Tuesday, July 29, 2008

Yet another store closure.

Every Bennigan's and Stake & Ale in the country suddenly closed today. That's pretty drastic, and without warning. It's probably a bad way to run a company, to not warn even your employees about possible closures, or to close everything at once, but when you know you're going bankrupt you may not care.

Friday, July 25, 2008

News that doesn't get out as much, I think.

BW Senior Economist Michael Mandel reports that real college grad wages are down a whopping 5.5% Ouch! That's a figure we generally don't want falling, because we want to give incentive for people to pursue college degrees. I think we should expect that figure to rebound over the next few years.

And, while new home sales are down (IHT), it's actually higher than expected (Bloomberg). Bloomberg also reports that durable goods orders are up, consumer confidence is up, and moderate growth is expected.

Friday, July 18, 2008

Factory Output and Unemployment

Bloomberg reports that factory output rose in June. What does this tell us?

Well, nothing we didn't already know, I think. Take a look at Capacity Utilization. Looks like it's been falling, until a recent jump up. We don't know if there'll be a change in trend back upward, but I find it interesting how different indeces are tied together.

Look at capacity utilization over the past three years (you'll have to click on 'Charts' then '3-year'), and you'll see the rise in capacity utilization, before its downward descent. It shouldn't surprise you to hear that there's probably a negative relationship between capacity utilization and the unemployment rate (or, perhaps, a positive relationship between capacity utilization and the employment rate).

Capacity utilization measures the percentage of factories in use, but it takes people to work those factories. With constant technology (or, in the short term), a decrease in physical capital will likely lead to a decrease in human capital. For a given technology level, there's a particular ratio of physical-to-human capital, so a decrease in one form of capital will mean a decrease in the other form of capital, in order to keep the ratio constant. A rise in utilized physical capital--as the Bloomberg article reports--might portend a drop in the unemployment rate, or at least provides downward pressure on the unemployment rate.

"Downward pressure" just means that there will either be a drop in unemployment or less of a jump in unemployment, all other things equal.

On the other hand, the report may not be indicative of a trend. Capacity utilization has been dropping this year, and unemployment has been rising. Unemployment continued to rise in June, which suggests that capacity utilization will continue to drop.

Bottom line is this: if the report is actually the start of a trend, we'll see the unemployment rate start to drop. If no, the unemployment rate will continue to rise.

Side note: interesting 2002 article on the savings rate.

Thursday, July 17, 2008

Educational issues

Apparently some people in the educational system want to do away with summer school. I wish he'd expound on his reasons a bit more, as summer school has been shown to help even low-income students.

An interesting topic raised in one of my old classes was Good Cause employment, we called it. In parts of Europe, I think by law, someone cannot be fired without a very good reason--and poor performance isn't good enough. In the United States, someone can be fired, essentially, at will or with no cause. In Europe, therefore, hirings and firings are less frequent, it is more costly to employ people (you have to be extra careful who you hire), and salaries are relatively lower. The discussion went on to conclude that in the United States, since hirings and firings and contracts are determined by the market forces, Americans prefer the extra pay to job security.

That's a long set up for one link, I think, but according to an online poll, some educators don't feel this same way. Those teachers prefer their job security over their high salaries. Also, according to that site, most teachers have functional or better parent-teacher relationships at their school, so I think that those polls don't represent a very representative sample of educators.

Thursday, July 10, 2008

Police and Privacy

This is a good op/ed piece in the Houston Chronicle about better neighborhoods having better police enforcement.

Under a truly free market system, all policing would be handled by private entities, and the poor would suffer from little to no policing. Indeed, there used to be private militias. I think most Americans agree, though, that safety should be universal, and police forces should equally protect everyone. There are certainly economic arguments to be made to this effect as well, particularly concerning the necessity of private property. If wealthier areas would like more or better police enforcement, maybe they could push for higher taxes to pay for better police wages or more officers for all. That's essentially what we do with national security, isn't it?

EDIT: Another article about the lack of police officers and how it affects other parts of an economy.

An article in PC Mag about the anonymity (or lack thereof) of internet activity.

Of course, this is an issue outside the realm of PC Mag, as people are afraid of losing their privacy. Allow me to play the devil's advocate: what are people trying to hide? In an age of the freedom of information, we learn that a more informed citizen is a more powerful citizen (and, you can substitute "citizen" for "consumer" or any other type of person). What are people doing that will harm them if their secret is revealed?

Let us assume a world in which we have no (or minimal) privacy. Let's call this a Free Information World. Everyone would have access to your phone number, your address, your name, your current location, what television shows you like, and so on. You wouldn't be afraid of stalkers. Why is that? Everyone would be able to identify a stalker pretty easily. If your current location was always known, the resident of a house would know when you were at his window. Stalking would be much more difficult. Criminal activity in general would be more difficult--which means that there would be fewer criminals, and less to be afraid of. This, of course, requires world-wide freedom of information. The system would work if it was limited to a country only if immigrants and foreign visitors were also tracked.

This Free Information World possess some practical problems with money. We wouldn't want people to be able to access your bank accounts, regardless of whether or not people knew how much money you had (it's not like you can be physically robbed, if your current location is known, and the source of "new" money is known, and so on). We'd need some high-tech DNA sampling identification system (or maybe just an ID card that stays around with you, assuming its current location is always known as well, in the event the card is lost or mistakenly picked up by someone else, or whatever).

But, your money, like all of your possessions, could be considered a private property issue in the sense that everything you own must be protected, and inaccessible by others unless you give it to them (blackmail is also more difficult, and naughty secrets are harder to keep in this world). As long as these private property issues can be resolved, this world should be a functioning society.

The only other issue I can possibly imagine is prejudice. If people know your medical history, they may be less likely to want a long-lasting relationship with you. If they know your financial history, they may be less inclined to spend time with someone outside of his socioeconomic class. I answer: you would know ahead of time what people's prejudices were. Do you want to associate with a prejudiced person? Associating with someone is a mutual thing. Also, if you knew every one's problems, then you'd likely be more understanding with people in different situations. Sure, that person may have some issue you don't like, but are you so perfect? Everyone has their issues.

Regardless, this hypothetical world is also probably futuristic enough that maybe there'd be less prejudice in the world anyways. I can hope, right?

Monday, July 7, 2008

More interesting things

It's been a tumultuous time around the world. Zimbabwe has just been a mess! Sadly, no one decided to do anything about it until after their elections were over.

Anyways, everyone knows oil prices have been high. Iraq wanted to try to get some help producing the stuff, but I've heard that has not met much success yet. It would be nice to get higher supply now, but if the situation is anything like how Heilbroner describes in Economics Explained, then we have a rough ride ahead of us regardless, with no easy end in sight (interesting bits on pages 181 and 207, regarding the 70s).

By the way, if you think everyone's doing poorly and losing money, take a look at McDonald's and Walmart. Inferior goods are an interesting thing.

And for those curious, Business Week had an interesting article to explain why it takes so long to call a recession. They don't really explain it very well, but it's still an interesting read.

Lastly, a Newsweek article asks if the president has the power to fix the economy.