Sunday, September 14, 2014

The Looming Blood Surplus: A Case Study in Supply and Demand

A market for blood? Many Americans, used to being rewarded for a donation with a warm feeling of talking to WPTV of West Palm Beach, Florida.
public service rather than cold cash, might see the idea as offensive. “I would guess 99 percent of people don't know that blood is sold,” says Ben Bowman, CEO of General Blood, a national blood brokerage firm,

Yes, there is a blood market, a big one with a turnover of $3 billion per year by some accounts, and it is entering a period of turmoil.

Demand

Just a few years ago, people thought an aging population, in need of more hip replacements and heart bypasses, would mean an endlessly rising demand for blood. In recent years, though, doctors have come to realize that transfusions, life-saving though they can be, have a downside. The cost of unnecessary transfusions is one consideration, but the risk of transmitting disease is the real negative.

As anesthesiologist, Josh Martini remarked to Minnesota Public Radio, "I was told in medical school, 'don't bother giving one unit, you should just give two if you're going to give any.'" Now, he says, the mantra is changing to "why give two, when one will do?">>>Read More

Follow this link to view or download a brief slideshow with supply-and-demand graphics that can be used as an in-class quiz or independent reading for students.

Saturday, September 6, 2014

Broad and Long-Term Unemployment Fall in August Despite Slowdown in Job Growth

The Bureau of Labor Statistics reported Friday that the broad unemployment rate and long-term
unemployment have fallen to new lows for the recovery, despite a slowdown in the growth of payroll jobs. Payroll employment increased by 142,000 in August, significantly less than the 212,000 average for the previous three months. The standard unemployment rate fell fractionally, returning to the low of 6.1 percent first reached in June. The percentage of the labor force working part-time for economic reasons also decreased.

The standard unemployment rate, U-3, is the ratio of unemployed persons to the civilian labor force. Both the numerator and denominator of the ratio fell in August. The broad unemployment rate, U-6, also takes into account discouraged workers (people who would like to work but have stopped looking because they think no jobs are available) and involuntary part-time workers. As the following chart shows, that rate fell to 12.0 percent in August, a new low for the recovery. >>>Read more

Follow this link to view or download a brief slideshow with additional charts of the latest employment situation

Thursday, September 4, 2014

Reading Recommendations for You and Your Students

Living with Water Scarcity, David Zetland. Back in April I posted a review of David Zetland's book that recommended it not only as a short, readable treatment of the high-profile issue of water scarcity, but as a case-study in scarcity and markets in general. Now David has reduced the price of the download version, from $5 to $0. If the $5 put you off when you first read the review, download it for free and read it today. (You can still buy the paper or Kindle versions from Amazon if you prefer).

A People's Endowment, Karl Widerquist. Recently I have posted several items on the idea of a universal basic income (See here and here). These posts have included suggestions as to how a UBI could be financed by replacing or cutting back on existing welfare programs, middle-class tax expenditures, and other budget outlays. Karl Widequist, another supporter of a basic income, is currently writing a book that is scheduled to come out next year. He has recently posted a draft chapter setting out his own views of how a basic income could be financed by setting up a people's endowment, similar to the Alaska Permanent Fund or Norway's Sovereign Wealth Fund. It makes good reading as it is, and the author would welcome comments as he works on a final version.

Monday, August 25, 2014

A Universal Basic Income and Work Incentives: What Does the Empirical Evidence Tell Us?

In Part 1 of this series, I outlined some basic economic theory regarding a universal basic income
(UBI) and work incentives. By a UBI, I mean an income support policy that provides a set monthly benefit to every citizen. A UBI, as I define it, would to everyone, regardless of income, wealth, or employment status. In that respect it differs from means-tested income support policies (MTIS), such as current US welfare system programs or a negative income tax (NIT), which reduce benefits as the recipient’s income increases.

The fear that a UBI would undermine work incentives is among the most important sources of resistance to the idea. In Part 1, I argued, on theoretical grounds, that replacing the existing welfare system with a UBI would tend to increase average work effort. This part will look at several sources of evidence that support the theory, beginning with the famous income maintenance experiments (IMEs) of the 1970s and 1980s.

What we can learn from the IMEs and what we can’t learn

The income maintenance experiments in question followed a method known as randomized field trials. Each of the experiments enrolled from several hundred to several thousand households and divided them into two groups. They assigned one group to an experimental income support policy while a control group continued to be covered by existing welfare programs, including Aid for Families with Dependent Children (AFDC), food stamps, and others. IMEs testing various policies took place in New Jersey, Iowa, North Carolina, Indiana, Colorado, and Washington. They covered both urban and rural areas; both single parent and two-parent households; and various ethnic groups. >>>Read more

Monday, August 18, 2014

Universal Basic Income and Work Incentives: What Can Economic Theory Tell Us?

Everywhere you look, it seems, people are talking about a Universal Basic Income (UBI)—a monthly cash benefit paid to every citizen that would replace the existing means-tested welfare system.

Supporters maintain that a UBI would not only provide income support to people in need, but would also increase work incentives. That is because, unlike the current welfare system, it would not claw back 50, 70, or even 100 percent of the earnings of low-income workers who make the effort to get a job. Opponents are more skeptical. They fear that if everyone were given a basic cash income with no requirement to work, people would quit their jobs in droves and we would end up with a nation of layabouts.

Who is right? This post examines the relevant economic theory. Part 2 will look at the evidence. >>>Read more

Wednesday, August 13, 2014

Krugman vs. the Libertarians on Phosphorus, Freedom, and Environmental Economics

Paul Krugman is at it again with a stunningly ignorant NYT op-ed on libertarians and the environment, “Phosphorus and Freedom.” As the author of a book on the libertarian perspective on environmental policy, I would like to respond.

Phosphorus comes into the picture in the form of agricultural runoff that pollutes Lake Erie, recently making the Toledo water supply temporarily undrinkable. Krugman blames this kind of thing on libertarians, who, he says, endorse an idea of freedom that includes the freedom to pollute one’s neighbor’s water supply.

Sadly, Krugman’s knowledge of the libertarian position on environmental economics seems to be limited to what he hears on talk radio and what he reads on conservative web sites like Red State. That is problem No. 1: Krugman pretends not to understand the difference between conservatism and libertarianism. He should start by reading Friedrich Hayek’s classic essay “Why I am Not a Conservative,” but maybe he can’t tear himself away from Red State.

According to Krugman, libertarians believe that “anyone who worries about the environment is engaged in scare tactics to further a big-government agenda.” In truth, real libertarians care very much about environmental issues. They just see them through a different lens than Krugman does. >>>Read more

Wednesday, August 6, 2014

How Many Miles Can You Drive on One Hour's Wages? From the Model T to the Prius in One Chart

Recently I came across this assertion in a comment box on one of my favorite websites: “The cost to fuel your car has never been higher as a percentage of disposable income.” 

Really? I know gasoline prices are high, but you just can’t make that assertion without looking at incomes and fuel economy, too. I decided to check the data.

I was able to put together 50 years of pretty consistent data for the key variables, with only a little stitching together to make the starting points and end points fit. The series I used were:
  • Nominal wage in dollars per hour for production and nonsupervisory workers.
  • Average fuel economy of cars on the road, old and new, based on a series from the Department of Transportation for 1980 to 2012 and estimates from various sources to fill in the earlier years.
  • Average gasoline prices from the Bureau of Labor Statistics and Department of Energy.
For  years before 1964, data are harder to come by. Instead of trying to put together a complete series, I decided to go with spot estimates for three iconic cars of yore: A 1919 Model T (About 17 MPG), a 1935 Ford V-8 (about 15 MPG), and a larger 1950 Ford V-8, about 14 MPG.

To calculate the miles that you could drive per hour worked (MPHW), just divide your wage by the price you pay for gasoline and multiply by your car’s fuel efficiency in miles per gallon. >>>Read more