Structural Employment

One of the things that we have talked about so far in macroeconomics is the different types of unemployment.  In particular, structural unemployment is often cited as a common problem in the United States.  From the early 1900s to the late 90s, the United States was heavily involved in manufacturing.  However, with NAFTA and increased globalization, it is not news to anyone that many of these jobs have now gone overseas.

That is why I read this article with great interest.  It seems that manufacturing is trying to make a comeback.  It is a specialized form of manufacturing, not the large scale "make giant things" manufacturing of the past.  Machines are becoming increasingly complex, and require a more trained and complex workforce to operate them.  This seems perfectly suited for the United States, which should be able to blend its manufacturing heritage with the human capital needed for complex industrial production.

And yet, it appears that the outsourcing of American manufacturing has led to a dearth of people skilled in factory jobs.  Trade schools and technical skills are a thing of the past; just think of Baltimore County.  Once, Western TECH and Eastern TECH were trade skills where students learned what we would call "votech" jobs.  Now, they are magnet skills which cater to a college bound clientele.

Read the article and consider the questions below:

• Do you see manufacturing as a "job for tomorrow" in the United States?  Or will factory jobs remain a niche in the United States, with the bulk of manufacturing occurring overseas?
• As a student, what do you think of the decline of vocational technology in schools?  Do you think some students would be better served learning heating and air conditioning repair or masonry in high school?  Or is the "everyone goes to college" model (promulgated by your very county) a better approach for an increasingly complex economy?
• Should the United States even bother competing for manufacturing if other countries can do it for a much lower cost?  Consider China for example.  (FYI:  video has two parts where naughty words are bleeped out).

The first blog post will be due on Saturday, February 25th at midnight.  The second blog post will be due Sunday, March 4th at midnight.

Is GDP the Be-All-End-All?

Here at the beginning of macroeconomics, we've really been discussing the aggregation of data.  After all, macroeconomics is the examination of the economy as a whole, and in order to do that economists must slog through a tremendous amount of data to find out what is happening.

GDP is the most common measure of economic progress; indeed, the release of this number is a big deal in the media, and dominates the news headlines over several days.  Entire economic policy choices are made using this number...Presidencies have collapsed because of this number.

What if it's wrong?

All statistics are, to some degree, inaccurate (the old saying "lies, darn lies, and statistics"), but they are at least supposed to somewhat mirror reality.  However, the very way that GDP is calculated might make it an inaccurate and not very useful measure of economic prosperity.

Please read the following article on GDP and answer the following questions:

• How is GDP computed?
• What are some things which would improve GDP that do not necessarily benefit society?
• According to Nic Marks, why is GDP an obsolete measurement?
• What are some alternative ways of measuring GDP?  What arguments do the proponents make?
• What is your view of GDP?  Is it an okay measurement of a country's economic health, or is outdated?  Explain.  (Note:  for guidance, here is a list of countries ranked by GDP per capita.  Look at the countries near the top and bottom...is there a discrepancy between their GDP and the country's "livability"?)

Your first post will be due by Saturday, February 4th by midnight.  The second post will be due by midnight on Sunday, February 12th.

How Much Does a Whale Cost?

In the past two weeks we've been discussing the tragedy of the commons, and the idea that unless a shared resource is somehow incentivized to be saved, than people will deplete it to extinction.  We discussed this in the context of grass on the commons, auctioned air, and now you will examine it in one other area:  the whaling industry.

Some of you may be familiar with this topic through "Whale Wars", while others of you might have thought that the practice of killing whales ended with Captain Ahab.  But the issue is becoming relevant again, and lo and behold some economists have gotten together and proposed a solution to help the whaling industry clean up its act.  Why, people should buy and sell whales.

Please read the article linked here (a warning to animal lovers:  the picture at the top of the article might gross you out a little).  After reading the market, consider the following:

• What is the current state of the whale population?  How are whales currently protected?  Do these protections seem to have much effect?
• What is the proposed option to save the whales?
• How is this scenario similar to the cap and trade auction we did in class?
• One argument against whale markets is that whales are different than pollution because they are sentient beings.  One researcher even suggests that this could be "worse than slavery."  Do you agree with this assessment?  Explain.
• How would enforcement work?
• Do you agree with this proposal or not?  Explain.

The first post will be due Saturday, January 14th at midnight.  The second post will be due Sunday, January 22nd at midnight.  These will be the last two posts of the quarter/semester, so make them count!

Wage Discrimination

In our last episode of the econ blog, we examined the discrimination in prices that men and women pay for similar products/services, haircuts being the most explicit example.  But now that we are in Unit 4 (and looking at factors of production), it is appropriate for us to examine what could be another example of discrimination:  the pay gap between men and women.

Provided here for your perusal is a very interesting chart courtesy of The New York Times, showing the wage gap between men and women at a variety of jobs.  (On the left hand side of the page you will see color-coded occupations; click on one to get more information on the jobs within that category).

Provided here for your ponderment is an article from The Economist looking at the issue of labor force participation by women in a variety of countries.  Consider these two sources, and answer the questions below.

• Describe the history of labor force participation by women.  Historically, how involved have they been in the labor force?  In what sorts of jobs?
• How has the gap closed?
• What economic benefits and costs have accrued as a result of more women in the workforce.
• Carefully examine the chart on the Times website.  Using your knowledge of MRP and derived demand, could there be any economic justification for the wage gap?  Explain why or why not.
• Note:  this can quickly become a very contentious, political, and decidedly uneconomic discussion if we are not careful.  For this particular question, I'm asking you to use your knowledge of derived demand to answer the question, not your knowledge of ethics, business, or anything else

Your first post on this issue is due by midnight on Saturday, December 3rd.  Your second post will be due by midnight on Sunday, December 11th.

Addendum:  For your second post, I'd like you to consider the productivity improvements on the continent of Africa.  This article summarizes one of the major influences on African productivity:  cell phones.  After reading the article, consider these questions:

• Explain the improvements to the economy since cell phones became popular.
• Using your understanding of marginal revenue product and derived demand, explain how increased cell phone penetration throughout the continent will help improve economic conditions.
• How might cell phones be used to effectively improve productivity in Africa?  In particular, keep in mind that many in Africa are still farmers...it's easy to see how a cell phone would help a banker, but how does it help a farmer?

This post is due by midnight on Sunday, December 11th.

Price Discrimination, or Discrimination?

In class recently we discussed the different types of price discrimination.  As I was driving home from work yesterday, I found myself at the cafe buying a cup of coffee.  Next to the cafe was a barber shop, catering to cutting men's hair.  Nearby the barber shop was a salon, catering to cutting women's hair.  The salon was much more expensive for a haircut.  I'm not talking about shampoo, or curls, or anything else.  The haircut at the barber shop was $10, at the salon it was $15.  I started thinking about this in economic terms, because I am a nerd.

Some internet trolling led me to this article, which discusses the differences in price that genders pay for products.  My question to you is this:  are these examples of price discrimination, or are they examples of "real discrimination"?

Consider the following below:

• Why do you think that there is a price difference between the salon and the barber shop?
• Are some of the products mentioned in the article examples of price discrimination, or are they examples of old-fashioned gender discrimination?
• Is price discrimination bad?  Should it be somehow outlawed or curtailed?
• The author seems to suggest that this price discrimination is not just a harmless case of charging women more for shampoo; subprime mortgages and other large purchases seem to fall into this category.  Is this an example of price discrimination, gender discrimination, or is there perhaps a perfectly "legal" reason that more women have worse mortgage rates or higher premiums?

The first blog post on this topic is due by Saturday, November 19th at midnight.  The second post will be due on Sunday, November 27th at midnight.

The Game Theory Behind Early Decision

We are in the midst of our discussion about game theory; at the same time, the annual ritual of the college application process is growing to a climax.  As your teacher, I am aware of this fact, given how much time I spend writing letters of recommendation from mid-October to late-November.  Therefore, it seems to take a moment during this stressful time and analyze the college admissions process through the lens of game theory.


I would like for you to read this article from The Atlantic magazine.  I will warn you now, the article is lengthy, but given the topic I don't think that you will find it boring.  I would like for you to consider the college admissions process as an example of game theory, and to answer the questions below:

• What is the history of early decision?
• Analyze this quote from the article using game theory:  "No one wants to be the first one to take the step, so everyone needs to step back together."  What is the speaker referencing, and how does game theory apply to the quote?
• Using what we have learned about game theory, suggest why the author's proposal would not work?
• How do you feel about the early decision process?  After all, you are all wrestling with this issues now.

The first post will be due on November 5th at midnight.  The second post will be due on November 13th at midnight.


Addendum:  Now that you have examined the game theory behind college, let us assume for the moment that college is not in your future:  instead, a life of crime awaits you!  Let's examine the game theory behind a REAL prisoner's dilemma.


Here is the opening scene from The Dark Knight.  I would like for you to watch the clip and answer the questions.

• How is this scenario an example of game theory?
• Listen to the conversation in the car at the beginning.  What does the driver suggest about The Joker?
• What was the strategy for each of the robbers?
• How might their strategy change if they were a true criminal gang that would work together in the future?
• What SHOULD each of the robbers have done?

This blog post will be due November 13th at midnight.

Sin Taxes

Recently we talked about taxes, and one of the things mentioned was that taxes serve double duty:  not only do they bring in government revenue, they can also serve to "nudge" us toward proper behavior.  For example, taxes on alcohol are not just to raise money; by making that six pack just a little more expensive, states can discourage the marginal drinker from buying a little extra booze, thus sparing society from the bacchanalian mayhem that might ensue.  Recently, the government has proposed another potential "sin tax" that might hit a little closer to home...

Please read the following article and then answer the questions below:

• What is your view on this particular tax?  Is taxing sugary drinks a viable solution to help end obesity?
• Look carefully at paragraph four; there is lots of juicy economics in that little passage.  Based on what you read, is soda an elastic or inelastic good?  Explain.
• What do you think of the beverage lobby's argument against the tax?  Is this tax regressive (i.e. hurts the poor more than the rich?)  Does that matter when it comes to taxes?
• Are these "sin taxes" morally correct?  Is it okay for the government to use taxes to "nudge" us to proper behavior?

The first post for this blog question is due by midnight on Saturday, October 22nd.  The second post is due by midnight on Sunday, October 30th (spoooooooky!).