to charge for wireless if you have some that will pay for wireless and some that won’t (like a fancy hotel with business travelers (will) and leisure travels (won’t)). However, if you are a typical road side motel fewer people will pay for it. So it might not be worth setting up the system to charge customers.

Wednesday, November 21, 2007

Paying for Wireless

Thanks to my buddies at Comcast, I now have the internet in my apartment. Silver Spring does provide free wireless, but it only works if we go outside or rarely inside into our apartment. Sick of sitting in the rain to send an important e-mail or look up directions, we are finally paying for internet.

Another option when you live in a big apartment is to use someone else’s wireless network. A nytimes article from last year suggests that in some cases using others network, will slow down their internet speed. In 2004 an editor of a technological website found that 30% of networks in LA had no security so anyone could go on them. In my building a sample of 10 wireless networks shows all have been password protected, although leaving wireless networks open still seems to be common place (in Tallahasse, New Orleans, Washington DC). I just wonder why those people could not live in my building (not that I would free ride).

Also thanks to Annapolispolitics for answer my questions about bar closing time in the comments.

Tuesday, November 20, 2007

Closing Time in Annapolis

Someone in Annapolis, Maryland reads this blog just about every day. Thanks Annapolis. So in honor of them, I would like to take on an economic issue that concerns Annapolis, bar closing time. According to this article, about ½ of the bars in Annapolis can stay open until 2am, the other ½ need to close at Midnight. A few interesting questions, perhaps my friend in Annapolis can help.

1. Does the midnight rule for some actually, reduce the number of people making a lot of noise leaving bars at 2am, if people can just go to another bar then leave again at 2am. If anything I would thinking herding people into fewer bars would make more problems
2. Economic theory would suggest that if fixed cost can be spread out over more hours, then drinks should be cheaper at 2am bars (adjusting for other factors). This could really hurt the midnight bars.
3. Are there any midnight to 2am drink specials?

To follow a play by play of the exciting city council meeting debating this very issue, from a blog that has previously linked here, check out Annapolis Politics.

I’m likely going to Annapolis this weekend with my in-laws, we will probably be eating crab and not drinking past midnight, but I’m always willing to help research.

Friday, November 16, 2007

Oyster Riot!

So tonight my wife and I will be going to the Oyster Riot at Old Ebbitt Grill. The Riot feature 20 varieties of oyster paired with wines. Being a Riot, it is all the oysters you can eat. A couple of economics lessons along the way.

1. The Oyster riot is a popular event, so popular tickets sold out in about 45 minutes. I purchased tickets on Craigslist for substantially more than the face value. I'm sure my wife values the tickets more than we paid, and since I offered more then other bidders through Craigslist I (we) value it more. I'm therefore still in favor of ticket reselling.

2. When purchasing through Craigslist, it helps to have idea of who you are buying from. The person who sold it to me sent the e-mail from her work e-mail. Checking the website it turned out she was a CEO and had a background with a well known company.

3. At some point eating oysters will reach diminishing returns, I will be curious to see when that happens for my oyster loving wife.


Thursday, November 15, 2007

Monopoly… BOO!

So I’m about ready to give an exam and question #5 deals with monopolies and cable companies. After calling several companies I’m pretty sure Comcast is the only internet service provider for my building. Comcast’s internet service is priced at over $50 a month, which is about twice as much as two other local area companies. However, they start you with a teaser rate of $22 for the first six months. There is no long term contract. I’m not sure I will pay $50 a month for internet, but $25 a month is fine. I’m wondering if in six months I can threaten to cancel my contract and get 6 more months of the teaser rate. For a couple hundred dollars I’m willing to try. It seems others have had luck with the same strategy (link).

I wonder if this is a backward form of price discrimination, where people less willing to bargain for a buck wind up paying more.

Wednesday, November 14, 2007

Hanging with Ben

At the Monetary Policy confrence I attended today, Federal Reserve Chairman Ben Bernanke, announced the Federal Reserve would reveal more about the economic forecasts they make (see NY Times Article). Given that the object of the Fed is to get people to react to their policy, seems like a good move to me (although I know little about monetary policy).

I did like his answer to a question about whether the American public should know more about how the Fed works. He discussed some programs the Fed has such as a model UN type program, where students pretend to be members of the FOMC. However, he said it is more important for Americans to understand their mortgage and how to balance their checkbook.

Tuesday, November 13, 2007

Breakfast with Ben

Tomorrow I will be attending the International Monetary Conference hosted at the Cato Institute. The conference is organized by my colleague Jim Dorn, and features a talk by Ben Bernanke current chairman of the Federal Reserve. With high oil prices, the sub prime market, the low dollar, it appears the task of sailing the economy through will be a difficult one. Is the economy deader than a five month old bed-bug or will this be our winter of discontent. Only time will tell.

If I knew what was going to happen to the economy I would be a lot richer man. Perhaps I can ask Dr. Benanke some advice.

Monday, November 12, 2007

Honoring our Veterans

In honor of Veterans Day, I thought I would post something about the economics of Veterans. The Washington Post had an article on how Veterans are going back to using programs designed to help them purchase houses. During the loose credit days of a few years ago fewer Veterans were taking advantage of loan programs that couldn’t match what was out on the market, but now as credit tightens it is not as easy to gain loans.

If the government wants to maintain military recruitment, perhaps expansion of programs like these and the GI bill, could help maintain the strength of our all volunteer force.

Thursday, November 8, 2007

The Economics of Dating Part V

This summary in slate of some research done on speed dating by economists and psychologists, shows once again some on clichés hold. Men like attractive women, although not mentioned in the article women like men who grew up in affluent neighborhoods. There was surprisingly little racial bias. Women preferred their own race and white men preferred Asian women.

My favorite line from the article: “We also found that women got more dates when they won high marks for looks from research assistants who were hired for the much sought-after position of hanging out in a bar to rate the dater's level of attractiveness on a scale of one to 10.”

Why again did work on dairy farmer surveys again for my RA?

h/t to Greg Mankiw

Why are Mexicans living in Beloit?

Why are there Mexicans in Beloit?

One of the interesting things about running a blog is you can see how people arrived there. A few weeks ago someone from Janesville, Wisconsin googled “Why do Mexicans live in Beloit” and they wound up on my blog. This is likely because I talk about Beloit College in Beloit, Wisconsin, where I taught last year, and Mexico. I have not talked about Mexicans living in Beloit until now.

There are definitely Mexicans living in Beloit, I know since I have sampled some of the great taquerias around the city (ones with Spanish jukeboxes and majority Latino clientele). A look at the 2000 Census data shows that Latinos make up around 10% of the Beloit population (almost as much as African Americans, 12%). Obviously, not all Latinos are Mexican, but in Beloit I’m pretty sure most are. Using Census data we can also examine specific characteristics for Latinos. According to the census about half of the Latinos (1,800 out of the 3,500) were born outside of the United States. Another interesting statistics about 2/3 household speak a language other then English at home.

One reason Latinos might decide to live in Beloit is they seem to be making about the same amount of money as the average non Latino, and much more than they would have in Mexico. For those of you who are not familiar with Janesville and Beloit the two cities are about 20 minutes apart, but Beloit has for a long time had more racial diversity, while Janesville continues to be 95% white. So perhaps there is another reason Latinos live in Beloit.

One final note even in DC I cannot find Mexican food as good as Beloit.

Wednesday, November 7, 2007

Urban Poverty Part II

Yesterday, I discussed how Economists at the World Bank are trying to track poverty numbers in urban areas. Poverty in the developing world is increasing in urban areas, but what can be done about it. This report on urban poverty put together by the UN Economic and Social Commission of Asia and The South Pacific provides an excellent framework for the discussion. As they point out much of the poor in urban areas are involved with informal sector work. In order to move them out of poverty the country must work to provide access to credit so that small informal sector businesses can grow. There needs to be well distributed information on how to do this along with a well functioning system of property rights. All of these changes are not easy (if they were wouldn’t have a problem).

These last two updates were geared toward my Economic Development students to help them write papers on key problems with urbanization in a country of their choice.

Tuesday, November 6, 2007

The Changing Face of the World’s Poor

Back when development economics was in its infancy, the first economists to study development were agricultural economist back in the 1950s. In part because a large portion of the developing world lived in rural areas and participated in agriculture, however development is increasingly including issues that surround urban areas. Over the summer I was lucky enough to attend a seminar on the relationship between urbanization and poverty in the developing world presented by Martin Ravallion who along with (Shaohua Chen and Prem Sangraula). In the accompanying paper (linked here) the authors find a few key results:

1. “Poverty is clearly becoming more urban, although our results suggest that it will be many decades before a majority of the developing world’s poor live in urban areas.

2. “The poor are urbanizing faster than the population as a whole, reflecting a lower-than average pace of urban poverty reduction.”

The second key result suggests that there may be a greater incentive for the poor to migrate to cities, then the non-poor. If result 2 is true then as the authors suggest we might see an increase in the percentage of the population who is poor in urban areas, as the authors show on pg 5. This might not mean that urbanization is causing poverty, but instead the poor are causing urbanization. Although separating cause and effect is difficult.

With the growth in urban population perhaps it is time for urban economists who specialize in public works, public safety, and large education systems to be like the agricultural economist of the 1950s.

Monday, November 5, 2007

Hot Stove League

As I sit in a coffee shop next to a fire place my mind turns to hot stove league baseball. One favorite topic of the hot stove league is how best to insure that teams like Kansas City, Oakland, and Minnesota can compete with New York, Boston, and Chicago. Currently those teams with larger revenues make payments to teams with smaller revenues to insure a more even playing field. However, those teams do not always spend those extra payments on getting more players. A recent NY Times column suggests that those payments should be tied to attendance, specifically the percentage of seats sold by a given club. A few problems arise with this suggestion, not all stadiums are the same size. For example the Pittsburg Pirates’ PNC park sits 38,000 compared to 50,000 at the Colorado Rockies Coors field. In other words the Rockies could be at 80% capacity and sell more tickets than a 100% Pittsburg.
Instead of linking the payments to percent of capacity filled, perhaps linking them to attendance. One way would be to predict what expected attendance should be in a given city compared to similar cities. Although, I’m not sure that is the answer either. Teams might want to give experience to rookies, who in the short term might not play as well as experienced players, but might lead to better outcomes in a few years. Baseball Prospectus has done some great work modeling, when teams might want to make these tradeoffs.

Finally, on the day after two juggernaut NFL teams face each other (the Colts and Patriots being the Yankees and Red Soxs of the NFL even under the salary cap), we might wonder if imbalance is such a bad thing. One recent paper has suggested that lack of balance does not impact attendance.

Although I’m not opposed to anything that hurts the Yankees.

hat tip to Sports Guy Talking Crazy for the Article

Friday, November 2, 2007

Strike One, Strike Two

In DC if you want to take a cab the price is currently determined by zones, which seems to confuse even long time DC residents so it always seem the cab drivers is making the price up on the spot. The DC mayor is trying to implement moving to a meter system, where cab fares will be based on distance. Cab drivers in response went on strike Wednesday (Halloween), it appears the strike had only a small impact (story). Another interesting (although colorful take) comes from a DC cabbie blogger. The blogger claims that unless you are cheating people the meter fairs shouldn’t make a difference. Although, given the payments the cabbie accepts I’m not sure how the switch from zone to meter will impact the cabby’s business.

In strike 2, the Writer Guild of America is about ready to strike (see this NY times article). It is likely this strike has a better chance of working as the writers are probably harder to replace than the cabbies. Also it appears the writers have the support of other unions, while the cabbies were not helped out by limo or bus drivers.

Thursday, November 1, 2007

What to pay the babysitter?

If you are in college or high school, perhaps you should consider babysitting as a lucrative opportunity. As the wages of teenage babysitters has outstripped inflation 3 to 1 over the last 5 years (See Wall Street Article). It also appears there is a growing number of college or post college older babysitters, who are paid much more. Not surprisingly, the wage depends on the babysitter’s age, experience, and the difficulty of the job. Prices also vary a lot by region.

Although, the article does not mention it I wonder if babysitter wages differ by the sitter’s gender. Even though mannies (male nannies) are apparently all the rage, I still think (and I probably most people) think of babysitter as being mostly female, although I had a couple of cool male babysitters growing up. Checking out a few babysitting website I do not see any male babysitters.

Now to answer that final question what to pay, it seems the going rate for a babysitter is now around $7-10 an hour and close to $15 an hour for a college educated babysitter in her mid 20s.

Wednesday, October 31, 2007

A tank of gas costs as much as a Banana?

In Venezuela a gallon of gasoline costs 7 cents a gallon, due to government price controls (see related NY times article here). In Monday's post I discussed how price controls can lead to shortages. One way to get around this is if the government continues to supply the product at a loss. The policy is costing the government 7 Billion dollars a year. Since, many Venezuelans cannot afford cars, the policy also only generally benefits the rich. Although President Chavez has tried to change the policy their appears to be too much support for it to make any changes.

Tuesday, October 30, 2007

Batteries not included?

My father, who is also is an economics prof, pointed out the other day I made an error in describing externalities. In cases like TV commercials or pop-ads, these are bundled goods. Externalities are when someone not involved in the transaction is impacted, but the person watching the ads decided to watch TV or visit the website so they get the ads and the content.

Often bundled goods are obvious (a combo meal, free sugar/cream with coffee, a set of matching gloves and scarf). But, I was wondering the age old question “why are batteries not included?” in something that needs batteries. I was thinking this as I went to purchase a printer cable for my new printer. If I need a cable to use the printer (I think?), why not sell me a cable too. I was surprised Dell, where I bought the printer, did not even offer me one.

I think it is not included, because Dell wants to make the printer seem cheaper than it is (the cable cost about ½ the price of the printer). Dell has been taken to task in the UK, for this false advertising on this issue (link). However, “Dell argued that it does not supply cables as standard with printers on the assumption that many customers would have one already.”

Monday, October 29, 2007

A Banana costs more than my house

One of my colleagues at Towson came by my office last week to show me pictures of his trip to Russia in the mid 1980s. I wish I could post a copy of one of his picture of a butcher shop with no meat. Last week may have signaled a returned to the Soviet style, as the leading supermarkets placed price controls on food staples such as bread, cheese, milk and eggs (see article here).

A similar policy was adopted this year in Zimbabwe (see link here), which has not worked very well. As seen in this article shelves are empty and the government is arresting its citizens for selling goods at a price where they can stay open. These price controls do not appear to have stopped inflation, as one Zimbabwean put it a banana costs more than my house.

Friday, October 26, 2007

Update on Previous Post: Gold Diggin' IV and Beer Economics

If you recall my first column on Gold Digging (link here). It appears the woman who was called a depreciating asset, has responded (link here)

Also not suprisingly Beer is strong currency in Wisconsin (link here).

How Many Miles to Wall Drug?

In my Intro to Economics class last week, I was lecturing on externalises, that is negative or positive consequences of economic transactions not involving the buyer or seller. I have been thinking a lot about externalises and advertising. Whether it is the annoying pop-up ad on the internet or the giant bill board distracting with something you don’t want . In the past the state of Oregon has put a limit on the number of bill boards (Link to Market Place story). It then starting selling a few billboard permits, which could then be traded. Since there was a limited number of permits, the price for a billboard soon went as high as $100,000. Recently Oregonians voted to change a related law that made it so anyone who had owned land before the billboard restrictions (or other land use laws) would be grandfathered in to longer having to follow those laws. This removed the limit on billboards, not surprising new billboards are popping up, the state legislature stepped in and changed the new law. A revote on the measure will be placed on the ballot on Nov. 6th.

This brings me back to my thought, how big are the externalises of advertising in our daily lives?

Thursday, October 25, 2007

How do we help

Today on Marginal Revolution, Tyler Cowen poses a reader's question (link)

“What single intervention would do the most to improve the health of people living on less than $1 a day?”

I was reading the blog while I was preparing for my economic development class this morning. I decided to show a video (which I rarely do) of a 15 minute presentation (linked here) by Bjorn Lomborg lays out the argument that HIV/AIDs then malaria then malnutrition should be the top priorities with Global warming the lowest. As he points out a HIV activist can tell you the best way to combat AIDs in Africa and a global warming scientist the best way to reduce pollution, but it is the job of the economist to determine which project to choose if we can only fund one.

As for Bjorn’s talk, I’m not sure I would put HIV/AIDs so high on the list. It is extremely expensive to treat and the money may have a better pay off in mosquito nets or providing clean water.

Wednesday, October 24, 2007

Kuznets in Action

In my economic development class the other day I was teaching my students about the idea of a Kuznets curve (link to Wikipedia Entry on Kuznets). Kuznets found an inverted U-shaped relationship between economic inequality and GDP per capita. Specifically he found that as countries develop there tends to be an increase in economic inequality, until the country passes a certain level of development and inequality starts to decrease.

The recent IMF World Economic Outlook for 2007 has shown that economic inequality is increasing in the developing world. Nancy Birdsall of the Center for Global Development has an interesting take on the situation. You can read her blog entry linked here, but she makes three main points

1. Inequality can inhibit future growth
2. Education is the main tool used to combat inequality, but education is highly dependent on income/wealth so education inequality is likely impacted by income inequality.
3. Globalization has losers and winners, in some cases the losers may be the already poor.

The policy to address inequality I'm most familiar with the conditional cash transfer, which pays money to families that send their children to school and if the family visits health clinics. In Brazil and Mexico a significant part of population (10-20%) receives funds through these programs. Although my research and that of most economist has focused on the impacts of these program on education it is worth noting that these programs give substainal cash payment to families usually increasing their income 10-20%. I have not seen an analysis of the long term impacts of these programs on income potential of both parents and children, but perhaps given Dr. Birdsall's 2nd point it is worth examining.

Tuesday, October 23, 2007

Agriculture and Development

Although fewer and fewer Americans are working in agriculture (see yesterday), in a lot the developing world agriculture (particularly Africa) employs a large majority of the population. This past Friday the World Bank released its annual World Development Report this one features the role of agriculture in development.
Some highlights from the press release linked here

“Agriculture consumes 85 percent of the world’s utilized water and the sector contributes to deforestation, land degradation, and pollution. The report recommends measures to achieve more sustainable production systems and outlines incentives to protect the environment.”

“…in Sub-Saharan Africa, where the [agricultural] sector employs 65 percent of the labor force and generates 32 percent of GDP growth.”

“The report says rich countries need to reform policies which harm the poor. For example, it is vital that the United States reduces cotton subsidies which depress prices for African smallholders.”

Monday, October 22, 2007

Two Orcs for Every Farmer

There are 4 million World of War Craft players, there are 2 million farmers (link) and 3 million Agricultural Workers in the US. Of those 3 million it is estimated that about ½ a million are immigrants working without proper authorization. On top of that appears that farmers are increasingly having a difficult time bringing in workers is through the H2A guest worker program.

The immigration debate is now coming to places like Zanesville, Ohio and Omaha, Nebraska. However, as the number of farmers shrinks will they have the ability to shape the US's immigration policy.

Friday, October 19, 2007

Green Collar Jobs

Paul Krugman and Thomas Friedman columns are free again (no more Times Select)! In Friedman’s Wednesday column (link) he discusses “Green Collar Jobs”, these are jobs retrofitting houses to increase energy efficiency or installing green technologies like solar and wind. As Friedman points out these jobs might be ideal for former blue collar workers who are losing their jobs through globalization, but in order to install a solar panel or insulation you need to be living in the US, so that job cannot be shipped overseas.

If we are going to retrain workers who lose their jobs due to globalization, getting them into industries where the more trained workers we have in the “green field” the lower the cost of these goods will be meaning more will be sold, which reduces pollution for everyone. A quick google search suggests Hillary Clinton and John Edwards are pushing for such a plan, although nothing is turning up for the Republican Front Runners or Obama.

Also for those of you in DC, today and tomorrow are the last two days of the Solar Decathlon an exciting competition where college students from across the world build houses that run on solar energy. Go down to the Mall and check it out.

Thursday, October 18, 2007

Cell Phone or Crazy Person

My wife and I like to play a game called crazy person or cell phone. In our game we try to tell if someone is talking to themselves (crazy) or talking to themselves with someone on the other end pretending to listen (crazy cell phone person). The problem with these blue tooth devices is that people go around announcing their conversations to the world. This annoys the heck out of me, I do not need to hear about sending the plans to Boston or how your contractor didn’t put the right tiles in the bathroom. In economics we call the impact of someone else using or making something on an innocent bystander an externality. I thought of this yesterday after reading an article in Salon: “Why are Bluetooth headsets so lame? In search of a hands-free phone headset that won't make people hate you.” I hope we continue to shun people who use these things in public, to limit their externalities.

Wednesday, October 17, 2007

More on Gender

I’m taking a break from editing a paper I have been working on. In the paper I was testing the relationship between the relative power of a husband and wife on their children’s school attendance and their spending on food for Nicaraguan households. In this case I measure power as the ratio of the wife’s education to her husbands. Most of the economic literature has suggested that as a wife’s power increases her children go to more school and the family spends more on food, since mothers tend to like to spend on those things. When I submitted the paper a reviewer suggested that perhaps when women are extremely more powerful than their husbands, then perhaps increasing their power further does not still increase schooling or food spending and in fact may actually lower these outcomes. When I reexamined the data looking for this relationship, I did find that once women have 4 times the education of their husbands, additional female education actually decreases schooling. Tomorrow I’ll give some more thought as to why this could be.

My buddy Scott, also raises a question about yesterday’s Gold Digging article. If you thought your income as a man would negatively effect your chance with the ladies then you should not report your income. In that case everyone who did not report their income would have low income so everyone should report their income (unless it is zero). However, perhaps not reporting your income is a signaling device in that by not reporting your income you only attract people who do not care about income. So do not report a high income if you make a lot of money, but do not want a woman looking for a rich guy. In this case only rich men ugly men who want the pretty women who wanted to date richer men, should report their income.

Also thanks to Baysian Heresey for the link.

Tuesday, October 16, 2007

Gold Digging II

My good friend Andy sent me a new article in our continuing series on Gold Diggers and Economics. A recent paper using data from an online data service, using observation from San Diego and Boston suggests that men who make more money get more responses from sexier women as rated by the website. One of the basic conclusions is that an average looking guy would have to make $200,000 a year to date a woman in the top decile of “hotness” (in the parlance of our times a “10” on a 1-10 scale). While a guy who is also a “10” in hotness could make $62,000 a year and be just as likely to marry a hot woman. Also they find that once you hit above $50,000 a year more income yields a more likely response from a “hot” woman (income under 50k) does not matter.

Of course income is self reported, and 1/3 of the people do not report income. Perhaps this does not apply for people who do not use on-line dating. I do know my friend Andy is a Doctor, but unfortunately last I checked he had a girlfriend in a high declie of hotness.

Monday, October 15, 2007

The Economics of Beer

Sorry you missed your regularly scheduled blog update, but this past Friday I was visiting the Great American Beer Festival in Denver. With four good college friends I sampled beers from around the US.

In honor of that trip a couple of Beer and Economic links:

In Macrobeer news it appears that Coors and Miller are merging to create a company that would rival the size of Anheuser-Busch, which now controls half of the US market (link).

As more of a microeconomist and microbrew drinker, I enjoyed this story on Market Place for the use of beer as currency. In economics we teach that anything that is perceived to have value can be traded. Just like the bike repair man in the story, PBR is the equivalent to the Zimbabwe Dollar to me.

Thursday, October 11, 2007

Live Long Eat Less

A recent study shows that Cuba might be surpassing US life expectancy (link), because of poverty during the 1990s that caused a decrease in calorie intake. I wonder where the optimal caloric intake is in terms of life expectancy. If we look at a graph of life expectancy and GDP per capita, I do not think we see a positive relationship between poverty and life expectancy. It looks like life expectancy stops increasing at about 10,000 per capita. The big outlier in this case is South Africa, which can be explained by HIV. For some reason Cuba isn’t listed on the graph (perhaps lack of data?), given Cuba’s per capita income of about $5,000 a person we would expect life expectancy base on the data to be close to similar countries like Guatemala and Morocco, which have life expectancy of around 70 years compared to about 77 in the US.

I'll have what Fidel is having to eat.

Wednesday, October 10, 2007

The Matching Game

Hillary Clinton unveiled her new retirement savings plan yesterday (link). There are some things to like about and other I do not. Starting with the good, the plan would offer up to $1,000 match to anyone making under $60,000 a year for the first $1,000 put away in retirement accounts. My rough calculations suggest that if you can encourage a person to save just $2,000 a year from 22-65, that person could have a steady stream of income of about $15,000 a year for ever. That seems like a good way to make sure people are set up for retirement.

Now here is the catch it is not matching in the typical sense. Normally when your employer matches your contribution they put that contribution into your 401k. The above linked article suggest the match will come as the form of a tax credit. That is someone who invests $1,000 will get $1,000 back after they file their taxes.

The other suggestion I have is if we are serious about getting people to save for retirement, why not do two things. First, anyone who has a job making less than $60,000 a year will be signed up for the program which they put in $1,000 a year (deducted from their paycheck), second the matching will go directly into their retirement savings account. Anyone can opt out of the program, but they start as enrolled once they fill out their W-4. As this report suggests automatically enrolling someone in 401k will increase participation rates to upwards of 90%

Tuesday, October 9, 2007

The Economics of Gold Diggin’

Steven Levitt has a great post today on the economics of gold digging (link). Basically there is a letter that was posted on craig’s list from a woman looking for a man who makes at least $500K a year. In response a high salaried man about the differences in the assets (looks and money_ the two couple bring to the table: “your looks will fade and my money will likely continue into perpetuity.”

I also like Dr. Levitt’s final aside that economists tend to marry well. I agree with this assertion from my sample of 1. A couple reasons economists might marry well is that they are in a male dominated field, in graduate school, but are in a social science so they might interact with other fields that have more women (sociology and anthropology). Perhaps household models and game theory also help in being a good spouse.

Or maybe we are better looking than other fields.

Monday, October 8, 2007

Tico Trade

In a rare popular vote on a free trade agreement Costa Ricans voted to accept CAFTA (Central American Free Trade Agreement), by a narrow margin of a few percentage points on Sunday. Those against the trade agreement rallied for a march of 100,000 citizens (link) in the capital last week. They cited US agricultural subsidies that pay farmers for milk and grain production, making it difficult for Costa Rican farmers to compete. There were concerns over privatizing state run telecommunication and public works monopolies. Finally, there were also worries that the US would include stricter enforcement of intellectual property rights on drug patents.

All of the reasons cited are legitimate concerns, but Costa Ricans passed the bill in part because of the U.S. unwillingness to renegotiate the trade agreement if the referendum on CAFTA was rejected (link). The greater lesson in all this is it is difficult for small countries like Costa Rica to bargain with the United States.

On a related noted, I once asked the then President of Costa Rica in the summer of 2000 who I met at a forum in DC if there were ever any protest against free trade agreement like Seattle in US a few years ago. He said that would never happen in Costa Rica. Things have changed.

Friday, October 5, 2007

Best Graph EVER!

As an economist I love graphs, perhaps too much sometimes. I had my mind blown yesterday! Hans Rosling has created a system to use UN data on basic economic indicators in the most visually stimulating graph I have ever seen. His graphs plot every country over the last 40 years, then the plots move over time to show change, the dots are sized by population and colored by region. Click on this graph to see the relationship between life expectancy and GDP per capita. If you have 20 minutes, I highly recommend his TED talk too.

Thanks to Dani Rodrick for pointing out this work on his blog.

Thursday, October 4, 2007

World Hunger

I came across this quote today from Malvika Subba, the former Miss Nepal and an activist fighting to end global hunger:

"I am not pessimistic because reports of the Food and Agriculture Organization show that there are enough food and mineral resources to feed the whole planet. The obstacles are mostly political."

Her remarks are similar to Amartya Sen (1998 Nobel Prize Winner in Economics ), who believed that famine and hunger are often not caused by a lack of food, but by a lack of ability to distribute that food.

Over the last two years the number of those who lack adequate access to food has grown by about 5%. It is not clear that just giving food to the poor is the best option (see a previous post).

Last week when I posted about homesteading a commenter asked, what could the developing world do with an extra $2 a day to become like the modern homesteader. If the money can be distributed effetely, that amount of money is enough to get children through middle school and provide basic health care as evident by the programs I have studied (Progresa in Mexico and RPS in Nicaragua). The question now is how do we get aid to people?

Wednesday, October 3, 2007

Retirement day 3

See the post starting two days ago if you have not been following along.

I would like to wrap up my thoughts today on the retirement paper. Overall the paper makes some conservative assumptions (returns of only 6%) and some riskier ones (social security will still be around). The paper does show the dramatic difference in the savings levels needed to maintain lower incomes or single families. The paper also shows the importance of a house. For those of you who make $135,000 combined with your spouse. One final calculation, to reach that $167,000 suggested in the paper, you should start putting away a little over $10,000 of your income each year starting at age 25. If you are willing to live on less (say $70,000) then you can put away only about $1,000 a year then increase your contribution to retirement to 8% when you reach 40.

So the overall recommendation to start putting money in a IRA plan as soon as you can when you are young is a good one.

Tuesday, October 2, 2007

Retirement Day 2:

The paper cited yesterday estimates the amount needed in retirement accounts by the time someone reaches 40 years old in order to maintain the person’s current level of consumption assuming that person lives to 95. Additionally the paper has somewhat conservative estimates on returns and savings.

Inflation rate 3 percent
nominal return 6 percent: assets (split evenly between money market and stocks),
Saving rate 7.5% total: 5 percent in a 401(k): 2.5 percent in non-tax-preferred
Includes social security benefits
house value is 2.5 times household income,
mortgage balance is 2.0 times household income

Let’s look at the three people again (the first two are from the paper, the final one is my own calculations)

1 Single, income $68,000, owns house: With these assumptions the single person will only need $14,000 by the time they are 40. With the 5% rate of savings, their assets will reach $272,000 is the next 25 years.
2. Married, income $136,000, owns house, two children: This couple will need 167,000 by the time they are 40. The model also figures in educational costs for children's college ($20,000 a year). By the time the couple reaches 65 they will need $850,000
3. A single person with income making 30,000, owns a house. By my calculations will need about $5,000-$10,00 in their retirement account by age 40 to reach a 50-50 shot of having about $250,000 when they retire including the assets of their house.

To perform the third calculation I used CNN’s financial calculator. A balanced portfolio of 50% stocks and bonds was used for savings. The third person also saved 8% of their income compared to 7.5% in the paper.

Monday, October 1, 2007

Retirement week

An economist at Brown, Jonathan Skinner, has written a recent paper asking if you are saving enough or too much for retirement (link here)? The paper suggests how much you have saved by the time you are 40 years old. The amount depends on your marriage status, kids, and if you own or rent a house. The paper does not offer any advice on how much someone under 40 should save, only saying that you should take advantage of matching funds and IRA accounts. This week I will look at these numbers to see how much one would need to save to reach these targets.

I will examine it for two types of people mentioned in the paper.
1 Single, $68,000, house
2. Married, $136,000,house, two children

Plus a single person making 30,000.

Friday, September 28, 2007

Modern Day Homesteading and Economic Development

I came across a blog about a modern day homesteader, she and her family live off of $6000 a year. This translates to about $5.50 a day per person. In East Asia and the Pacific 50% of people live on less than $2 a day, 85% in Southeast Asia 23% in Northern Africa, 75% in Subsaran Africa, 20% in Latin America (more information). It is worth noting this $2 a day is adjusted for differences in prices in each of these countries.

I’m not criticizing the modern homesteader, it is just worth realizing that a large part of the world lives within these economic means.

Next week I will do an analysis of retirement savings for people in their mid 20s, based of of a recent NBER paper.

Thursday, September 27, 2007

Who’s the boss? Cable TV, Gender in India

Continuing on the theme of economics and gender issues. Emily Oster, an economist at Univ Chicago, has a recent paper showing that when cable TV is introduced in rural India, that women’s lives improve. Particularly they make more decisions in the household, there are less instances of domestic violence, and the households show less gender bias towards their children. The findings suggest that by watching cable TV, these women see the possibility of gender equality. (Link to brief description of her work with links.)

Perhaps a policy solution in the U.S. and India is to show more reruns of the 1980s sitcom Who’s the Boss, where macho Italian Tony Danza does the housework for advertise executive Angela.

Or maybe they are getting the Life Time Original Movies Channel (so hilariously described by my friend Sarah on her blog).

Wednesday, September 26, 2007

Who is Happy?

A few interesting results from a paper by Betsey Stevenson and Justin Wolfers Economists at Univ. of Pennsylvania (quotes taken from this NY Times Article)

“In the early 1970s, women reported being slightly happier than men. Today, the two have switched places.”

“Women are not actually working more than they were 30 or 40 years ago. They are instead doing different kinds of work. They’re spending more time on paid work and less on cleaning and cooking.”

The article goes on to say that basically men are doing less stuff they dislike and replacing it with relaxing.

“Inside of families, men still haven’t figured out how to shoulder their fair share of the household burden. Instead, we’re spending more time on the phone and in front of the television.”

Tuesday, September 25, 2007

Gender Issues

An article the Sunday New York Times describes how women are now more likely to pay for dates, in part because employed women in urban areas are now starting to earn more money than men. Additionally, the percentage of men in the labor force has been steadily declining as the percentage of women increases. This extremely readable report from the Boston Federal Reserve on gender issues in the U.S. labor force. Some trends remain there are still few stay at home dads (less than .5% of married Dads with children under 18) and according to the Fed. Report married working women still do 6 more hours of house work a week than their working husbands.

Perhaps my favorite take on the subject from an economist's point of view are my old undergraduate professors Mark Montgomery and Irene Powell who write about married economist. Here is their conversation about who does the dishes (an excerpt)

You [Spouse 1]: "I've done the dishes every night this week - it's your turn.
Spouse [2]: "What a shame to waste all the human capital you've built up."

Perhaps that is why I do all the cooking in the house as it would be a shame to lose all that human capital, I earned from the cooking lessons I received when I was 12.

Monday, September 24, 2007

$100 laptops

The $100 laptop are ready for sale (bbc link). These laptops were designed especially for children in developing countries. The design includes the low price (although it’s now about $200) , water proof case and the ability to use solar or foot power to charge the battery. While the cheap laptop seems like a marvel of technology, I’m still skeptical that the money is best spent on laptop. As a Tunisian government official said:

"If you live in a mud hut what use is that computer for your children who don't have a doctor within walking distance?" (article)

I'm still looking for good economic evaluations of the impact of giving out these laptops to students in the developing world.

Friday, September 21, 2007

Welcome Towson

Last night at new faculty dinner each department chair introduced their new faculty. During my introduction my chair was kind enough to mention this blog. Perhaps you were at this dinner and this your first visit to the blog. Thank you for coming. Towson already has a couple of well known blogs. First our University President Robert Caret has one (linked here) and a recent Towson graduate turned his blog into a job at the New York Times.

The goal of my blog is to discuss what I find interesting about economics or life and bring those stories to you each weekday. On my drive into Towson today, I started thinking about how the recent history of the school mirrors a trend in education. Around the time I was born Towson had an enrollment of about 10,000 students in the past 25 years or so it has doubled in size and plans to increase to 25,000. Towson has taken on a lot of the growth in the number of students attending college in Maryland, which has experienced a similar increase. Why are those students going to school in larger numbers, one reason is that average income for college graduates is now 85% higher than high school graduates, back in the early 1980s it was around 55%.

Thursday, September 20, 2007

Sirens and Seatbelts

The other day on Marginal Revolution Tyler Cowen asked how many lives should be saved in order for a seat belt law to be enacted. One point of view is if the only person hurt by the lack of seatbelt is the driver without a seatbelt, then we should let them make their own decision. However, not all car decisions only impact the driver. It reminded me of this recent story about Mazadas surrounding a Hummer on a Chinese Highway, imagine what their boxing in could do to the Hummer driver. Even more so I liked this description of the Mazadas

“Many had their Mazda 6s tricked out with souped-up engines, spoilers, and even police sirens. Modifying cars is technically illegal in China, but the laws are not strictly enforced.”

I will come out on record as saying I’m for laws that outlaw people putting police sirens on their car.

Wednesday, September 19, 2007


Ahoy! Today, a Pirate Capt. Black Sideburns, has commandeered this here blog for this Talk Like a Pirate Day. Me thinks that this blog needs more pirate economics. A rouge scurvy ravaged economist has shown that global warming has led to the number of pirates falling like sails in the South China Sea (link). Or you may look to the stern to see an economic take on the pirate code. Although the housing market may yet keelhaul all you land lubbers, me lookout man says invest your booty in pieces of eight.

Capt. Black Sideburns

Tuesday, September 18, 2007

Buy Low Sell High

I really like the website ask a metafilter ( In the website people post random questions and those with knowledge (or perhaps free time) post answers. One question asks, If one can purchase a house with student loan money” With the recent sub-prime crises my guess is it is going to get harder to get someone to guarantee you a loan at a reasonable interest rate without any income. The writer also supposes they can purchase the house when the market “really flops”. It is likely a better strategy to buy at a bargain, than hope that buying during an upswing of the market because trends suggest the prices will continue to rise. But you cannot predict where the market will go (if you could you could make a lot of money though) The question asker would also rent out a room in the house to offset the mortgage costs. As the answers given suggest being a landlord is not exactly a piece of cake. So overall I do no think one should purchase a house where the price needs to rise over a five year period or they could be really stuck (plus think of all of the people who leave school after a year or two). But, maybe I’m just a little more averse to risk.

Monday, September 17, 2007

The Price of Pasta

I really loved this article in the Sunday Washington Post about how rising wheat prices are causing an increase in the price of pasta and cookies, although with my love of starch I do not like the trend. Basically we can see the following happening. Corn prices are higher due to demand for ethanol, which causes some to substitute wheat for corn, causing higher cost of wheat, which in turn raises the cost of inputs to bakers and pasta makers, so now the price of pasta is rising. Hopefully my ECON 201 students will know, which way to shift the curves.

Friday, September 14, 2007

I need a phone call

Today one of my students sent me an article on a development project in Africa to provide cellular phone service to 79 villages in 10 African countries. The article begins by discussing how cell phones will help education and health care. I’m skeptical about the returns for cell phone service in terms of education. Where cell phones seem to be the most important are for local entrepreneurs. The article discusses taxi drivers and laborers using the phone to find jobs. However, I think cell phones are even more important for local farmers who can use them to check sale prices in various markets and so they can call around to find the best price for fertilizer. This is because without a phone in rural Africa it is hard to tell when you are getting a good price. On Tuesday in my Development Economics class we will discuss the big push model. In that model entrepreneurs will not start new businesses until enough other people start them. For example, if there is a taxi driver and there are only poor farmers without enough money to pay for a taxi, the taxi business will not be profitable. The taxi drive needs there to be other business men/women to drive around. As Jeffery Sachs, the lead economist on the project and friend of Bono, suggests you need a holistic approach.

Thanks Evelin for the article.

Thursday, September 13, 2007

Demand Taste

Sometimes in economics we assume all people are alike in terms of their tastes and preferences. This is helpful when doing theoretical work or showing basic theorems. I often wonder what the world would be like if everyone had my same preferences. My guess is each downtown would have the following businesses: a micro-brewery, a coffee shop, a deli, another coffee shop, an Indian restaurant, a Thai restaurant, another micro-brewery, yet another coffee shop, a brew supply store, and some big box store with everything else. Unfortunately (perhaps fortunately) tastes are different from person to person so there are hair salons, art supply stores, and antique stores. I thought about all of this when I read a recent blog post on Man Bites Blog, which I found through Marginal Revolution’s comments section. He asks pop economist bloggers: What motivates someone to answer a restaurant survey where there is a possibility to win a cash prize if you participate? The post lays out several factors. I think one more to think about is I might fill out a survey if I thought I could influence a business to cater to my taste. I actually did fill out a radio listening survey to hopefully influence radio stations to play better music. Perhaps if I fill out enough surveys my dream downtown can become a reality.

Wednesday, September 12, 2007

The Big Push to Clean Our Dirty Undies

Marginal Revolution airs the dirty laundry of the Department of Energy. New washing machines are not cleaning our clothes properly due to modification made to meet new federal standards that require a 21% energy reduction (according to Consumer Reports). At first I thought perhaps this is the government screwing up a market and it may actually increase energy use (if we have to rewash our clothes). I may not be so sure now, after reading this I began preparing a lecture on the Big Push model. In that model there are high costs to innovation to create new products. By requiring this new standard there is a larger payoff to inventing a cheap and energy efficient washer. So this policy might create a new and better washer where the old one would not. Honestly I’m not sure if this is good government or bad government policy, but it is important to acknowledge both possibilities. We may see similar issues arise if miles per gallons standards are implemented for cars.

Of course if you really strong believe it is not good policy you could always send the Under(wear) Secretary of Energy your undies.

Tuesday, September 11, 2007

Sometimes the market works, sometimes it does not

In Greg Mankiw’s intro text books he provides seven principles of economics, one is that sometimes governments can improve markets. Sometimes government can screw up markets too. This recent New York times piece discusses how cheap basic pain medication (morphine) can not be purchased in developing countries due to international laws aimed to prevent the spread of heroin. Sometimes markets fail, a recent Atlantic monthly article discusses Bill Clinton’s new foundation that tries to create markets for AIDS drugs and bio-friendly products by agreeing to purchase large quantities. Often Clinton works with developing countries to purchase medicine to distribute it to the poor. In which case I think governments are improving on markets.

The Atlantic article is subscription based, but a link to help you find it is here.

Monday, September 10, 2007

Importing Poverty

As some of my friends have pointed out offline part of payday loan profits come from check cashing particularly for illegal immigrants who cannot open a bank account. In related news, recent figures suggest that most of the growth in the poverty rate in U.S. has been among Hispanics. As Robert Samuelson in an Op-ed in the Washington Post (linked here) stated the below figures:

“From 1990 to 2006, the number of poor Hispanics increased 3.2 million, from 6 million to 9.2 million. Meanwhile, the number of non-Hispanic whites in poverty fell from 16.6 million (poverty rate: 8.8 percent) in 1990 to 16 million (8.2 percent) in 2006. Among blacks, there was a decline from 9.8 million in 1990 (poverty rate: 31.9 percent) to 9 million (24.3 percent) in 2006. “

We can debate our immigration policy, but the figures shown by Samuelson suggest that the recent trend in poverty are in part caused by immigration.

Friday, September 7, 2007

Another payday loan post.

Non-profits have entered into the payday loan business. Two weeks ago the New York Times profiled one such business, unfortunately the Times is a non-non-profits, so the article is no longer free. Based on the article description and some other blogs it looks like a non-profit called Goodmoney charges a mere $10 per $100 borrowed per two weeks. Only a 252% interest rate!

As this article from last year in USA Today points out about $5 of the $10 charged goes to defaults. Perhaps the answer can be found in the beginning of the article where credit unions work with customers to give loans at reasonable interest rates 12% per year, but make sure that customers learn to better manage money.

Two finals thoughts. First, I would like to point to bloggingawaydebt. It is one of many personal finance blogs I have been reading over the summer. They do a great job. Second, in the last post my wife commented about how can we trust the data provided by the report I linked in the last post. There are a lot of bogus statistics out there, but their data seems to be provided by the State of Ohio and other reputable sources. So I feel reasonably confident there data is correct (and my wife is reassured also). Interestingly the USA Today article shows last year there were as many pay day loan places as Starbucks and McDonalds.

Thursday, September 6, 2007

Pay Day

Surprising statistic of the day. There are more payday loan franchises in Ohio, my home state, than McDonalds, Wendy’s, Burger King combined. According to this report on pay day loans in Ohio these places charge on average $15 per $100 loan for a two week period. For those of you without a calculator that is an average interest rate of around 400% a year! I’m not an expert on payday loan places, but like the fast food industry it seems that there are several different companies. I assume if one wanted to start their own payday loan place they could if they had enough money, or could borrow enough. In this type of situation economists would predict that if profits could be made at a lower interest rate someone would come in and charge $10 per $100 per two-week period. So I think what this interest rate suggests is there is an extremely high level of default for payday loans.

Clearly the tougher question is how would/could regulation improve the payday loan industry and consumers.

In other news I got my first pay check from Towson today. Thank you Towson!

Wednesday, September 5, 2007

Lets all go to the movies

My wife and I like to have dinner at home, we also like to go to the movies, we also like to go to bed before midnight. So the ideal movie time for us is between 8 and 9 pm. So we walked over to the local multi-screen theater and not a single movie begins between those hours. In fact, I do not think a movie began after 7:30 and before 9. Movies typically last about 1.5 hours add in previews and clean up time each showing needs about 2 hours. Probably the most likely reason movies start around 7 and a bit after 9, is that more people want to go movies at those times total. The other option for the movie theater is to show two shows one at 8 and one at 10 pm. I guess not enough people want to go at 10 pm. Another possibility is that by having movies around 7, perhaps they can convince people to buy more snacks. Now why is movie popcorn so expensive?

I suggest you see this classic slate article, about why wireless internet is free some places, which also discusses the price of movie popcorn.

Tuesday, September 4, 2007

More Disaster Relief

Here is the link to the final article in the three part series by my buddy Dan Rothschild on Katrina recovery.

As I said it is even harder in the developing world. Rebuilding after the Peruvian earthquake that struck a few weeks ago is still going slow. I thought this article really demonstrated the difficulties in distributing aid. I also liked this quote from the article from the President of Peru:

"An earthquake is like a war situation arising from a foreign invasion," García said. "In situations like this we need a single chain of command, with less democracy and a more vertical command structure."

This suggestion reminds me of a recent book (that I'm meaning to read) Paul Collier's the Bottom Billion. Collier suggests military action as a way to make sure that funds get properly distributed and economies function properly in the most war torn states.

Although the results in a sample of one in Iraq are not great so far.

Friday, August 31, 2007

What kind of instrument do you play?

My father and I along with his grad school buddy, Doug Southgate, have been working on a paper on return migrants in Mexico. That is Mexicans who come to the US than return home. Using a survey of Mexican households we found those who had returned from the US, in some regions, were less likely to be employed than those who never left. When we submitted it for publication the reviewers suggested that something other than the migration itself may be the cause of the employment differences. For example perhaps economic conditions are poor currently in some regions causing lower employment and higher migration (leading to more return migrants). To control for this we needed an instrument, that is something related to migration but not likely to be related to current employment. We found a paper , by Gordon Hanson and Christopher Woodruff where for a different study the authors had used 1950s State level migration to control for the possible bias. We utilize their data to help control for this fact and once we put it in our model the negative effect of being a return migrant was no longer there. Instruments can get even more extreme. The freakonomics blog, points to a new paper that utilizes 19th century rail road patterns to instrument for where people chose to live to explain segregation. In fact I later found out the authors who used the 1950s state level migration data later found data on late 19th century railroad access. They used it as an instrument which was linked to past migration and past migration helps future migration.

Instruments can get even crazier, but those are the kind of instruments economists play. Perhaps if we find more Mexican instrument we can start a marriachi band?

Thursday, August 30, 2007

Reflecting on Katrina

About two years ago many of us spent the Labor Day weekend, wondering what is happening in New Orleans post Katrina. As the national media reflects on the rebuilding process I thought I would turn to a person I trust, a college buddy Dan Rothschild has been working closely studying the rebuilding process. This link goes to his first article in a set of three on post Katrina myths. The first myth is that more money is needed. Dan argues that it is the lack or coordination and government that does not properly distribute funds. This argument mirrors one of Bill Easterly in the developing world that suggests US aid to these countries is not working. If we cannot get it together in New Orleans it is hard to imagine how development will work in a developing country post hurricane.