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June 29, 2010

GDP and Life Expectancy Animated

By Cindy Ivanac-Lillig

Have you ever taken a class in economic development? During the first few sessions, the class is usually instructed to explore the relationship between economic and human development. It may sound elementary, but why study economics and economic growth unless you can determine that it improves the human experience. There are usually some students in the class that tend to be more anthropologically-minded and are cautious of emphasizing economic growth. They worry about the loss of value that we aren't trained to analyze such as the loss of traditional livelihoods and weakened social capital. However, the class is eventually shepherded around to the idea that there just isn’t much reliable data available for all the different aspects of human development and one of the strongest relationships that can be observed is GDP per capita and a handful of different (albeit flawed) measures of human development. The understanding that GDP is at least a strong indicator of economic and human development allows the class to move on to more complex topics.

Today, I ran across a short animation that shows the progression over the last 200 years of both per capita income and life expectancy throughout the world. It is pretty interesting and teaches a lot in a matter of seconds about economic development. For all the students currently enrolled in an economic development class, increasing GDP per capita didn't necessarily lead to longer life expectancy, but it certainly seemed to have helped! I don't think the video can replace the first few classes’ worth of discussion, but it is striking.

Check it out here: GAPMINDER


Videos to explain graphical relationships over time works for me… What do you all think?


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June 15, 2010

The Living Euro

By Cindy Ivanac-L.

I happened to be living in Bologna in 2002 when Italy officially switched from the lira to the euro. It was a bit chaotic the first few weeks. One day a kilo of apples was 3000 lira (about $1.50), and the next day it was 3 euro (at that time roughly $3). After about 90 days, things seemed to settle down and the seniors of Italy were no longer holding out their change purses asking vendors to take the money out by themselves. It was an extraordinary experience to live through. (My only personal gripe was, and still is, that the lowest denomination of paper currency is 5 euro – this creates a lot of heavy change to carry!)

As luck would have it, I was in graduate school at the time and studying macroeconomics. In theory, you learn that there can be only one monetary policy for a currency. The participating countries had in fact given up their ability to enact their own monetary policy when they joined the euro. For many, including many Italians we knew, this was welcome news. I would say many southern European countries were glad to give up their own monetary policy. They had experienced rather intense bouts of inflation in the 20th century and in some cases had difficulty creating monetary authorities independent of politics.

The creation of a common currency in Europe sparked a debate that still endures: Does a monetary union require an eventual political union? The answer is probably still unknown. During workshops in the U.S., I have asked students to think about our country as a monetary union, with every state having the same monetary policy even though the state economies themselves are pretty different. However, we have fiscal policies/mechanisms on a federal level that can and do treat states differently.

During our recent financial crisis, states fared very differently. Without a flexible fiscal policy, things may have been much worse. Compare this with the relatively young euro, currently facing its first serious crisis. All of this news about the trouble facing the euro seems to reflect the euro countries attempting to figure out how to address the fiscal disparities among members -- with everyone else watching to see if it what they come up with is sustainable. There was always debate about whether or not they needed a political union in good economic times, but this crisis may add a new level of debate to the decade-old conundrum. I always tell students and teachers that it is a gift to study economics now, as we are witnessing a major transformation in the euro, and the ideas that gave birth to it are still very much alive and being debated.

To learn more about the euro from an academic standpoint, please visit www.euro-challenge.org, which has many wonderful resources dedicated to students and teachers. Many of the resources are designed for a program called the Euro Challenge we co-host with the Delegation of the European Union to the U.S., but the materials can be used by anyone. There are also great historical and analytical pieces on the site. For those more interested in the political aspect of the euro, there was recently a provocative blog entry in the NY Times called, The Euro's Lost Promise. Regardless of whether you agree or not with the author, the historical account he presents is an interesting read.

Let me know what you think – what is the interplay between monetary policy, politics and fiscal policy? Will a monetary union demand a political one in the future? What are the pitfalls?


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June 3, 2010

Econ in the Summer

By Cindy Ivanac-Lillig

There are a few days of school left and faculty and students around the country are breathing a sigh of relief. However, most economics teachers/professors that I know don't kick up their heels and sip colorful drinks for two months. Many of them use the time to study both current events and new ways to bring their lessons to life.

I am teaching at a couple of workshops this summer and I am always impressed with the dedication of these educators. Yes, many of these programs offer graduate credits, but I think most folks are taking part for the benefit of their classroom and not their resume.

At the end of the month I will be part of a week-long Indiana University/Purdue University (IUPUI) workshop in Indianapolis teaching about the Fed and Monetary Policy. If you happen to be teacher and are interested, please check your local Council of Economic Education website (most states have their own) and see if there is something similar offered. If you happen to be a teacher from Indiana, here is a complete list of the IUPUI Schedule of Workshops.

Here are some local state councils' websites:
Illinois
Indiana
Wisconsin
Michigan

I am also wondering if there are any interactive on-line/desktop courses for economics teachers that anyone knows about. Please share as I would love to check it out.

It's good to be back. Please share your thoughts and ideas below...


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