I realize the potential federal government shutdown this is more of a politics than economics question, but this is some dish from CNN insider, Dana Bash (via Slate):
I’ve not talked to anybody here who doesn’t think it’s a very, very big possibility, even Republicans, that the government won’t shut down—even for a short time.
I can’t say this with certainty, but I am unsure whether or not I can say that I don’t disagree with Ms. Bash’s observation.
UPDATE: The talk is in Steitz 102.
The first Economics Colloquium of the year is our own Professor Marty Finkler talking about some of his recent work on the U.S. employment situation. He will give a 30-40 minute talk, after which we will adjourn for Econ Tea in Briggs 217 at 5:15.
Please join us for Professor Finkler’s talk, and to meet our visiting faculty, Satis Devkota and M. Taylor Rhodes.
The abstract is below:
________________________________________________
Merton D. Finkler
Professor of Economics
Lawrence University
The economic recovery from the recession of December 2007 to June 2009 featured real GDP returning to its pre-recession level while employment continues to lag behind to its pre-recession level. One possible reason is that employment patterns contain both cyclical and structural components. In this paper, changes in the price of labor, unit labor costs, and the cost of equipment and software are studied as key structural components. Separate regressions with changes in employment as the dependent variable are performed for goods producing, service producing, and manufacturing sectors. In each case, explanatory power is increased with the inclusion of a representation of the cost of labor; thus, macroeconomic policy that seeks to stimulate employment growth should consider the effects of the chosen policy on the relative cost of labor and not just on aggregate demand.
I see that McDonalds employees from around the country have been walking off the job to protest low wages, even causing some restaurants to shut down temporarily. What would happen, do you suppose, if McDonalds started paying its employees more?
Writing in Forbes, Tim Worstall makes the extraordinary claim that McDonalds could raise workers wages to $15 an hour and it would have no impact on the price of a Big Mac! This is such an extraordinary claim that I will go ahead and quote it at length:
Hmm. Well, what else can we surmise about a rapacious capitalist organisation? In that ruthless pursuit of gelt and pilf for its shareholders it is going to gouge the customers for the absolute maximum that it can, yes? … What limits McDonald’s ability to entirely empty our wallets every time we want a hamburger is that there are other people who will also sell us one. Wendy’s, Jack in the Box, In and Out, there’s a multiplicity of places where we can go to fur our arteries. Which leads to our conclusion on pricing in a capitalist and free market economy. The capitalists charge the absolute maximum they can get away with, that ability being limited by the competition that comes from alternative suppliers.
Thus the price is not determined by the cost of production of an item. Which means that, if we raise McDonald’s production costs by increasing the wages of the workers, the price isn’t going to change. For it’s not production costs that determine prices: it’s competition that does. Another way to put this is that McDonald’s is already charging us the absolute maximum that it can for its current level of sales. Thus it cannot raise its prices if its production costs go up.
All of which means that the real change in the cost of a Big Mac, or the dollar menu, if McDonald’s workers were paid $15 an hour is: nothing. For production costs simply do not determine the prices that can be achieved in a competitive market.
I’m not sure I’ve ever heard anyone argue that costs don’t matter in determining prices: Every text that I’ve taught out of walks through the logic of a firm’s profit maximizing decision — firms maximize profits by setting output where marginal revenue equals marginal cost. So, costs do help to determine prices, at least the way I teach it. Continue reading I’m Lovin’ It. But if that Counter Guy Gets $15/hour, I’m Lovin’ Less of It
Once again Talk Like a Pirate Day, meaning that it’s time to send you over to the The Mudd’s witty homepage— more than a laugh a minute.
The Big question on everyone’s mind today seems to be what impact will Talk Like a Pirate Day have on the President’s Convocation Speech?
The graph shows the trajectory of today’s S&P 500 index (green) and the yield on the 30-year treasury bond (blue).
The U.S. Federal Reserve said on Wednesday that it would continue buying bonds at an $85 billion monthly pace for now, surprising financial markets that were braced for a reduction in the central bank’s economic stimulus.
Can you guess what time the Fed made the announcement?
Clearly, anyone betting on a Bear market took it in the teeth today (especially if it is just delaying the inevitable). I guess we’ll have to wait and see.
Those of you out-of-staters venturing into Wisconsin for the first time perhaps have noticed a few things — the verdant landscape, the ubiquitous beer-drinking establishments on and around College Avenue, people wearing green and mustard yellow clothing as if that were a normal thing to do, and, of course, the Wisconsin dairy culture (so to speak).
Indeed, Wisconsin dairy farming is second to none (well, second to California, but California is really big) and the locals here embrace the cheese culture in ways that Californians could only dream. Firstly, of course, the locals actually call themselves cheeseheads, and will go so far to wear cheese-themed headwear.
We also have something else the median Californian doesn’t see much of — winter. As you might expect, the cheeseheads are busy looking for innovative ways to defray the considerable costs of combating roadway snow and ice. And, as it turns out, they need look no farther than the cheese on top of their heads.
The Milwaukee Journal-Sentinel is on top of the story:
The [Milwaukee] Department of Public Works will go ahead this winter with a pilot program to determine whether cheese brine — a liquid waste product left over from cheesemaking — can be added to rock salt and applied directly to the street…
Tiny Polk County, in the northwest part of the state, has been using cheese brine since 2009. According to the city report, Polk County saved approximately $40,000 in the first year by using cheese brine as a pre-wet agent to salt or a combination of salt/sand.
It seems they spray the cheese on the ground as a primer and then dump the rock salt on top of that. Rock salt is more expensive than cheese brine (generally, I guess) so it seems to make sense. Except the cheese is kind of stinky, it seems.
I really liked the writing in the story and the somewhat comical undertones (though my spell check doesn’t seem to recognize the word cheesemaking, it seems to flow quite naturally in the Journal-Sentinel prose). Perhaps the most interesting aspect is that cheese wasn’t the first choice — the city has been toying around with salt-brine, molasses, and beet juice as supplements to defray the cost of rock salt.
Beet juice!?!
Next time they’ll know better.
President Mark Burnstein has taken the reins here at Lawrence, and he will give his first Convocation talk as President this coming Thursday at 11:10 in the Chapel. His talk “Crossing the Threshold: Community as Curriculum,” will undoubtedly be infectious.
It is the Matriculation Convocation, so the faculty will be suited up.
See you there.
Who is teaching all of these additional courses?, you ask. Well, here we go: The Economics Department is pleased to welcome two visiting professors, M. Taylor Rhodes and Satis Devkota, for the 2013-14 academic year.
Professor M. Taylor Rhodes hails from Charlotte, North Carolina, where he completed his doctorate in economics at UNC Greensboro in the Spring of 2013. Other stops along the way include the University of Virginia and Penn State. At Lawrence, he is teaching introductory macroeconomics (Fall and Spring), advanced topics in Sports Economics (Winter), and labor economics (Fall). He has an active research agenda in applied microeconomics, including local economic policies, topics in sports economics, and the introduction of new beer brands in the US beer industry. He has four years of teaching experience, both in the classroom and online. In his spare time (?) he is something of a computer jock — listing his hobbies as desktop Linux, open source software and network and cloud computing. His aspirations for the year include the creation of his own cloud.
Professor Satis Devkota, completed his doctorate at Wayne State University in 2012, focusing on Health Economics and Comparative Health System. This year he will be teaching development economics (Fall and Spring), two sections of econometrics (Winter), and international trade (Spring). He also has an active research agenda in applied microeconomics focusing on health economics (sustainable policy, comparative effectiveness and health care disparity), education economics (socio-economic determinants of disparity in education and access to schooling), development economics (farmer’s productivity, inequality and poverty) and international trade (exchange rate and trade). He has more than 12 years of teaching experience at the collegiate level, including a stint teaching MBAs this past year as a visiting professor at the University of South Dakota.
And, of course, the indefatigable Professor Gary Vaughan will be back this year with an expanded role for the innovation & entrepreneurship program. Once again he will be teaching sections of financial accounting (ECON 170) in the Fall and Spring, as well as playing a role in the entrepreneurship courses (ECON 180 and ECON 211). In addition, he will be offering a follow-up to his financial accounting course, Topics in Finance (ECON 295) in the Winter term. Professor Vaughn is the founder and runs Guident Business Solutions in Appleton, and sits on the board of several organizations, including Board of Advisor member to College of Buisness and Legal Studies at Concordia University and the Self Employment in the Arts (SEA) Organization.
Welcome to Professors Rhodes and Devkota and welcome back to Professor Vaughn. We hope to have a welcome Econ Tea in the next week or two.
Welcome back, students and faculty. Here is the full schedule for your perusal.
Fall Additions:
ECON 120 ● INTRODUCTION TO MACROECONOMICS ● 12:30-01:40 MWF MEMO 118 Briggs 217 ● Mr. Rhodes
ECON 200 ● ECONOMIC DEVELOPMENT ● 08:30-09:40 BRIGGS 217 ● Mr. Devkota
ECON 295 ● TOPICS : LABOR ECONOMICS 03:10-04:20 MWF BRIGGS 217 ● Mr. Rhodes
Winter Additions:
ECON 295 ● TOPICS: FINANCE ● 12:30-01:40 MWF TBD ● Mr. Vaughan (not yet listed)
ECON 380 ● ECONOMETRICS ● 08:30-09:40 MWF BRIGGS 223 09:00-10:50 T BRIG 223 ● Mr. Devkota (not yet listed)
ECON 495 ● ADVANCED TOPICS: SPORTS ECONOMICS ● 03:10-04:20 MWF BRIGGS 217 ● Mr. Rhodes
Spring Additions (not on schedule yet):
ECON 120 ● INTRODUCTION TO MACROECONOMICS ● 12:30-01:40 MWF TBA ● Mr. Rhodes
ECON 200 ● ECONOMIC DEVELOPMENT ● 11:10-12:20 MWF TBA ● Mr. Devkota
ECON 460 ● INTERNATIONAL TRADE ● 08:30-09:40 MWF TBA ● Mr. Devkota
When the indefatigable Saturday Morning Breakfast Cereal weighs in on economists, hilarity ensues.
Economists are further ridiculed here and also here. Oh, and here, too!
We are somewhat more heroic in this piece, I’d say! (For an explanation of the value of a painting vs. the value of grandma, see here. And then see here).
Thanks to Mr. T. for the tip.
This past weekend Nobel Laureate Ronald Coase died. He is one of the most influential social science scholars ever, having shaped questions of organizational economics, and virtually founding the field of law & economics. His 1937 paper, “The Nature of the Firm,” addressed the canonical question for organizational economics, and a mere 23 years later in 1960 he altered the trajectory of social science research with “The Problem of Social Cost.” As Coase put it:
Transaction costs were used in one case to show that if they were not included in the analysis, the firm has no purpose, while in the other I showed, as I thought, that if transaction costs were not introduced into the analysis, for the range of problems considered, the law had no purpose (p. 62).
The Cheap Talk guys give us a short, pithy take on the organizations piece, and Steven Landsburg distills the essence of the externalities argument here.
It’s difficult to convey what an influence Coase has had on the profession, but it is certainly much greater than the “median” Nobel Prize winner. Peter Klein weighs in:
His “Problem of Social Cost” (1960) has 21,692 Google Scholar cites, and “The Nature of the Firm” has 24,501. Adam Smith’s Wealth of Nations, summed across editions, has about 30,000. Coase changed the way economists think about the business firm and the way they think about property rights and liability…. Not all economists have agreed with his arguments and conceptual frameworks, but they radically changed the terms of debate in the economics of law, welfare, industry, and more. He is the key figure in the “new institutional economics” (and co-founder, and first president, of the International Society for New Institutional Economics).
The Lawrence Economics Blog’s links to Coase are here, and here is a the University of Chicago notice. If you just type “Coase” into a search engine, you will have plenty to read. Wow.
