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Economics

August 12, 2014

"The Future of Iced Coffee"

So it seems like coffee--soon even iced coffee--is going the way of beer, some clothes, and other items. For a while, big companies, mass production, and low prices dominate. Then, almost as soon as critics decry the loss of quality and craftsmanship as one of the horrors--horrors!--of the free market, the market produces . . . quality.

August 11, 2014

"Why We Shouldn’t Raise Teacher Pay"

Nicely done.

Why has increasing teacher pay not led to a corresponding increase in teacher skills? Vanderbilt University economist Dale Ballou has an answer. Simply put, even when schools are offered highly-skilled teachers, they don’t seem to want them. Writing in the Quarterly Journal of Economics, Ballou demonstrated that many of the most attractive teaching applicants—those who graduate from more competitive colleges, earn higher GPAs, or hold degrees in specialized areas such as math or science—schools often reject them in favor of less-impressive candidates who took the traditional route of majoring in education. An education degree was generally preferred even for applicants preparing for a secondary-school position. . . .

Ballou and fellow economist Michael Podgursky of the University of Missouri have shown that higher pay without reforms could actually lower teacher quality. Their argument starts with the observation that increasing pay reduces the number of job openings (because fewer teachers will quit or retire), and increases the number of new applicants (because the salary is more attractive). This necessarily lowers the chance that any given teaching applicant will receive a job offer.

That reduced probability may discourage certain would-be applicants from making the costly investment of time and money in becoming certified for teaching, especially if they do not perceive that schools favor them in the hiring process. And, unfortunately, the best-qualified applicants are probably most discouraged.

". . . the long-term debt situation remains far from solved"

That's the bipartisan Committee for a Responsible Federal Budget commenting on the 2014 CBO long-term budget outlook. (You can try to balance the budget with their nice budget simulator.)

Related: Clifford Asness, "We Must Head Off the Looming Pension Tsunami".

We have not saved enough for the retirements that we have promised people, public or private. Moreover, that problem is greatly understated by current reporting methods. This may seem an undramatic candidate for addressing one of our biggest problems, but that's part of my point. Unlike hurricanes or wars or debt ceilings, we don't have to deal with retirement funding today. However, this problem grows and eventually will metastasize. Until the looming pension crisis is dealt with, one way or another, no one's retirement is secure, no government fiscal projections are fully credible, and no one's property is safe against extreme and unpredictable taxation.

August 10, 2014

"What Today's Economic Gloomsayers Are Missing"

World-class optimism from noted economist Joel Mokyr. I think he is absolutely correct.

So: If everything is so good, why is everything so bad? Why the gloominess of so many of my colleagues? Part of the story is that economists are trained to look at aggregate statistics like GDP per capita and measure for things like "factor productivity." These measures were designed for a steel-and-wheat economy, not one in which information and data are the most dynamic sectors. They mismeasure the contributions of innovation to the economy.

Many new goods and services are expensive to design, but once they work, they can be copied at very low or zero cost. That means they tend to contribute little to measured output even if their impact on consumer welfare is very large. Economic assessment based on aggregates such as gross domestic product will become increasingly misleading, as innovation accelerates. Dealing with altogether new goods and services was not what these numbers were designed for, despite heroic efforts by Bureau of Labor Statistics statisticians.

"How to Get America Moving Again"

Simple and excellent but all but impossible politically.

But that could change.

August 06, 2014

"In Pittsboro and beyond, pining for floors from old tobacco barns"

Free enterprise is grand.

Grumette’s story speaks to the world’s unlikely curiosities: America’s richest now line their floors with pieces of the country’s agricultural past, much of it collected on North Carolina back roads.

This discarded wood that once dried tobacco or sheltered horses now commands at least four and sometimes 10 times the price of what you’d buy at Home Depot, made valuable both by the decades it survived and the care spent rescuing it from the fate of old things.

August 05, 2014

"Disruption Ahead: What MOOCs Will Mean for MBA Programs"

Interesting interview with two Wharton professors on the economics of MOOCs, at least from the perspective of a top MBA program. 

It’s actually not very expensive. If you look at what it costs to develop a MOOC, in a sustainable mode, in the long run it would be about $70,000, but we reach with a MOOC several hundred thousand students. If we really look at it – if you look at it on a per viewer basis — it runs to about 50 cents per person. At 50 cents per person, that’s cheaper than almost any other form of outreach. Fifty cents for that kind of engagement is very, very inexpensive.

August 04, 2014

"You Are Not Late"

Warning: industrial-strength optimism. On my better days it's an optimism I share.

Right now, today, in 2014 is the best time to start something on the internet. There has never been a better time in the whole history of the world to invent something. There has never been a better time with more opportunities, more openings, lower barriers, higher benefit/risk ratios, better returns, greater upside, than now. Right now, this minute. This is the time that folks in the future will look back at and say, “Oh to have been alive and well back then!”

The last 30 years has created a marvelous starting point, a solid platform to build truly great things. However the coolest stuff has not been invented yet — although this new greatness will not be more of the same-same that exists today. It will not be merely “better,” it will different, beyond, and other. But you knew that.

"Some Public Pension Funds Making Big Bets On Hedge Funds"

I don't think this will end well.

Public pension funds have been doing something new in recent years — investing in hedge funds.

Hedge funds are often secretive investment firms led by supposedly supersmart fund managers. Though, sometimes they implode spectacularly — think Long-Term Capital Management. Another prominent firm, Galleon Group, recently got shut down for rampant insider trading.

Those may be rare examples, but one thing that's true about nearly all hedge funds is that they charge high fees. And some experts are questioning whether public pension funds should be investing this way.

July 31, 2014

"At this bar I go to, the prices of the beers change every 15 minutes based on supply and demand inside the bar."

Fifteen minutes seems a little short, but the idea is certainly worth experimenting with. (Unless it's just a marketing gimmick.)

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