What You Can Learn In Economics Class

The August 17, 2012 Doonesbury:

In this class last year, during the first week, a student who had read something on this blog outside of class came to class the next day and asked what one of the words I used meant.

I gave him some good advice. Open Google, and type the keyword define and the word you don’t know, and it will give you definitions. He didn’t know this, and he was an A student. Now you know it. Here’s what I got when I looked it up in Google.

N.B.: Fungible has been a word on the move the last 2 decades. When I first heard it perhaps 25 years ago, it wasn’t in even in the first dictionary I looked at. Now, it’s such a useful word for an interesting property that there is a Wikipedia page for fungibility. Even though the word “fungibility” is not in Microsoft’s default dictionary for Windows Live Writer (which I use to write these posts).

BTW: If you find dictionary definitions to dry to be useful, you should try Wordnik, where people can post examples of the actual usage for words. It has a page for both fungible and for fungibility.

FWIW: I don’t use dictionaries any more. I packed up all the ones in the house and office about 2 years ago. They’re in storage, but I haven’t gotten them out once.

A Sign of the Times

Math is a skill not a talent.

You get better at it by having self-respect and not making excuses, and by having others not accept your BS.

National governments are not that different from school kids. Don’t believe it when someone says they aren’t.

Chops to Scott Adams for this August 17, 2012 Dilbert.

Why the World Seems Like One Big Currency Crisis

It’s all about incentives:

In 1902, European nations responded to a Venezuelan government debt default with military force. German, Italian and British gunboats blockaded ports, seized customs houses and bombarded a Venezuelan fort. Venezuela caved, agreeing to restructure and pay its debts.

These days, when European leaders see Greece and Ireland on the brink of default, they don't send gunboats--they send money.

And that behavior encourages …

I hate to sound unenlightened, and it certainly isn’t nuanced in the 21st century way, but if defaulting countries could be invaded, and have their government officials put in jail where they can’t spend their Swiss banked money, a lot of this would go away.

Schoolshops Not Sweatshops

In Bangladesh, villages that have had textile factories – you know… sweatshops – have had higher percentages of girls in school for over 30 years.

Get the message folks: people who are against sweatshops are prejudiced against girls.

Read “One More Reason Wal-Mart Deserves the Nobel Peace Prize.

How Low Can NPR Go?

Last night at 5, NPR announced that the unemployment rate rose from 8.22 to 8.25%. Note that this went out over the airwaves; their print site does not document this.

I have never heard of such a thing.

I am starting my 24th year as a professional macroeconomist. Before that I was tuned into macroeconomic issues for at least 10 years.

And not once, ever, have I heard a mainstream news organization carry the unemployment rate to the hundredths position. Never!

Of course, I have heard academic macroeconomists carry out the unemployment rate that far. We have the data, and running the calculation is easy. In fact, that’s the source of the number: Alan Krueger, the White House economist.

But, does being able to do something mean that you should do it? Academics tend to know better than to make claims at this level of fineness.

So why now? My guess is because the “rounded” values would be 8.2% and 8.3%, which sounds like a much bigger change, and might decrease Obama’s reelection chances.

Even so, 8.2% and 8.3% are the official unemployment rates. Officially, this number is not carried to the hundredths.

To even get the number to the hundredths spot, you need to dig a bit, and get the actual number of unemployed, and the number in the labor force, and do the division yourself.

Of course, the BLS is not full of stupid Republicans. Instead, they don’t do this for a reason. After the seasonal adjustment process used before those numbers are released, the hundredth digit is not considered accurate enough to announce.

There’s a more practical reason as well. You and I can’t feel a 0.1% change, much less a 0.03% change. I’ve told macroeconomics students for a decade or two that our tolerance for what we can feel is about 0.5% up or down.

To me, as a pretty decent economist, that suggests that we shouldn’t even be worried about the change that did take place. But the Obama administration has to worry about it, because they don’t have any better news to crow about.