Sunday, September 30, 2007

Real GDP Graph

Free Textbooks

A quick registration process take less than 2 minutes. Currently not a lot of titles, but it is likely to grow. The books can be downloaded in pdf format chapter by chapter.

How Different Investments Did Last Week

Friday, September 28, 2007

Students: Questions, Comments, and Suggestions

The benchmark is approaching. We have one more test before the benchmark. The benchmark will cover everything through supply. Don't wait to the last minute to cram for the exam. Start preparing now.

Hopefully the re-test will be much better. Use the book, ask questions, and pay attention in class. Those three things will help you tremendously. Doing your own homework at home (not in class AFTER it is due) will help you learn the material.

When we have the EOCT in May, it will be obvious who learned the material v. those who merely crammed and memorized the information for a single test. Work hard, study, learn, and pay attention in class.

Parents: Questions, Comments, and Suggestions

After an extremely poor results on the demand test. I have decided to issue books to the period classes. I had hoped the fill-in blank notes would be successful in getting the student to focus and pay attention in class and at the same time to move at a slightly faster pace in order to include the additional material that must be taught this semester based on the Georgia Performance Standards (GPS). The readings I provided apparently did not help students to gain a greater understanding of the material, I suspect largely to the fact that the reading handouts went unread.

We retested on demand today. Hopefully, the scores will be much improved. The issuing of books was generally well received. I hope they will be used. I think that most of the students now realize that economics is a subject that you must understand, not memorize. A lot of it is common sense, but many things also seem counter-intuitive until they learn to think like an economist.

There is no reason for panic. I think I now have their attention and I expect the test scores to have reached the low water mark. There is one test between now and the benchmark test (10%) given at midterm. We will be ready for it if they cooperate, work hard, and study.

The block class is performing very well. No problems at all. We are testing about every 4th day and the test result are among the best I have ever had. The students in that class like not having a book and enjoy the fill in the blank notes.

Thursday, September 27, 2007

Bonus: Name the Members of OPEC

I will leave this post open for comments until sometime Sunday night.

Anna and Amber already have pre-emptively posted the answers to some other thread. Thanks for the eagerness.

Wednesday, September 26, 2007

UAW Strike Ends

The deal struck at 3:05 a.m. yesterday between General Motors Corp. and the United Auto Workers union marks the dawn of an uncertain new era for the American auto industry and its unionized work force.

For much of the last half century, Detroit's Big Three auto makers had collaborated with the UAW to create an industrial aristocracy of blue-collar workers whose pay and benefits set the standard for the American middle class. If the proposed contract announced yesterday is ratified by union members -- and is subsequently replicated at Ford Motor Co. and Chrysler LLC -- that era in American industrial history may be over.

read the entire article

Tuesday, September 25, 2007

How to Tell When You Are Rich

When you buy a 16 million dollar estate complete with a main house and 5,000-square-foot guest house... to tear it down and built a new house.

read the story

Monday, September 24, 2007

UAW Go on Strike Against GM

The United Auto Workers union launched a nationwide strike against General Motors on Monday as 73,000 UAW members walked off the job and hit the picket lines at the nation's largest automaker.

full article

Sunday, September 23, 2007

Economics Contest (APEE)

The Benefits of a Free Market Economy

First Prize: $2,500
Second Prize: $2,000
Third Prize: $1,500
Honorable Mentions: $250

Contestants will choose from the following three topics:
What Causes Prosperity?
What is the Role of Ethical Behavior in a Free Market?
Can Free Markets Protect the Environment?

Deadline: December 1, 2007

Winners announced February 15, 2008

more info

Give it a try you might win.

How Different Investments Did Last Week

Saturday, September 22, 2007

"Helicopter Ben" Bernanke

In monetary economics, a liquidity trap occurs when the economy is stagnant, the nominal interest rate is close or equal to zero, and the monetary authority is unable to stimulate the economy with traditional monetary policy tools. In this kind of situation, people do not expect high returns on physical or financial investments, so they keep assets in short-term cash bank accounts or hoards rather than making long-term investments. This makes the recession even more severe.

In normal times, the monetary authority (usually a central bank or finance ministry) can stimulate the economy by lowering interest rate targets or increasing the monetary base. Either action should increase borrowing and lending, consumption, and fixed investment. When the relevant interest rate is already at or near zero, the monetary authority cannot lower it to stimulate the economy. The monetary authority can increase the overall quantity of money available to the economy, but traditional monetary policy tools do not inject new money directly into the economy. Rather, the new liquidity created must be injected into the real economy by way of financial intermediaries such as banks. In a liquidity trap environment, banks are unwilling to lend, so the central bank's newly-created liquidity is trapped behind unwilling lenders.

Milton Friedman suggested that a monetary authority can escape a liquidity trap by bypassing financial intermediaries to give money directly to consumers or businesses. This is referred to as a money gift or as helicopter money (this latter phrase is meant to call forth the image of a central banker hovering in a helicopter, dropping suitcases full of money to individuals). Political considerations make it difficult for a monetary authority to grant the money gift, because individuals and firms not receiving free money will exert political pressure. The monetary authority must act covertly to give gift money to specific individuals or firms without appearing to give money away. During the Great Depression in the United States, the Federal Reserve offered to buy any gold at a price well above current market prices. This was essentially a money gift to gold holders.

full article

Thursday, September 20, 2007

Will the Dollar Collaspe?

read one opinion

Debt Ceiling: $8.965 trillion

"Treasury Secretary Henry Paulson told Congress on Wednesday the government will hit the current debt ceiling on Oct. 1.

He sought quick action to increase the limit, saying it was essential to protect the "full faith and credit" of the country, especially at a time of financial market turmoil.

The limit is $8.965 trillion. Unless Congress votes to raise it, the country would be unable to borrow more money to keep the government operating and to pay debt obligations coming due."

Wednesday, September 19, 2007

Alan Greenspan's New Book

"The Age of Turbulence will stand as Alan Greenspan's personal and intellectual legacy."
from the review on


"The enduring legacy of the Greenspan era will be the large-scale confiscations of wealth and economic imbalances — all of it blamed on others."
from The Mess Greenspan Leaves

Tuesday, September 18, 2007

Stock Market Has A Big Day

Fed Rate Cuts and the Stock Market

Federal Funds Rate Cut to 4.75%

The Federal Reserve cut the target on a key short-term interest rate by half of a percentage point Tuesday to 4.75% in a bold acknowledgement that the central bank is concerned the mortgage meltdown plaguing Wall Street and Main Street could hurt the economy...

The cut to the federal funds rate, the first since June 2003, was widely anticipated by investors and followed a surprise cut to the Fed's discount rate on Aug. 17...

full story

Friday, September 14, 2007

Thursday, September 13, 2007

History of the iPod

Oil Hits An All-Time High (Nominal Dollars)

Oil prices turned higher Thursday, setting another record high over $80 a barrel, as Hurricane Humberto made landfall along the refinery-laden Texas coast.

Light, sweet crude for October delivery rose 9 cents to $80.01 a barrel on the New York Mercantile Exchange. The electronic contract touched $80.20, breaking Wednesday's intraday record of $80.18....

Despite Wednesday's jump in crude prices, oil is still well below inflation-adjusted highs hit in early 1980. Depending on the adjustment, a $38 barrel of oil in 1980 would be worth $96 to $101 or more today...

read the full story

Wednesday, September 12, 2007

Bonus Opportunity

This one requires a little more effort.

10 points for the 1st five students who give me a signed bookplate for Freakonomics.

Here is the link that you need.

You should order it yourself, to your address, and give it to me at some point.

Incentives Matter

Once again, I am trying to encourage blog readership.

The 1st five people with the correct answer to the following question will receive 5 bonus points.

Who won the Nobel Prize in Economics in 1976?

4 correct answers, thus far (1:50 PM Sat)

Monday, September 10, 2007

Government Planners Want to Ban Plasma TVs

from the Sun (UK newspaper)

THE Conservatives will propose banning plasma screens and other energy-guzzling electrical goods in a report to be unveiled next week...

The ideas come from a Conservative group set up by David Cameron to develop policies to protect the environment and although the measures to make household electrical appliances more energy efficient are not binding on Mr Cameron, they are thought likely to be warmly received by the Tory leader.

The group will also suggest scrapping Gross Domestic Product (GDP) as a measure of the nation’s success in favour of a model that measures people’s happiness drawn up up by Friends of the Earth.

Under the proposals, a cap could be set on the energy use of each electrical appliance, and those exceeding limits could be banned from sale in the UK.

A new labelling requirement could be introduced to inform consumers of products’ annual energy consumption compared with other similar appliances...

read the entire article

Sunday, September 9, 2007

The Search for the Perfect Steak

from the Search for the Perfect Steak
September 8, 2007 Wall Street Journal

I'm standing in the kitchen of Brooklyn, N.Y.'s Peter Luger Steak House, inches from a wall of broilers, fearing that I, like the Flintstone-size porterhouses sizzling behind me, might be developing a heavy char. Waiters rush to pick up hissing plates of beef, while cooks spear steaks onto huge, pointy forks and, in a flash, dissect them into chunks…

Even as the price of prime beef skyrockets -- partially an odd side effect of the nation's new love of ethanol, which is driving up the price of corn used to feed cattle -- I discovered there's a trick to making cheaper choice cuts nearly as flavorful and tender as prime. And I learned why the most critical gadgets in the pro steak chef's grilling arsenal are a humble cast-iron pan and tongs.

Americans have grown accustomed to the taste of top-drawer steak since the steakhouse industry began to boom in the early 1990s. But for years, there was a still a difference between the beef served up at these pricey restaurants and the best cuts sold in most stores. That began to change toward the end of the '90s, when more retailers started carrying USDA prime, sometimes dry-aged. The "prime" label is the highest grade assigned to beef by the Agriculture Department based on the amount of marbling, or lines of fat, it contains. Lesser grades, such as choice and select, have less marbling…

But the good stuff doesn't come cheap. At Peter Luger, for example, a porterhouse for two costs $81.90 -- or roughly $2.04 an ounce. You can cook a similar steak at home by buying a porterhouse package through the restaurant's online butcher shop for $206.20, or about $2.71 an ounce (though you get steak sauce, chocolate coins and shipping, too).

Whereas restaurants might eat margin losses or rejigger the rest of the menu to offset losses, retailers set their prices high partly as a hedge against market fluctuations. This year, for example, wholesale prices for USDA prime steaks have jumped 8% to 9% from the same period last year -- and that's on top of a 15% increase from 2005 to 2006. These are historically large jumps, according to market analyst Cattle-Fax, reflecting the high demand for prime.

Fueling the increase are corn prices that have risen by 50% this year compared with last year, partly a result of rising ethanol demand. Ethanol uses up 26% of the total U.S. corn crop -- up from 11% five years ago, according to USDA numbers. In response, the beef industry is cutting the number of days it feeds cattle grain, which translates into fewer cattle developing the marbling that merits a prime grade…

Elias Iglesias, the 14-year veteran executive chef at the New York branch of Morton's, says though he uses prime at the restaurant, he happily cooks choice meat at home… cuts them into even, 1½- to 2-inch steaks himself (filet should be cut 2½ inches thick)…well-marbled choice steaks can taste as good as prime if they are properly aged and cooked…

While prime beef is slightly scarcer than usual right now -- accounting for about 2.5% to 3% of all beef on the market, down from 3.1% last year -- choice beef is plentiful, at roughly 58% of all beef, compared with 56% last year. Beef grade is largely determined by nature, though the industry tries, through genetics and feeding practices, to raise cattle so that they will earn a choice grade…

Cooking the meat to 165 degrees would kill off pathogens, but the meat would be like shoe leather by then. For medium rare, most chefs cook steak until the interior is 125 to 130 degrees (it will continue to rise in temperature by a further five to 10 degrees as it rests) and has a rosy, but not blood-red, hue…

At Morton's, I saw large trays of raw meat sitting out beside the stove. Mr. Iglesias explained that the restaurant lets steak sit outside the refrigerator for about an hour -- as much as the health code allows -- but "at home I let them sit for two hours," he admitted. The purpose: To raise the internal temperature slightly, so that the center doesn't stay cold while the exterior burns. This turned out to be a key technique for cooking the perfect steak.

To imitate the golden crust the steakhouse broiler provides, Mr. Iglesias suggests searing steaks in an extremely hot cast-iron pan coated with a little oil and flipping them with tongs, never a fork, which releases juices. Then, the steaks should be moved to the center rack of a 400-degree oven to finish cooking. Of course, it's wonderful to use an outdoor grill -- searing first over high heat and then moving the steaks to a cooler part of the grill to finish cooking -- though not practical in winter.

Morton's also seasons steak with a secret salt-and-spice blend. Mr. Iglesias says Lawry's Seasoned Salt is a perfectly good alternative (though I, a purist, just use kosher salt). After cooking, he says it's critical to let the meat rest for a few minutes before eating it, to allow the juices to reabsorb into the meat…

* * *

Lessons From the Pros

Master Recipe

2 steaks; cut strip steaks or rib-eyes about 11/2 inches thick, filet mignon, 21/2 inches
2 teaspoons grapeseed or canola oil
Kosher salt

Remove steaks from refrigerator 2 hours before cooking time. Dry them with a paper towel.

Preheat oven to 400 degrees, with a rack set in the middle.

Heat a heavy, cast-iron skillet over medium-high heat, until a few drops of water sprinkled in the hot pan evaporate within 3 seconds.

Coat the bottom of the pan with 2 teaspoons of grapeseed or canola oil.

Liberally salt the steaks with kosher salt, about 3/4 teaspoon for each steak.

Place steaks in pan and sear for 2 minutes on each side, flipping only once with tongs.

Transfer the steaks, still in the pan, to the oven and roast for roughly 8 to 9 minutes for 11/2-inch steaks to achieve medium-rare (an instant-read thermometer should register between 125 and 130 degrees).

Let the steaks rest, under a tent of aluminum foil, for 5 minutes before serving.

* * *

Bobby Flay's Coffee Spice Rub for Strip Steaks

Makes 1 cup

1/4 cup ancho chile powder
1/4 cup finely ground espresso-roast coffee beans
2 tablespoons sweet paprika
2 tablespoons dark brown sugar
1 tablespoon dry mustard
1 tablespoon salt
1 tablespoon freshly ground black pepper
1 tablespoon dried oregano
1 tablespoon ground coriander
2 teaspoons ground ginger
2 teaspoons chile de árbol powder or cayenne (optional)

Combine all the ingredients in a bowl or a jar with a tight-fitting lid and mix well. Store in a cool place. Omit the chile de árbol if you want a milder rub. To use: Proceed with the master recipe, replacing the kosher salt with a coating of 1 tablespoon of spice rub on each steak, plus salt to taste. During searing, there will be a bit of smoke, but the steaks are not burning; it is just smoke from the spices in the rub. Works on all steaks but is best on strip steaks or rib-eyes.

read the entire article

a good article, worth reading, I would quibble with a few points, but it should help you prepare better steaks

How Different Investments Did Last Week

Wednesday, September 5, 2007

Starting Salaries for Different Majors

New iPod

The new Nano, meanwhile, will have video and a larger, brighter screen with an interface similar to the iPhone. Apple will also bundle three games into the new Nano, including Sudoku from Electronic Arts.

The new Nano will feature two memory sizes: A 4-gigabyte model for $149 and an 8-gigabyte model for $199. It will be sold in black, red, silver, blue and green.

As for the iPod Touch, Apple watchers had speculated for days that Apple would unveil an iPod similar to its new mobile phone. Though slimmer than the iPhone, the iPod Touch features a similar multitouch interface, built-in Wi-Fi and the Safari Internet browser.

Like the iPhone, the iPod Touch can play YouTube videos. It will retail for $299 or $399, depending on the memory installed.

read the entire article

Economic Freedom of the World

The foundations of economic freedom are personal choice, voluntary exchange, and open markets. As Adam Smith, Milton Friedman, and Friedrich Hayek have stressed, freedom of exchange and market coordination provide the fuel for economic progress. Without exchange and entrepreneurial activity coordinated through markets, modern living standards would be impossible.

Potentially advantageous exchanges do not always occur. Their realization is dependent on the presence of sound money, rule of law, and security of property rights, among other factors. Economic Freedom of the World seeks to measure the consistency of the institutions and policies of various countries with voluntary exchange and the other dimensions of economic freedom.

read the entire report

Tuesday, September 4, 2007

Big 3 Automakers Back on Top

General Motors posted a surprise sales gain in August, bucking an industry trend of weak auto sales in the period, and helping domestic brands to recapture a majority of U.S. sales.

Monday, September 3, 2007

U.S. Workers: World's Most Productive

The average U.S. worker produces $63,885 of wealth per year, more than their counterparts in all other countries, the International Labor Organization said in its report. Ireland comes in second at $55,986, followed by Luxembourg at $55,641, Belgium at $55,235 and France at $54,609…

The U.S., according to the report, also beats all 27 nations in the European Union, Japan and Switzerland in the amount of wealth created per hour of work - a second key measure of productivity…

Norway, which is not an EU member, generates the most output per working hour, $37.99, a figure inflated by the country's billions of dollars in oil exports and high prices for goods at home. The U.S. is second at $35.63, about a half dollar ahead of third-place France

…a Chinese industrial worker produces $12,642 worth of output - almost eight times more than in 1980 - a laborer in the farm and fisheries sector contributes a paltry $910 to gross domestic product…

The difference is much less pronounced in the United States, where a manufacturing employee produced an unprecedented $104,606 of value in 2005. An American farm laborer, meanwhile, created $52,585 worth of output, down 10 percent from seven years ago, when U.S. agricultural productivity peaked.

read the entire story

Sunday, September 2, 2007

Top Earning Dead Celebrities

Want to Save $30,000? Keep Your Old Car

"By keeping your car for 15 years, or 225,000 miles of driving, you could save nearly $31,000, according to Consumer Reports magazine. That's compared to the cost of buying an identical model every five years, which is roughly the rate at which most car owners trade in their vehicles."

read the entire news story

Gas Prices are Controlled by Supply and Demand

The horror. The horror.

Big Oil did not manipulate U.S. gasoline prices: FTC

WASHINGTON (Reuters) - Big oil companies did not conspire to raise U.S. gasoline prices last summer, as it was high crude oil costs and supply problems that caused the spike in pump prices, government investigators said on Thursday.

The Federal Trade Commission said that about 75 percent of the rise in gasoline prices was due to a seasonal increase in summer driving, higher oil costs and more expensive ethanol that was blended into gasoline. (Demand)

The other 25 percent of the price increase stemmed from lower gasoline production as refiners moved to using ethanol as the main clean-burning fuel additive and lingering damage from hurricanes Katrina and Rita that reduced refining capacity. (Supply)

"Our targeted examination of major refinery outages revealed no evidence that refiners conspired to restrict supply or otherwise violated antitrust laws," the FTC said. "We therefore conclude that further investigation of the nationwide 2006 gasoline price spike is not warranted at this time."

Many lawmakers at the time had accused oil companies, which were raking in billions of dollars in record profits, of overcharging U.S. consumers at the pump.

The FTC said its investigation found the increases in motor fuel prices "were caused by a confluence of factors reflecting the normal operation of the market."

read the entire article

Supply and Demand

The law of supply and the law of demand are simple, fundamental, and basic principles that serve as the cornerstones of economics. Yet, the politicians, bureaucrats, and various other economic illiterates can’t seem to comprehend them.

Central Planning can't work and will never work. The U.S. Congress will certainly be among the last groups of people to ever recognize this fact.

for further reading: Gas Prices and Price Controls
for further (advanced) reading: The Use of Knowledge in Society by F.A. Hayek

New Research: Thriving in a Global Economy: The Truth about U.S. Manufacturing and Trade

Executive Summary

Reports of the death of U.S. manufacturing have been greatly exaggerated. Since the depth of the manufacturing recession in 2002, the sector as a whole has experienced robust and sustained output, revenue, and profit growth. The year 2006 was a record year for output, revenues, profits, profit rates, and return on investment in the manufacturing sector. And despite all the stories about the erosion of U.S. manufacturing primacy, the United States remains the world’s most prolific manufacturer—producing two and a half times more output than those vaunted Chinese factories in 2006.

Yet, the rhetoric on Capitol Hill and on the presidential campaign trail about a declining manufacturing sector is reaching a fevered pitch. Policymakers point repeatedly to the loss of 3 million manufacturing jobs as evidence of impending doom, even though those acute losses occurred between 2000 and 2003, and job decline in manufacturing has leveled off to historic averages.

In the first six months of the 110th Congress, more than a dozen antagonistic or protectionist trade-related bills have been introduced, which rely on the presumed precariousness of U.S. manufacturing as justification for the legislation. Justification for those bills is predicated on the belief that manufacturing is in decline and that the failure of U.S. trade policy to address unfair competition is to blame. But those premises are wrong. The totality of evidence points to a robust manufacturing sector that has thrived on account of greater international trade.

from the conclusion:

U.S. manufacturing is generally in superb health, and increasing international trade has a lot to do with that condition. Accordingly, lawmakers should back away from their hostile rhetoric about trade before they adopt policies that will damage the sector. Despite all of the bluster about “saving” U.S. manufacturing, the truth is that the sector is in robust health. Record output, record sales, record profits, record returns on equity, and record compensation define the most recent year’s performance. Rather than being aberrational, one-time blips, those records are all the latest data points of a gradually ascending trend line that has been evident since the beginning of the sector’s recovery.

…The evidence points to a U.S. manufacturing sector that is thriving in a global economy.

read the entire paper here

Imports: Good for the Economy

"U.S. companies spend about $100 billion more on imported inputs ($504 billion) than consumers spend on final goods ($411 billion). This distinction is important because, when most people think about imports, we think about finished, retail consumer goods like Toyotas from Japan, toys or big screen TVs from China, etc., and don't realize that the majority of imports are inputs, raw materials and capital equipment for U.S. firms. Raising trade barriers with protectionist tariffs would create significant harm for U.S. companies and their employees by artificially raising the price of their inputs, putting them at a competitive disadvantage in an increasingly competitive global economy.

Bottom Line: Tariffs on imports are essentially punitive taxes on the inputs of U.S. producers, and if you tax something you'll get less of it, including fewer jobs for Americans working at U.S. companies buying inputs from abroad."

from Carpe Diem

How Different Investments Did Last Week