Cash for Clunkers

Link

This could be the dumbest economic policy in my lifetime. It might have prompted more sales in the summer of 2009. However, most of these sales were not to people who are buying an "extra" car. It just prompted them to move up their car purchase, or they were going to buy one anyway. Therefore, all of the people who purchased a vehicle likely would have purchased one anyway in the next year or two.

Further, this decreased the number of used cars in the market. That forced the price higher. Many individuals who we would think of as the "working poor" rely on "clunkers" for transportation. Making their life more difficult by raising the price of vehicles isn't good policy, if you care at all about the poor.

Oh, and for this policy, all we had to do was pay $24,000 per "clunker".

Sowell's "The Housing Boom and Bust"

The Housing Boom and Bust

Earlier I posted book recommendations and I recommended books by Thomas Sowell. Currently I am reading Sowell's new book - "The Housing Boom and Bust" - and it is also great. Sowell is truly gifted at organizing relevant material in a concise and meaningful way.

It really gives a detailed explanation of all the factors that went into the boom - including some truly horrible government policies. Warning - It is tough to read this book without getting angry at elected officials of both parties.

Listen to my radio interview

Here is a link to a radio interview I did for the "On the Mark" show on WKOK radio.

The show is 90 minutes - I come on at about minute 34 or so - and am on for the rest of the broadcast.

http://www.megaupload.com/?d=NGI80ORB

I am quoted in an article

From the Los Angeles Business Journal

http://www.labusinessjournal.com/article.asp?aID=140749

Upcoming radio appearance:

Tuesday, September 22nd
AM 1070 WKOK
The "On the Mark" program from 9:00-10:00 AM.

You can listen live online at http://www.wqkx.com/1070_WKOK/WKOK_HOME.htm

What economics books should a non-economist read?

Economics Books for Non-Economists

Students (and sometimes non-students) will often ask for recommendations on books to read. Here are a few books I recommend for those who want to learn more about economics:

1. Anything by Thomas Sowell. He writes clearly, his assertions are well-backed by research, and his books are stunningly insightful. If you don't know where to start, try "Economic Facts and Fallacies", or "The Quest for Cosmic Justice". I am currently reading "Black Rednecks and White Liberals". What I have learned in the first 20 pages was worth the price of the book many times over. One note - Sowell isn't light reading - but it is well worth the time and effort.

2. Freakonomics. This is a fun-to-read book that discusses how Steven Levitt (and others) have used economic methods and thinking to examine many different issues. Freakonomics 2 (superfreakonomics is coming out this week). I will certainly be purchasing it ASAP. I am hoping it is as entertaining ast he first.

3. Free to Choose. Milton Friedman's classic about capitalism and the economy is now 30 years old, but it still seems relevant.

Some other good economics books include: Nudge, What it Means to be a Libertarian, and Discover your Inner Economist: Use Incentives to Fall in Love, Survive Your Next Meeting, and Motivate Your Dentist.

Some non-economics books I like and that have some academic value:

- Malcolm Gladwell books (The Tipping Point, Blink, and Outliers). His books are well-researched and thought provoking. He generalizes his conclusions to much, but other than that these books are terrific.

- Gang Leader for a Day. A fascinating book about a sociology doctoral student who does research with a street gang. While not an economics/business book, it is interesting to see how a gang operates and the incentives/disincentives the gang leaders provide their employees.

Daily Item article on Employment in the Valley

Region's jobless rate improves

By Tricia Pursell

The Daily Item

June 02, 2009 06:36 am— Regional unemployment improved in April, but was still worse than the state and national averages, according to the Pennsylvania Department of Labor & Industry.

"We have been hurt very hard with manufacturing losses here," said Matthew Rousu, assistant professor of economics at Susquehanna University in Selinsgrove. "There are some sectors of the economy that haven't been hit as hard."

Snyder County's unemployment rate for April was 8.7 percent, an improvement from 9.1 percent in March -- a difference of 100 jobs.

In Northumberland County, the April rate was 9.6 percent, compared to 9.7 percent in March, and in Union County, the April rate was 8.8 percent compared to 9.4 percent in March.

Montour County bucked the trend. Its jobless rate got worse, going from 6.3 percent in March to 6.8 percent in April.

The state unemployment rate is 7.6 percent, and the national jobless rate is 8.6 percent.

April was the most recent month for which seasonally adjusted figures were available.

The seasonally adjusted rate, according to Scott Meckley, with the Center for Workforce Information & Analysis, is used to check trends without the typical factors of job gain and loss at certain times of the year, such as construction declining in the winter and retail employment spiking over the holidays.

The unemployment rate numbers are not going to fluctuate too dramatically, Rousu said. They are numbers that move slowly beyond the overall economic condition of the nation. Little by little, the rates may drop, but "there are some areas that are still going to experience pain," he said.

A survey of economists that was published last week showed they all thought the recession would be over within nine months, Rousu said.

"Some are even thinking it's over," he said. "However, the unemployment rate is a lagging indicator. Even when the economy gets better, the unemployment rate is not going to improve as quickly as the economy improves.

"The reason is likely because employers err on the side of caution. "Firms are just trying to survive," he said. "It takes longer to catch up once the economy recovers."

When the most recent recession ended in 2001, the highest unemployment rate did not come until the middle of 2003, Rousu said.

Article - Should online poker be illegal?

This is from a couple years ago, but since it is new here I figured i would post it. This was originally published in the Daily Item in August, 2006.

Unemployment rate in Susquehanna Valley

This region has been hit quite a bit harder with high unemployment rates than the country as a whole - here's the story ...

http://www.dailyitem.com/archivesearch/local_story_090072237.html/resources_printstory

Valley’s jobless rate rises

By Jaime North
The Daily Item

March 31, 2009 07:20 am— Unemployment rose in the Valley for the fifth straight month in February and will probably get worse, a state official said Monday.

Northumberland County had the highest jobless rate at 10.9 percent, and Montour County posted the lowest at 9 percent. Snyder County’s rate was 10.4 percent, while Union County’s was 9.9, according to the state Department of Labor & Industry.

And the worst is yet to come, according to Scott Meckley, an analyst with state Department of Labor and Industry’s Center for Workforce Information and Analysis.

“It’s a broad-based decline right now with every area in the state pretty much acting the same way,” Meckley said. “Based on what other economic groups have forecasted, we’re probably not at the peak yet. How far it’s going to continue, we’re not sure. Prognosticating is not what we do.”

Meckley said there has been indications the national unemployment rate is expecting to continue to rise. As a result, Pennsylvania will likely follow suit, he said.

“To say we peaked may be a little early,” Meckley said. “I’d like to think that would be the case, but doubt that is the true forecast.”

Valley unemployment rates for February were higher than state and national rates, which were at 7.5 percent and 8.1 percent respectively.

Local unemployment rates ranged from 4.6 percent to 5.7 percent in September, according to state data.

According to Meckley, the health care sector appears to be the lone survivor of the current economic recession among the larger job markets.

The Department of Labor & Industry reported jobs in education and health services grew by 2.4 percent in the north central region, which includes the Valley, slightly ahead of the statewide gain of 1.9 percent in that area.

“It’s simply because of the demand for jobs,” Meckley said. “Pennsylvania has an older population, so there is a need for health care jobs.”

Meckley said a growing number of displaced workers are heading back to school.

“The best thing is to start looking at changing careers, maybe furthering education or taking advantage of training offers,” Meckley said. “We know the health care sector is recruiting people who are working in other industries.

“More people are starting to think about changing careers, instead of looking for another factory job or finance job.”

I will be in two upcoming panel discussions on the economy

I will be part of two panel discussions on the economy:

Wednesday, March 31st: 7:00 PM. Susquehanna University, Isaacs Auditorium.

Wednesday, May 13th: Time/location TBD.

Two Radio Interviews

Listen to me in two interviews. The March 10th interview is approximately 40 minutes long. The February interview is approximately 30 minutes long. (I was interviewed February 10th, but it was not broadcast until several days later.)

March 10, 2009

February 2009

Wall St. Journal Editorial on Obama "Rhetoric"

http://online.wsj.com/article/SB123457303244386495.html

Obama's Words and their Effect on the Economy

President Obama, whether he knows it or not, is hurting our economy. His words will likely prolong this recession, and in certain instances, people who are out of work will be able to (or can) thank President Obama personally for their situation.



Some examples:


His remarks on the severity of the downturn. Obama has made many dire claims, including discussing how this is the worst economic condition since the great depression. It may end up being that way, but right now our unemployment rate is at 7.6%. This is still lower than most of the recessions since the great depression. It could get worse - but claims like this are very harmful. The economy depends very much on consumer confidence, and Obama's depression and dark forecasts will not help American consumers desire to spend money. This is not good.





Las Vegas. Obama mentioned that companies should not be taking trips to reward employees and some companies have canceled trips. Some people living in one of the most prominent places to take a trip, Las Vegas are not pleased. Las Vegas mayor, Oscar Goodman, who like Obama is a Democrat, has discussed how this likely has had a negative effect on Las Vegas' tourism industry. (For more, see http://content.usatoday.com/communities/theoval/post/2009/02/62704125/1 ). Obama's words are causing economic pain to Las Vegas residents and workers.




Corporate Jets. Obama mocked Citigroup for spending $50 million on a corporate jet. While this certainly is a lot of money, the company obviously felt it was better to have the jet to allow executives to travel more easily than to not have it. Whether that is true or not is debatable - but here is what isn't: When companies stop ordering corporate jets because of Obama's rhetoric, jobs are lost. People earning middle-income jobs are assembling those jets and repairing those jets. For more, see http://abcnews.go.com/Business/Politics/story?id=6740011&page=1




As a new president, we could give Obama a bit of latitude. But words matter, and Obama has already worsened the economic situation for the country as a whole, and certainly for some specific groups of workers. Hopefully he is a quick learner and does not make these mistakes in the future. How quickly (or slowly) our economy recovers will depend, in part, on his words.

The Costs and Benefits of the Boscov's Plan

The Costs and Benefits of the Boscov's Plan
By Matthew Rousu
Published in The Daily Item, January 4, 2008

Economists are a strange bunch. We tend to remove emotions from our decision-making. When a controversial issue arises, however, like the Boscov’s loan issue, this is an important trait. We are trained to make decisions simply by looking at the potential benefits and the potential costs of a particular action. Let’s take a close look at the potential benefits and costs to see whether or not the Snyder County Commissioners made a good decision in rejecting the loan to Boscov’s.

First, what are the potential costs of providing the loan to Boscov’s? One potential cost is that the loan could default. While some have said the loan had no risk, anyone who has followed the closings of businesses recently knows there is always at least some risk, even if a business looks completely safe. With a business that has declared bankruptcy, the risk is higher. If there really is no risk of the loan defaulting, why wouldn’t a local bank jump at the opportunity to provide this loan?

A second potential cost to providing the loan is that $5 million could have been used for other projects. Providing this loan now would limit the future opportunities to provide loans. A third potential cost is a big one: what precedent does this set and what are the side effects of this loan bailout? For precedent, should the county now provide loans to all businesses, even if they have declared bankruptcy? How about the Mom and Pop store? Also, is it right for a government to provide assistance to a major retailer when many smaller shops, owned by local middle-income families, compete with Boscov’s? This is an enormous cost – yet one that most people who supported the loan ignored.

Having listed three potential costs, let’s look at the potential benefits of providing Boscov’s a loan. The one main potential benefit for using public funding, as was made clear in almost every article and editorial, is preventing a loss of jobs. For the loan to benefit the community by saving jobs, however, two things must happen. First, the loan would have to make the difference between Boscov’s staying in business and closing down. According to the December 20th article in the Daily Item, Albert Boscov indicated that the Boscov’s store would stay open “With or without the county’s help”. If that is true, this is a big argument against providing the loan.

Let’s suppose that Mr. Boscov is wrong, however, and the store might close down and that the loan would prevent the store closing. A second thing that would have to happen is that by Boscov’s staying open, it would “save jobs”. However, contrary to the conventional wisdom, this probably isn’t true. If Boscov’s does indeed shut down, that means that people who otherwise would have purchased their TVs, clothing, furniture, etc. from Boscov’s would have a choice to make. They could either not purchase those items at all, or they could buy them elsewhere.

Given that there are many other stores that sell these items nearby, it is likely that Boscov’s customers can find what they want at other stores in the area. When these individuals buy their items at the other stores, those stores will experience an increase in sales, and will need to hire more people. Eventually, the “lost jobs” from Boscov’s would be “new jobs” at the competitor’s businesses. Overall, one would expect no lost jobs for the area.

The only way one could credibly make the argument that Boscov’s closing would result in fewer jobs for the area is if people who would buy from Boscov’s would no longer purchase products from Snyder country – instead buying from stores in other counties or from the Internet. Given the number of stores that sell the same types of items as Boscov’s in Snyder country, few people likely fall into this category.

Given a look at the benefits and costs, I think it is pretty clear that we should commend the Snyder County Commissioners for rejecting the loan.



Some background articles on the controversy can be found at these links:

http://www.dailyitem.com/archivesearch/local_story_358122746.html

http://www.dailyitem.com/archivesearch/local_story_354223055.html

Welcome

Hello All!

Welcome. My name is Matt Rousu. I am an Assistant Professor of Economics at Susquehanna University. Susquehanna University (SU) is located in central Pennsylvania, and I am creating this blog to write thoughts about local, state, national, and international economic topics.

I hope you enjoy!

Matt