Recommended Reading: Roads, Bridges, and Socialist Capital

"Neither the US government nor the State of Minnesota, which jointly "own" the bridge that collapsed, received "profits" from that bridge. Once it was built, it represented pure cost to these governments.

Thus, we then see the sets of incentives of which both Edmonds and Sowell spoke now making more sense. The owners of a privately owned bridge would have the incentive to keep it in repair because the bridge is bringing them income; loss of that piece of capital is the loss of the income that flows from it. Therefore, we see the economic calculation for privately owned capital at work.

Governments, on the other hand, operate according to a very different economic calculus. Since the bridge does not bring an income to the state, at least directly, it is much easier for politicians to want to spend on those things that provide fame, glory, and votes. In fact, in a perverse way, the bridge collapse in Minnesota provides a benefit to politicians, since they now have an excuse to confiscate even more taxes from individuals, thus expanding the power of the state."

read the entire article

Stock Market Valuation

Pay Gap between Men and Women

"Women have been graduating from college in larger numbers than men, and that many of those women seem to be gravitating toward major urban areas. In 2005, 53% of women in their 20s working in New York were college graduates, compared with only 38% of men of that age. And many of those women are not marrying right after college, leaving them freer to focus on building careers."

from Mark Perry

It appears that college pays

Incentives Matter

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In the comments include the following info:

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What is the opportunity cost of reading my blog?

Deficit Watch

If trends continue the budget will be balanced in March 2009. I'm guessing not.

from the Skeptical Optimist

Parents: Questions, Comments, and Suggestions

This will be a weekly feature. If you have questions, comments, or suggestions about class let me know.

Please take note of the Class Announcements at the top of the page. I will post test dates and other important class info there.

Students: Questions, Comments, and Suggestions

This will be a weekly feature. If you have questions, comments, or suggestions about class let me know.

Please keep the comments appropriate. The comments are moderated, so don't repost 17 times.

How is the Economy Doing? Cartoon Edition

cartoons from: http://www.jsmineset.com/

How Different Investments Did Last Week

Active Day for the Federal Reserve

The Federal Reserve injected a total of $38 billion into the banking system Friday, saying it was providing liquidity as needed to keep financial markets operating normally.

"The Federal Reserve is providing liquidity to facilitate the orderly functioning of financial markets," the Fed said in a statement.

full story

OPEN MARKET OPERATIONS:

The buying and selling of U.S. Treasury securities by the Federal Reserve System (the Fed) as a means of a controlling the money supply. An increase in the money supply is achieved when the Fed buys securities. A decrease in the money supply is achieved when the Fed sells securities. The Federal Open Market Committee is the specific component of the Federal Reserve System that is charged with open market operations. Open market operations are the most important of the three monetary policy tools that the Fed can use, in principle, to control the money supply. The other two are the discount rate and reserve requirements.

read more about open market operations here

LIQUIDITY:

The ease with which an asset can be converted to money with little or no loss of value. Money, currency and checkable deposits, is the benchmark for liquidity. Money is what other assets are converted to. Different assets have differing degrees of liquidity. Financial assets have differing degrees of liquidity but tend to be more liquid that physical assets. Liquidity is important to components of the three monetary aggregates tracked and reported by the Federal Reserve System--M1, M2, and M3.

read more about liquidity here

Dow Jones Drops 387 Points

It was the 2nd worse day of the year for the Dow. The Dow drops over 2.8%

full article

Recommended Reading: I, Pencil

here is the link to I, Pencil

It is worth reading if you get a chance. Many of the principles from the "Economics In One Page" handout are illustrated in the short essay.

from the Skeptical Optimist

Parents: Questions, Comments, and Suggestions

Welcome. If you are reading this, I know you have seen the syllabus. I am looking forward to an interesting and rewarding year. Let me know how I can be of assistance to you.

I plan to use this site to make you aware of upcoming tests.

Feel free to make comments.

Students: Questions, Comments, and Suggestions

Welcome. Hopefully you will check this site out often. I will use this site to help keep you informed about the class. You will find many things here that will help you to learn and understand more about economics.

Please keep the comments appropriate. The comments are moderated, so don't repost 17 times.

Federal Funds Rate Remains 5.25%

Carlos Slim: The World's Richest Man

read the story at CNN

Couch Potatoes

read the story from the Economist

Recommended Reading: Walter Williams' Column

the latest column from Walter Williams

Economic Thinking

"Historical costs, sometimes called sunk costs, are irrelevant to decision-making because they are costs that have already been incurred....
The only costs relevant to decision-making are what economists call marginal or incremental cost; that's the change in costs as a result of doing something. That cost should be compared to the expected benefit..."

read the entire column

1,028 Economists Oppose Protectionist Policies

PETITION
Concerning Protectionist Policies Against China

We, the undersigned, have serious concerns about the recent protectionist sentiments coming from Congress, especially with regards to China.

By the end of this year, China will most likely be the United States' second largest trading partner. Over the past six years, total trade between the two countries has soared, growing from $116 billion in 2000 to almost $343 billion in 2006. That's an average growth rate of almost 20% a year.

This marvelous growth has led to more affordable goods, higher productivity, strong job growth, and a higher standard of living for both countries. These economic benefits were made possible in large part because both China and the United States embraced freer trade.

As economists, we understand the vital and beneficial role that free trade plays in the world economy. Conversely, we believe that barriers to free trade destroy wealth and benefit no one in the long run. Because of these fundamental economic principles, we sign this letter to advise Congress against imposing retaliatory trade measures against China.

There is no foundation in economics that supports punitive tariffs. China currently supplies American consumers with inexpensive goods and low-interest rate loans. Retaliatory tariffs on China are tantamount to taxing ourselves as a punishment. Worse, such a move will likely encourage China to impose its own tariffs, increasing the possibility of a futile and harmful trade war. American consumers and businesses would pay the price for this senseless war through higher prices, worse jobs, and reduced economic growth.

We urge Congress to discard any plans for increased protectionism, and instead urge lawmakers to work towards fostering stronger global economic ties through free trade.

List of economists