Reading to Your Kids is Important

I was listening to This American Life’s podcast (episode 364 Going Big) over the weekend. The first story follows a project called the Harlem Children’s Zone. The basic point of the story is that to make a real change in Children’s lives you had to start at an early age. Geoffrey Canada who runs the program philosophy is that poorer families need to do the same things middle class and rich families think is obvious: read to your young children, encourage them a lot, and use time outs and reasoning instead of corporal punishment.

As part of the episode the reporter interviewed James Heckman, Nobel Prize winner and U Chicago Economist. I wrote about Heckman’s work on these types of programs about a year ago (see this post). Heckman findings can be summed up with to make a difference you need to intervene before a child gets to 3 years old to make a difference.

A close look at the Harlem Children’s Zone data by Dobbie and Fryer in a recent paper shows “….Harlem Children’s Zone is enormously effective at increasing the achievement of the poorest minority children. Taken at face value, the effects in middle school are enough to reverse the black-white achievement gap in mathematics and reduce it in English Language Arts.”

You Don’t Have to Take My Word for It: Reading Rainbow Teaches Economics

I heard on NPR this morning that after 26 years Reading Rainbow is ending its television run. It made me a little sad as it was one of my favorite program growing up.

So I got to looking at YouTube videos of old Reading Rainbow episode to find one that teaches economics. This awesome Flash Dance style video praises the benefits of teamwork. Teamwork is the foundation of Adam Smith’s economic thought. The famous example from his book Wealth of Nations talks about a pin factory, where each worker does a different task. When each worker specializes and works together more gets done.

It doesn’t matter if you are making pins, running a restaurant, fighting fires, or dancing, specialization is a fancy word for teamwork.

But you don’t have to take my word for it: Watch the Video or check out Adam Smith’s Wealth of Nations.

Bud, Coors, and Miller are Inferior Goods

"Heineken and Corona are struggling more than Anheuser-Busch and MillerCoors -- which have 80% of the U.S. market by volume -- because beer drinkers are picking out the cheapest drink from the cooler."

From a recent CNN article on beer prices. Economist call any good where demand increases when income goes down an inferior good, famous examples include hot dogs, ramen, and low quality toilet paper. Incomes are going down now and people are reaching for the cheap beer (at least according to CNN).

My Dad forwarded me this article and said it was bad news. I'm not so sure if it so bad for people like me and my dad. If non-bud beers are normal goods, as income goes down people buy less. Then beer prices for good beers should actually fall during an economic downturn. Since we don't drink bud type beers we should be good.

But I don't worry about this too much, I just relax and have a homebrew.

Ben Bernanke and Joe Torre

Obama tapped Ben Bernanke to serve as Federal Reserve chairman for another 4 years, but has Bernanke been good at his job? Most economists seem happy with the reappointment , I haven’t seen anyone really against.

It got me thinking though judging the quality of a Fed chair is like judging the quality of a baseball manager. Was Allan Greenspan a good Fed chair or was the economic situation such that it made him look good. One could ask something similar about Joe Torre did he manage the Yankees to several World Series titles because he was a good manager or was it mostly his players. When they didn’t win the World Series how much was his fault.

I think it is hard to separate the factors outside of the control of the Fed chairman and a baseball manager and what is in their control? I think we tend to over estimate the ability of Fed chairman and managers.

So perhaps the baseball analogy is that Bernanke has been rocked early in his start in part due to some bad defense, but managed to escape a bases loaded jam and manager Obama is going to keep him in the game.

The Women's Crusade and Duflo

Esther Duflo of M.I.T. found that when the men’s crops flourish, the household spends more money on alcohol and tobacco. When the women have a good crop, the households spend more money on food. “When women command greater power, child health and nutrition improves,” Duflo says

.

From the NY Times on the role of women in economic development.

Duflo’s findings aren’t new that women are more likely to funnel extra money to their children. But this idea has been part of the two biggest successes in my view for household based economic development. Conditional Cash Transfers that pay women if their children attend school and microcredit that gives small loans that are typically targeted towards women.

Although maybe microcredit isn’t as great as some people think. Duflo is also behind recent research showing microcredit doesn't increase household consumption. See this link for a good summary of her recent work with her co-authors.



Thanks to my former student Kelly for forwarding the NY Times article to me.

Who Turned Off the AC?

Pepco our local utility sent us an offer in the mail to participate in their energy wise program. I decided to consult my in home energy expert, my wife, to figure out what this is all about. So here’s my interpretation (i.e. the views and opinions below are mine).

The Problem: On really hot days the power grid is taxed with all the ac units running. To keep up with demand the power company (PEPCO) has to keep excess capacity. This excess capacity is expensive and not used a lot of the time, so the power company would like to find a way to have fewer power plants.

Possible Solution 1: Turn off power to some people when PEPCO hits excess capacity sometimes called a rolling blackout. This type of measure is used in developing countries, but it hurts business. Imagine trying to buy something at just about any store in the US without power, in 95% plus my guess is it is not possible. Plus not having electricity is a pain for our modern lives, so it will anger consumers.

Possible Solution 2: Charge people more for power during peak times. This probably won’t work too well since people are generally price inelastic to energy cost (that is an increase in the cost of electricity does not change my electricity use too much).

Possible Solution 3 (Energy Wise): Now back to energy wise the program that started the post. The program will pay my wife and me a monthly credit ($16)* to turn off our air conditioner on days when the company really needs it. PEPCO will be able to
turn off our AC through remote control when they need the power.

This is really a case where behavioral economics will come into play. If solution 2 does not work and 3 solution 3 does I think this shows that people will respond differently to a $16 increase in their bill (probably not at all) and a $16 decrease (join the program thereby cutting their electricity use), even though economic theory would suggest there should not be a difference.

Of course there are also questions about losing control of your AC. Will allowing people to override the system and turn their AC back on twice during the year be enough? I’ll be curious to see how successful the program is at cutting energy use and saving on PowerPlant construction.

We have to check with our landlord, but we’re strongly thinking of participating.


*correction it was $16 a month not $10 a month as I had in an early draft.

The Economics of Toilet Scrubbing

About a month ago Marketplace did a story on recent college grads who had hired someone to come in to clean their apartment. Their roommate the reporter seemed a bit stunned that her roommates weren’t cleaning the house themselves.

I was thinking about this from an econ 101 standpoint. Which would generally tells us that if someone could clean your house for cheaper per hour than your hourly wage, then you should hire a house keeper and work an extra hour. You might also take into account how much you like working and how much you like cleaning.

But then again most people can’t just work another hour. So what else is in the calculation? It’s a set of 3 roommates. Sure they could divide the chores. But monitoring who does what is a pain, so is enforcing that your roommates actually clean or their effort. Splitting a house keeper is a lot easier.

Final thought, I’m really not impressed with the Psychologist interviewed as part of the story. Why is hiring a housecleaner such a big deal and indicative of a spoiled generation? In short my guess is that generation Y was more likely to grow up with a house cleaner, since their mom was more likely to work .

For what it is worth growing up we had our house cleaned about once a week by someone my parents hired. I don’t hire someone to do it now, but probably will at some point….

Anyone interested in cleaning my house in exchange for economics lectures?