Is it time to say goodbye to the Penny?

Has the venerable $.01 piece outlived its usefulness? Check out the website for some of the arguments in favor of eliminating the penny. What do you think?

Pigou would say, Hooray for the Irish!

A Pigovian tax, named for British economist Arthur Pigou, is a tax aimed at diminishing an activity seen as harmful to society. An example would be a pollution tax on companies guilty of polluting the air or water.
The Irish have taken this step to rid their society of plastic bags. Could we do the same here? Should we? Can you think of other activities that could be taxed?

World Clock

Check out this facinating website. Did any of the numbers surprise or even frighten you?

Bail Bonds; A Purely American Tradition

I did not realize that the use of bailbondsmen was unique to the American Justice system. Read this article and comment; What are your thoughts on allowing people to pay a percentage of their bails to bondsmen in order to get out of jail while awaiting trial? Is it free enterprise at its best? or Is it a practice that needs to be done away with?

Tax Rebates by May

Tax rebates of up to $600 per person could be in our hands by early May. Is this a good idea? Can you think of any drawbacks? Could it just be an election year ploy?

Cash for Grades

The New York school system is considering a plan for rewarding student performance with cash. Do you think this is a good idea?

What does Economics mean to you?

As we embark on this new semester of Economic study, I am curious to know what Economics means to you and what role it plays in your life. Leave your comments.
Mr. Pye

Week 1 Assignment

Go to Reffonomics website. Click on Lesson Plans link. Under basic concepts lessons, click on "Introduction to Economics." Review lessons 1 and 2. "What is Economics?" and "Opportunity Cost vs. Tradeoffs." Click on Multiple Choice quiz link and take 10 question MC quiz. Print off your score. Bring to class on Friday January 25, 2008.

Holiday Wishes

Have a Merry Christmas, and a Happy New Year. See you in 2008.

A Quick Quiz

Demand, Supply Hip Hop Style

All right you hip hop wannabes, check out this rap. It actually makes some good points about the principles of economics. It is the last song on the index.

Push Presents; Are you kidding me?

Apparently this is a new phenomenon, giving new mothers gifts of jewelery particularly diamonds just after they give birth. Is this an example of materialism run amok? Or does it show that men are more compassionate these days after seeing their spouses go through the pain of pregnancy and childbirth. Perhaps its a creation of the jewelry industry in order to sell more products. What do you think?

Death of the U.S. sock industry

Check out this story from NPR about the Invisible Hand at work. You can also listen to the story if you prefer. It is an excellent article about the pros and cons of globalization in the once thriving U.S. sock industry.

Goalies, Stop Jumping.

Staying with our sports theme this week, check out this bit of economic research on goalies and penalty shots. It might surprise you. Isn't it funny how economics can be used to explain almost anything?

Should College Athletes Share in the Revenues

Check out this local story from the Chronicle. It is an old argument, that college athletes (especially football players) are bringing millions of dollars into their schools, and that they should be getting some of that money. Would that be the end of college fooball as we know it, if we started paying players? What about the free education these players are getting? What do you think?

Debunking some myths regarding healthcare

Many of the current presidential candidates are railing about the failure of the U.S. healthcare system and calling for major reform. In this editorial, economist Greg Mankiw looks deeper at some of the claims being made.

Thinking about your future

Still trying to decide what to major in in college, how about oil. Read this article about the looming shortage of petroleum engineers, geologists, and oil industry workers in general.

Devices Enforce Cellular Silence, Sweet but Illegal

I want one of these. Check out this NY Times article on cell phone jammers. May we never have to listen to someone's personal details in an elevator, checkout line, or waiting room again.

Maybe its not as bad as we think

Today is Jobs Day. Here’s what you need to know about the October employment report:
+166,000 net new jobs were added in October. This is almost twice what the markets expected.

The unemployment rate is unchanged at 4.7%.

The US economy has created 1.68 M net new jobs over the past year, and 8.3 M since the labor market turnaround in August 2003.
We’ve had 50 months (4 years and 2 months) of continuous employment growth, a new record.

Wages are up 1.2% over the past year, adjusting for inflation.
In other economic news, on Wednesday we got GDP data:

GDP grew 3.9% in the 3rd quarter, well above market expectations of about 3%. This is the strongest quarterly GDP growth in 1½ years. Extra happy.

We can see the effects of a strong labor market in the consumption numbers – people are working and their real incomes are climbing, so they’re buying more stuff. Since consumption is about 70% of the economy, strong consumption growth is critical to continued GDP growth.

Housing is still a drag – it knocked 1.1% off the third quarter growth number. This is bad but unsurprising. The silver lining is that there’s no evidence the housing decline is spilling over into consumption.

Business investment was solid. Investment in “equipment and software” grew at a 6% rate, the best in 1½ years.

Exports continue to be strong, and they now make up 1 in 8 dollars of our GDP (12%). The rest of the world is growing, and they’re buying our stuff.

This last point is a useful reminder – world economic growth is not a zero sum game. When other countries’ economies grow, they buy more US goods. That’s good for us.

It’s no fun unless you have a picture. The yellow bar shows the total of 3.9% GDP growth. The other bars show where the growth is coming from.

This is my favorite way to show what’s actually going on – you can see that most of our growth is coming from consumption, that business investment and exports are important, and that housing is still a big drag.

We also had some happy news that productivity grew 2.6% in the 2nd quarter of this year. Higher productivity means each worker makes more stuff. Over time, productivity growth leads to wage growth.

Wednesday the Federal Open Market Committee cut the fed funds rate by a quarter point, to 4.5%. They also cut the discount rate by the same amount, to 5%. The FOMC also put out a statement. Since we don’t comment on the Fed’s monetary policy actions, I’ll leave it at that.

There are, however, some clouds going forward.

It’s probably going to take a while to work out of the housing downturn. We expect housing will continue to be a drag on GDP growth.
Oil prices are nearing an all-time inflation-adjusted high (depending on how you measure inflation).

The credit markets are still working through problems that first appeared in August.
One of our favorite words when talking about the US economy is “flexible” – we have extremely flexible labor and capital markets. When bad things happen (e.g., a factory closing, wildfires, housing and credit market troubles), a flexible economy can adjust and recover quickly and with the smallest amount of pain. We’re seeing the benefits of a flexible economy now.

Halloween Spending

Check out this slide show about the money that Americans spend on Halloween. It is very interesting and eye opening. Remember consumer spending is the key to keeping the economy going. Maybe we should create a few more holidays in order to fend off recession.