Wednesday , October 28 2020
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Articles by [email protected] (Cyril Morong)

How Odysseus Started The Industrial Revolution

4 days ago

Factory work may have been a commitment device to get everyone to work
hard. Odysseus tying himself to the mast was also a commitment device.
Dean Karlan, Yale economics professor explains how commitment devices
work:
"This idea of forcing one’s own future behavior dates back in our culture at least to Odysseus, who had his crew tie him to the ship’s mast so he wouldn’t be tempted by the sirens; and Cortes, who burned his ships to show his army that there would be no going back.Economists call this method of pushing your future self into some
behavior a “commitment device.” [Related: a Freakonomics podcast on the
topic is called "Save Me From Myself."] From my WSJ op-ed:
Most of us don’t have crews and soldiers at our disposal,
but many people still find ways to influence their

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Studying Economics Increases Wages a Lot

11 days ago

By Alex Tabarrok. He is an economics professor at George Mason university.He discusses the key issue, causality. Does majoring in economics cause the higher salary? Or did smart people major in economics who would have made high salaries anyway?The study looked at students who just barely had a high enough GPA to qualify to major in econ and compared them to students who were just below the cutoff. So the two groups are very similar (meaning we have ceteris paribus conditions or holding all other factors constant).Here is the post from Dr. Tabarrok. The link he has at the end is also very interesting."Students who majored in economics earned median wages at the age of
forty of $90,000 in 2018. Students who majored in other social sciences
earned only $65,000. Why the big difference?

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When workers were paid twice a day and given half-hour shopping breaks (Germany, 1923)

18 days ago

Here is Michael K. Salemi on hyper inflation. He is an economics professor at the University of North Carolina in Chapel Hill.
"Inflation is a sustained increase
in the aggregate price level. Hyperinflation is very high inflation.
Although the threshold is arbitrary, economists generally reserve the
term “hyperinflation” to describe episodes when the monthly inflation
rate is greater than 50 percent. At a monthly rate of 50 percent, an
item that cost $1 on January 1 would cost $130 on January 1 of the
following year.

Hyperinflation is largely a twentieth-century phenomenon. The most
widely studied hyperinflation occurred in Germany after World War I. The
ratio of the German price index in November 1923 to the price index in
August 1922—just fifteen months earlier—was 1.02 ×

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Is Covid causing some structural unemployment?

25 days ago

See Companies Step Up Distribution Automation Under Pandemic Strains: Robots are helping speed the flow of goods while workers maintain social distance in warehousing and fulfillment operations by Jennifer Smith of The WSJ. In my macroeconomics class, we talk about the types of unemployment. Here is one of them:Structural-unemployment
caused by a mismatch between the skills of job seekers and the requirements of
available jobs. One example of this is when you are replaced by a machine. Excerpts from the article:"A handful of warehouse robots helped

American Eagle Outfitters Inc.

cope with a flood of online orders during coronavirus lockdowns as
consumers loaded digital shopping carts with hoodies, leggings and
loungewear.

Now the company is stepping

Read More »

Ventilators and the law of increasing opportunity cost

September 11, 2020

See As Coronavirus Hospitalizations Surge, Ventilator Manufacturing Ramps Up—but Not Quickly Enough:
Hospitals need the breathing machines for critically ill virus patients
but can’t get their hands on the numbers they require by Peter Loftus and Melanie Evans of The WSJ.It reminds me of  The Law of Increasing Opportunity Cost.
That is the idea that as you try to produce more of one good (A), you
have to keep giving up more and more of another good (B), to get 1 more
unit of A. This is because different resources are better suited to
different productive activities.One example I give in class is a of a college needing to teach more math
classes. They might first have a physics professor teach a math class.
He might need to take just one refresher course. Then you might have an

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Why Being Kind Helps You, Too—Especially Now

September 4, 2020

Research links kindness to a wealth of physical and emotional benefits. And it’s an excellent coping skill for the Covid-19 era By Elizabeth Bernstein of The WSJ.Adam
Smith said when people act selfishly they are led, as if by an
invisible hand, to make society better off. So what if you try to help
others because you know it will make you better off? Are being kind
(altruistic) or selfish?One researcher says "Our attention isn’t
something that
is infinitely expansive." It like saying you only have a certain amount
of money to spend so spend it wisely, where it will help you the most.Excerpts from the article:"Research links kindness to a wealth of physical and emotional benefits.
Studies show that when people are kind, they have lower levels of stress
hormones and their

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Another Semester Has Started

August 29, 2020

Welcome to any new students. The entries usually have something to do
with a basic economic principle that is related to a recent news story.Here is something I wrote for The Ranger (the school paper of San Antonio College where I used to teach) back in 2011 titled "Why is college so hard?"Students might wonder why college, and SAC in particular, is hard. This
might sound trite, but I think the faculty at SAC want students to
achieve success in life and that means that classes have to be hard if
you are going to learn and understand the concepts which provide a
foundation for that success.I think my own experience as a
community college student over 30 years ago helps me understand this. My
teachers took their subjects seriously and maintained high academic
standards. They got me

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Is Covid causing some structural unemployment? (Part 2)

August 16, 2020

See Hotel Robots Get Second Life as Industry Adapts to Covid-19: Bots like Relay, produced by a Google Ventures-backed company, cut down on unsafe interactions by Will Parker of The WSJ. Excerpts:"Hoteliers and robotics companies say delivery bots like Relay,
produced by the Google Ventures-backed Savioke Inc., are cutting down
on potentially unsafe interactions between hotel staff and room guests,
by offering contactless room service. And cleaning robots, like
Maidbot’s Rosie, are vacuuming hallway floors while cleaning crews spend
more time than ever sanitizing rooms.""Requests for delivery robots from the hospitality sector have doubled since the pandemic began""Savioke is now finishing work on a new robot that is two times as large
as the pint-size Relay, to accommodate the

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Is Covid causing some structural unemployment?

August 15, 2020

See Companies Step Up Distribution Automation Under Pandemic Strains: Robots are helping speed the flow of goods while workers maintain social distance in warehousing and fulfillment operations by Jennifer Smith of The WSJ. In my macroeconomics class, we talk about the types of unemployment. Here is one of them:Structural-unemployment
caused by a mismatch between the skills of job seekers and the requirements of
available jobs. One example of this is when you are replaced by a machine. Excerpts from the article:"A handful of warehouse robots helped

American Eagle Outfitters Inc.

cope with a flood of online orders during coronavirus lockdowns as
consumers loaded digital shopping carts with hoodies, leggings and
loungewear.

Now the company is stepping

Read More »

Judge says sharp elbows don’t violate anti-trust laws

August 14, 2020

See U.S. Appeals Court Throws Out Antitrust Ruling Against Qualcomm: Court rules federal government hadn’t shown chip maker engaged in illegal monopolization by Brent Kendall and Asa Fitch of The WSJ. Excerpts:"A federal appeals court on Tuesday threw out a sweeping antitrust judgment against

Qualcomm Inc.,

QCOM 0.29%

ruling the federal government didn’t prove the dominant cellphone chip maker engaged in illegal monopolization.

The San Francisco-based Ninth U.S. Circuit Court of Appeals
ruled unanimously that the Federal Trade Commission hadn’t shown that
Qualcomm’s core business practices related to its cellphone chips and
patents were anything more than lawful attempts at profit maximization.

San Diego-based

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Why Being Kind Helps You, Too—Especially Now

August 13, 2020

Research links kindness to a wealth of physical and emotional benefits. And it’s an excellent coping skill for the Covid-19 era By Elizabeth Bernstein of The WSJ.Adam Smith said when people act selfishly they are led, as if by an invisible hand, to make society better off. So what if you try to help others because you know it will make you better off? Are being kind (altruistic) or selfish?One researcher says "Our attention isn’t something that
is infinitely expansive." It like saying you only have a certain amount of money to spend so spend it wisely, where it will help you the most.Excerpts from the article:"Research links kindness to a wealth of physical and emotional benefits.
Studies show that when people are kind, they have lower levels of stress
hormones and their

Read More »

Can computers write poetry? Could they replace poets?

August 12, 2020

See Was This Poem Written by a Computer or Human? Put your bot-sniffing skills to the test, and see how you do by Hailey Reissman. Excerpts:"In 2013, Australian grad student Oscar Schwartz and his friend Benjamin Laird created a website called bot or not. On the site, you’re presented with a poem and you have to guess whether it was written by a human or computer.""some poems in the bot or not database have fooled 65 percent of human readers"The article has some examples of poems by both humans and computers and you can test yourself. In my macroeconomics class, we talk about the types of unemployment. Here is one of them:Structural-unemployment
caused by a mismatch between the skills of job seekers and the requirements of
available jobs. One example of this is when you are replaced by a

Read More »

The Incredibly True Story of Renting a Friend in Tokyo

August 11, 2020

When you’re alone in Tokyo and you need someone to talk to, do as the locals do: Rent a friend
By Chris Colin. Excerpts:"Miyabi isn’t a sex worker, or an escort or an actor or a therapist. Or
maybe she’s a little of each. For the past five years she has been a
professional rent-a-friend, working for a company called Client
Partners. There was the string of teenage girls struggling to
navigate mystifying social dynamics; at their parents’ request, Miyabi
would show up and just be a friend. You know, a normal, companionable,
27-year-old friend. She has been paid to cry at funerals and swoon at
weddings, lest there be shame over a paltry turnout. Last year, a high
schooler hired her and 20 other women just long enough to snap one
grinning, peace-sign-flashing, I-totally-have-friends

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Adam Smith Meets Joseph Campbell

August 9, 2020

Campbell wrote the book The Hero With a Thousand Faces, which was
one of the inspirations for Star Wars. He was interviewed by Bill
Moyers in a six hour series in the 1980s on PBS. That series was called The Power of Myth.Here is one passage:
"“This is the threat to our lives that we all face today. Is the system
going to flatten you out and deny you your humanity, or are you going to
be able to make use of the system to the attainment of human purposes?
How do you relate to the system so that you are not compulsively serving
it? It doesn’t help to try to change it to accord with your system of
thought. The momentum of history behind it is too great for anything
really significant to evolve from that kind of action. The thing to do
is learn to live in your period of history as a

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Do You Know the Difference Between Being Rich and Being Wealthy?

August 8, 2020

To one man, money was a plaything. To another, it was a possibility. Guess which one came out ahead in the end?
By Jason Zweig of The WSJ. He discusses investing, consumption and the book “The Psychology of Money”

by Morgan Housel (reminds me of the book Money and the Meaning of Life by philosopher Jacob Needleman).Excerpts from the article:"Money isn’t primarily a store of value. Money is a conduit of emotion
and ego, carrying hopes and fears, dreams and heartbreak, confidence and
surprise, envy and regret.""Investing isn’t an IQ test; it’s a test of character."One person "could defer gratification and had no need to spend big so other people
wouldn’t think he was small. From such old-fashioned virtues great
fortunes can be built." (reminds me of the concept of

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Does a Raise or Remote Work Sound Better?

August 5, 2020

Telecommuting is emerging as a coveted perk. Workers and their companies see the benefits, but how will they feel in 2021?
By Rachel Feintzeig of The WSJ. Excerpts:"“The euphoria is kind of peaking,” says Nicholas Bloom, an economist at Stanford University’s Graduate School of Business.Part of the appeal might stem from the fact that we’ve only been doing
this for a few months, when the weather’s warm. Even if you remove the
Covid-related factors from the equation—the chaos of taking conference
calls with children underfoot, the stress of trying to focus
as the world careens into crisis—there’s reason to believe working from
home has some downsides. An experiment that Dr. Bloom did with workers
in China in 2009 and 2010 found that intense loneliness tended to set in by the ninth

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The FDA, Masks and Type I & Type II Errors

August 4, 2020

See FDA’s Shifting Standards for Chinese Face Masks Fuel Confusion: Some states stop using KN95s to protect workers; agency cites ‘regulatory flexibility’ by Austen Hufford, Liza Lin and Mark Maremont of The WSJ.I use the book The Economics of Public Issues in my micro
classes. Chapter 1 is called "Death by Bureaucrat." It discusses how the
Food and Drug Administration can make either a Type I error or a Type
II error.Type I error: The FDA approves a drug before enough testing is done and when people take it, there are harmful side effects.Type II error: The FDA tests a drug longer than necessary to stay
on the safe side. But people might suffer because the drug is not yet
available. 80,000 people died waiting for Septra to be approved.The FDA would usually rather make a Type II

Read More »

C.E.O.s Are Qualified to Make Profits, Not Lead Society

August 4, 2020

An old debate over the proper role of C.E.O.s has entered the political arena. But chief executives aren’t well equipped to take on broad social issues.By Greg Mankiw. Excerpts:

“It’s way past time we put an end to the era of shareholder capitalism,
the idea the only responsibility a corporation has is with
shareholders,” he said. “That’s simply not true. It’s an absolute farce.
They have a responsibility to their workers, their community, to their
country.”Mr. Biden echoed a stand taken last year by the Business Roundtable,
a lobbying group. In a new “Statement on the Purpose of a Corporation,”
181 chief executives belonging to the organization committed themselves
“to lead their companies for the benefit of all stakeholders —
customers, employees, suppliers, communities and

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Companies Start to Think Remote Work Isn’t So Great After All

August 2, 2020

Projects take longer. Collaboration is harder. And training new workers is a struggle. ‘This is not going to be sustainable.By Chip Cutter of The WSJ. Excerpts:
"as the work-from-home experiment stretches on,
some cracks are starting to emerge. Projects take longer. Training is
tougher. Hiring and integrating new employees, more complicated. Some
employers say their workers appear less connected and bosses fear that
younger professionals aren’t developing at the same rate as they would
in offices, sitting next to colleagues and absorbing how they do their
jobs.""No CEO should be surprised that the early productivity gains companies
witnessed as remote work took hold have peaked and leveled off, he adds,
because workers left offices in March armed with laptops and a sense of

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Can Fed policy work just by being announced and not necessarily being used?

August 2, 2020

Why Growth in the Fed’s Asset Portfolio Has Paused: That doesn’t mean the central bank has dialed back its support for markets or the economy by Nick Timiraos of The WSJ. Private invetors might not want to buy certain assets like, for instance, corporate bonds. They may be pessimistic. Yet if the Fed announces a willingness to buy them, then investors have more confidence that these assets will retain their value even if the Fed does itself does not buy many of them.Excerpts:
"The Fed’s asset buying falls into three categories. The first is a
classic lender of last resort function: The central bank flooded
short-term funding markets—the plumbing of modern finance—with loans.""The central bank this month had no takers for short-term overnight loans
called repurchase agreements, down

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Will computer programs replace newspaper columnists?

August 1, 2020

See How do you know a human wrote this? by Farhad Manjoo of The New York Times.In my macroeconomics class, we talk about the types of unemployment. Here is one of them:Structural-unemployment
caused by a mismatch between the skills of job seekers and the requirements of
available jobs. One example of this is when you are replaced by a machine.Excerpts from the article:
"This month, OpenAI, an artificial-intelligence research lab based in
San Francisco, began allowing limited access to a piece of software that
is at once amazing, spooky, humbling and more than a little terrifying.OpenAI’s new software, called GPT-3, is by far the most
powerful “language model” ever created. A language model is an
artificial intelligence system that has been trained on an enormous
corpus of text; with

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In 1834 the British government spent about 40% of the national budget to buy out slaveowners to emancipate their slaves

July 30, 2020

Three Books on Jamaica: Anatomy of an Uprising: Back-breaking labor, an oven-hot climate, whip-bearing overseers and a planter class eager to exploit slave labor. Jamaica exploded in rebellion—and the empire struck back by Fergus M. Bordewich. He reviews three books in The WSJ. Excerpts:
"Just after Christmas in 1831, the British Empire’s wealthiest island [Jamaica] exploded.""Hundreds of slaves, having been pushed beyond endurance, attacked hated
overseers and their masters’ property. “We have worked enough already,
and will work no more,” striking laborers told a pair of plantation
owners. “The life we live is too bad; it is the life of a dog.” In all,
145 estate houses were destroyed and many others severely damaged.""The uprising was soon over, having been weakened by its poor

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From 1720 to Tesla, FOMO Never Sleeps: The South Sea bubble is the classic story of an investing mania. Are investors today any wiser?

July 29, 2020

By Jason Zweig. I like articles like this that link economics and storytelling. In fact, I have another blog called Dollars and Dragons: A look at the intersection of economics and mythology. If humans are the storytelling animal (which is the name of a book by Jonathan Gottschall), then it wi worth looking at how stories affect or play out in the economy.Excerpts from Zweig’s article:
"In the summer of 1720, shares in the South Sea Co.
and other leading stocks roared to all-time highs as speculators chased
instant profits. Ever since, this sudden outbreak of stock trading has
been known as “the South Sea bubble.” Even faster than it inflated, it burst—and left us with lessons about human nature that reverberate today.From July 10 through July 12, 1720, South Sea shares perched at

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As more people choose to marry someone with a similar income, inequality increases

July 25, 2020

See Rich Like Me: How Assortative Mating Is Driving Income Inequality by Branko Milanovic. Excerpts:
"Recent research has documented a clear increase in the prevalence of
homogamy, or assortative mating (people of the same or similar education
status and income level marrying each other). A study based on a
literature review combined with decennial data from the American
Community Survey showed that the association between partners’ level of
education was close to zero in 1970; in every other decade through 2010,
the coefficient was positive, and it kept on rising.
A different database provides another perspective on this trend; it
looks at marriage statistics for American women and men who married when
they were “young,” that is, between the ages of twenty and thirty-five.
In

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Coronavirus Tests Role of Higher Education as Recession Buffer

July 24, 2020

Social distancing could lead to lower enrollment, and it’s unclear how many colleges and universities will reopenBy Josh Mitchell of The WSJ. Excerpts:
"In past recessions, the U.S. higher education system has served as a
buffer of sorts by absorbing unemployed workers. The peculiarities of
the coronavirus-induced recession present obstacles to colleges playing a
similar role this time around, some economists say.For one, it is unclear how many colleges and universities will reopen or to what extent, or how many people will decide to enroll. Many laid-off workers might lack access to high-speed internet to take online courses.
It is also unclear how long unemployment will remain elevated, and
whether students will acquire the skills they need in the post-Covid job
market.""Workers

Read More »

Justice Department okays merger between two clickbait companies

July 23, 2020

See
Taboola and Outbrain’s Clickbait Marriage: What Happened When the Justice Department Showed Up: Antitrust officials, after studying proposed merger of industry leaders, don’t object at the altar by Brent Kendall and Patience Haggin of The WSJ.Although no market share numbers are given, it says the two firms dominate the industry. But the Justice Department says competition is emerging from companies like Verizon and Alphabet.Excerpts:
"The Justice Department decided not to challenge a merger of rival
internet companies whose sponsored-content offerings generate revenue
for publishers around the globe.The department’s antitrust division recently informed ad
networks Taboola Ltd. and Outbrain Inc. that it wouldn’t stand in the
way of their proposed merger,""The companies, which

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How to Get a Big Break on the Cost of College: Just Ask: The pandemic has accelerated a yearslong shift in financial power toward families, away from schools

July 22, 2020

By Josh Mitchell of The WSJ. Excerpts:
"Many colleges customize tuition-and-aid offers to extract the maximum
from each prospect without driving the student to a rival campus. An
industry of enrollment-management consultants uses computer algorithms
to advise administrators on each prospect’s “price sensitivity.”" (sounds like what economists call price elasticity of demand).Families, in turn, are turning to consultants who, using their own
algorithms, specialize in coaching them on strategies to squeeze more
money out of colleges. One such consultant, Massachusetts-based Shannon
Vasconcelos, said she expects bargaining between many families and
schools to go through summer: “This is a big, big year for asking for
more money and receiving.”""The American Council on Education, a

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When Companies Wielded the Power of States

July 21, 2020

By Andrew Phillips and J.C. Sharman. Mr. Phillips is an associate professor of international relations at the University of Queensland and Mr. Sharman is a professor of international relations at the University of Cambridge.They refer to these companies as "Janus-faced entities." Janus was the two-faced Roman god, among other things, of duality. Excerpts:
"After the European voyages of discovery in the 15th and 16th centuries,
the most important trading networks between West and East weren’t built
by kings or private merchants but by “company-states” like Britain’s
East India Company, which combined the profit motive of corporations
with the governmental powers of sovereign states.""The original company-states . . .
were founded under royal or parliamentary charters to undertake the

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ESG Investing in the Pandemic Shows Power of Luck

July 20, 2020

Multiplicity of environmental, social and governance grading schemes sows confusionBy James Mackintosh of The WSJ.I am usually interested in these articles since economists say that people act on their own self interest. But in this case, they may be trying to be a bit altruistic if they accept lower returns to invest in ESG. If they are not getting lower returns, then maybe it is not altruistic.Excerpts:
"Does ESG investing make money? The trouble with asking about
environmental, social and governance investing is that it isn’t a thing
that can be measured—or rather, it is lots of things all measured
differently.""ESG investing
makes money" (fund managers  say)"Reams of studies show ESG outperforming traditional approaches.The trouble is that reams of other studies show ESG

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How Texas funds highways and its impact on other programs during recessions

July 20, 2020

Texas uses formulas for how much money goes to highways. They are guaranteed a certain portion of the revenue. That could mean less money for other programs that don’t have guarantees.This is from In a coronavirus-induced recession, should highway spending keep its protected status? by MICHAEL TAYLOR of The San Antonio Express-News.Excerpts:

"The State Highway Fund has an unusual funding mechanism, so here’s a primer on how it works.

Sales taxes are Texas’ largest source of revenue,
making up 57 percent of all state revenue. The state is budgeted to
collect $35.6 billion this year and is on track, even with lowered
expectations, to collect at least $33 billion. But here’s the thing:
After sales taxes reach $28 billion, the State Highway Fund
automatically gets the next $2.5

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