All posts in Economics

→ NYCC ’15: Harley Quinn To Run For Mayor Of New York

She’s got my vote.

→ Dan from Now I Know explains The Decoy Effect

An explanation of the “decoy effect”:

In 2007, the Washington Post covered a situation on which the above is based, postulated by a marketing professor from Duke University named Joel Huber. Professor Huber assembled two groups of people to test the effect of this seemingly irrelevant choice. The first of Huber’s groups were, like the example above, given two choices — the nearby 3-star restaurant and the further 5-star restaurant, and they split based on preference. Some, as above, wished a quicker fix to their hunger while others wanted a higher quality dining experience.

The members of the second group were given three choices, including the 4-star eatery much further away. What Huber found was that this logically irrelevant option was anything but. As the Post reported, “people now gravitated toward the five-star choice, since it was better and closer than the third candidate. (The three-star restaurant was closer, but not as good as the new candidate.)” And in a different test, when the second group was given a a two-star restaurant which was closer than the 5-star one but farther than the 3-star option, “many people now chose the three-star restaurant, because it beat the new option on convenience and quality. (The five-star restaurant outdid this third candidate on only one measure, quality.)” Basically: the obviously-lesser option made one of the “real” choices seem suddenly better.

Something to keep in mind next time I am trying to suggest where to eat.1

  1. I say while holding my 32GB iPhone. 

→ Obamacare Expected To Cause 80-Percent Spike to Average Individual Premiums in North Carolina

I am one of the people who got the “substantial increase” notifications.1 I am not at all surprised, since I have thought this law was a disaster from the start.

  1. As, I am sure, a number of young, healthy professionals did. Which, of course, makes it all the more ridiculous that they threw their support behind Obama in the election. 

→ New York Times Column on the “Slow Death of the American Author.”

Head of the Author’s Guild Scott Turow writes about eBooks, the recent Supreme Court decision regarding importation of international versions of foreign works, and how those working against authors in America trying to make a living.

My thoughts on Mr. Turow’s column:1

I think this is a market failure not a copyright law failure. The existing publisher-centric model seems destined to perish in the digital market. Authors who can take advantage of channels not involving the traditional publishers will thrive, while publishers and those who cling to that model will not.

I think the publishers took their last stab at relevance when they partnered with Apple to try and set standard eBook prices across the industry. Now that the DoJ has broken that up, I think it is only a matter of time before the publishers start to crumble. My guess is that the publishers will slowly start to merge with one another in hopes of staying afloat, but that, ultimately, they will fade away.

I would encourage authors like Mr. Turow to start exploring economic models outside of traditional book publishing. Building an audience without the aid of a publisher’s marketing arm and without places like Barnes & Noble will be difficult, but the returns will be there for those willing to put in the effort. If Mr. Turow and the Author’s Guild only strategy is to try and stand in the way of consumers’ access to content, they will doom themselves to the same fate as the Russian authors.

  1. Originally posted on a Facebook group taking about these types of issues. DISCLAIMER: This post may contain some discussion about legal issues, but (1) it is not legal advice, (2) does not establish an attorney-client relationship, and (3) is not advertising for legal services. The full disclaimer can be found on the Disclaimer Page

→ Will 401(k)’s Disappear in the Interest of Fairness?

Professor Jacobson quoting a Breitbart story on his Legal Insurrection blog:

The budget President Barack Obama will submit on April 10 will contain a proposal that would prohibit individuals from accumulating more than $3 million in Individual Retirement Accounts (IRAs) and tax-preferred retirement accounts.

According to a White House statement, the Obama administration believes the current rules allow some wealthy individuals “to accumulate many millions of dollars in these accounts, substantially more than is needed to fund reasonable levels of retirement saving.”

“The budget would limit an individual’s total balance across tax-preferred accounts to an amount sufficient to finance an annuity of not more than $205,000 per year in retirement, or about $3 million in 2013,” the statement said. “This proposal would raise $9 billion over 10 years.”

Outrageous and scary1. First came the government calls as to what we can and cannot get for health insurance, now come the government calls for how much we are allowed to put away for retirement. Here’s hoping that the GOP can hold onto the house next year to keep the Democrats from actually being able to implement things like this.

  1. Not Cyprus level scary, since they are not trying to take money that people have already put away for retirement. Yet. 

→ ‘Death tax’ could die in N.C.

a move that would cost $52 million in revenue

I would just hate to see the state “lose” $52 million in revenue as a result of parents being able to actually pass on their life’s savings to their children.

→ Some Analysis on Rapidly Rising Gas Prices

As you can imagine, there a ton of factors coming together to raise prices. Of course, the lack of investment in America’s possible oil resources is one of those factors.

→ What’s the Best Term for Describing Obamanomics and Obamacare?

Dan Mitchell, Thomas Sowell, and the CEO of Wholefoods all agree: fascism.

→ Wendy’s Franchise Owner Cuts Hours to Avoid Obamacare

Why does this still surprise people? Of course businesses were going to have to do this in order to continue to stay open. The “outrage” associated with businesses being forced into these decisions is mind-boggling.

→ It Didn’t work in Denmark, but I am Sure it Will Work Here

People who push for these European-style reforms should have to spend 5 years living in Europe to see how much they damage countries.

→ Let the Layoffs Begin

Yesterday, a Las Vegas business owner fired 22 of his 144 employees, phoning in anonymously to a local radio host and explaining how the decision was directly caused by President Obama’s reelection.

As expected, ObamaCare starts to crush business growth.

→ The Stock Market has its Worst Day of the Year

Clearly the market did not get the message about how much “hope” we have in a second term for President Obama.

→ How the Economy Could Recover under President Romney

If Mitt Romney is elected and secures Republican control of both houses of Congress, the U.S. could be poised for a vertiginous economic snap back.

Worth a read if you want to see how President Obama has been damaging the U.S. economy.

→ Jack Welch Responds to Critics

Let’s get real. The unemployment data reported each month are gathered over a one-week period by census workers, by phone in 70% of the cases, and the rest through home visits. In sum, they try to contact 60,000 households, asking a list of questions and recording the responses.

Some questions allow for unambiguous answers, but others less so. For instance, the range for part-time work falls between one hour and 34 hours a week. So, if an out-of-work accountant tells a census worker, “I got one baby-sitting job this week just to cover my kid’s bus fare, but I haven’t been able to find anything else,” that could be recorded as being employed part-time.

The possibility of subjectivity creeping into the process is so pervasive that the BLS’s own “Handbook of Methods” has a full page explaining the limitations of its data, including how non-sampling errors get made, from “misinterpretation of the questions” to “errors made in the estimations of missing data.”

What is the over / under for the next report? 8.3%?

→ Strange Jobs Report Numbers Released

I agree with Jack Welch that something smells funny about this report.

→ Thomas Sowell Explains Capital Gains Tax

How are capital gains different from ordinary income?

Ordinary income is usually guaranteed. If you work a certain amount of time, you are legally entitled to the pay that you were offered when you took the job. Capital gains involve risk. They are not guaranteed. You can invest your money and lose it all. Moreover, the year when you receive capital gains may not be the same as the years when they were earned.

If a country wants investors to invest, it cannot tax their resulting capital gains at the same rate as the incomes of people whose incomes were guaranteed in advance when they took the job.

It is really quite simple1.

  1. If you want more of Dr. Sowell’s explanations of economics, I highly recommend Basic Economics (Affiliate Link). 

→ Amazon Already Starting to Lower Book Prices

I am not going to miss the “agency model” one bit.

→ Simple Introduces Goals

Instead of buying something with a credit card now and working to pay it off, you can set a goal for something you want to buy on a specific date and work toward saving for that. The process takes a little out of your account on a daily basis to put it into a holding area for the purchase. I love it.

(via Matt Alexander)

→ GM Headed for Bankruptcy Again

President Obama is proud of his bailout of General Motors. That’s good, because, if he wins a second term, he is probably going to have to bail GM out again. The company is once again losing market share, and it seems unable to develop products that are truly competitive in the U.S. market.

But wait, it gets better:

It’s doubtful that the Obama administration would attempt to sell off the government’s massive position in GM while the stock price is falling. It would be too embarrassing politically. Accordingly, if GM shares continue to decline, it is likely that Obama would ride the stock down to zero.

Well, at least it was not the American people’s tax dollars that got wasted in that deal. Think of how bad that would look.

→ Dan Mitchell on Obamanomics

Keynesian spending policies and class-warfare tax policies have produced dismal economic performance, with unemployment stuck above 8 percent – even though the White House promised the joblessness rate by this point would be about 5.5 percent if we squandered $800 billion-plus on the so-called stimulus.

Spoiler: He is not a fan.