Thursday, February 22, 2018

San Antonio has highest credit card debt burden in US

From news4sanantonio. Excerpts:
"San Antonio has the highest credit card debt burden in the U.S., according to a new CreditCards.com report. The study looked at each of the 25 largest cities in the U.S. and compared the average credit card debt and the median income. If you go by what experts recommend and dedicate 15% of your income to credit card debt, it would take the typical San Antonio resident 22 months to get out of debt and he or she would pay $911 in interest."

"Cities with the highest credit card debt burdens:

1. San Antonio (22 months, $911 interest)
2. Miami/Ft. Lauderdale/West Palm Beach (21 months, $814 interest)
3. Houston (20 months, $799 interest)
4. Los Angeles (20 months, $745 interest)
5. Dallas (19 months, $801 interest)"
Click here to see the news release from creditcards.com

Friday, February 16, 2018

The Resource Curse

By Melissa Mittelman of Bloomberg.

In the book The Economics of Macro Issues, they mention that Russia has many resources but its per capita income is less than that of Luxembourg which has few resources. The book suggests that the economic system matters more that how many resources a country has.

Here are some excerpts from the article, including links to research which says there is no resource curse:
"Striking gold or discovering oil would seem to guarantee instant fortune. Instead, it often leads to conflict, corruption and poverty. History is full of examples of countries whose natural-resource wealth led to less economic success. Revenue from extracting raw materials might be mismanaged or embezzled by government officials, or siphoned off by foreign corporations. The bonanza might crowd out investment in other parts of the economy and make goods and services more expensive. And the country’s fiscal and economic fate might hang on volatile global commodity prices, especially for smaller and less diverse economies. All told, local populations can be left with little to show for their resources except a degraded environment. Economists and social scientists call this phenomenon “the resource curse.” Many countries are trying to determine how to prevent or reverse it."

"The average incomes of African countries, including Angola, Nigeria and Sudan, are low and their health indicators are poor, despite their abundance of oil, diamonds and other precious minerals. While oil exports prop up extensive welfare spending in Middle Eastern petro-states, they remain vulnerable to price swings and their people subject to undemocratic regimes. Brazil continues to grapple with corruption and vast, dangerous slums, though it's rich in resources as varied as oil, iron ore, coffee and soybeans."

"The British economist Richard Auty coined the term “resource curse” in a 1993 book investigating why resource-rich countries under-performed other developing economies. A 1995 study found that economies with high commodities exports grew more slowly from 1971 to 1989, even after controlling for variables such as income and investment rates. Notwithstanding a few success stories (such as Botswana), the negative correlation between raw-material exports and economic growth suggests that resource wealth at least doesn’t help. The most commonly suspected causes include under-investment in other industries (such as manufacturing), exposure to price swings, and concentration of wealth that discourages the development of a rule of law and other conditions needed for a vibrant economy. The resource curse is sometimes lumped with Dutch Disease, named for a 1960s crisis in the Netherlands after it discovered natural gas in the North Sea. It describes what happens when an event like a commodity boom makes a country’s currency more expensive and its other goods less competitive."

"Some researchers question the existence of a resource curse, suggesting that resource wealth helps economic growth after all. Others have suggested that what matters isn’t resource abundance but the amount of diversification in the economy and the strength of a country’s institutions."

"A Stanford University paper challenging the conventional account."

Friday, February 09, 2018

A Special Valentine's Message On Romantic Love

The first one is Researchers at AAAS Annual Meeting Explore the Science of Kissing. The following quote gives you an idea of what it is all about: "Kissing, it turns out, unleashes chemicals that ease stress hormones in both sexes and encourage bonding in men, though not so much in women." I guess economists call this "interdependent utility functions." Meaning that what brings one person pleasure brings brings the other person pleasure, and vice-versa.

The other is Cocoa Prices Create Chocolate Dilemma. (that is from 2009) The article opens with "Soaring cocoa prices are creating a Valentine's Day dilemma for chocolate makers. They don't want to raise retail prices when recession-weary consumers are trying to limit their spending." The problem is crop diseases in Ivory Coast and Ghana. You might need to be a WSJ subscriber to read the whole article.

Here is a new article from yesterday's San Antonio Express-News (2-13-2011). Romance in bloom at workplace: Survey indicates 59% have taken the risk-filled leap. It seems like many people admit to having a romance at work and/or meeting their spouse at work. So what starts out as economic activity leads to some other needs being met.

Now the economic definition of romantic love.


 Abstract: "Romantic love is characterized by a preoccupation with a deliberately restricted set of perceived characteristics in the love object which are viewed as means to some ideal ends. In the process of selecting the set of perceived characteristics and the process of determining the ideal ends, there is also a systematic failure to assess the accuracy of the perceived characteristics and the feasibility of achieving the ideal ends given the selected set of means and other pre-existing ends.

The study of romantic love can provide insight into the general process of introducing novelty into a system of interacting variables. Novelty, however, is functional only in an open system characterized by uncertainty where the variables have not all been functionally looped and system slacks are readily available to accommodate new things. In a closed system where all the objective functions and variables must be compatible to achieve stability and viability, adjustments in the value of some variables through romantic idealization may be dysfunctional if they represent merely residual responses to the creative combination of the variables in the open sub-system."

The author was K. K. Fung of the Department of Economics, Memphis State University, Memphis. It was from a journal article in 1979. More info on it is at this link. The entire article, which is not too long, can be found at this link.

Then there was this related article: Love really is blind, U.S. study finds. Here is an exerpt:

"Love really is blind, at least when it comes to looking at others, U.S. researchers reported on Tuesday.

College students who reported they were in love were less likely to take careful notice of other attractive men or women, the team at the University of California Los Angeles and dating Web site eHarmony found.

"Feeling love for your romantic partner appears to make everybody else less attractive, and the emotion appears to work in very specific ways in enabling you to push thoughts of that tempting other out of your mind," said Gian Gonzaga of eHarmony, whose study is published in the journal Evolution and Human Behavior.

"It's almost like love puts blinders on people," added Martie Haselton, an associate professor of psychology and communication studies at UCLA."
More links:

How to Be a Better Valentine, Through Economics by economist Paul Oyer.

Here’s what science says is the secret ingredient to making your love spark 

Can Giving Up Money And Material Things Lead To More Love?

What Do Men In China Need To Get A Bride?

Adam Smith, Marriage Counselor

A Special Valentine's Message On Romantic Love

Can You Put A Price Tag On Love?

Do Opposites Attract? Not Usually, Except Maybe When It Comes To Money

Return of the Love Headhunters

eHarmony To Provide Personal Counselors To Help You Find Mr. Or Ms. Right

Economist Paul Zak, aka Dr. Love (he studies the brain with "neuroeconomics")

This is your brain on love   (brain scans and biology seem to confirm the economic definition given above)

Dollars & Sex: The Blog of Economist Marina Adshade

Do Women Really Value Income over Looks in a Mate? by Marina Adshade

Friday, February 02, 2018

The percentage of 25-54 year-olds employed decreased in January

(Note: For student just beginning this week click here to read something about me).

One weakness of the unemployment rate is that if people drop out of the labor force they cannot be counted as an unemployed person and the unemployment rate goes down. They are no longer actively seeking work and it might be because they are discouraged workers. The lower unemployment rate can be misleading in this case. People dropping out of the labor force might indicate a weak labor market.

We could look at the employment to population ratio instead, since that includes those not in the labor force. But that includes everyone over 16 and that means that senior citizens are in the group but many of them have retired. The more that retire, the lower this ratio would be and that might be misleading. It would not necessarily mean the labor market is weak.

But we have this ratio for people age 25-54 (which also eliminates college age people who might not be looking for work)

The percentage of 25-54 year olds employed is 79.0% for January. It was 79.1% in December. It is still below the 79.7% in December 2007 when the recession started (it was 80.3% in January 2007).  Click here to see the BLS data. The unemployment rate was 4.1% in January (it was 4.1% in December as well). Click here to go to that data. The percentage of adults employed stayed at 60.1%.

Here is a good graph from the St. Louis Fed. It shows that there are about 125 million people in the 25-54 year old group. So since we are 0.7 percentage points below the 79.7% of December 2007, that is still 875,000 fewer jobs (Hat tip: Vance Ginn of the Texas Public Policy Foundation).

Here is the timeline graph of the percentage of 25-54 year olds employed since 2007.


Here it is going all the way back to 1948


The annual numbers are important, too. It rose to 78.63% for all of 2017 from 77.925% in 2016. We have had 4 or more straight years of a 0.5 or more gain. The last time that happened was 1984-89. But we are still below the 79.9% for all of 2007 (the recession started in Dec. 2007).

Again, there are about 125 million people in the 25-54 year old group. So since we are 1.26 percentage points below the 79.9% of 2007, that is still 1.58 million fewer jobs. 

Thursday, January 25, 2018

Can adding a phantom third story to their homes help families find a wife for their son?

See Supply, Demand and Marriage by economist Robert Frank. Maybe this shows how powerful supply and demand works if it can help explain marriage. Excerpts:
"IN some cultures, romance isn’t nearly as important as cash when it comes to choosing a marriage partner. And even when money plays no explicit role in selecting a mate, courtship customs are governed by the venerable economic model of supply and demand.

Under the dowry system in India, for example, parents of older brides would typically pay more to prospective grooms. Men with better jobs would receive larger payments, too.

In short, there really is a marriage market in many countries around the world, and economic principles apply to it. In markets with a preponderance of women seeking partners, the terms of trade shift in favor of men. If more men are seeking partners, the reverse is true."

"An imbalance in the opposite direction characterizes the contemporary marriage market in China. The Chinese government’s one-child policy, combined with a cultural preference for sons and technologies that permit selective abortion, have helped to create a large sex-ratio imbalance among young Chinese. For every 100 women in that group, there are now more than 120 men.

According to market models, the terms of trade in the Chinese marriage market should have shifted sharply in favor of women. And evidence suggests that young Chinese women and their families have in fact become much more selective in recent years.

They appear, for example, to focus more critically on the earnings potential of prospective mates. Because house size is often assumed to be a reliable signal of wealth, a family can enhance its son’s marriage prospects by spending a larger fraction of its income on housing. (Other families can follow the same strategy, of course, but when all families do so, the resulting homes are still reliable indicators of relative wealth.) Such a shift appears to have occurred.

For example, when Shang-Jin Wei, an economist at Columbia University, and Xiaobo Zhang of the International Food Policy Research Institute examined the size distribution of Chinese homes, they found that families with sons built houses that were significantly larger than those built by families with daughters, even after controlling for family income and other factors. They also generally found that the higher a city’s male-to-female ratio, the bigger the average house size of families that have sons.

Mr. Wei reports that many families with sons have begun to add a phantom third story to their homes, one that looks normal from the outside but whose interior space remains completely unfinished.
“Marriage brokers are familiar with the tactic,” he reports, “yet many refuse to schedule meetings with a family’s son unless the family house has three stories.”"
Related posts:

A fake job reference can be just a few clicks away.

Fake Economist Fools Portugal.

Slave Redemption in Sudan. (Fake slaves are sold to those who buy slaves and then give them their freedom)

Can A Product Work Just Because It's Expensive?. (fake medicine)

If It Pays To Have Friends, Can You Pay To Have Friends?. (you can hire fake boyfriends)

Study: Half of American Doctors Give Patients Placebos Without Telling Them.

Saudis grapple with fake street sweepers .

Rent a White Guy: Confessions of a fake businessman from Beijing (by Mitch Moxley in The Atlantic Monthly)

Wednesday, January 17, 2018

Another Semester Has Started

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) 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 excited because of the expertise they brought to their teaching. Now that I have been a teacher for over 20 years, I can see how important that was.

After finishing my A.S. degree at Moraine Valley Community College (MVCC) in Palos Hills, Ill., I transferred to and graduated from the University of Chicago with a degree in economics. But it was my community college teachers prepared me to handle the rigors of the U. of C.

Later, I got a Ph. D. in economics from Washington State University. But I've accomplished some other things I never could have dreamed of when I began taking classes at MVCC and I think my teachers there paved the way for me.

In 2005, I had a letter to the editor published in The Wall Street Journal (I have now had five published there, three in The New York Times and three op-eds in the Express-News). This one was several paragraphs long, nearly as long as some of their op-ed pieces. It was the first letter in the letters section that day, and I got the top headline. It dealt with NAFTA and trade agreements.

As nice as that was, I got a big shock a few days later when I got a letter in the mail, on official stationery, from Richard Fisher, the president of the Federal Reserve Bank of Dallas. He complimented me on my letter and said it was superb. I had never even met him or ever tried to contact him before.

Wow. I graduated from high school with a 2.7 GPA, and when I started at MVCC, I had no idea what I would do with my life. If you had told me then that someday I would have a letter in the WSJ and get that kind of compliment, I doubt I would have believed you.

Then an adjunct professor at the business school at the University of Chicago contacted me a few years ago and wanted to know if it was OK for her to assign a paper I wrote on entrepreneurs for a class she was teaching on innovation. (Of course, I said yes).

That professor was Nancy Tennant Snyder. She has a Ph. D. from George Washington University and is a vice president at Whirlpool. Business Week magazine has called her one of the leading innovators in the world. She also cited two of my papers in one of her books.

Then I got an email from John Joseph, a professor at the University of Edinburgh. He is an expert on language and politics. He wanted to know if he could include an essay I wrote in a four-volume work he was planning. I again said yes and it was published last year (and it is called Language and Politics).

It is a collection of essays. Mine is titled "The Intersection of Economic Signals and Mythic Symbols." Other contributors include Jeremy Bentham and George Orwell. When I was a community college student, I never imagined being included along with the likes of those great thinkers.

The co-authors of the book The Economics of Public Issues have thanked me in each of the last three editions for my helpful suggestions. Almost all of the people they thank are from big universities. One of the co-authors of this book, Douglass North, is a Nobel Prize winner. Never imagined someone like that would value my input when I started out as a community college student.

Getting such recognition in cases like this gives me a sense of achievement. I know I have made a scholarly contribution to the world. And I want all SAC students to have a chance for this same kind of success (as an academic or any in line of work). I think all SAC faculty do. That is why school is hard, and that is why I'm thankful that my community college teachers were experts who maintained high academic standards.

Monday, January 15, 2018

China Is Ahead Of The U.S. In Mobile Payments

I use a book in my class called The Economics of Macro Issues by Roger LeRoy Miller & Daniel K. Benjamin. One of the chapters is called "Revolutionizing the Way We Pay." It includes discussions of things like paying for goods with your phone, etc. So this article is related to that.

See The Cashless Society Has Arrived— Only It’s in China:Mobile payments surge to $9 trillion a year, changing how people shop, borrow—even panhandle by Alyssa Abkowitz of The WSJ. Excerpts:
"Though the U.S. saw $112 billion of mobile payments in 2016, by a Forrester Research estimate, such payments in China totaled $9 trillion"

"For Alibaba and Tencent, the payoff isn’t just the transaction fees they make from merchants, typically 0.6%. It’s also the consumer data collected"

"The payments haven’t been required to go through the central bank’s clearing system"

"Consumers also are being offered more pitches for loans, investments and other financial products via smartphone. Short-term consumer credit in China soared 160% in the first eight months of 2017"

"Chinese . . . spent about 66 trillion yuan (nearly $10 trillion[in cash]) that way in 2016, down about 10% in two years, according to a central-bank payments report."

"Alibaba, which hosts online shopping bazaars where merchants sell goods to consumers. More than a dozen years ago, Alibaba, taking a page from the U.S. company now called PayPal Holdings Inc., started a system called Alipay as an escrow service."

"passed PayPal as the largest mobile-payment platform in 2013."

"People link their bank accounts to the app, then can pay for things either by scanning a merchant’s QR code or having the merchant scan theirs. People also can transfer money by tapping on an icon in WeChat or Alipay."

"the government made it tough for Visa Inc. and Mastercard Inc. to set up shop.

The rise of tech companies as financial powers has dealt a blow to traditional banks. China’s state-owned banks lost nearly $23 billion in fees in 2015 they might have collected from card fees"

"Visa and Mastercard both have mobile apps that allow users to pay via near-field communication and are incorporating biometrics into their offerings. They also work with Apple Pay and Samsung Pay."

"Smartphones are vastly more common than Palm Pilots ever were, yet Apple Inc. has struggled to get consumers to use its Apple Pay service, now accepted at more than 50% of all U.S. retail locations.

Just 19% of iPhone users have tried Apple Pay at least once"

"In Scandinavia, Nordic and Dutch banks have cut total branch levels by about 50% from peak levels, and Sweden hasn’t had checks since the late 1980s, according to Citi Research, part of Citigroup Inc."

"WeChat Pay and Alipay are gaining attention in U.S. tourist centers after striking deals with hotels and resorts. A group of Chinese tourists recently dined at the Bacchanal Buffet at Caesars Palace in Las Vegas, where the menu includes T-bone Australian lamb, chilled crab legs and handmade dim sum. They settled their bill with a smartphone."

"Tencent and Alibaba say they have no plans to push their payment platforms to U.S. consumers. Many Americans don’t see the need for mobile payments, since their plastic cards and cash are welcomed and some merchants still accept checks.

“Any new way of paying has to prove itself to be incrementally better than any other options you have,” said James Wester of research firm IDC Financial Insights. In the U.S., “plastic is convenient, widely accepted and understood by the customer.”"