Practice Good Theory

Conventional economic theory says that over-supply typically causes a fall in price , and this cheaper price will cause more demand , till there is no longer any over-supply. Applied to the labor market, when a recession throws people out of jobs, wages should fall, the lower wages should make previous employment levels profitable to businesses, and the unemployment rate should fall back to its norm. Yet, this does not happen. By and large, managers prefer to fire people rather than reduce wages. Imagine that a recession hits and the unemployed find they must take an average 10% cut in their wages to get similar work. If a firm wants to cut its wage costs by 10%, it seems logical (in a Vulcan way) that the management would force a 10% wage-cut rather than letting 10% of its workforce go. However, managements mostly choose the latter. Understandably, such managements prefer to cause pain to a few people who are then no longer with the company, rather than cause pain across the...

With the economic downturn, a lot of public libraries are pressed for funding. Some have cut services, others have closed. In California, a $80 "out-of-county fee" has gone into effect . In Wisconsin, they're considering charging for CDs and DVDs In Topeka, they're adding late fees where they had none In Ridgewood, they will charge businesses (like tutors) who use their meeting rooms Prescott, Arizona is discussing usage fees A quote from a director of the American Library Association, says Selected ALA members will begin charging an annual fee of $10 for each issued library card. Each borrowed book will cost $1 and we think that’s fair. Use of a whole book for more than a week, well it’s quite fair when one considers the retail cost avoided All this is a good thing, and a far cry from the situation during the housing boom of a the early 2000's when a lot of libraries took on debt and expanded. I hope it sticks.

I like this constitutional check from Britain. The Army Act is only ratified for a year at a time From Wikipedia ... that the maintenance of a standing army in time of peace, unless with the consent of parliament, is against law. Each session therefore the text of the act had to be passed through both Houses clause by clause and line by line. The Army Act, on the other hand, is a fixed permanent code. But constitutional traditions are fully respected by the insertion in it of a section providing that it shall come into force only by virtue of an annual act of parliament. This annual act recites the illegality of a standing army in time of peace unless with the consent of parliament, and the necessity nevertheless of maintaining a certain number of land forces (exclusive of those serving in India) and a body of royal marine forces on shore, and of keeping them in exact discipline, and it brings into force the Army Act for one year.

According to the Wikipedia , " After founder Jimmy John Liautaud graduated second to last in his class ... [his] father lent him $25,000 to start his own hot dog business. If the business was successful, Liautaud would own 52% of it and his father would own 48%. If it failed, he would join the Army. ]..., he decided to open a sandwich shop... He started baking bread in his mother's kitchen, bought the most expensive meats from Dominick's, and had family members vote on the best four sandwiches (out of six) he created. The first Jimmy John's opened in a garage in Charleston, Illinois on January 13, 1983 with used equipment and no menu or outdoor advertisement, simply selling the four sandwiches and 25-cent Cokes. After giving samples out around town, his business began to thrive. He especially catered to college students at Eastern Illinois University; and part of that success came from his willingness to deliver to dorms, which many other local establishment...

Studying the history of a subject gives one a deeper perspective on the subject. The NOT PC blog has a nice graphic, showing the " Family Tree of Economists (click here) " A good book on the subject is "The making of Modern Economics"

News reports say that China -- supplier of over 95% of the world's "rare earths" -- is curtailing these exports. Since rare earths are used in devices that have military uses, this got me wondering if China is simply the cheapest producer or if it actually has a lock on geological deposits. Via the Wikipedia , I found detailed information in a USGS report (2010-5220 ). Most rare earths are in more abundant supply than gold, platinum, silver or mercury. Indeed, their average concentration in the earth's crust is higher than copper. However rare-earths are more dispersed than copper, so areas with high concentrations -- making mining economical -- are more rare. Still, they have been mined all over the world. "Until 1948, most of the world's rare earths were sourced from placer sand deposits in India and Brazil....Through the 1950s, South Africa took the status as the world's rare earth source. Through the 1960s until the 1980s, the Mountain Pass ...

Some government bonds (called TIPS) compensate the lender for changes in the CPI. For instance, if you lend $100 to the government, and the CPI goes up by 3% when it is time to repay, you will be paid $103 (a falling CPI has the reverse effects, within certain ranges). If a TIPS bond has a yield of 2% and inflation is expected to be 1% a year, we would expect people to want at least 3% (2% + 1%) yield on a regular (non-TIPS) government bond. In other words, the difference between the yield on TIPS and the yield on regular government bonds is the "implied" rate of inflation (i.e., the rate assumed by a decision-maker who considers both types of bonds and is open to buying either). Of course, market actors are simply making their best guesses; in retrospect, the assumption may prove to be wrong. This chart shows the yields for (5-year constant maturity) TIPS (red ) and Treasuries (blue) . The next chart shows the spread between the two, which is the "implicit" annua...