The Blast

Can You Help It if You’re a Spendthrift or Tightwad?
September 30, 2009, 9:47 pm
Filed under: economics

New York Magazine has an article that attempts to answer the question: Are you a spendthrift/tightwad by nature, or is it learned?

“To the economist, your decision to buy the boots should be purely rational. You should think: Do I have the money to afford these boots? If so, is the pleasure they will give me equal to or greater than the cost? And if I save this money, will it afford me greater pleasure in the future—for example, by contributing to a vacation or simply to an increased sense of security?

To Benjamin Franklin, your decision is a moral one. Couldn’t you go another season with your old boots, maybe if you got them resoled? And by denying yourself this indulgence now, might you not become a better person in the long run?

As for the behavioral psychologist, well, until fairly recently, no one was really sure what he would think. While there have been plenty of studies on why we spend money, there have been relatively few studies on why we don’t.”

The article highlights the work of George Loewenstein, professor of economics and psychology at Carnegie Mellon University, who worked with economists and psychologists at MIT and Stanford taking MRI scans of participants as they weighed economic decisions:

When the team studied the scans, they discovered the subjects were making their spending decisions in an intuitive, even animalistic, manner. When a subject saw an item he wanted, it activated his nucleus accumbens, which is the area of the brain associated with anticipating or experiencing pleasure, such as eating a piece of cake. But when he saw a price he didn’t like, it activated the insula, the portion of the brain that reacts to unpleasant shocks, like a bad smell. So for tightwads, encountering an expensive item was literally unpleasant—like sniffing a carton of spoiled milk.

Does that mean that you’re stuck with your natural inclination? Are you totally helpless? Should you just toll over and accept your fate?

Stop being so anxious about it and read the full article.

I’m tempted to say that I’m a tightwad, but I have a feeling someone close to me would call BS on that one. I wonder if Loewenstein considered identification issues. Hmm…


As Fruit of the Loom Goes, So Goes the Nation
August 31, 2009, 8:55 pm
Filed under: economics

Generally, when we are in the throes of an economic downturn, we tend to look for indicators that are a bit more tangible to grasp than GDP or CPI. Perhaps something more personal, something we can feel with certainty day to day…

Here’s the theory, briefly: Sales of men’s underwear typically are stable because they rank as a necessity. But during times of severe financial strain, men will try to stretch the time between buying new pairs, causing underwear sales to dip.
“It’s a prolonged purchase,” said Marshal Cohen, senior analyst with the consumer research firm NPD Group. “It’s like trying to drive your car an extra 10,000 miles.”

Sure, there are other examples of necessities, purchases of which can be prolonged (perhaps like making that tube of toothpaste last a bit longer), but this example really makes you feel the recession where it hurts.

(That was admittedly a poor attempt at the end there. Anyone have a better suggestion?)

Here’s the full article at the Washington Post

On Behavioral Economics
July 25, 2009, 9:40 am
Filed under: economics

The only problem I see with this particular example is that your guests probably won’t want to see your leftover pits before they even sit down. Imagine if a restaurant did this. If I was really concerned about this, I’d just be the first one to eat an olive after everyone was beginning to eat.

via Marginal Revolution

Salary and Wages
July 24, 2009, 6:46 am
Filed under: economics, infographics has released their 2009 Payscale College Salary Report, and contains a few interesting tidbits of knowledge. One example, of many, are the top paying degrees by salary:

A couple things to note: these figures are for annual pay for those with Bachelors degrees, and not higher degrees; and this data is purely extracted from their 1.2 million users, and is not necessarily a representative sample of the real world. Of course, by excluding those with higher degrees, the median salary figures are skewed higher than if they would be otherwise. Payscale’s full methodology can be found here.

Along these same lines,effective today the federal minimum wage rises by 70 cents to $7.25 per hour. Not all states meet this level, and others exceed it. Some don’t have any minimum wage law requirement at all. Here’s a map:

via Economix and The Economist

Kneeling at the Altar of Capital won’t get you anything
April 2, 2009, 7:21 pm
Filed under: economics

The Morning News printed a collection of their readers’ Favorite Things about the Recession. Here’s one of them.

While the polite answer to the question is “I still have a job,” if I’m being perfectly honest, my favorite thing about the recession is schadenfreude.

I don’t have any money. I’ve never had any money. This is not only because I don’t know how to get any, but because every time someone tries to explain to me how I could potentially get some, my eyes kinda glaze over and I start fantasizing about unicorns mud-wrestling or something fun like that. I went to a dinner once, a business dinner of my father’s, and I’m pretty sure I was sitting at the same table with money, but I spent most of the night flirting with one of my dad’s associates because her dark eyes and distinctly Central American accent were way more interesting, and given the recent global economic collapse, rightly so.

Some people had money, and now they don’t. How awesome is that? All these slick business-school types were kneeling at the altar of Capital, and they got their false-god-worshipping, goldbricking asses handed to them. I know this won’t change much in the pecking order, and that any scarcity at the top is going to be visited tenfold on those of us here at the bottom, but it feels shamefully good to know that some people out there lost fortunes, whereas I—with no investments, savings, or stocks—will leave this recession the same way I came to it: piss-poor.

via The Morning News.

Levitt and Mankiw join the Obama Administration
April 1, 2009, 7:27 am
Filed under: economics

This could be cool. Another landmark economist from the ‘Chicago School of Economics’ (in addition to Goolsbee), and a highly respected conservative economist from Harvard. Unfortunately, I am ever suspicious that this is an elaborate April Fool’s Joke.

For example. A sliver of the above link when discussing Levitt:

When we finally reached Levitt, he was at McDonalds headquarters at Oak Brook, IL.  Some of their franchises have been cheating by hiding Big Mac revenues that they have to share with McDonalds.  Levitt has found a way to benchmark performance that can reveal suspiciously underperforming locations.  “This is what economists call ‘moral hazard,’ ” Levitt said over a carton Chicken McNuggets. “Look, economics is not rocket science.  Think of the US Government as like McDonalds, a bank and a toxic asset are just like a franchisee and a Big Mac.  Once you see it that way, its simple.”

And discussing Mankiw:

There is another factor at play.  True to predictions, Larry Summers has proved hard to control within the West Wing.  Orzag and Geithner have not been able to do it.   In any case, they are fantastically busy trying to implement Obama’s healthcare policies and manage the financial crisis.  Furman and Goolsbee , who were both students in Cambridge, are in awe of their former teacher and find it hard to contradict him.  Summers and Mankiw respect each other, or at least Mankiw respects Summers!  Obama has watched Biden and Clinton argue over Afghanistan policy.  As a lawyer, Obama has always favored the “team of rivals” approach and wants to replicate it in economic policy.

Joke or no joke, did anyone really think that they could contain The Larry Summers!!! I think not! Rawr!

Recession Cocktails
March 28, 2009, 7:38 pm
Filed under: economics, humor

People are always so inventive during economic downturns.

Princeton Bitters

Pour two ounces of vodka into a cocktail shaker. Lament fact that you moved into a smaller house to pay for your son’s college education and, since he couldn’t get a job and he’s now twenty-six, he’s living on your couch. Eying your son as he works his Wii, pour two more ounces of vodka into shaker. Serve with a grimace.

via The New Yorker