Marginal Thoughts tag:marginalthoughts.chicagofedblogs.org,2013://11 2013-04-22T22:48:31Z Movable Type 3.35 GDP & IMDb tag:marginalthoughts.chicagofedblogs.org,2013://11.550 2013-04-22T15:32:29Z 2013-04-22T22:48:31Z By Cindy Ivanac-Lillig These days, it's nothing new to point out how technology is changing the way we are living, raising children, attending class, etc. However, I bet you haven't spent much time thinking about how technology is changing how... CIndy Ivanac-Lillig marginalthoughts.chicagofedblogs.org GDP) is the sum of the value of all goods and services produced in the United States. It is the go-to answer to the question: "How is the U.S. economy doing?" GDP is calculated by the Bureau of Economic Analysis (BEA), which has just announced that it will be changing some classifications and calculations to better represent value creation in our economy. One of the big changes is the treatment of Research & Development (R&D) spending. R&D will now be treated as an investment as opposed to an expense. So, for example, Apple's significant R&D investment will now be counted in GDP as opposed to simply final iPad sales. This is a big deal and is easily the most profound change being made to the GDP calculation, but it was another rather small change that caught my attention and really made me think about how technology is affecting what we consume and how we count it. The BEA will now begin looking at artistic investment differently. According to the Financial Times, the BEA analyzed data from www.imdb.com (the Internet Movie Database for the scarce few who have yet to visit the site) to help discern the value of a movie long after it has been produced. This research seemingly helped craft new accounting treatments for what they are calling "artistic originals." Wow! And here I thought IMDb was only there for people like me that can't remember actors' names. There are a couple of good articles on these and other changes to GDP: click Financial Times; International Business Times. How has technology and the speed of technological innovation affected our overall perception of value? (For the econ students out there: Does this change your thinking about utility and indifference curves?) ]]> Details Matter: Quick Guide to Understanding the Fiscal Budget, Deficit, Debt Ceiling and Debt-to-GDP Ratio tag:marginalthoughts.chicagofedblogs.org,2013://11.548 2013-03-29T16:47:20Z 2013-03-29T16:53:50Z By Cindy Ivanac-Lillig In hockey, “clearing” the puck looks very similar to “icing” the puck, but the outcome of the game can rest on this detail in the final minute of play. In football, “false starts” and “offsides” look very... CIndy Ivanac-Lillig marginalthoughts.chicagofedblogs.org Fiscal Budget – This refers to the annual budget of the federal government. When the budget is “balanced,” that means the revenue the government takes in (primarily from taxes) equals what it is spending to provide services to the public. The important thing to remember is that the government’s overall revenue depends on the amount of tax dollars being generated, which in turn depends on the overall level of economic activity (GDP). Deficit / Surplus -- If government revenue falls short of spending or spending rises faster than revenue, a budget deficit is created. Revenue falling short of expectations usually means that the nation’s GDP is going down. In either case, the difference is made up (in the case of the United States) by the Treasury, which borrows dollars on the global market by issuing bonds backed by the U.S. government. The opposite of a budget deficit is a surplus, which means receipts were larger than expenses. In that case, a government can either refund the money or buy back its outstanding bonds (pay back the money it borrowed), thus reducing its total debt. Debt Ceiling– The U.S. Congress legislates how much our government can borrow in total. That’s called the debt limit or the debt ceiling. It has been raised over the years as the U.S. Treasury has continually needed to fill the gap between receipts and expenditures. The total debt is a cumulative number that sums up the outstanding debt over many years. The current budget deficit will contribute to the total outstanding debt – albeit a relatively small proportion. Therefore, when you hear someone mention the debt ceiling, that’s not solely a reference to the current budget spending/tax policies. Instead the term refers to the maximum amount the government can borrow to cover its cumulative budget deficits. Debt-to-GDP Ratio – This is a widely used barometer of a country’s fiscal health. It is basically the total outstanding debt divided by the current year’s GDP. Now you might ask why we compare many years’ worth of debt to one year of GDP. That’s because the GDP level offers insight into a country’s ability to repay its debt. It’s sort of like how our annual income is used to determine the size of a 30-year mortgage. Our income offers insight into our ability to repay our mortgage. However, it is important to keep in mind that in the case of a country, economic activity changes constantly, whereas personal incomes do not change that quickly. An increase in economic activity can automatically make your country’s credit worthiness look much better even though the total debt levels haven’t changed. Consider that during the last major recession, both negative forces were at work in most developed economies – GDP fell and debt rose – and almost universally deteriorated the debt-to-GDP ratios around the world. Most governments are designed to provide a social safety net such as unemployment benefits. Therefore, during times of economic crises, a government’s bills often go up. Conversely, the receipts (tax revenue) go down as GDP contracts. I hope this proves somewhat helpful. I tried not to include the actual data as I just wanted to better define the terms. Let me know what is most confusing to you about the current economic debate? If you are an educator, consider having students go and look up these figures and tell the story of the U.S. fiscal situation and consider the complexities of a rising vs. falling GDP.]]> New Resource: Michigan Economy Blog tag:marginalthoughts.chicagofedblogs.org,2013://11.543 2013-02-25T16:53:58Z 2013-02-25T16:58:51Z By Cindy Ivanac-Lillig There are a lot of good economics blogs on the internet. I have linked to many of them in my posts. However, objective blogs that specialize in a particular industry and/or geographic area are much more difficult... CIndy Ivanac-Lillig marginalthoughts.chicagofedblogs.org Michigan-based economic blog. Michigan is a small state. It represents 2.5% of our national GDP and only a little over 3% of our population, but has more research and development in the automotive sector than the remaining 49 states combined. It is a small place in the world that is important to many big places in the world such as the EU and China. Please check it out and see how it can enhance your work. The post about Canada-U.S. relations caught my eye. Do you know of any good specialized economics blogs? Please do share them. ]]> Gender Gaps Worldwide tag:marginalthoughts.chicagofedblogs.org,2012://11.538 2012-12-06T23:00:48Z 2013-01-06T00:22:59Z By Cindy Ivanac-Lillig Happy New Year! To build upon entries I have done on "Gender and Policymaking" and "More Women=More GDP Growth," I wanted to kick this year off with the recently released, Global Gender Gap Report from the World... CIndy Ivanac-Lillig marginalthoughts.chicagofedblogs.org Gender and Policymaking" and "More Women=More GDP Growth," I wanted to kick this year off with the recently released, Global Gender Gap Report from the World Economic Forum. This study does a good job of measuring the gap that exists between men and women in both access and attainment of existing resources within an individual country, whereas many other gender studies simply observe the relationship between the level of development of a particular country (how many resources it has) and the status of its women. In the words of the authors, this study is not about women's empowerment but more a measure of equality among genders. The U.S. ranked 22nd overall, with its highest ranking (1st) in Educational Attainment, followed by (8th) Economic Participation, (33rd) Health and Survival, and (55th) Political Participation. What do you think? How much potential economic growth lies in the untapped talent of women? Check out the article from theglasshammer.com and see if it sparks any new thoughts. If you are a classroom educator and find a way to use this resource in the classroom, please share. ]]> Gender and Policymaking tag:marginalthoughts.chicagofedblogs.org,2012://11.533 2012-10-19T21:06:37Z 2012-10-19T21:22:19Z By Cindy Ivanac-Lillig I have tried to make it a habit to write down quotes or sentences I like. A good sentence can be awe-inspiring for sure, but it can also serve to create a frame for an entire thought... CIndy Ivanac-Lillig marginalthoughts.chicagofedblogs.org Slate magazine blogger: Part of the essence of privilege is that it is invisible to the privileged… It was part of a post entitled, “The Economics Gender Gap.” The Slate blog post and the USA Today story it was based upon, “He Said She Said: Economists’ View Differ by Gender,” both address a recent survey of economists conducted through the American Economics Association. The survey found that women viewed economic policies quite differently than their male counterparts. Consider the following findings:
— Health insurance. Female economists thought employers should be required to provide health insurance for full-time workers: 40% in favor to 37% against, with the rest offering no opinion. By contrast, men were strongly against the idea: 21% in favor and 52% against. — Education. Females narrowly opposed taxpayer-funded vouchers that parents could use for tuition at a public or private school of their choice. Male economists love the idea: 61% to 14%. — Labor standards. Females believe 48% to 33% that trade policy should be linked to labor standards in foreign countries. Males disagreed: 60% to 23%.
There were areas that men and women agreed upon, but in the three areas above and in the area of career mobility/compensation, the differences were pretty stark. It made me wonder how different the world of public policy would be if there were more, or at least an equal proportion of, women in positions of power. If you accept that men benefit from some level of unsaid and unseen privilege by virtue of their gender and society’s expectations of their gender, it is probably safe to conclude that this has affected the creation of public policy. At the Fed, the last four years have seen quite a dramatic uptick in leadership positions for women. Four of the twelve voting members of our 2012 monetary policy committee, the FOMC, are women. I don’t think there has ever been a year with this many women on the committee. How different would policy or the study of economics be with different representation? How important is it to acknowledge and address that which is invisible to the privileged among us? ]]> The difficulty in applying economic thinking to the value of college tag:marginalthoughts.chicagofedblogs.org,2012://11.527 2012-08-16T15:28:19Z 2012-08-23T22:06:45Z By Cindy Ivanac-Lillig Freakanomics.com has a new podcast out on the value of college: Is college really worth it? The podcast features a series of interviews with people ranging from college students to professors to education economists. The podcast avoids... CIndy Ivanac-Lillig marginalthoughts.chicagofedblogs.org Is college really worth it? The podcast features a series of interviews with people ranging from college students to professors to education economists. The podcast avoids oversimplifying the conversation and tries to apply economic thinking to answer the question. Most experts interviewed in the podcast seem to agree that the benefit of college is almost always greater than its cost (with the notable exception of students who might consider going into a trade); however, exactly why this is remains somewhat of a mystery...even to the experts. One interviewee discusses how students don't remember much from their coursework and yet something about the process is transformative. It’s unclear if the benefit lies principally in knowledge acquisition, new perspectives, peer effects or simply being subject to higher expectations. Further, it is possible that the benefit is different for every individual. And if the benefit side of this economic equation is a bit blurry, looking at the cost side might be even tougher. Another interviewee dwells on the fact that the gap between the sticker price and the actual price paid for college has widened, making price discrimination much more prevalent. Price discrimination is when you charge different prices for the same or similar service. A popular example of this concept in textbooks is usually airline ticket sales. In the case of college, this means that students are routinely charged vastly different prices based on a variety of factors. Therefore, the average actual price paid by students and their families, when available, is not that helpful when attempting to conduct a cost/benefit analysis. Economists and thought leaders are somewhat stumped as to how to apply economic thinking to this issue, but they all seem to agree that only in limited cases is going to college not worth the price tag. What do you think? If you happen to teach in a high school or university setting, consider having your students listen to the podcast and see what they think. ]]> Compensation as an Incentive for Talent tag:marginalthoughts.chicagofedblogs.org,2012://11.521 2012-06-19T21:11:49Z 2012-06-19T21:40:05Z By Cindy Ivanac-Lillig In Michael Lewis’s book, The Big Short, one of the main protagonists sets up a couple of meetings with people from different rating agencies. Before the meetings, he wonders if the folks from the rating agencies will... CIndy Ivanac-Lillig marginalthoughts.chicagofedblogs.org The Big Short, one of the main protagonists sets up a couple of meetings with people from different rating agencies. Before the meetings, he wonders if the folks from the rating agencies will be able share with him something he doesn’t know or hasn’t thought of in the course of his own analysis of the mortgage market. But shortly after the meetings, he comes to the conclusion that they, as well as most regulators, don’t understand the market at all. Not only did they not share anything new, but they seemed poorly informed. Clearly when it came to understanding the intricacies of financial instruments and risk modeling in the mortgage market, there was an A Team and a B Team on Wall Street. And in his opinion, the rating agencies were not the A Team. It is a pretty amusing snippet in the book, but the underlying presumption that investment banks attract more and better talent due to the opportunities and compensation available is not a new idea. Frankly, it seems pretty logical. Even though, there are plenty of people who work in many different public service/policy sectors who are very smart and are knowingly giving up larger salaries in order to work in their chosen fields, the earnings gap in the field of finance seems quite large. I haven’t come across a good study yet, but based on anecdotal information, it seems larger than in many other fields. In addition to the compensation disparity, there is also a question of skill set. Not all financial skill sets are the same. The business of banking – that is taking in deposits and making loans – seems rather quaint when compared with the business of financial engineering and synthetic credit portfolio management. The requisite skill set on Wall Street and in the public sphere may be ever-changing, more global, and more inter-disciplinary than it ever was. And perhaps while Wall Street has figured out a relatively easy way to attract some of these skills through compensation, the public sector has been slow to recognize the shift in skill set and even slower in trying to figure out how to attract more of this talent. For all the economics students out there who believe strongly in incentives, what are some potential solutions that would help rating agencies, regulators, and policymakers achieve a level of skill parity? Is compensation the best and only way? Or do you disagree with The Big Short premise that there is an A Team and a B Team?]]> Not Only Faster, but Better Solutions Through Technology tag:marginalthoughts.chicagofedblogs.org,2012://11.518 2012-06-04T15:51:54Z 2012-06-04T16:02:24Z By Cindy Ivanac-Lillig How many of you use Wikipedia? I bet even the die-hard researchers among you use it. Sure, the die-hards among you may go back to the source links, but your introduction to many terms/subjects is probably from... CIndy Ivanac-Lillig marginalthoughts.chicagofedblogs.org Wikipedia? I bet even the die-hard researchers among you use it. Sure, the die-hards among you may go back to the source links, but your introduction to many terms/subjects is probably from Wikipedia. Now, how many of you would have believed that a model of open collaboration among the world-wide public would produce something that has surpassed the usefulness of resources such as the Encyclopedia Britannica? New terms are constantly added to Wikipedia, and errors are being corrected as we speak. It is nothing short of amazing to conceptualize how this messy process actually produces better-than-average results. It makes me wonder if there isn’t a lesson in efficacy here. Perhaps for gargantuan tasks, the key to getting good results isn’t efficiency, proper planning, and expertise. Perhaps, instead, the keys are extremely fast and large feedback loops that help build the final product. Technology has not only revolutionized delivery, logistics, learning, and sharing, but it may also hold the key to revolutionizing our ability to come up with solutions to hard problems and public policy issues. Maybe you have heard about the video game called, Foldit, which scientists have credited with solving a problem that had plagued AIDS researchers for years. It was solved on-line in days. Amazing. However, how does this translate to economic policy-making or any type of public policy-making? I haven’t seen many examples yet. The closest thing I can think of was when one of Marginal Revolution bloggers spoke at the recent AEA conference in Chicago. He said that during this most recent economic crisis, the blogosphere provided a wonderful opportunity for policymakers to test out ideas and theories rather quickly. He went on to point out how the immediacy of the feedback and the vast number of on-line contributors may have rendered traditional academic journals irrelevant in the policy space. It was an interesting angle from which to view the recent economic crisis and policy discussions. It is true that blogs are different than the Wikipedia model, but I think his reflection is similar to the lesson I take away from Wikipedia’s fast and large feedback loops. How can we harness technology’s power to deepen our discussions and potential solutions in this arena? And for the educators out there, how have you used collaborative work to enhance what students believe they are able to do/solve? ]]> 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]]>