Tuesday , October 15 2019
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Articles by [email protected] (Cyril Morong)

Using Reggae to Fight Inflation

5 days ago

See ‘Keep de Rates dem Low’—Jamaica Sets Inflation Fight to Reggae Beat: Central bank calls on music stars to record upbeat songs explaining inflation targeting, monetary policy and consistent GDP growth by Robbie Whelan. If you go to the article, you can watch one of the music videos. Excerpt:
"KINGSTON, Jamaica—Call it Reggaenomics.As a drumbeat eases the listener into a familiar reggae rhythm, the high tenor of Jamaican pop star

Tarrus Riley

cuts through the groove.All the high prices that mean me harm  They can go back where they came from No inflation monster Shall prosper! Mr. Riley looks into the camera and explains in Jamaican
patois: “High inflation is a wicked ting, and we must banish it like
slavery….Low, stable and predictable inflation is to the

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Do We Have A Zombie Economy?

13 days ago

See When Dead Companies Don’t Die: The policies created to pull the world out of recession are still in place, but now they are strangling the global economy by Ruchir Sharma in The NY Times.
He is author of “The Rise and Fall of Nations: Forces of Change in the
Post-Crisis World” and is the chief global strategist at Morgan Stanley
Investment Management.This ties in to some recent posts I did on the recovery and Joseph Schumpeter (links below). Excerpts:
"Since the end of the recession, the
economy has grown at about 2 percent a year in the United States and 3
percent worldwide — both nearly a point below the average for postwar
What explains the longest,
weakest recovery on record? I blame the unintended consequences of huge
government rescue programs, which have

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How the U.S. justifies & enforces sanctions on countries like Iran and how other countries try to get around the sanctions

19 days ago

See The Dollar Underpins American Power. Rivals Are Building Workarounds. Iran sanctions spur Europe and India to devise systems to trade with Tehran without using the U.S. currency by Justin Scheck and Bradley Hope of The WSJ. Excerpts:
"In congressional testimony in March, Treasury Department undersecretary
Sigal Mandelker said that “those who engage in activities that run afoul
of U.S. sanctions risk severe consequences, including losing access to
the U.S. financial system and the ability to do business with the United
States.”"The dollar’s status dates back to the end of World War II, when the
U.S. economy was the world’s most robust and dollars were plentiful. The
currency’s liquidity, and the efficient U.S. banking system anchored by
the Federal Reserve, mean trading in

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Why honey prices have climbed about 25% since 2013

26 days ago

See You’ll Need a Lot More Money to Buy That Jar of Honey: Beekeepers are in a sweet spot as consumer trends shift away from cane sugar and high-fructose corn syrup by Lucy Craymer of The WSJ. Excerpts, with my comments in brackets:
"Honey prices are starting to sting.Global honey prices are at their highest levels in years, due
to a new wave of consumer demand for natural sweeteners [demand
increases because tastes or preferences increased with the opposite
happening for sugar] and declining
bee populations that are hampering mass production [supply decreases].""In addition, it is being used more as an ingredient in shampoos,
moisturizers and other personal-care products that companies market as
naturally made [another increase in demand due to tastes].""Retail honey prices

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Why Doing Good Makes It Easier to Be Bad

September 12, 2019

By Abbas Panjwani. He is a journalist at Full Fact, the UK’s leading fact-checking charity. He has previously written for the Sunday Times.Adam Smith’s "invisible hand" suggests that if you follow your own self
interest, you will promote the interests of society. I have had some
posts on this issue of being selfish vs. being altruistic and if they
can actually be separated before. So those links are at the end.But this article says that if you work in a "socially responsible
company" it makes you think that it is okay to do something immoral,
that somehow you have earned that right.Excerpt:
"Oscar Wilde, the famed Irish essayist and playwright, had a gift, among
other things, for counterintuitive aphorisms. In “The Soul of Man Under
Socialism,” an 1891 article, he wrote, “Charity

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How Technology Has Changed The Distribution Of Income Among Musicians

September 5, 2019

See Music Superstars Are the New One Percenters: Huge stars like Beyoncé and Taylor Swift are dominating the concert-tour business like never before, as music’s top 1% takes home an increasingly large share of the pie by Neil Shah of The WSJ. Excerpts:
"A small number of superstars like Beyoncé and Taylor Swift is
gobbling up an increasingly outsize share of concert-tour revenues, as
music’s biggest acts dominate the business like never before.Sixty percent of all concert-ticket
revenue world-wide went to the top 1% of performers ranked by revenue in
2017, according to an analysis by Alan Krueger, a Princeton University
economist. That’s more than double the 26% that the top acts took home
in 1982.Just 5% of artists took home nearly the entire pie: 85% of all
live-music revenue,

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Another Semester Has Started

August 28, 2019

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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The benefits of utilizing markets in the U.S.

August 20, 2019

An article I wrote for the San Antonio Express-News last March.

"I was glad to see that Beto O’Rourke recently said,
“I’m a capitalist. I don’t see how we’re able to meet any of the
fundamental challenges that we have as a country without, in part,
harnessing the power of the market.”

seems like our country is turning away from markets too much these
days. Democrats are proposing massive government interventions like the
Green New Deal, along with much higher taxes on wealth and income.
President Donald Trump is for tariffs and border walls, and issued an
executive order to buy and hire American.

economists say “markets,” we mean allowing individuals to decide who
they will trade (buy and sell) with, free of bureaucratic mandates. This
is a very democratic

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New Braunfels businesses fooled into taking movie money

August 14, 2019

By Bryan Kirk of The San Antonio Express-News. Funny story. It has pictures of the fake money.
"Reports that several New Braunfels businesses have been fooled into
accepting money used as props in movies is being investigated by the New
Braunfels Police Department.Officials said Tuesday that a number of people in the area have accepted movie money without realizing it is fake.According to a New Braunfels police news release, the
money looks real enough at first glance, but there are several key
features in plain sight that reveal the cash is indeed bogus.Some of those features of the movie money include: Asian markings may be seen on the front or back.
Bills may have the words: "For Motion Picture Purposes Only" or "In Props We Trust."
Check for bills marked with the word "Replica" in

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Can scientific thinking help entrepreneurs?

August 13, 2019

See A Scientific Approach to Entrepreneurial Decision Making: Evidence from a Randomized Control Trial by Arnaldo Camuffo, Alessandro Cordova, Alfonso Gambardella and Chiara Spina (the first three are with Bocconi University, not sure about Spina).Maybe science can help, but entrepreneurship always takes place in the face of uncertainty. Maybe science can help but there will never be a sure thing. What if another entrepreneur is doing the same study you are doing right now and you both concluded the new business will be a good idea. You both can’t succeed, or at least not as well as if only one of you went forward with your plan.


classical approach to collecting and elaborating information to make
entrepreneurial decisions combines search heuristics, such as trial and

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College Still Pays Off, but Not for Everyone

August 11, 2019

By Josh Mitchell of The WSJ. Excerpts:
"Investing in a college degree still pays off for most students with
higher salaries and greater wealth, but in recent years it has become
riskier, splitting graduates more widely into haves and have-nots.“It just has not been the blanket guarantee of following the
same path to prosperity that the earlier generations followed,” says
economist William Emmons of the St. Louis Federal Reserve.There are three related shifts causing
economists to re-examine the returns of college. First, the wages of
college graduates have remained mostly flat this century, after
inflation. Second, the cost of attending college has soared. Third, even
with higher salaries, significant numbers of college graduates in
recent years are failing to build the kind of

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Why Rate Cuts Don’t Help Much Anymore

August 10, 2019

By Austan Goolsbee. Excerpt:

"Take spending on consumer durables. A recent study
by economists at the Federal Reserve Bank of Minneapolis and the
University of California, San Diego, notes that these purchases occur in
lumpy spurts. People tend to spend nothing on such items for long
periods, then spend a lot all at once, when money is cheap and prices
are enticing.

The problem now is that
once-in-a-lifetime offers don’t generate the same excitement if they are
repeated every week. And, the study suggests, after 10 years of
extremely low interest rates, there probably aren’t many consumers with
pent-up demand, waiting for rates to fall. Because so many people have
already made their big purchases, the economic kick from a rate cut is
smaller than it would be at a “normal”

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San Antonio, Poverty and Economic Segregation

August 8, 2019

See Another haunting reminder about economic segregation, San Antonio Express-News editorial. Important issue, but in some ways, San Antonio is similar to the rest of the nation. Excerpt:"About 20 percent of African American and Hispanic residents live in poverty, compared with 10 percent of Anglos."But this is very similar to the country as a whole.  The poverty rate for non-Hispanic Whites was 8.7 percent in 2017. For Blacks it was 21.2 percent. For Hispanics was 18.3 percent. So the poverty differences by race in San Antonio are close to those for the whole country. See Income and Poverty in the United States: 2017 from the Census Bureau.The editorial also says "The median income for African American households is about $36,000, and
for Hispanic households it’s about $43,000. By

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Texas A & M economists study cheating (and how much might not depend on being rich or poor)

August 7, 2019

Study: Richer or poorer, cheaters cheat by Lynn Brezosky of The San Antonio Express-News. If people don’t cheat as much as they could possibly get away with, does it mean they are not always following their self-interest? Excerpts:

"Are people more likely to cheat when times are tough?

team of behavioral economists from Texas A&M University and
Rensselaer Polytechnic Institute on New York traveled to a remote
village in Guatemala to answer that question.

they found surprised them: while most people cheat a little, people who
cheat more do so regardless of whether they’re richer or poorer.

In another finding, people gave more to strangers in another village
when times were bad for everyone, indicating people are more empathetic
in times of scarcity."


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Could we up with too few robots rather than too many in the future?

August 6, 2019

See This Economy Is Not Aging Gracefully: The American population is getting older, and that has devastating consequences for the economy. Could robots save us? by Eduardo Porter of The New York Times.
"Consider the bluntest measure of progress: economic growth. Comparing
growth across American states that are aging at different speeds,
researchers from Harvard’s Medical School and the RAND Corporation
concluded that a 10 percent increase in the share of the population over
60 reduced the growth rate
of per capita gross domestic product by 5.5 percent. They projected
that aging would shave no less than 1.2 percentage points off annual
economic growth this decade.Part of this is because of a shrinking labor supply. As baby boomers
move into retirement, leaving the work force to

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Immigrants and Western Values

August 6, 2019

Here is a letter I sent to The WSJ. See Assimilation of the ‘Other’ and Immigration: There may be many in “non-Western” countries who want to come here because they already believe in our values.
"Amy Wax “argued that the U.S. should reduce immigration from non-Western
countries because those migrants aren’t likely to assimilate as
smoothly into American society as Western immigrants do” (“Where Amy Wax and Her Critics Agree,” op-ed by Mark Bauerlein, July 29).Given that Asian-Americans have by far the highest median household
income, it seems that they are assimilating very well. That takes hard
work and a strong commitment to education, values all Americans should
honor. Beyond that, how is the federal government going to decide which
countries are Western enough? And shouldn’t

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Tradeoffs and anti-trust policy

August 4, 2019

Life is full of tradeoffs. Even in anti-trust policy, which is supposed to make our economy more competitive. See FTC Antitrust Probe of Facebook Scrutinizes Its Acquisitions: Regulators examining whether social-media giant bought companies to neutralize possible rivals. Excerpts:
"The Federal Trade Commission is examining

Facebook Inc.

FB -1.92%

’s acquisitions as part of its antitrust investigation into the
social-media giant, seeking to determine if they were part of a campaign
to snap up potential rivals to head off competitive threats, according
to people familiar with the matter.""FTC investigators are examining whether the company and its CEO, Mark
Zuckerberg, purchased technology startups to keep them from

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Wealth And The Middle Class

August 2, 2019

See Families Go Deep in Debt to Stay in the Middle Class: Wages stalled but costs haven’t, so people increasingly rent or finance what their parents might have owned outright by AnnaMaria Andriotis, Ken Brown and Shane Shifflett of The WSJ.This article has lots of interesting data. But things might not be as bad as the headline indicates. Although the middle class has shrunk, the upper class has grown more than the lower class.The article mentions that wealth has increased, in percentage terms, more for the top quintile than the middle quantile. But people do move between quintiles. Usually after 10 years, about half the people in the top quintile have fallen to a lower quintile.It mentions middle class wages only growing slightly over time. But this could party be caused by high income

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With technology that can more closely monitor worker activity, will wages fall or not rise as much?

July 31, 2019

The Keynesians
have come up with theories to explain why wages might be slow to fall
in a recession. Here is one of them:

Efficiency Wage Theory-Companies
set wages above competitive (that is, market determined) levels to increase
labor productivity. This does two things:

1. It reduces worker turnover,
since workers will want to keep this high paying job. This in turn reduces
training and hiring costs. When that happens, productivity rises.

2. It reduces slacking
since no worker will want to get caught not putting forth their best effort
because the job pays so well. They would not want to get fired from a job that
pays so well. The company cannot constantly monitor its employees, so the high
wage prevents slacking.The idea is that it was too costly to constantly monitor what all

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Many college dropouts are worse off economically than if they hadn’t started college

July 30, 2019

See ‘The College Dropout Scandal’ Review: A Matter of Degree. Naomi Schaefer Riley reviews The College Dropout Scandal by David Kirp in The WSJ.It seems that part of the problem is that a little bit of college is no help on the job market. The big payoff is getting a degree since that is a signal to employers that you are smart, hard working and finish what you start. So if you paid to go to college and it does not lead to a better job, you will be worse off. I also like that it mentions the opportunity cost of going to college, that you don’t get paid for any job you can’t take.The book covers what some schools are doing to help students. But the results are mixed. Excerpt:
“the contention that college is the engine of social mobility is
false advertising for the 34 million Americans

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Is the Phillips curve affected by prices that are acyclical?

July 30, 2019

The Phillips curve says that there is an inverse, and probably non-linear, relationship between the inflation rate and the unemployment rate. The inflation rate is expected to rise more and more as the unemployment rate falls (assuming demand increases past full-employment). Some of my links below to previous posts go into more detail and use graphs. If what this article says is true, unemployment might be able to go lower than previously thought before we get high inflation.See A Key Reason the Fed Struggles to Hit 2% Inflation: Uncooperative Prices
Recent studies show that a large segment of the economy, from health care to durable goods, appears insensitive to rising or falling demand by Paul Kiernan of The WSJ. Excerpt:
"Many of the prices consumers pay don’t respond to the strength

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Farmers might be reducing supply of corn now in expectation of higher prices this fall

July 28, 2019

One of the shift factors we cover in supply and demand is expectation of future price. If buyers expect higher prices in the near future, they will try to buy more today to beat those higher prices, causing an increase or rightward shift in demand.It is the opposite for supply. If you are a seller, you will reduce supply today if you expect higher prices in the near future.See Farmers Stockpiling Corn in Response to Tough Growing Conditions by Kirk Maltais and
Jacob Bunge of The WSJ. The article shows what is happening to supply and demand right now in the corn market (big companies are offering farmers more now for corn, indicating demand is increasing in addition to supply decreasing).Also, the article mentions that meat prices might go up. This is because supply of meat will decrease

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The Average Profit Margin for a Restaurant

July 27, 2019

By Patrick Gleeson, Ph. D.,; Reviewed by Michelle Seidel, B.Sc., LL.B., MBA. According to a frequently cited study by Ohio State University on failed restaurants, 60% do not make it past the first year, and 80% go under in five years.

"There are two profit margins widely used by accounting professionals:
gross profit margin and net profit margin. Confusingly, some restaurant
journalists write about profit margins without specifying which. Worse,
when you read these articles carefully, you see that some use "profit
margin" to refer to the gross profit margin and some use the same phrase
to refer to net profit margin. There’s a huge difference!
Gross Profit Margin
Gross profit, is what is left after you deduct the direct costs of goods sold – such as food costs and labor costs

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Hotels having trouble hiring workers: Low jobless rate here (San Antonio) cuts into workforce

July 26, 2019

One thing I mention when I talk about labor markets is how workers will leave one occupation if the wage rises for another, implying cross industry competition for workers.This article was by Madison Iszler of The Express-News. I don’t see it online anywhere right now. You might need an email subscription to read it. If a link becomes available, I will add it.Excerpts:
"With San Antonio’s unemployment rate hitting historic lows, hoteliers in the city’s $15.2 billion tourism industry are struggling to find housekeepers, dishwashers and waiters.It’s never been easy recruiting for jobs that involve hard work and low pay, but the crunch is reaching new levels of pain.“I’ve been in this business for a long time, and I think it’s the worst we’ve ever seen it,” said Avinash Bhakta, president of

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Maybe machines might not take your job but they could decide if you get a promotion

July 25, 2019

Walmart Turns to VR to Pick Middle Managers: Retailer using virtual reality headsets to gauge workers’ potential and skill level, help determine promotions and pay cuts by Sarah Nassauer and Chip Cutter of The WSJ. Excerpts:
"When some


WMT -0.08%

store workers want to apply for a higher-paying management role,
the company fits them with a $250 virtual reality headset to see if they
are the right candidate for the job.The country’s largest private employer is
using a VR skills assessment as part of the selection process to find
new middle managers, watching how workers respond in virtual reality to
an angry shopper, a messy aisle or an underperforming worker.VR training is becoming more common in a variety

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Why the number of Guatemalans coming to the U.S. has increased so much

July 22, 2019

See The Guatemalan City Fueling the Migrant Exodus to America: Guatemala is now the largest source of illegal immigrants headed to the U.S., with the emigration epicenter in Joyabaj, population 100,000 and falling by José de Córdoba of The Wall Street Journal.When people change what they are doing, as the first sentence below shows, economists ask what changed to cause the change in behavior? The article gives a number of reasons. Excerpts: 
"Apprehension of Guatemalans jumped to about 236,000 in the first nine months of fiscal year 2019 from about 15,000 in 2007" "Guatemala’s economy has averaged 3.4% growth in the past five years, and
the homicide rate has fallen by half to 22.5 homicides per 100,000
people compared with 2009. The U.S. homicide rate was 5.3 per 100,000 in

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Has social media increased the demand for wedding party activities?

July 21, 2019

It seems like people are spending more money on weddings and related activities. This gets expensive for bridesmaids and groomsmen. Some of them drop out because it their bride or groom friends want them to spend too much money.See Go Broke or Go Home Bachelorette Parties by Rhiannon Picton-James in The NY Times. Excerpts:

"The cost of bachelorette parties is ever
growing, with weekend wedding festivities at destination locales now the
norm. Millennials are even going broke to attend, and I’m one of them.

A recent survey from Credit Karma
found that about one in three millennials have gone into debt to attend
a bachelor or bachelorette party. Among them, 36 percent were more than
$500 in the red.

It’s not only
bachelorette parties that are cash drains. A third of people who

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Was there really a shortage of meatless burgers?

July 19, 2019

See Mission Impossible? Maker of Plant-Based Burger Struggles to Meet Chains’ Demand: The popularity of Impossible Foods’ meatless burger patty is disrupting supply chains at White Castle and Red Robin by Neil Vigdor of The NY Times.The article mentions a shortage. But it also mentions that demand had increased and that one restaurant had raised its price. That is what we expect to happen when demand increases. Maybe people would like to buy more meatless burgers at the price of a regular burger, that does not mean there is a shortage. Excerpts:
"Impossible Foods, a Redwood City, Calif., company that makes the patties from genetically engineered, soy-based heme protein,
said that it was not playing favorites and that it was ramping up
production of the burgers. It uses more than 400

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Ws there really a shortage of meatless burgers?

July 19, 2019

See Mission Impossible? Maker of Plant-Based Burger Struggles to Meet Chains’ Demand: The popularity of Impossible Foods’ meatless burger patty is disrupting supply chains at White Castle and Red Robin by Neil Vigdor of The NY Times.The article mentions a shortage. But it also mentions that demand had increased and that one restaurant had raised its price. That is what we expect to happen when demand increases. Maybe people would like to buy more meatless burgers at the price of a regular burger, that does not mean there is a shortage. Excerpts:
"Impossible Foods, a Redwood City, Calif., company that makes the patties from genetically engineered, soy-based heme protein,
said that it was not playing favorites and that it was ramping up
production of the burgers. It uses more than 400

Read More »

People Spend Real Money On Imaginary Products

July 17, 2019

See You Spent $1,500 on Virtual Bazookas? Kids Are Splurging on Digital Goods:In-game purchases come under new scrutiny from lawmakers; with virtual spending, ‘money turns magical’ by Julie Jargon of The WSJ. Excerpts:
"Kids are now spending hundreds or even thousands of dollars on more
ephemeral goods such as outfits for their videogame avatars and gems to
help them level up in games.""Buying an item while playing a game is instantaneous. Meanwhile, the
dollar amounts add up without kids noticing how light the piggy bank is
getting.""“The danger with these purchases is that money turns magical,” said
Nathan Dungan, founder and president of financial-education firm Share
Save Spend. “Children’s brains can’t process these virtual transactions
because it’s not tangible to them.”""A

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