Marginal Thoughts tag:marginalthoughts.chicagofedblogs.org,2012://11 2012-04-09T21:39:57Z Movable Type 3.35 Scratching the Surface: Youth Unemployment and Policy tag:marginalthoughts.chicagofedblogs.org,2012://11.509 2012-04-09T21:35:08Z 2012-04-09T21:39:57Z By Cindy Ivanac-Lillig A couple of weeks ago, my friend sent a short and sarcastic email that has haunted me. It said, “Funny that Switzerland's minimum wage is $15 per hour, and the country is #1 in global competitiveness with... CIndy Ivanac-Lillig marginalthoughts.chicagofedblogs.org unemployment (scroll to the bottom of the page) vs. minimum wage. My meager experiment of googling these maps didn’t produce much that was satisfying or definitive. In fact, generally speaking, the northwestern part of the country has higher minimum wages and somewhat lower youth unemployment rates. However, at the risk of sounding too academic, this by itself doesn’t disprove the general theory outlined in the article. I finally found an interesting piece from the Federal Reserve from 2003. It discussed the factors that mitigate or exacerbate this general theory of minimum wage (price floor). As it turns out, the relationship between unemployment and minimum wage is greatly affected by labor laws, the degree to which the government is proactive in helping youth find jobs, and the manner in which the minimum wage is negotiated. As usual, you ask an economic question and the answer is rarely straightforward. There are many dynamics at play in regards to youth unemployment. If you are interested, check out a 2011 paper from the Fed detailing the deterioration of youth job opportunities entitled, Polarization, immigration, education: What’s behind the dramatic decline in youth employment? The paper points out that the employment rate among 16-17 year-olds is currently at 15%, which is the lowest level ever recorded by the BLS. Also, check out a recent article from the Economist that outlined the long-term effects of youth unemployment. As many of my readers work with young adults, numbers like this may not be news. But all of this has me wondering if youth unemployment is more expensive to society in the long-run than it may seem on paper? What do you think? ]]> Professor Bernanke, I have a question… tag:marginalthoughts.chicagofedblogs.org,2012://11.507 2012-03-30T16:22:57Z 2012-03-30T16:44:11Z By Cindy Ivanac-Lillig How would you like to walk into one of your business classes and have Chairman Bernanke standing behind the podium? Students at George Washington University recently experienced this very feeling. The Chairman guest lectured a four-part series... CIndy Ivanac-Lillig marginalthoughts.chicagofedblogs.org Origins and Mission of the Federal Reserve The Federal Reserve after World War II The Federal Reserve’s Response to the Financial Crisis The Aftermath of the Crisis At one point during a lecture, a student was crafting a question and inadvertently said, “If you were Chairman of the Fed….” To which the Chairman smiled, interrupted the student, and said, “I am the Chairman.” If you have the time to watch the lectures, in addition to learning about the history of central banking and the current day dilemmas of economic policymakers, you may even smile once or twice. The Fed has provided a link to all four of his lectures as well as links to his PowerPoint presentations. Please feel free to use them in your teaching and/or studies. What do you think of the lecture series? What would you like to see the Fed do going forward to encourage students to continue to explore the Great Recession? ]]> The Art of Well-Being and Economics in the Euro Zone tag:marginalthoughts.chicagofedblogs.org,2012://11.501 2012-03-02T22:03:20Z 2012-03-07T16:20:07Z By Cindy Ivanac-Lillig What do art and economics have in common? Not that much I thought. However, I recently found a Wall Street Journal photo essay (interactive graphic) on “Life in the Euro Zone,” which depicts what life looks for... CIndy Ivanac-Lillig marginalthoughts.chicagofedblogs.org Life in the Euro Zone,” which depicts what life looks for a handful of ordinary families in light of the recent austerity measures and general economic uncertainty. This photo essay does something that many economists are lousy at doing – connecting to people and families and ultimately explaining why all this matters. Why does economic policy matter? It matters because there is a child who is growing up surrounded by anxiety and fear, a generation of young men who can’t find a way to support themselves, a generation of retirees who may not know the calm of reflection and retirement, a generation of youth who dream of moving, and families who are deciding how many children to bring into the world based on how much opportunity they think they can provide. It is a beautiful piece that also happens to do a great job of weaving in some good economic indicators throughout the slideshow. I especially want you to note the following charts: Economic Sentiment Index, Long-Term Unemployment ( >12 month), Percentage of Women in Labor Force, Unemployment of Young Men, and Social Spending as a Percentage of GDP. Interesting stuff. I hope you enjoy this as much as I did. If you find anything interesting that attempts to bring to life some of our economic indicators and policy outcomes here in the U.S., I would be very interested to hear about it. Macroeconomic policy can sort of be boiled down to asking everyone, “What is your life like now and what do you think the future holds?” And as it turns out, maybe artists can teach us something about how to communicate this... So, what do you think? How differently did you look at the economic indicators in this photo essay because they were embedded in the story of a real family? ]]> Economic Calendars tag:marginalthoughts.chicagofedblogs.org,2012://11.499 2012-02-22T16:49:58Z 2012-02-22T17:56:29Z I love the new tool that the Financial Times has put out, Economic Calendar. I am always looking for ways to simplify my information flow and this tool is user friendly. It is basically a snapshot of the week's economic... CIndy Ivanac-Lillig marginalthoughts.chicagofedblogs.org Economic Calendar. I am always looking for ways to simplify my information flow and this tool is user friendly. It is basically a snapshot of the week's economic reports/data available globally. For example, today they listed snapshots of 50 different economic reports. It only took me about one minute to read through and find some interesting information, such as some of inflation figures coming out of Italy and the Euro zone. Another good data aggregator..... Let me know if you find any others and what you think about FT's economic calendar. ]]> Inflation Dashboard tag:marginalthoughts.chicagofedblogs.org,2012://11.491 2012-01-18T15:55:07Z 2012-01-18T16:08:54Z By Cindy Ivanac-Lillig Check out the Atlanta Fed's inflation dashboard. It visually depicts where inflation is in the context of a longer term trend. As you drill down into the component parts, you get a flavor for not only which... CIndy Ivanac-Lillig marginalthoughts.chicagofedblogs.org inflation dashboard. It visually depicts where inflation is in the context of a longer term trend. As you drill down into the component parts, you get a flavor for not only which direction the indicators are moving, but how similar indicators relate to one another. In this case, a picture really does say a thousand words! Let me know what you think -- ]]> Groupthink and Economics tag:marginalthoughts.chicagofedblogs.org,2012://11.490 2012-01-13T22:43:52Z 2012-01-17T16:08:46Z In today’s NY Times op-ed, “The Rise of the New Groupthink,” Susan Cain bemoans the fact that many workplaces and schools champion the idea of teamwork and group projects. The article points out that there is little scientific evidence that... CIndy Ivanac-Lillig marginalthoughts.chicagofedblogs.org NY Times op-ed, “The Rise of the New Groupthink,” Susan Cain bemoans the fact that many workplaces and schools champion the idea of teamwork and group projects. The article points out that there is little scientific evidence that better ideas or greater achievements are produced in groups. It actually may be the opposite. “Privacy makes us more productive,” says Cain. This is interesting, but not terribly surprising to anyone who has sat in a corporate “brainstorming” session. Cain says that group brainstorm sessions suffer from groupthink: “People… instinctively mimic others’ opinions and lose sight of their own…” A neuroscientist, Gregory Berns, discovered that is partly chemical. We activate a small organ in our brain that is associated with the fear of rejection. However, the one exception that Cain points out is “electronic brainstorming.” On the Internet, it appears that groups outperform individuals, especially really large groups. Presumably, this is because we lose our fear and therefore can combine what is powerful about individual thought with the sheer number of ideas from large groups. Cain writes of electronic brainstorming, “It’s a place where we can be alone together – and that is precisely what gives it power.” Now, you are thinking, how does this relate to economics? After reading Cain’s piece, I was reminded of an econ blogging session I attend at last week’s American Economics Association conference here in Chicago. Panelists made the case that blogs’ more informal nature allowed current events and current policy prescriptions to be discussed with various levels of depth in a remarkably short period of time. A panelist noted that today, economic journals are of little use to economic policy-makers whereas blogs are helpful in flushing out ideas quickly and efficiently. The panelist also alluded to the fact that by virtue of the number of contributions, blogs have avoided what many academic journals have been accused of --groupthink. The idea of further democratizing journals and economic policy discussion captured my imagination and left me wondering how we could best use “electronic brainstorming” and other methods of electronic discussion. Electronic publication is one thing; finding ways to capitalize on large groups of experts’ ideas is still quite awe-inspiring and difficult. What do you think about the groupthink dynamic and electronic brainstorming? For my econ friends, what is the middle ground? What could the field do better to try and generate the best ideas and promote interdisciplinary work? And finally, if you are an educator, how has the Internet changed your group assignments? Have you found a way to encourage “a place where we can be alone together”? ]]> Back to the Basics: Interpreting the Bond Market tag:marginalthoughts.chicagofedblogs.org,2011://11.487 2011-12-23T20:13:45Z 2011-12-23T20:17:36Z By Cindy Ivanac-Lillig Investors generally have two choices in the financial market. They can purchase a piece of a company by buying what’s called a stock, or they can lend money to a company, city, state, or country by buying... CIndy Ivanac-Lillig marginalthoughts.chicagofedblogs.org What are your thoughts on the recent slew of Italian bond market headlines? Did the walk through some of the bond market basics help? If you are an educator, please share how you have incorporated the recent EU sovereign debt troubles into your economics or finance classes. Check out this interesting private report on the structure of global financial markets from Russell Index: (http://www.russell.com/indexes/documents/research/structure-global-equity-markets-July2010.pdf) SIFMA (Securities Industry and Financial Markets Association) Statistics: http://www.sifma.org/research/statistics.aspx]]> An "Insanely Great" Creative Economy tag:marginalthoughts.chicagofedblogs.org,2011://11.478 2011-10-27T16:07:27Z 2011-10-27T21:25:13Z By Cindy Ivanac-Lillig Steve Jobs' Apple created extraordinary products we use every day. They are extraordinary not simply because we all use them. After all, we all use toasters at home too. What’s extraordinary is that people have an emotional... CIndy Ivanac-Lillig marginalthoughts.chicagofedblogs.org Innovation. However, I’d like to raise what I think is a more important point: When Jobs' biographer, Walter Isaacson, asked him if there was any one product that he was most proud or liked best, Jobs instead answered that he was most proud of the company itself. Think about that. Maybe the products aren’t the real extraordinary innovations here. It’s true that much of the technology existed before Apple ever manipulated it. Maybe the real innovation is Apple, Inc. Maybe the company itself and how it works is an innovation, one that is still in the process of helping build the foundation of our creative economy. Consider this definition of the creative economy as described by the United Nations Development Program:
“…creative economy...has emerged as a means of focusing attention on the role of creativity as a force in contemporary economic life, embodying the proposition that economic and cultural development are not separate or unrelated phenomena but part of a larger process of sustainable development in which both economic and cultural growth can occur hand in hand.”
If you agree the role of creativity is increasingly important in our economy and our development, the question becomes how we can foster its development. Dr. Benjamin Olshin delivered a paper to the Philadelphia Academies in 2006 that discussed creativity as a process and not simply as an individual thinking “out-of-the-box”:
“In business, when a new product or service is introduced, or in academic institutions when new curricula or policies are discussed, there is often the idea that a simple roundtable discussion or a committee will generate a creative idea…. These failures come from the inability to see that the creative, innovative ideas that society needs are the result of a process…Only through a process can the input of creative people be fully understood and fully utilized.”
Apple seems to have a process that does something special: It allows the input of creative people to be fully utilized. This creative process led to a company that was worth more than Exxon Mobile last year. Let’s learn more about this process and look beyond the cool products. New paradigm shifts in business and technology inevitably require a change in paradigm in other fields, especially education and economic policy. Maybe in a few years we won’t be described as a service economy but a creative economy. And to borrow Steve Jobs’ famous phrase, if we can get this right, maybe we will have an “insanely great” creative economy. What do you think? ]]> The Fed on your iPad tag:marginalthoughts.chicagofedblogs.org,2011://11.477 2011-10-07T19:43:49Z 2011-10-07T19:54:44Z By Cindy Ivanac-Lillig Check it out! Now available for free at iTunes. For those of you that follow the Fed, you won't believe your eyes. It gathers press releases and social media activity from all 12 reserve banks and the... CIndy Ivanac-Lillig marginalthoughts.chicagofedblogs.org iTunes. For those of you that follow the Fed, you won't believe your eyes. It gathers press releases and social media activity from all 12 reserve banks and the Board of Governors....in one screen. What do you think?]]> Government finances are like... tag:marginalthoughts.chicagofedblogs.org,2011://11.474 2011-09-14T14:57:18Z 2011-09-15T17:10:37Z By Cindy Ivanac-Lillig In speaking about the financial crisis and how it is different than other types of crises, I have often invoked the metaphor of the human body. Banking may be like the circulatory system in our body. The... CIndy Ivanac-Lillig marginalthoughts.chicagofedblogs.org not instructive. When a household spends less given the same level of income, it has improved its financial situation. When the government spends less in our current economic environment, it may mean that it will take in less income as well. Government spending increases the purchases of goods and services (economic activity), which increases tax revenue. Government finances are more like a dynamic function of both tax policy and the general health of the economy and less like a simple budget model from personal finance. There is balance of long term and short-term changes the government can make to improve the overall dynamic, but unfortunately this doesn't lend itself to a simple and memorable metaphor. What do you think -- do you have any ideas? Government finances are like..... ]]> More Women = GDP Growth tag:marginalthoughts.chicagofedblogs.org,2011://11.472 2011-08-19T20:23:06Z 2011-08-19T21:16:03Z By Cindy Ivanac-Lillig Long-term economic growth potential is affected by two basic things: more people (resources) and/or more productivity. However, Kathy Matsui recently gave a TEDx speech on “Womenomics” that has me thinking that we could add one more factor:... CIndy Ivanac-Lillig marginalthoughts.chicagofedblogs.org Womenomics” that has me thinking that we could add one more factor: more working women. In this time when most economists are bemoaning the balancing act that many countries face between cutting costs and promoting economic growth, it is interesting to hear something a bit out of the box. Mindset, daycare solutions, regulation, and explicit female participation goals are the four factors she lists as keys to solving Japanese economic malaise and adding up to 15% to their GDP! Perhaps this issue will be the great opportunity that arises out of the ashes of this great recession. What do you think? ]]> Is there any room for morality in economics? tag:marginalthoughts.chicagofedblogs.org,2011://11.470 2011-07-28T21:26:38Z 2011-07-28T23:02:00Z By Cindy Ivanac-Lillig and Laura Perez Recently, Russ Roberts of EconTalk** spoke with Duke Professor Michael Munger about the relationship between morality and economic choices. Munger makes a distinction between what we call “voluntary” in economics with what he dubs... CIndy Ivanac-Lillig marginalthoughts.chicagofedblogs.org EconTalk** spoke with Duke Professor Michael Munger about the relationship between morality and economic choices. Munger makes a distinction between what we call “voluntary” in economics with what he dubs “euvoluntary.” Munger’s term, euvoluntary, describes a voluntary transaction that among other criteria has the unique characteristic of not having too great a difference between the agreement (in a voluntary transaction) and the next best alternative. Munger goes on to provide an example in which the transaction is voluntary but not euvoluntary. A man is wandering in the desert, lost with $5,000 in his pocket. Suddenly Tony’s Taco Truck comes over the hill with a sign reading: “Today’s Special: Three tacos for $5, one bottle of water for $1,000 or three bottles of water for $2,500.” The lost man tells Tony that his prices are ridiculous and watches as Tony starts up the truck to drive away. Faced with either dying or paying the exorbitant price, the man reluctantly enters into the transaction. This is not a euvoluntary transaction because the disparity in the next best alternative is enormous. In this case, the next best alternative to the negotiated agreement is death. Many black market transactions are not euvoluntary (organ sales, price gouging after a disaster, etc) due to the disparity between the agreement and the next best alternative, but the interesting question is should they be legal? And, if so, where should the line be drawn? In other words, if you made it illegal to charge $1000 for water, would better choices emerge or would we be left with no water in the desert? What do you think? **EconTalk is a weekly podcast put on by the Library of Economics and Liberty. Check it out at: http://www.econtalk.org/archives/2011/06/munger_on_excha.html]]> Core Training: Measure of Inflation tag:marginalthoughts.chicagofedblogs.org,2011://11.465 2011-07-15T21:20:54Z 2011-07-18T20:25:54Z By Cindy Ivanac-Lillig I recently spoke at a university and when we came to the slide on core inflation, someone sighed (loudly). That’s because folks bristle at the idea of core inflation (inflation measures that strip out food and energy... CIndy Ivanac-Lillig marginalthoughts.chicagofedblogs.org Trimmed Mean PCE Inflation Rate. Inflation is an interesting and dynamic topic. There are folks arguing that core should be further pared down by subtracting some additional categories that have proven to be volatile and those on the other side arguing that core is not the best way to think about future inflation to begin with. What do you think? For current Personal Consumption Expenditure (PCE) information, check out BEA. (Note: The Fed prefers the Personal Consumption Expenditure (PCE) measure of inflation over the more well-known Consumer's Price Index (CPI). Both of these indices assess how much more or less it is costing people to buy what they normally buy. And both track each other fairly well. The PCE is put out by the Bureau of Economic Analysis, and unlike the CPI, accounts for consumers substituting goods as prices change. There are a few other technical differences on how things are weighted and accounted for. Here is a presentation that compares the two measures.) ]]> NFCI in Your Toolbox tag:marginalthoughts.chicagofedblogs.org,2011://11.463 2011-06-23T19:31:33Z 2011-06-23T19:47:38Z By Cindy Ivanac-Lillig When evaluating and forecasting the U.S. economy, the challenges are numerous. What information offers the most predictive value? There are many good pieces of data. Economists affectionately call these “leading indicators.” Some examples of leading indicators include... CIndy Ivanac-Lillig marginalthoughts.chicagofedblogs.org S&P 500 is interesting but it is weighted heavily toward certain types of instruments. No one argues about the importance of looking at capital markets’ indices, but there aren’t many good, widely available tools to evaluate the financial market conditions more broadly and easily. Now help is here. The Chicago Fed has recently introduced something called the National Financial Conditions Index (NFCI) that just might be the tool you need for your forecasting toolbox. There are some similar composite indices around, but none that represents 100 indicators and is released weekly. The volume of historical data that this index has and the breadth of instruments covered make it very interesting. The index combines 100 indicators’ worth of data. It weighs them to mirror the relative importance of the data to historical fluctuations. The indicators that are most heavily weighted are from the repo, short-term treasuries, commercial paper, and corporate bond markets. The value that is published represents how far from the historical average the current data is. So, if the NFCI is in positive territory, the index is above the historical average. A positive reading indicates tighter financial conditions or more stress in the financial market, and a negative value means better or looser financial conditions. The link between financial conditions and future economic growth is strong. Having lived through the last few years, you probably didn’t need me to tell you that. Check out this new tool and let me know what you think. How will you use it? Here's an interview with one of the economists responsible for the NFCI: To subscribe, click on the "subscribe" button option on this page. ]]> Recovery for Whom? tag:marginalthoughts.chicagofedblogs.org,2011://11.462 2011-05-25T15:37:47Z 2011-05-25T16:12:35Z By Cindy Ivanac-Lillig As many of you do, I often read and listen to analysts discuss the improving picture of the U.S. economy and how long it will take until we fully recover. However, there isn’t much differentiation made between... CIndy Ivanac-Lillig marginalthoughts.chicagofedblogs.org The State of Working America’s Wealth,” points out that 3.6% of households (income > $250,000) own 53.7% of all common stock and the top 5% of households own about 80% of common stock. The paper goes on to point out the logical conclusion that the recent stock market recovery disproportionately helped the top 5% of households, as the bottom 95% did not have many assets invested in the stock market. When you consider that most of American household wealth comes from home equity and not the stock market, it becomes clear that this recession is not just about job loss, but about the majority of American households losing some of the only wealth they ever had – with little or no recovery to date. This strikes me as a glaringly unique characteristic of this recession and recovery. As we continue to discuss recovery and the impact of gas and food prices on the “U.S. consumer”—whoever that may be— let's keep in mind the lack of recovery most American households feel in terms of their wealth. Check out the paper and let me know what you think…. If you happen to teach macroeconomics, let our readers know if and/or how you are tackling this recovery in your classroom. ]]>