Today’s Wall Street Journal (March. 19, 2017, page R1; online version is here) printed an article I wrote. They asked me to be part of a debate on “Should the U.S. Retire the Penny and Nickel?” I took the “no” side. This is a follow on article from the piece I wrote for TheConversation back in August 2017 (see the original piece here) that advocated the same idea. Because of space limits the Wall Street Journal edited down my piece. Below is the unedited version: Continue reading
The annual college basketball spectacle known as March Madness has arrived. Millions of people will tune in to the three-week tournament to see who’s the best team in the U.S. And millions more will wager a few bucks to take part in an office pool in which they try to pick the winner. Even presidents have been known to take part in the madness. But behind the hype is a lot of cash. Just as journalists are trained to follow the money, so are economists like me. So let’s take a closer look. Continue reading
Does going to college make students into political liberals? Conservative activists have claimed that universities brainwash students and indoctrinate them into believing a liberal ideology. The line of reasoning goes like this: Liberal college professors tell students “what to think,” and “what to think” is that conservatives and their positions are to be dismissed. A state lawmaker in Iowa has even suggested universities consider political affiliation in connection with hiring practices in order to balance out the distribution of political representation on the faculty. Continue reading
In a speech at the 2018 World Economic Forum held in Davos, Switzerland, French President Emmanuel Macron said he wanted to “make France a model in the fight against climate change” and promised to shut all coal-fired power plants by 2021 – two years earlier than the timetable put forward by his predecessor.
While Macron’s move is mainly symbolic since France only generates about 2.2 percent of its power from coal, it signals his government is actively trying to wean itself off fossil fuels in sharp contrast to the current policy of his U.S. counterpart. “We have finally ended the war on coal,” pretty much sums up American policy these days, as President Donald Trump declared in a recent speech. Continue reading
Credit card fraud is a major problem, which costs billions each year. Banks and credit card issuers have tried a number of ways to reduce the fraud. Recent examples are the rollout of cards with computer chips. Cards with chips are more secure for in-person transactions. Unfortunately, chipped cards are no more secure than older cards without a chip for remote transactions, such as paying for something over the phone or buying something on the Internet. Continue reading
It is almost Christmas time and the song “Santa Claus is coming to town” keeps playing over and over. For me the key lines of this ear-worm are “He knows if you’ve been bad or good so be good for goodness sake.” The song clearly states doing the right thing leads to more gifts on Christmas day.
I have been puzzling over these lyrics for years and wondered if the lines are true. Outside of Christmas does being ethical and honest lead a person to riches or poverty? While the debate has lasted a long time, only recently have actual data been gathered that can answer the question. My recently published analysis contained results that surprised me; only a few ethical and unethical acts were associated with financial changes. Continue reading
Thanksgiving is a great U.S. holiday during which people consume huge quantities of turkey, stuffing, cranberry sauce and pie. One of the stranger things about this holiday, however, is that a few days before everyone starts cooking, whole turkeys are suddenly discounted by supermarkets and grocery stores. Continue reading
Tucked away in the recently announced GOP tax bill is a small item you may have missed: a new tax on university endowments. As I have spent decades working in higher education, the proposal immediately piqued my interest.
Colleges create endowments by raising funds from alumni, companies and other donors, invest the money in stocks, bonds and other assets, and use the returns to fund student aid programs, professors’ salaries and any other expenses needed to run a college. Republicans want to slap a 1.4 percent tax on certain endowments’ investment income, also known as their returns. Continue reading
Hurricanes Irma and Maria devastated Puerto Rico in September destroying homes, crops and communications. Many weeks later, less than 20 percent of the electricity has been restored, and no one really knows when the rest of the island will regain power.
How much did the devastation caused by these storms on Puerto Rico impact key U.S. mainland indicators like GDP, unemployment and inflation? The answer might surprise you; not at all.
How Does The U.S. Government Handle Puerto Rican Numbers?
Branches of the U.S. government that collect statistics generally do not include Puerto Rico in national totals. For example, the U.S. Census Bureau has calculated Puerto Rico’s population since 1910. It even lists the island’s almost 4 million people along with the population of the other 50 states. However, the total population of the U.S. does not include the island’s people unless they move to the mainland.
GDP shows the size of a country’s economic pie. The U.S. Commerce Department’s Bureau of Economic Analysis tracks U.S. GDP at a very detailed geographic level. If you want to know the GDP of Oshkosh, Wisconsin ($10 billion in 2016) or Altoona, Pennsylvania ($5 billion), the U.S. government has you covered.
What they don’t track is Puerto Rico. This is strange since the Bureau does track the GDP of four smaller U.S. territories. Data are published annually for the U.S. Virgin Islands, Guam, American Samoa and the Mariana Islands. The press release discussing territorial GDP does not explain why Puerto Rico isn’t part of the list.
One reason might be that Puerto Rico produces its own numbers. However, Puerto Rico produces Gross National Product (GNP) figures. The U.S. mainland tracks Gross Domestic Product (GDP). While the two sound alike, they are not comparable. GNP measures what Puerto Ricans produce where ever they live. GDP tracks what is produced within the U.S. borders irrespective of citizenship or immigration status of the worker.
Unemployment and Prices
Other important economic data are information on unemployment and inflation, which are produced by the U.S. Department of Labor’s Bureau of Labor Statistics. Like population, the unemployment figures for Puerto Rico are calculated and released along with other states. However, Puerto Rican numbers are not included in the national total, which means Maria’s destruction of jobs and businesses will have no impact on U.S. unemployment.
Just as interesting is the region in which the Bureau of Labor Statistics classifies Puerto Rico. The Caribbean island is part of the New York-New Jersey region. It is not part of something geographically close like Florida.
Hurricane Maria has raised the price of food and other necessities on the island. However, the hurricane will not impact U.S. mainland inflation. U.S. inflation figures are calculated by changes in the Consumer Price Index or CPI. The U.S. CPI collects prices from 87 cities. None of those cities is in Puerto Rico.
Does Puerto Rico count at all in U.S. statistics? The answer seems to be summed up by the Central Intelligence Agency, CIA. The CIA publishes an amazing statistical resource called the CIA World Factbook. The Factbook provides a fast and simple method of tracking key statistics needed to understand the political, economic and military capability of any country. The CIA has a separate entry for Puerto Rico, which they consider “a self-governing commonwealth in political association with the US.”
Overall, there is no impact on the U.S.’s GDP, unemployment or inflation after the extensive devastation of Hurricane Maria since Puerto Rico is not included in the calculation of key economic data.
Is there any silver lining to being ignored by the U.S. government? The Internal Revenue Service (IRS) does not care about Puerto Rico. Island residents do not have to pay U.S. federal income taxes on their earnings. This means there is at least one upside to being overlooked by Washington.
A world without cash seems wonderful at first glance since it is convenient and fast. You don’t need to withdraw dollars or euros ahead of time. You don’t have to worry about money being lost or stolen. Paying for things with your phone is a breeze.
Many countries around the world are steadily shifting away from cash. Canada, the United Kingdom and Sweden have already largely embraced a cashless society. The U.S. is also steadily making the move, with people holding smaller amounts of cash.
However, the recent string of natural disasters and security breaches at major financial entities exposes a huge flaw in this trend: When the power goes out, telephone lines shut down or account information is stolen, it is impossible to use ATMs, credit or debit cards or mobile payments – no matter how rich you are.
In other words, giving up cash increases the chance of the kind of economic catastrophe that results when people can no longer easily trade for the goods they need and want. The solution to this national security issue is simple: bring back the currently maligned large denomination bills like the $500, which was discontinued in 1969. Continue reading
The 2017 Nobel Prize in economics was won by the University of Chicago’s Richard Thaler. The Royal Swedish Academy of Sciences gave the prize “for his contributions to behavioural economics,” which is the integration of economics with psychology. The award was not a total surprise since Thaler’s name was floated earlier on the list of potential winners. Continue reading
On October 10th Proctor and Gamble, nicknamed P&G, is holding a shareholder meeting to elect a new board of directors. This vote has the potential to dramatically impact Cincinnati, Ohio.
Most corporate shareholder meetings are boring affairs that rubber stamp management’s slate of candidates. Not this one. Nelson Peltz, a Wall Street billionaire, is spending huge sums of money asking P&G’s shareholders to vote the white ballot. Voting white will put him on the board and give him some control. P&G is spending equally large sums to convince shareholders to vote the blue ballot. The blue ballot will keep Peltz off.
Is it just me, or do you also think the number of major natural disasters is increasing each year? Disasters make news. Are they just being over-hyped by the onslaught of 24/7 reporting?
The U.S. government’s National Oceanic and Atmospheric Administration (NOAA) actually maintains a website that answers this question. NOAA’s list of billion dollar weather and climate disasters goes back to 1980 and records the date, place, deaths and total cost. Since 1980 there have been 212 disasters, which NOAA calculates have a combined cost of over US$ 1.2 trillion. Continue reading
There has been a growing war on cash in an attempt to curb terrorism and tax evasion. Much of the focus has been on abolishing large bills, such as the decision to eliminate the €500 note from circulation. However, politicians are also targeting smaller forms of money for elimination. U.S. Senators John McCain and Mike Enzi introduced legislation in March 2017 to eliminate minting of pennies and switch the dollar from paper to a coin only. Continue reading
The number of international travelers is soaring. Many travelers need different currency as they arrive in new countries. In the past, travelers using an ATM, credit or debit card were simply charged for purchases and withdrawals in whatever currency the locals used. For example, U.S. travelers to France were charged in Euros when they used their credit card in Paris.
Recently, instead of being simply charged in the local currency many travelers are being asked if they want to pay in their home currency. Companies offering the service call it “dynamic currency conversion.” For example, some U.S. travelers to France are now asked if they want to complete transactions in dollars.
The change is occurring because ATMs and credit card terminals now have the ability to check where a card was issued. Then international travelers can be asked whether they want to use their home currency for their transactions. The question seems innocuous, but agreeing to use your home currency in a foreign land can inflate the cost of every purchase. Continue reading
Before I get to Quarles and his qualifications, it’s important to understand the Fed and what it does. Its decisions are vital to every person on the planet who borrows or lends money (pretty much everybody) since it has enormous influence over global interest rates. Its board of governors also influences most other aspects of the global financial system, from regulating banks to how money is wired around the world. Continue reading
The 4th of July is a day for many people of parades, barbeque and of course fireworks. The tradition got its start when the founding fathers met in Philadelphia to write and sign the Declaration of Independence. The day after the Continental Congress voted for independence, John Adams, the future U.S. president, wrote to his wife Abigail. At the end of his letter he stated that Independence day
“ought to be solemnized with pomp and parade, with shews, games, sports, guns, bells, bonfires and illuminations from one end of this continent to the other from this time forward forever more.”
One year later in 1777 Philadelphia had fireworks, which Adams called “illuminations,” plus a parade commemorating Independence Day. Since the 4th is so closely associated with fireworks here are four key points to talk about between explosions. Continue reading
Eating fast food is frequently blamed for damaging our health. It is not the healthiest type of meal since it is typically high in fat and salt. Because of this some government officials have considered regulating parts of the fast food industry to improve public health and reduce health inequalities across society.
Regulating fast food locations to improve health among low income Americans rests partly on a key assumption: that fast food is primarily eaten by poor people, who cannot afford nutritious but more expensive food. Mark Bittman in the New York Times, summed it up nicely: “The ‘fact’ that junk food is cheaper than real food has become a reflexive part of how we explain why so many Americans are overweight, particularly those with lower incomes.”
Our recently published research examined this assumption by looking at who eats fast food using a large nationwide random sample. What we found surprised us. The poor don’t eat the most fast food. Instead, the middle class do. Moreover, the difference between the proportion of rich people and poor people who eat fast food was quite small. It seems when you ask people if they ate at a fast food restaurant like McDonalds, Kentucky Fried Chicken or Taco Bell last week, the majority of rich, poor and middle class said “yes.” Continue reading
A few months ago newspapers in Columbus and Dayton trumpted stories with headlines like “More People Moving Out of Ohio.” Both stories relied on data from large moving companies. While data from United Van Lines and Atlas Van Lines is interesting, relying on moving companies for migration information presents a biased view of migration. Continue reading