Saturday, May 12, 2012

Nice Chart showing showing poverty, income inequality and redistribution in developed countries...See how the US stacks up...

Income inequality and poverty is a hot political and economic topic today.  Below is a chart (from The Economist) that compares, within developed countries, levels of poverty and income inequality BEFORE and AFTER "taxes and cash transfers" (fancy way of saying "income redistribution"). 

The light and dark blue sections of the bar TOGETHER represent the percent of each countries population below the median income level for that country (median income--half of the people are above that level of income, half are below).

Just the light blue part of the bar represents the percentage of the population that is below the median income level AFTER people pay taxes and those taxes are redistributed to the relevant stakeholders-- people below the median.



As an example of how countries use policy to "level income" , I isolated the US ("A") and Sweden ("B"). I used these two because the percentage of the population living below the median is roughly the same--each bar (light and dark sections) settle at around 26%-27% and because they have a significantly different outcomes after redistribution.

After taxes and transfers ("C"), the US has roughly 17% of the population under the median income level and Sweden has 8% under the median.  The US reduced the percentage below the median by 37% and Sweden reduced it by 70%.  (If I did my math right!) 

So, while both countries started out with roughly the same percentage of people below the median, after taxes and transfers, Sweden (percentage-wise) did significantly better than the US in getting its population to/above their median income level.

Good thing, Bad thing, Neither? What do you think?  Keep comments kind, please...

Studying for the AP Economics Test? Try this App to improve your score. There IS still time!!

Here are links to "Apps" to help you study for the AP Economics tests next week.  They are from Mike Fladlein at Mikeroeconomics Blog.  These will help you for last minute cramming.  Lots of questions and instruction.  Download so you can Upload into your brain!!! GO FOR IT!!

Click HERE for i-Tunes
Click HERE for Android

Thursday, May 10, 2012

Nice graph showing CEO-To-Worker Pay Ratio. Can you guess under which President it had the widest gap BY FAR? Better look before leaping.

Here is a graph charting CEO (Chief Executive Officer) pay and compensation relative to the wages paid to workers in the employ of those CEO's (for a summary of the methodology of this study go HERE to EPI). 

In 1965 the ratio is 20:1. The CEO was making 20 times the compensation (wages and benefits) that the average worker in his employ was making.  Read any point one the line in the same way. 

I was surprised to see that the ratio is now back to mid-1990 level!  It fell dramatically after 9/11 and the subsequent recession (or should say the one we were already headed into) and never recovered to its peak in the last year(s) of the Clinton administration Yes, the Clinton administration! 

Note: The source of this chart comes from the Liberal (Left-leaning) think tank Economic Policy Institute (EPI). PLEASE no rants of bias! :)
Source: EPI

Two possible explanations: (1) the rapid growth in CEO pay and leveling of wages in the US coincided with globalism---CEO's/Execs had world-wide operations responsibilities increase (hence more pay/compensation) and US workers rapidly had to "compete" (read that had jobs off-shored) with workers around the world (hence stagnating wages).  Or (2) the default--Corporate greed.  You choose.  I am not picky...

Nice graphic on the "Plastic Island" floating around the Pacific Ocean. We're gonna need a bigger recycling container...


This is a graphic that shows the floating island of debris in the Pacific Ocean.  It shows its evolution over time.  Below is what The Economist says about it.  Here is the link to the actual study. 
Source:  The Economist


""New data on the amount of plastic washing around the Pacific
MUCH of the plastic swirling around the sea ends up in the North Pacific Gyre, where four great ocean currents meet to create a swirl of water moving clockwise that is twice the size of the United States. Its less polite name is the North Pacific Garbage Patch. A new
study led by Miriam Goldstein of the Scripps Institute of Oceanography and published in Biology Letters has quantified the increase in scraps of plastic there between 1972-87 and 1999-2010. The number of small particles of less than 5mm in diameter floating in the areas sampled increased about 100 times (from virtually nothing). This is bad news for almost everything apart from Halobates sericeus, a small insect that now has lots of nice little floating platforms on which to lay its eggs.""

Wednesday, May 9, 2012

Helpful hint to Election watchers---Ignore the Romney vs Obama National Polls you see...THIS is the map that matters...One candidate is in REAL trouble...

National polls on Presidential candidates are virtually useless.  Presidents are elected by the Electoral College process.  A candidate needs to rack up 270 electoral college votes to win.  

Notice the data in the lower left hand corner. Give or take a few votes, Pres Obama already has near enough to win.  If the election were held today, Mitt Romney would have to win ALL of the States considered "toss ups" to get exactly 270.  On the map those would be the States in the grayish color. 

Game over???

I pity the people in those toss up States in the Fall. They are going to get hammered with campaign advertisements and scrutiny.

Note: I added a second map I found HERE so as you can see that I did not cherry pick.


Source: 270toWin


Nice Graph showing the External Costs associated with Energy Production. A nice lesson on Negative Externalities...

When a firm produces a good the cost of producing it only includes the input costs associated with making the good.  These are called "internal costs" in economics.  The costs of producing are borne only by the producer and paid for by the consumer, the two most interested parties in any transaction.

What if the production and consumption of this good imposes ADDITIONAL costs on people or society ("third parties") that are not paid for either in the production or consumption of this good? These additional costs are called "external costs" in economics. 

Some goods create more external costs than others. Looking at the bar graph below, you can see electricity production is all over the map. 

On the far left, we have electricity produced by coal.  The black portion of the bar shows how much of the costs of producing electricity are internalized.  The other two bars show how much in external costs imposed on society per kilowatt of electricity produced.  Producing coal for electricity is cheap but it imposes significant other costs, mainly health and environmental, on society that the producers and consumers of coal generated electricity do not pay for up front. 


Source: The Conversable Economist
The other sources of energy  you see on the graph impose less external costs on society BUT cost more to produce and consume.

Energy policy and health/environmental policy converge. The stuff  Economists dream about...

Read the whole blog entry regarding this graph HERE. It is well worth the time.

Great Photo showing how much water there is on earth relative to the size of the earth. Makes you go "Hmmm".

The small sphere respresents all the volume of water on the planet literally rolled up into a ball and juxtaposed against the barren earth.  I would like to see extracted from this sphere another one showing the size how much of that is drinking water and not sea/salt water.  Pretty amazing. 
Source: USGS

Monday, May 7, 2012


I think the market supply curve is a mystery to most economics students.  The demand curve is more intuitive because, well, we are all demanders of goods but few of us are suppliers/producers of a good. 

The supply curve on a graph reflects two things at the same time.  The market price received by the producer (determined by Demand) AND the cost of producing a good. Specifically, regarding the last point, the marginal cost of producing one more unit of a good (movement ALONG the supply curve). Marginal cost is the additional cost in labor and materials needed to produce that extra unit

In the market graph below I show the demand curve intersecting the supply curve at the "crook" of the supply curve.  At point "A" the quantity demanded = quantity supplied at 1,000 units.  I use point "A" as the current Full Capacity












The Tale of Two-Tiered Bankruptcies with GM and Chrysler. Sick of the rhetoric from BOTH parties on this issue? The try some honest analysis here...

Here is a very short, down the middle, as unbiased a primer as I have seen on the GM and Chrysler Motors bankruptcies.  Below is the conclusion, but if you want to be better informed on this political issue, then read the whole thing at the link below.  This will help you separate fact from the fiction BOTH sides of the political spectrum espouse.

The GM and Chrysler Bail-Outsb (source: The Conversable Economist)
The claim that the U.S. government "saved" GM and Chrysler is wildly overblown. The firms would have continued to exist if they had gone through a standard bankruptcy process. Were the TARP loans to GM and Chrysler and the government intervention in the bankruptcy process worth it? Part of the answer is the value you place on the faster bankruptcy process, or on how you feel about a process that gave bondholders less value and the UAW retirement fund more value than they probably would have received in a standard bankruptcy. But as another metric, let's say that the government ends up eventually losing $10 billion of its investment in GM, which has 50,000 hourly jobs in 2010. Say that in a standard bankruptcy, hourly jobs would have been slashed more sharply, down to 30,000. (Of course, it's possible that GM would have been managed differently under a standard bankruptcy, in such a way that jobs wouldn't have needed to be cut as sharply.) Saving 20,000 jobs at a cost of $10 billion works out to $500,000 in government spending per job saved.   
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