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» Bloomburg: The Economic Nightmare of Halloween
The first law of economics would be that lump-sum transfers are more economically efficient than in-kind transfers. If you are going to give a gift to somebody, you should just give them the money. They will be a better judge of the best way to spend it. If instead, you give them a specific good, then you make them worse off, unless you somehow miraculously anticipate what the recipient would purchase if he received the money instead... Halloween is no time for thoughtful, targeted gift-giving. At Halloween, each house on a typical American block picks out one type of candy, and they give that exact same candy willy-nilly to everyone who shows up at the door. It's an economic nightmare.
(via WSJ Economics Blog) [ 10/31/07 ]
» New Yorker: James Surowiecki why the orthodoxy of supply-side economics remains so popular in the Republican party, despite clear evidence that tax cuts—surprise—shrink government revenue.
Saying today that tax cuts will increase tax revenues is not like saying that bombing Iran constitutes a sensible foreign policy, or that education vouchers will wreck the public schools. It's more like saying that the best way to treat sick people is to bleed them to let out the evil spirits.
[But] the absurd idea that tax cuts pay for themselves is based on an idea that is not at all absurd, which is that tax rates can have an impact on people's behavior.
I've never bought the idea that wealthy people will just refuse to make more money if they are taxed too heavily. When's the last time you saw a movie star—or a hedge fund manager—refuse cash so that they can be taxed at a lower rate? That's senseless.
And let's be clear that the very rich are making much of their money from investments, not from work. People may change their investment strategies to maximize profits, but that's not the same as choosing not to create wealth (ie - "value for society") because they won't be able to keep enough of it. [ 10/23/07 ]
» Mortgage crisis overwhelming credit counselors. "We knew it was going to be bad, but we didn't think it would be this bad. [...] All the predatory lending that has gone on, all of the pushing of exotic loans on people of color, female-headed households, families with children, people with disabilities -- it's all coming home to roost." Kaye Britton, a foreclosure counselor. / (3) Comments / [ 03/23/07 ]
» Yikes! More on those Adjusted Rate Mortgages—and how they are going to fuel the bust.
There's no way to camouflage what Harold, a former computer technician who asked BusinessWeek not to publish his last name, is about to face. He's disabled and has one source of income: the $1,600 per month he receives in Social Security disability payments. In September, 2005, Harold refinanced out of a fixed-rate mortgage and into an option ARM for his $150,000 home in Chicago. The minimum monthly payment for the first year is $899, which he can afford. The interest-only payment is $1,329, which he can't. The fully amortized payment is $1,454, which his lender, Washington Mutual gets to count on its books.
(via rc3oi) / (1) Comments / [ 09/07/06 ]
» It would appear that the real estate bubble is starting to deflate. Fortune outlines four housing myths and why you should not believe them. [ 08/31/06 ]
» The latest statistics show a slowdown in home sales, but a slight uptick in home prices. What gives? Incentives to the buyer ranging from vacation time-shares, to free upgrades, to cash back. What that means is that, in spite of the statistics, home prices may in fact be falling. "We don’t have any house price indexes that get it right." Todd Sinai, associate professor of real estate at the Wharton School of the University of Pennsylvania. [ 08/31/06 ]
» Mortgage insurers are so alarmed by the proliferation of interest-only and "option" mortgages, they are asking Federal regulators to restrict them.
About 70 percent of the people who take out an option adjustable-rate mortgage, which lets the buyer avoid paying even the full interest on the loan [Ed: !!!!], end up paying the lowest permissible amount each month, according to the Federal Deposit Insurance Corp., which regulates banks. The amount unpaid is added to the mortgage balance, so borrowers end up owing more than when they started. Having no equity in a home increases the risk of foreclosure, especially when housing values fall and houses are hard to sell.
It's like the credit card writ large. / (2) Comments / [ 08/23/06 ]
» Malcolm Gladwell:
The Risk Pool. What’s behind Ireland’s economic miracle—and G.M.’s financial crisis? / (1) Comments / [ 08/22/06 ]
» A new study concludes that residents of Chicago's South and West sides—a "food desert" with ample access to fast food restaurants, but very few grocery stores—are more likely to die prematurely and at greater rates from diabetes, cancer, cardiovascular disease and obesity. [bugmenot] Overall, the worst food choices fell in African-American neighborhoods. "The new study is a sequel to a 2005 report that found that poor residents of Chicago's South Side live in a 'commercial desert' where they have little access to major grocers, pharmacies or other retailers, but have plenty of liquor stores and fast-food restaurants." (via batc) [ 07/20/06 ]
» Meanwhile, the Brookings Institution has discovered that the Ghetto tax is real. "[P]oor urban residents frequently pay hundreds if not thousands of dollars a year in extra costs for everyday necessities. The study said some of the disparities were due to real differences in the cost of doing business in poor areas, some to predatory financial practices and some to consumer ignorance." The study is available online. [ 07/20/06 ]
» A Little Weekend Reading: The Immigration Equation probes the immigration debate through the lens of two economists: David Card, a Canadian who believes that "immigration is no big deal and that a lot of the opposition to it is most likely social or cultural" and George Borjas, a Cuban immigrant who believes he has proven that immigrants hurt the economic prospects of the Americans they compete with. It's a thought-provoking and subtle examination of a complex issue.
That stark contrast conveys, to economists, two important facts. One is that Mexicans are supplying a skill level that is much in demand. It doesn't just seem that Americans don't want to be hotel chambermaids, pick lettuce or repair roofs; it's true. Most gringos are too educated for that kind of work. The added diversity, the complementariness of skills, that Mexicans bring is good for the economy as a whole. They perform services that would otherwise be more expensive and in some cases simply unavailable.
The Americans who are unskilled, however, must compete with a disproportionate number of immigrants. One of every four high-school dropouts in the U.S. was born in Mexico, an astonishing ratio given that the proportion of Mexicans in the overall labor force is only 1 in 25. [...]
That's the theory. But economists have had a hard time finding evidence of actual harm.
[ 07/14/06 ]
» Lawyer, writer, actor and economist Ben Stein looks at the economic landscape and gasps in horror.
We are mortgaging ourselves to foreigners on a scale that would make George Washington cry. Every day — every single day — we borrow a billion dollars from foreigners to buy petroleum from abroad, often from countries that hate us. We are the beggars of the world, financing our lavish lifestyle by selling our family heirlooms and by enslaving our progeny with the need to service the debt.
I don't see this — except for the taxes — as a Republican thing or a Democratic thing. It's just the way we live today. Drunken sailors from the Capitol to the freeways. Heirs living on their inheritance and spending it fast. The titans of corporate America getting as much as they can get away with and hiring lawyers and public-relations people if there is a problem. It is later than anyone dares to think.
(via htstw) [ 07/13/06 ]
» Salon has an excellent article that explains network neutrality and what is really at stake if the Telcos get their wish. For an analogy, think of the way cable companies operate. Have we seen competition emerge amongst cable companies within individual cities and neighborhoods? Do they always choose the programs you want to see for "Basic cable"? Do you have any recourse if they decide not to carry a particular station you want to watch? Now imagine that same state of affairs when you surf the Web. If this issue is new to you, it's worth your while to understand why the Telcos are lobbying Congress so hard. (via rc3oi) / (1) Comments / [ 05/03/06 ]
» Flickr photos arranged by "Interestingness": A Day Without Immigrants. [ 05/02/06 ]
» A Little Weekend Reading: Working Girls, Broken Society is a terrible title for a really smart article . "While the benefits of career equality are axiomatic, its negative repercussions are wilfully ignored. In a contentious essay that is sparking fierce debate in Britain, a King's College professor argues that we must confront the losses to society when women choose work over family."
Politicians, journalists and businessmen often emphasize the negative economic consequences of any barriers to female participation in the workforce, and of losing half the country's best brains to the kitchen sink. Of course they are right, and I am in no hurry to go back there myself.
But it is striking how little anyone mentions, let alone tries to quantify, the offsetting losses when women choose work over family. This is stupid.
(via dm) / (8) Comments / [ 04/14/06 ]
» Um."Investment bank Bear Stearns has advised investors to start dumping airline and retail stocks in favour of blue-chip utilities as a hedge against bird flu." (via rw) [ 03/23/06 ]
» NYT: "An examination of regulatory filings by The New York Times shows that companies with electric utilities in at least 26 states have pocketed money intended for income taxes, and that utilities can legally do so in 21 more states." (via dm) [ 03/16/06 ]
» What a new 'Gilded Age' may bring. It's interesting that the future imagined here is reactionary and intolerant, whereas the last Gilded Age led to widespread support for unionization and the Progressive Movement. The chart at the end really illustrates the wealth trend. "The richest of the rich, the top 1/1,000th, enjoyed a 497 percent gain in wage and salary income between 1972 and 2001. Those at the 99th percentile, who made an average $1.7 million per year in 2001, enjoyed a mere 181 percent gain." [ 03/09/06 ]
» For the first time since the Great Depression, the US savings rate is in negative numbers. "A lot of us are approaching retirement and a lot of us are approaching it with much too little saved up. They're either going to depend on Social Security, which is hardly a good bet given the state of the federal government's finances, or they're going to be taking early retirement at the age of 75." David Wyss, an economist with Standard and Poor's.
I found the 3 questions the Kinder Institute of Life Planning ask their clients to be interesting:
- If money was no longer an obstacle, what would they do with their life?
- If a doctor informs them that they have a terminal illness and have only five to 10 years left to live, what would they do within that time?
- If the doctor then informs them, they only have 24 hours left to live, what would they regret? What did they miss in life?
[ 03/09/06 ]
» Wanting to take a truly long-term view of real estate values, a Dutch professor studied the price of real-estate transactions over four centuries on the Herengracht canal, and discovered that, adjusted for inflation, real property values rose only 0.2 percent per year. "It's true that economic and social conditions were different back then. But major crises do happen, and we can't necessarily predict them. Will bird flu be a major disaster? Will there be more hurricanes? I don't know. Nobody knows." Piet Eichholtz, a professor of real-estate finance at Maastricht University in the Netherlands. (thanks, jjg!) [ 03/08/06 ]
» Britain is working to produce wheat-based bioethanol, hoping it will provide 5 percent of all fuel used annually by British motorists by 2010 — and bolster the lot of the wheat farmer. "In a pleasing symmetry, the amount of wheat required would be around 3 million tons, roughly equal to the excess produced each year that is unwanted by the domestic market." [ 02/14/06 ]
» The Economist: Desperate measures: America's health-care crisis is a terrific explanation of the US legacy healthcare system and current proposals for reform.
This system is a legacy of the second world war, when firms, hamstrung by wage controls, used health insurance as a way to lure in workers. It means that, according to census figures, around 174m Americans get health coverage from their own, their spouse's or their parents' employer. Another 27m buy health insurance individually, for which they do not get a tax subsidy. The government picks up the tab for 40m elderly and disabled Americans (through Medicare) and about 38m poor (through the state-federal Medicaid scheme). That leaves around 46m uninsured, though many of these, whether students or workers, go without insurance by choice. In practice, they get emergency care at hospitals, which is paid for by higher premiums for everyone else.
(via rw) [ 01/27/06 ]
» A new study shows that in 38 states, during last 20 years the incomes of the top fifth of families grew faster than those of the bottom fifth.
[W]hen wealthier families see their incomes rise at a faster pace than everyone else, their spending can create what [Cornell economist Robert Frank] calls an "expenditure cascade." That is, the demand for bigger and better homes or safer cars can create new standards for those lower down on the economic scale.
But since their incomes aren't growing as fast, they have a hard time keeping up, leading to what Frank calls "welfare loss." For example, as home prices rise, it becomes harder to afford a home in a neighborhood with good public schools.
[ 01/27/06 ]
