Wednesday, February 18, 2015

What did you learn at your minimum wage job?

This article from The Federalist looks at how some highly-successful people answer that question.

I like this article as it serves as a good reminder that a minimum wage job can provide many skills that help later in life.  For me, I learned to show up on time, provide good customer service, listen to my boss, and more.

Saturday, February 7, 2015

Principles of Macro - Let's Grade Paul Krugman

Krugman discusses the national debt.  If this were an essay from a freshman student, I'd give it a pretty good grade.  He mentions some important things that any good principles of macro class should cover, and that the good students should learn.

Suppose that for some reason the government were to decree, arbitrarily, that every American whose last name begins with the letters A through K now owes $100,000 to a special government agency; meanwhile, every American L through Z is given a $100,000 bond to be paid by that agency.
Clearly, the overall level of debt in the U.S. economy has suddenly increased (actually by about $1.6 trillion). But has the nation become any poorer? Is that $1.6 trillion of additional debt money taken from the next generation? No and no: the additional debt represents a claim by one set of Americans on another set of Americans — and we’re talking about people here now, not future generations.

Krugman the principles of macro student would probably get a B for writing this.  It is well thought out and logical.  But it ignores one crucial fact that any good principles of macro course should mention.  The above analysis only holds if all our national debt is owned by other Americans.  Given that the percent of debt owned by foreigners is now over 30% and has been increasing, Krugman's analysis is wrong. The portion that has to be paid to foreigners will make future US citizens worse off.

For a freshman in a principles of macro course, Krugman's analysis might earn a B.  For a Ph.D. economist, however, Krugman earns a F.

Friday, February 6, 2015

Quoted in story on economic impact of pipeline ...

link here 

Susquehanna University economics professor Matthew Rousu, who reviews economic impact studies related to the state's oil and gas industry, said that although he hasn't yet examined Econsult's study, a $3 billion investment could very well generate a $4.2 billion impact.

Thursday, February 5, 2015

Learning economics through pictures - wine prices in Pennsylvania and Arizona

Here's the price tag in Arizona for a 1.5 liter bottle of Gallo Pinot Grigio.  The regular price is $9.99, but it is on sale for $6.99.  

Here is the price tag for the same bottle in Pennsylvania:

That's not all - in Arizona, when you buy six bottles at a time you get a 10% discount!

So without a sale, in Pennsylvania the price is $11.49 and in Arizona the price is $9.99.  With a sale and bulk discounts, it's actually a bigger disparity.  Why such a difference?  Wine is sold through free-markets in Arizona.  But in Pennsylvania the wine stores have a monopoly.  What's even worse is that it is a government-run monopoly, so there is not even a push for efficiency.  A simple step would be for the Pennsylvania government to privatize the liquor industry.

David Henderson on minimum wage

Link here

He's responding to a question from a Susquehanna University student (after his visit to talk at our university)...

I recommend reading the entire thing.  Here's an excerpt:

One of the students I met and talked to afterward sent me the following query this morning:

I have yet to find an argument that makes economic sense that would be in favor of raising the minimum wage and I was wondering if you could play devil's advocate and make a point about why it would be beneficial if there is any.
Here's my answer:
Let me give some context to the minimum wage discussion before answering your specific question about the devil's advocate part. It's very hard to deny the law of demand: so, when the minimum wage rises, there will be fewer low-productivity people employed at that higher wage. Most of the discussion has been about how many fewer. Is the demand for low-skilled workers elastic or inelastic? One thing that seems to be agreed on is that the reduction in employment for the kinds of minimum wage increases we've seen in this country in the last 2 or 3 decades is not large.