Category Archives: economics

Quote

Senior Citizens Are Replacing Teenagers as Fast-Food Workers. Some thoughts.

Worth reading: Senior Citizens Are Replacing Teenagers as Fast-Food Workers – Bloomberg.

Some thoughts:

  • the reasons to hire older workers for fast food places is also true for other work as well.
  • the notion of retirement needs to be rethought. People are living lives well past traditional retirement ages, and some people retire involuntarily decades before they die.  Additionally, many of them cannot afford to not work all that time. Having work and an income in their later years makes sense.
  • Good work is uplifting. If you can find good work as you get older, you can find a way to make your later years more worthwhile.

 

Advertisements
Quote

How economic hardship traumatizes people individually and as a culture

This piece, Opinion | Still Haunted by Grocery Shopping in the 1980s – The New York Times, by a Brazilian economist highlights the emotional scars that economic hardship has on a person. Key quote for me was this:

Research has found that children living in poverty are at increased risk of difficulties with self-regulation and executive function, such as inattention, impulsivity, defiance and poor peer relationships. It takes generations until society fully heals from periods of deep instability. A study in the early 2010s showed that Germans were more worried about inflation than about developing a life-threatening disease such as cancer; hyperinflation in the country ended almost 100 years ago.

Not only does it touch people individually, but you could make the case that it gets embedded into the culture. Germans are still worrying about inflation! Indeed, I remember my mom telling me how the Great Depression affected her mother to the point that she adopted behaviors she could never shake, not matter how much she had in the future.

Economics can seem dry, especially when people focus on numbers. But those numbers paper over how people are really affected. What is the emotional impact of high (or low) unemployment? What do we see happening in the culture when housing becomes unaffordable or work impossible to get. The numbers are an essential part of the story but they are also just the start of the story.

 

Can we have greater equality without great catastrophes?

This is the question reviewed here:  Are plagues and wars the only ways to reduce inequality? | Aeon Essays.  (It’s a long read but a good one.)

If you are not familiar with this idea, consider this graph:

The higher the red line is, the greater inequality is. Throughout the last 2000+ years, inequality has been reduced only by terrible events like plague and war.

For a time post World War II, inequality was declining in much of the world. Then, around the 1980s, it started to increase and continues to do so. Now we have a race on. Population declines should occur over the next 100 years, leading to greater equality. To counter that, we have greater automation occurring which may boost inequality as those with the means to control the automation make much of the income and increase their wealth. Will this inequality lead to events that once again levels off the distribution of wealth and income? Or will we reach a balance somehow?

I highly recommend the article. Rising inequality will be one of the great strains on the 21st century, and this article helps to provide some context on the subject.

 

Good news regarding food and agriculture


The good news is this: There’s More Farmland in the World Than Was Previously Thought | Agweb.com.

There are still problems in preventing hunger and famine, but decreasing farmland should not be adding to that. Good! Now to decrease conflicts and ensure everyone has access to good, cheap, nutritious food.

(image via pexels.com)

An introduction to Richard Thaler, winner of this year’s Nobel Prize for Economics

Often times it is hard to appreciate the work of Nobel Prize winners, including those in Economics. Thaler is not one of those people. His work is very approachable for laypeople, and the benefits of his work is obvious.

Here’s one example, of how his work led to better results for people in terms of pensions.

Youtube is a great source of videos on Thaler. If you want to get started understanding what is behind his thinking, you can start there.
In addition, the New York Times covers his award winning here and it is another good introduction. Finally, here is a piece in the Times that Thaler wrote himself, on the power of Nudges. If you do anything, read that.

Good to see him win.

A cautionary tale of what low taxes and libertarianism brings

Amish women on the beach
There can be many lessons that can be drawn from the story here: The Rise and Fall of the ‘Freest Little City in Texas’

The ones I drew were

  • You get the society you pay for. In this case, the people of this part of Texas were unwilling to pay for anything, and they got nothing in return. It’s hard to believe this even needs to be said in this age, but apparently it does.
  • Even basic services cost money. That money comes from taxes or service fees.
  • Those services are expensive to pay for individually: it makes much more sense for people to pool their money (in the form of taxes),  to make it cheaper overall for everyone.
  • Taxes are only part of what makes a society, but a society that is based on money and that does not have taxes is no society at all.
  • Only a society that does not depend on money can get away without taxes. Typically those a tightly knit,  cohesive, pre-money communities that depend heavily on sharing and barter. These communities are more socialist or communist in nature as opposed to libertarian. More like an Amish community or hippie commune or a religious community of some form.
  • The best way to have a libertarian society is to have one of great abundance. Scarcity requires people to share and work together if they want to survive.

It’s a good story. Read it for yourself and draw your own conclusions.

(Photo above is Amish women on the beach)

Wages, Nash equilibrium, and the productivity paradox: a small theory of my own

Economists write a lot about the mystery of why productivity is not increasing, with pieces such as this. There’s even a section on it in Wikipedia.

My own theory is that limited wage increases is also limiting the benefits of productivity aids. How I think this works is so:

  1. Employers wont raise wages for employees.
  2. Employers deploy technology that should result in productivity gains.
  3. Employees take the technology deployed and use them to decrease their efforts.
  4. The employer sees some productivity gains and assumes that is the limit for the technology deployed.

Look at this chart:

In much of the world economy, all the job growth is in the services sector (green line), not the manufacturing sector (red line). Achieving productivity gains in the manufacturing sector is more straightforward: replace people with robots and you are done. It’s not as straightforward as that in the services sector. In some services sector jobs, it is not possible to decrease effort without it being visible. But in many services sector jobs, it is. If employees cannot improve their lives by making more money, they may decide to do so by working less and working right up to the point where they don’t lose their job.

If you look at employment as a game, then we currently have a Nash equilibrium where the employees know that they won’t get paid more working for the same company, because that is the best strategy for the company. Therefore the best strategy for the employee is to minimize their effort without getting fired and while showing little if any productivity gains.

That’s to me is key reason why I think we have the productivity paradox.

I would add that the reason this is a paradox is because no one wants to admit that this is happening. It seems like a failure on both the employers and the employees side. The employee wants to be seen as a good worker and the employer doesn’t want to admit it could be paying more. Instead technology is brought in to solve an organizational problem, which is something technology cannot do.

(Chart from Business Insider).