Assigned to probe the causes of the 1929 crash, he led what became known as the “Pecora commission,” making front-page news when he called Charles Mitchell, the head of the largest bank in America, National City Bank (now Citibank), as his first witness. “Sunshine Charley” strode into the hearings with a good deal of contempt for both Pecora and his commission. Though shareholders had taken staggering losses on bank stocks, Mitchell admitted that he and his top officers had set aside millions of dollars from the bank in interest-free loans to themselves. Mitchell also revealed that despite making more than $1 million in bonuses in 1929, he had paid no taxes due to losses incurred from the sale of diminished National City stock—to his wife. Pecora revealed that National City had hidden bad loans by packaging them into securities and pawning them off to unwitting investors. By the time Mitchell’s testimony made the newspapers, he had been disgraced, his career had been ruined, and he would soon be forced into a million-dollar settlement of civil charges of tax evasion. “Mitchell,” said Senator Carter Glass of Virginia, “more than any 50 men is responsible for this stock crash.”

That was just the beginning. The proceedings became a “circus” and a media sensation. Read about how Pecora unearthed the dirty secrets of the banking industry that led to the Great Depression at Past Imperfect. Link

The most expensive item on the list? Six swans a swimming that will run you $6,300. While the item measurements make sense, I just can’t fathom how eight maids a milking only costs $58 when nine ladies dancing goes for $6,294.03. I guess that’s why I’m not an economist.

Link Via Consumerist

Image Via cobalt123 [Flickr]

Randall Munroe at xkcd put together a chart about money, so massive that you’ll have to enlarge a few times just to read it. The statistics cover what things cost, what people earn, business profits, taxes, government spending, utilities, war, and more. The amounts of money for each are laid out in blocks for comparison. That’s a lot of blocks. What is shown here, as compressed as it is, is just a portion. Link -via Boing Boing

Though financial institutions are not yet turning away customers at the door, they are trying to discourage some depositors from parking that cash with them. With fewer attractive lending and investment options for that money, it is harder for the banks to turn it around for a healthy profit.

In August, Bank of New York Mellon warned that it would impose a 0.13 percentage point fee on the deposits of certain clients who were moving huge piles of cash in and out of their accounts.

Others are finding more subtle ways to stem the flow. Besides paying next to nothing on consumer checking accounts and certificates of deposit, some giants — like JPMorgan Chase, U.S. Bancorp and Wells Fargo — are passing along part of the cost of federal deposit insurance to some of their small-business customers.

Even some community banks, vaunted for their little-guy orientation, no longer seem to mind if you take your money somewhere else.

“We just don’t need it anymore,” said Don Sturm, the owner of American National Bank and Premier Bank, community lenders with 43 branches in Colorado and three other states. “If you had more money than you knew what to do with, would you want more?”

Well, Neatoramanauts? What say you? Does charging money to hold your money seem counter-intuitive, or is this a good tactic for discouraging large-sum depositors from parking away their millions in a vault?

Link

Ever since the collapse of the Soviet Union, Cub has been inching towards capitalism -mostly in the form of tourism. Can Havana once again become “the Latin Las Vegas”?

Communist countries aren’t known for being vacation hot spots, and for good reason. To have a thriving tourist sector, you need luxuries to offer and visitors willing to spend money on them. That’s the stuff of capitalism. And yet, Cuba attracts about 2 million sightseers every year, mostly from Europe and Canada. That number is especially remarkable considering that two decades ago, Cuba’s tourism industry was not only nonexistent, it was outlawed.

FROZEN DAIQUIRIS

Cuban tourism was banned in 1960 as part of the Communist Revolution. Shortly after Fidel Castro came to power, his regime closed the island’s internationally renowned hotels. He also cracked down on prostitution, gambling, and illicit drugs -trades that had made the country a den of hedonism. As Castro saw it, tourism was a form of capitalist exploitation in which the rich pleasured themselves on the backs of the poor. He felt that Americans used the island as a playground with little concern for the welfare of those who lived there. In his new country, Cuban citizens would be equal; no one would stay at luxury hotels until everyone could stay at luxury hotels.

(Image credit: Flickr user Tom Graham)

Cuba got by without tourism for nearly 30 years, mostly by exporting sugar to its top trading partner, the Soviet Union. But after the Soviet Union collapsed in 1991, billions of dollars disappeared from Cuba’s coffers overnight. To keep the country from going bankrupt, Castro announced a five-year era of austerity, which he dubbed the “special period.” Never in the history of politics has the word “special” been used more euphemistically. Castro cut mass transit and food rations by 80 percent -moves so drastic that they caused the average Cuban to lose 20 pounds. But cutting costs alone wouldn’t make the country solvent again; Cuba needed new trading partners and new industries. So, very reluctantly, Castro re-opened the tourism sector.

THE TOURISM APARTHEID

During the 1990s, the Cuban government poured $3.5 billion into rebuilding the tourism industry, restoring old hotels, nightclubs, beach resorts, and churches, some of which date back 500 years to the Spanish colonial era. Still, because tourism is antithetical to the communist ethos, Castro tried to keep the sector as separate from most Cubans as possible. Cuban citizens weren’t allowed to enter tourist establishments, and by the same token, tourists weren’t allowed into areas designated for regular Cubans. To further distance citizens from foreigners, Castro’s regime created two separate currencies: the peso for Cubans, and convertible pesos, or CUCs (pronounced “kooks”), for tourists.  Most businesses in Cuba accepted one currency or the other, but not both.

In effect, Castro had blocked contact between tourists and the vast majority of the population, Suddenly, Cubans were second-class citizens in their own country, just as they had been before the Revolution. The new system became known as “tourism apartheid.”

(Image credit: Flickr user somebody_)

But the creation of the tourism sector in Cuba had some progressive aspects to it, as well. As vice-president during the 1990s, Raul Castro ushered in some small but significant reforms that allowed for limited private enterprise. For example, in 1995, Cuba legalized paladeres -privately owned, family-run restaurants. Two years later, the country started allowing citizens to turn their homes into casas particulares -bed-and-breakfast hotels open to Cubans and foreigners alike.

Tourism has also brought back the capitalist practice of tipping. Taxi drivers, musicians, tour guides, waiters, bartenders, and bellboys are coveted occupations because they receive tips, one of the few ways to get ahead on the island. A Cuban guitarist earning just $200 a month in tips makes 10 times the average government wage -far more than most Cuban doctors.

THE POWER OF THE SMALL BUSINESS OWNER

Since assuming the office of president full-time in 2008, Raul Castro has continued to make small changes to foster free enterprise. Aside from ending tourist apartheid, he’s also granted hundreds of thousands of new licenses to family businesses. Outside the tourism sector, he’s passed massive agrarian reform, allowing farmers to sell their produce directly to consumers. And now that a few people in Cuba have disposable income, Raul has made it easier for them to spend it. In the past three years, he’s made it legal for Cubans to rent cars, renovate their homes, and buy computers, cell phones, DVD players, and other electronics -all of which had previously been banned. Although Cuba is still not a market economy, it’s impossible to deny that times are changing.

The American government has been responsive to the expanding freedoms. In 2009, president Obama made it easier for Cuban-Americans to send money to their families back in Cuba. Then, in January of 2011, Obama made it legal for any American to send up to $500 every three months, so long as the money goes toward funding private enterprise in Cuba. In other words, if you have a friend in Havana, and you want to help him start a restaurant, all you have to do is write him a check. The embargo may soon come to an end, and not because Americans renounced the Cuban economy, but because they helped rebuild it, one small business at a time.

(Image credit: Flickr user Frans Persoon)

CAN AMERICANS VISIT CUBA LEGALLY?

Yes, they can, and it’s getting easier to do all the time. Although it’s still illegal for Americans to visit Cuba simply for pleasure, since 1999 the United States has allowed Americans to travel to Cuba for journalistic and educational purposes. If you’re a reporter on assignment or a doctor attending a medical conference, it’s perfectly legal to fly there. Also, as of 2009, Cuban-Americans are allowed to visit their relatives in Cuba as frequently as they’d like. Under the old rule, they were only permitted once every three years. In fact, today, there are nonstop flights to Havana from New York, Los Angeles, and Miami, and that list stands to expand.

There are plenty of ways to visit Cuba illegally, too. Tourists simply fly to Mexico or Canada and then catch another plane there. The Cuban government won’t stamp your passport anymore; they know that some Americans have gotten into trouble when they returned to the United States with a Cuban seal on their books. These days, Cuban officials at customs simply hand you a tourist visa, which gets stamped instead. So unless you try to smuggle a carton of cigars back in your suitcase, odds are, the government will never know you were there. An estimated 20,000 to 60,000 Americans travel illegally to Cuba every year.

_______________________

The article above, written by Jennifer Drapkin, is reprinted with permission from the July-August 2011 issue of mental_floss magazine. Get a subscription to mental_floss and never miss an issue!

Be sure to visit mental_floss‘ website and blog for more fun stuff!

Can you teach a monkey the basics of market economy?

In this article over at our pal mental_floss, Allen St. John wrote about an intriguing research by Laurie Santos and Keith Chen of Yale University to see if they can teach monkeys to spend money:

A video of one of these early experiments shows that when Felix, the group’s alpha male, entered, he received a “wallet” with 12 of those round aluminum tokens. Two student researchers, one wearing a pink T-shirt, the other blue, stood on either side of that 3-foot cubic enclosure, each holding a different tray of food. The premise at this stage was pretty basic: Felix could swap his tokens for food with either of the two researchers. He didn’t seem to care much about the students. But he did care profoundly about what the researchers would sell him in exchange for that little metal token.

Felix and the others were cautious, observant shoppers. As the video shows, Felix would head first to the researcher holding out pieces of orange, examining them carefully; before leaving, he stopped to smell them. He went to the other researcher and did exactly the same thing—looking, sniffing, shopping. He then headed back to the first researcher and handed over a token to complete the transaction. Oranges, please.

“When you watch it, it looks like they’re contemplating, thinking about what they’re going to buy,” says Santos. What separates these capuchins from the scores of animals who have been trained to perform complex behaviors in exchange for food is the option presented by that second researcher.

“The critical aspect of money is that it’s fungible. It represents a choice,” explains Chen. “A coin is fundamentally different than, say, pressing a lever.” Santos and Chen had not only achieved their preliminary goal, they had made history: The monkeys were using cash. The capuchins were now operating in a sphere where humans had been dwelling alone.

Link

The Empire’s answer to Ash Carter should have seen it coming. It’s embarrassing enough that the galaxy’s supposedly most fearsome weapon was felled by crappy duct work.

But it was entirely predictable. A project so big and complex, Ward writes, will invariably stretch the oversight capabilities of acquisition staff. In this case, it led to manufacturing delays and prevented the Empire from realizing that one of its thermal-exhaust ports was a de facto self-destruct button.

Moreover, for all the expense poured into it – $15.6 septillion and 94 cents, to be precise — the Death Star is destroyed twice, and in its two iterations only ever manages to get off a few shots.

Ward says that droids are a much better bargain for any military budget. It’s tongue-in-cheek, of course, but can be related to some actual military spending projects. Read more about it at Wired’s Danger Room blog. Link -via TYWKIWDBI

Previously/Related: The Economics of Death Star Planet Destruction

The cornerstone of Harvard professor N. Gregory Mankiw’s introductory economics textbook, Principles of Economics, is a synthesis of economic thought into Ten Principles of Economics (listed in the first table below). A quick perusal of these will likely affirm the reader’s suspicions that synthesizing economic thought into Ten Principles is no easy task, and may even lead the reader to suspect that the subtlety and concision required are not to be found in the pen of N. Gregory Mankiw.

I have taken it upon myself to remedy this unfortunate situation. The second table below summarizes my attempt to translate Mankiw’s Ten Principles into plain English, and in doing so to provide the uninitiated with an invaluable glimpse of the economic mind at work. Explanations and details can be found in the pages that follow, but the average reader is advised to simply cut out the table below and carry it around for assistance in the (hereafter unlikely) event of confusion about the basic Principles of Economics.

————————————————————

Mankiw’s Principles

#1. People face tradeoffs.
#2. The cost of something is what you give up to get it.
#3. Rational people think at the margin.
#4. People respond to incentives.
#5. Trade can make everyone better off.
#6. Markets are usually a good way to organize economic activity.
#7. Governments can sometimes improve market outcomes.
#8. A country’s standard of living depends on its ability to produce goods and services.
#9. Prices rise when the government prints too much money.
#10. Society faces a short-run tradeoff between inflation and unemployment.

————————————————————

Yoram’s Translations

#1. Choices are bad.
#2. Choices are really bad.
#3. People are stupid.
#4. People aren’t that stupid.
#5. Trade can make everyone worse off.
#6. Governments are stupid.
#7. Governments aren’t that stupid.
#8. Blah blah blah.
#9. Blah blah blah.
#10. Blah blah blah.

————————————————————

Explanations and Details

At first glance, the reader cannot but be impressed by the translation’s simplicity and clarity. Accessibility, however, should not be mistaken for shallowness: further study will reveal hidden depths and subtleties that will richly reward the attentive student. Indeed, a moment’s reflection will identify any number of puzzles and mysteries. Chief among them is probably this: Why do Principles #8, #9, and #10 have identical translations?

The immediately obvious explanation is that these are macro-economic principles, and that I, as a micro-economist, am ill equipped to understand them, let alone translate them.[2] As is often the case in this complex world we live in, this immediately obvious explanation is also wrong. The true reason I have provided identical translations of “Blah blah blah” for Principles #8, #9, and #10 is that these principles say exactly the same thing, namely, “Blah blah blah.” Sometime when you’ve got a few hours to spare, go and ask an economist — preferably a macro-economist — what he or she really means by “standard of living” or “goods and services” or “inflation” or “unemployment” or “short-run” or even “too much.” You will soon realize that there is a vast difference between, say, what Principle #10 says — “Society faces a short-run tradeoff between inflation and unemployment” — and what Principle #10 means: “Society faces blah between blah and blah.” My translations are simply concise renderings of these underlying meanings.

Having cleared up that issue, let us go back to Mankiw’s

PRINCIPLE #1
People face tradeoffs.
TRANSLATION: Choices are bad.

The reasoning behind this translation is obvious. For example, imagine that somebody comes up to you and offers you a choice between a Snickers bar and some M&Ms. You now have a tradeoff, meaning that you have to choose one or the other. And having to trade one thing off against another is bad; President Truman supposedly asked for a one-armed economics advisor because his two-armed economics advisors were always saying, “On the one hand…but on the other hand…”

People who have not received any economics education might be tempted to think that choices are good. They aren’t. The (mistaken) idea that choices are good perhaps stems from the (equally mistaken) idea that lack of choices is bad. This is simply not true, as Mancur Olson points out in his book, The Logic of Collective Action: “To say a situation is ‘lost’ or hopeless is in one sense equivalent to saying it is perfect, for in both cases efforts at improvement can bring no positive results.”

Hence my translation of Mankiw’s first principle of economics: Choices are bad. This concept can be a little difficult to grasp — nobody ever said economics was easy — but the troubled reader will undoubtedly gain clarity from Mankiw’s

PRINCIPLE #2
The cost of something is what you give up to get it.
TRANSLATION: Choices are really bad.

Beyond transforming Mankiw’s semantic deathtrap into simplicity itself, this translation has the advantage of establishing a connection between Principle #1 (Choices are bad) and Principle #2 (Choices are really bad).

To continue to deepen the reader’s understanding of why choices are bad — really bad — let’s return to our previous example, in which somebody offers you a choice between a Snickers bar and a package of M&Ms. Suppose, for the sake of argument, that you take the M&Ms. According to Mankiw, the cost of those M&Ms is the Snickers bar that you had to give up to get the M&Ms. Your gain from this situation — what economists call “economic profit” — is therefore the difference between the value you gain from getting the M&Ms (say, $.75) and the value you lose from giving up the Snickers bar (say, $.40). In other words, your economic profit is only $.35. Although you value the M&Ms at $.75, having the choice of the Snickers bar reduces your gain by $.40. Hence Principle #2: Choices are really bad.

Indeed, the more choices you have, the worse off you are. The worst situation of all would be somebody coming up to you and offering you a choice between two identical packages of M&Ms. Since choosing one package (which you value at $.75) means giving up the other package (which you also value at $.75), your economic profit is exactly zero! So being offered a choice between two identical packages of M&Ms is in fact equivalent to being offered nothing.

Now, a lay person might be forgiven for thinking that being offered a choice between two identical packages of M&Ms is in fact equivalent to being offered a single package of M&Ms. But economists know better. Being offered a single package of M&M effectively means having to choose between a package of M&Ms (which you value at $.75) and nothing (which you value at $0). Choosing the M&Ms gives you an economic profit of $.75, which is $.75 more than your economic profit when you are offered a choice between two identical packages of M&Ms.

At this point it is worth acknowledging that (1) there may be readers who have failed to grasp the above subtleties in their entirety, and (2) such readers may well be beginning to wonder whether they are, in a word, stupid. Any lingering doubts should be eliminated by the Mankiw’s

PRINCIPLE #3
Rational people think at the margin.
TRANSLATION: People are stupid.

One point that is immediately obvious to the most casual observer with the meanest intelligence is that most people do not think at the margin. For example, most people who buy oranges at the grocery store think like this: “Hmmm, oranges are $.25 each. I think I’ll buy half a dozen.” They do not think like this: “Hmmm, oranges are $.25 each. I’m going to buy one, because my marginal value exceeds the market price. Now I’m going to buy a second one, because my marginal value still exceeds the market price…” We know most people don’t think like this because most people don’t fill their shopping baskets one orange at a time!

But we are now led inexorably toward a most unhappy conclusion. If — as Mankiw says — rational people think at the margin, and if — as we all know — most people do not think at the margin, then most people are not rational. Most people, in other words, are stupid. Hence my translation of the third principle of economics: People are stupid.

Before sinking into despair for the fate of the human race, however, the reader would be wise to consider Mankiw’s

PRINCIPLE #4
People respond to incentives.
TRANSLATION: People aren’t that stupid.

The dictionary says that incentive, n., is 1. Something that influences to action; stimulus; encouragement. SYN. see motive.

So what Mankiw is saying here is that people are motivated by motives, or that people are influenced to action by things that influence to action. Now, this may seem to be a bit like saying that tautologies are tautological — the reader may be thinking that people would have to be pretty stupid to be unmotivated by motives, or to be inactive in response to something that influences to action. But remember Principle #3: People are stupid. Hence the need for Principle #4, to clarify that people aren’t that stupid.

Only truly stupid people can fail to understand my translation of Mankiw’s

PRINCIPLE #5
Trade can make everyone better off.
TRANSLATION: Trade can make everyone worse off.

But, the reader may well be asking, isn’t the translation of the fifth principle the exact opposite of the principle itself? Of course not.

To see why, first note that “trade can make everyone better off” is patently obviously: if I have a Snickers bar and want M&Ms and you have M&Ms and want a Snickers bar, we can trade and we will both be better off. Surely Mankiw is getting at something deeper than this? Indeed, I believe he is. To see what it is, compare the following phrases:

A: Trade can make everyone better off.
B: Trade will make everyone better off.

Now, Statement B is clearly superior to Statement A. Why, then, does Mankiw use Statement A? It can only be because Statement B is false. By saying that trade can make everyone better off, Mankiw is conveying one of the subtleties of economics: trade can also not make everyone better off. It is a short hop from here to my translation, “Trade can make everybody worse off.” (A numerical example can be found in Note #3, below.)

The subtlety evident in Principle #5 is even more clearly visible in the next two principles.

PRINCIPLE #6
Markets are usually a good way to organize economic activity.
TRANSLATION: Governments are stupid.

and

PRINCIPLE #7
Governments can sometimes improve market outcomes.
TRANSLATION: Governments aren’t that stupid.

To see the key role that Principle #5 plays in both of these statements, note that the original phrasing of Principle #5 (“Trade can make everyone better off”) leads to Principle #6 (“Governments are stupid”). After all, if trade can make everyone better off, what do we need government for? But the translation of Principle #5 (“Trade can make everyone worse off”) leads to Principle #7 (“Governments aren’t that stupid”). After all, if trade can make everyone worse off, we better have a government around to stop people from trading!

Like the first five principles, Principles #6 and #7 demonstrate the fine distinctions inherent in the economic way of thinking. People are stupid, but not that stupid; trade can make everyone better off, but it can also make everyone worse off; governments are stupid, but not that stupid. Exploring, refining, and delineating these distinctions is the subject matter of upper-level economics classes, doctoral dissertations in economics, and the vast majority of papers in the American Economic Review and other scholarly journals. Should the reader decide to follow this path, the fundamental principles described on the first page of this article will provide invaluable guidance.

Acknowledgement

Thank you to Ivars Skuja for assistance in taking and preparing the photographs[4] that accompany this article.

Notes

1. My own microeconomics text, Quantum Microeconomics, can be found online.

2. The exact meanings of the terms “micro” and “macro” may be lost on the reader — or, more likely, may never have been found in the first place. This should not be cause for concern: absence of these terms from Mankiw’s Ten Principles indicates that they are not of fundamental economic importance.

3. Many non-economists (and some economists) are intimidated by numerical examples. To make it easier for those people to recognize that the following is a numerical example, it is formatted in very small type.

Consider a small town with three families. It just so happens that Family #1 needs a snowblower, Family #2 needs a leafblower, and Family #3 needs a lawnmower; each family values their particular need at $200. Fortune appears to be smiling on this town, because it also just so happens that Family #1 owns a leafblower, Family #2 owns a lawnmower, and Family #3 owns a snowblower. These sit unused in their respective garages; each family has no use for its current piece of equipment, and therefore values it at $0.

The situation appears ripe for gains from trade: Family #1 could buy a snowblower from Family #3 for $100, Family #2 could buy a leafblower from Family #1 for $100, and Family #3 could buy a lawnmower from Family #2 for $100. Each family would be $200 better off.

Unfortunately, life in this small town is not so simple; the town is located in a valley that is susceptible to severe air pollution problems. Blowers and mowers emit large quantities of air pollutants, and in fact each blower or mower that is used will make air pollution so bad that hospital bills (for asthma, etc.) will increase by $80 for each family. Three additional blowers and mowers will therefore increase each family’s bills by $240.

Two results follow. First, the trades will still take place. For example, Family #1 and Family #3 will both be better off by $100 – $80 = $20 if Family #3 sells Family #1 its snowblower for $100. Second, the three trades together make everyone worse off: each family gains $200 from buying and selling, but loses $240 in hospital bills, for a net loss of $40.

4. To accommodate schools that teach micro and macro separately, Mankiw’s Principles of Economics is also published in separate pieces; the accompanying photographs are of the micro piece, Principles of Microeconomics. Note that the same Ten Principles of Economics (some micro, some macro) appear in all versions of the book.

__________________________

This article is republished with permission from the March-April 2003 issue of the Annals of Improbable Research. You can download or purchase back issues of the magazine, or subscribe to receive future issues. Or get a subscription for someone as a gift!

Visit their website for more research that makes people LAUGH and then THINK.

What’s the economic calculus behind the Empire’s tactic of A) building a Death Star, B) intimidating planets into submission with the threat of destruction, and C) actually carrying through with said destruction if the planet doesn’t comply?

Doesn’t the Empire take a huge economic loss from the lost productivity of an entire planet? They were presumably paying taxes and providing resources to the rest of the Empire. Presumably the loss of that planet’s output would have to be made up by increased output from other planets that were either slacking in productivity due to rebellion or threatening to rebel and withdraw from the Empire altogether. It doesn’t seem to make good economic sense.

What follows is a cost-benefit analysis from various members of the Think Tank. Read the rest at (where else?) Overthinking It. Link -via Metafilter

As it turns out, quite a lot. A non-scientific study of Commerce Department data suggests that in February, U.S. consumers spent an annualized $1.2 trillion on non-essential stuff including pleasure boats, jewelry, booze, gambling and candy. That’s 11.2% of total consumer spending, up from 9.3% a decade earlier and only 4% in 1959, adjusted for inflation. In February, spending on non-essential stuff was up an inflation-adjusted 3.3% from a year earlier, compared to 2.4% for essential stuff such as food, housing and medicine.

Minnesotastan wonders how we define essentials and non-essentials. There are a lot of items that can be defined either way. Braces for teeth? Books? College tuition? Lawnmowers? Where do you draw the line? Link

The term “globally” here does not mean worldwide so much as it means seeing the problem as a whole as opposed to its parts. Dr. Eli Goldratt {wiki} explains what happens to the supply chain of consumer goods during a recession, in terms even I can understand. With animation by Aharon Charnov. -Thanks, Joe Brown!

In one experiment in particular, led by doctoral student, Paul Piff and his researchers, participants completed a questionnaire reporting their socioeconomic status  and a few days later were provided with $10 to share anonymously. The findings concluded the more generous of the income brackets were on the lower-income scale. A recent national survey
reiterates the results, revealing lower-income people give more of their hard-earned money to charity than the wealthy.

At a time when the richest one percent of Americans own more than the bottom 90 percent combined, Piff and his colleagues’ findings are more than a little timely. “Our data suggests that an ironic and self-perpetuating dynamic may in part explain this trend,” the study researchers write, to be published in the Journal of Personality and Social Psychology. “Whereas lower-class individuals may give more of their resources away, upper-class individuals may tend to preserve and hold onto their wealth. This differential pattern of giving versus saving among upper–and lower– class people could serve to exacerbate economic inequality in society.”

Did anyone else think, “duh!” when they read the last line of that quote? Link -via Digg

(Image credit: Flickr user Kathryn Harper)

Some economists may be cheap, at least by the standards of other people, because of their training or a fascination with money and choices that drives them to the field.

In recent research, University of Washington economists Yoram Bauman and Elaina Rose found that economics majors were less likely to donate money to charity than students who majored in other fields. After majors in other fields took an introductory economics course, their propensity to give also fell.

"The economics students seem to be born guilty, and the other students seem to lose their innocence when they take an economics class," says Mr. Bauman, who has a stand-up comedy act he’ll be doing at the economists’ Atlanta conference Sunday night. Among his one-liners: "You might be an economist if you refuse to sell your children because they might be worth more later."

Economists long have studied "free riders," the sort of people who take more than their fair share of something when circumstances permit. Think of the person who orders the most expensive entr[eacute]e at a restaurant, knowing that the check will be shared equally among companions.

University of Wisconsin sociologists Gerald Marwell and Ruth Ames, in a 1981 paper, found that in experiments, economics students showed a much higher propensity to free ride than other students. In questioning after the experiment, the sociologists found that for many of the economics students, the concept of investing fairly "was somewhat alien."

Link

The report by USDA’s Center for Nutrition Policy and Promotion notes that family income affects child rearing costs. A family earning less than $56,870 per year can expect to spend a total of $159,870 (in 2008 dollars) on a child from birth through high school. Similarly, parents with an income between $56,870 and $98,470 can expect to spend $221,190; and a family earning more than $98,470 can expect to spend $366,660. In 1960, a middle-income family could have expected to spend $25,230 ($183,509 in 2008 dollars) to raise a child through age seventeen.

When you consider the income levels in these calculations, it doesn’t seem all that bad. Many families spend more than that on a house. Then again, the child’s shelter expense is the biggest item on the total bill, comprising 32% of the total. Link -via J-Walk Blog

(image credit: Flickr user Matt Stratton)

Our very own John who blog at The Zeray Gazette has, and he’s given it some serious thoughts:

… my usual interpretation of the economics of Star Trek: they were unrealistic, as they eliminated the first law of economics — scarcity. Thanks to the replicator, there is virtually no need to manufacture anything. Although there were a few objects, such as latinum or yamok sauce, that could not be replicated, there was essentially nothing that your replicator could not provide for you — including more replicators.

Link

Come to think of it – how would a money-less economics of the future a la Star Trek work? Who’ll do the scut work?