The Curmudgeonly Professor

Don't Blame the Economists for not Understanding Economics Yourself

Economists catch a lot of flak because they make mistakes in forecasting future economic trends.  If a Nobel prize-winning economist misses the mark in aiming at the future, he or she is assumed to be totally worthless after all.  Many of the issues concerning the public's conception of economics and economic policy stem from an abysmal lack of understanding of economic analysis in the first place.

To begin with, just as cats are not a generic breed, with every cat in the world born the same color and body conformation, so a multitude of economists with different perspectives exist.  We have Keynesian economists, who believe that government spending is necessary to fill gaps in a recessionary economy to prevent a collapse of the economy.  We have monetary economists who believe that government economic policy can be magically controlled by pegging various economic indicators to changes in the money supply.  We have libertarian economists who hate the government and believe that a totally "free enterprise" economy is the answer.  We have labor economists, econometricians (who use statistics and mathematics to forecast the future and analyze the economy, consumer economists, agricultural economists, financial economists, and economists who specialize in virtually every field of economic study.

I guess you could say that I am a Keynesian economist, although I did not know at my young tender age of 24 when I entered the economics doctoral program at the University of Michigan that a Keynesian economist was what I was destined to become.  As the years have gone by, I am thankful that I am a Keynesian economist.  Most of the mistakes being made today by policy makers devoid of even a smidgen of understanding of economics are basic Keynesian mistakes.  Cutting government spending during a downturn is the worst mistake policymakers are pursuing.  Contrary to achieving the desired result of shrinking a government deficit, reducing government spending and total spending will shrink the economy even more and delay even farther into the future the likelihood of enough economic growth to pay down the deficit.  Witness the disaster of austerity policies in Europe.

Seeking to destroy necessary economic regulations to control egregious practices in financial markets is another mistake.  Letting everyone do exactly what they want to do is an open invitation for spectacular geniuses to invent spectacular fraud and mismanagement.

Much of the information Congressional leaders and public policy makers need to know about economics to minimize the mistakes they are hell-bent on making can be learned in the first few weeks of a basic economics course with a standard economics text used universally throughout the country. What a pity that those deciding our current economic policies are totally ignorant of these basic principles.  Either that, or political gain is deemed more important to ensure selfish survival than is strengthening the economy so we can pay off our debts.  Sadly, according to the oft-quoted saying, "good economics is rarely good politics."  Sad, indeed.  Eighteen-year old college freshmen know more economics than some Congressional leaders and other policy makers apparently know.

The Curmudgeonly Professor's Diaries for August 14 2012

Because of unprecedented interest in the daily thoughts, confusions, and erroneous conclusions reached by the Curmudgeonly Professor, here is a sampling of the ruminations for the day:

• The Powell Tribune (WY), my home town, reports a bar brawl caused by a Maryland man.  What is a Maryland man doing in a Powell WY bar?  The Curmudgeonly Professor thinks he might have been comfy hanging out at the Long Branch with Marshall Dillon, Doc, Miss Kitty, and Festus, jawing and drinking 7Up.  Only problem, 90% of all evil activity in Western oaters (movies to the uninitiated) took place in saloons and they were always scraping corpses up off the floor.  Fortunately, in the movies and on TV, none of them were really dead, they were just pretend dead, so they all got up laughing and hee-hawing after the final camera shoot and went up to the bar to have a drink and slap each other on the back.
• Watching the 25th Anniversary Les Mis concert on public TV.  Incredible.
• Olympics over.  Suffering withdrawal pangs.  Must now go back to BBC series and maybe watch Downton Abbey over again.  Have Rosemary and Thyme series newly acquired to watch.
• Blessed relief to have politics diluted for a couple of weeks.  Now the messages of brotherly love and constructive plans to resurrect our tired economy and our slumbering Congress surfacing again.
• As an economist, I tend to judge politicians by whether their economic proposals would pass the first two weeks' lectures and study material of Econ 110.  Many politicians bask in discredited political dogma, not economics, from decades ago, not knowing the difference between said political dogma and sound economic thinking.  
• Many people were coming in the EXIT door at WalMart last time we were there, just as we were attempting to exit ourselves through the crowd who cannot read signs.
• Air quality in Salt Lake Valley is sad, sad, sad.  Hardly dare go outside.
• Looked for some flowers to photograph the other day.  Came up with nothing.
• Should I buy an iPad along with my Kindle?  Or not?
• Many people were exiting through the ENTRANCE door at WalMart the last time we were there.  Why doesn't WalMart just wise up and do like Costco does to make sure folks can only enter and exit properly and mannerly fashion irregardless (sic) instead of randomly and haphazardly and rudely?  I like to use the bad word irregardless to see how many people think I am stupid and kindly correct my grammar.  Irregardless, it's fun to try using it anyways (sic).
• My sons keep running into people who, when they note that my sons are named Blood, ask them if they are related to Professor Blood, from whom they took economics?  I cringe every time this report meets my ears, since a few of my former students still have vitriol and bilious memories of how much I did them in for not knowing a blasted thing about economics, but thinking they deserved a higher grade, irregardless.
• Have a nice day.  Remember, marginal costs must equal marginal revenues to maximize profits.

Econ 110 Lesson: How to Tell if the Point of Diminishing Marginal Utility has been Reached

One of the most important principles of basic economics is the Law of Diminishing Marginal Utility.  Just because the Law contains three multi-syllable words, students assume that this law is so technically complex and arcane that they can never understand it.  Besides, their roommates, their parents,and  their friends all warned them not to take economics in the first place.  "It's dry,' they say.  "Too theoretical and impractical, " they opine.  "I couldn't pass it and I doubt you can pass it either," they warn.

Nonetheless the Law of Diminishing Marginal Utility states unequivocally that increased marginal increments of consumption of a specific item lead to diminishing marginal increments of utility, or satisfaction.  There, was that so hard?  Because "the Law" often did not penetrate the minds of the eager students in the back row  of a 350 student class, who were busy checking out the members of the opposite sex in their immediate vicinity, I explained:  "If you eat too many bananas, eventually you will barf."  When I see students after 20 years or more since taking Econ 110, they still remember the bananas and barf connection.

So here are five ways to tell if you have NOT reached the Point of Diminishing Marginal Utility:

1. You find that you are enjoying each additional Progressive Insurance ad more and more after seeing it hundreds of time in a day, thousands of times in a week.  You can hardly wait to see the Progressive Insurance lady a few hundred more times before the day is over.
2. Your first week of Econ 110 was exciting and your second week was so interesting you decided to major in economics, much to the disappointment of your parents, who expected you to follow in daddy's footsteps and become  a gastroenterologist.
3. You find that each time you wash the dishes or the laundry or sweep the floor, you are enjoying the work more and more each time.
4. You find your room mate's loud snoring enjoyable.
5. You still want to marry the girl of your dreams even though she hates basketball, football, soccer, golf, rugby, baseball, softball, badminton, and pingpong, and vows that she will never watch any of these wretched activities on TV with you.

Now you have the hang of it.  We will have a multiple choice and essay test Monday to see if you have mastered this complex and entertaining theory.  Please bring a bluebook.  Do not bring your iPhone, iPad, cell phone, blackberry, iPod, and any and all other electronic, mechanical, or old-fashioned methods of bringing accessible information to class to consult during the exam.  And no, I don't care if you are getting married on Monday or if it's the first day of the deer hunt, you must put first priorities first.  That's what Steven Covey says, and people pay a lot of money to read the first couple of chapters of his book.  See you Monday.  Class dismissed.

 

 

 

Ten Things We Won't Have to Worry About if the End of the World Happens Saturday

Inasmuch as some prognosticators have forecast that the world will end on Saturday, here are ten things we won't have to worry about:

1. Raising the federal debt limit.
2. LeBron James won't have to wonder any more why he "took his talents to Miami."
3. I may postpone vacuuming and mopping the floors until I see for sure what will happen.
4. I may have some unrepented sins not reported or repented of in time for Saturday's deadline.
5. How many Republicans plan to run for President.
6. Whether the BCS fat cats will ultimately get busted for their unmitigated greed.
7. Whether I will ever get more than 355 followers on Twitter.
8. Whether some heretofore undiscovered episodes of Matlock will be found in a vault and released.
9. Whether the Heat will go to the finals and whether Dallas can beat them to keep their (the Heat's)  egos at a more humble level.
10. Whether all of the economically illiterate members of Congress and the voting public will ever learn enough economics to make sense out of economic policy.

But, just in case, I won't cancel my four newspaper subscriptions or my cable TV contract.  And I may order some more books from Amazon or Daedalus Books.  Just in case.

Economic Facts for April 6 2011: American's Tax Burden Falling

Perhaps the most frustrating aspect of being an economist is the cavalier attitude that so many people take, including politicians, about understanding actual data and factual information about economic data.  Instead, policy decisions too often are based on politics, not economics.  So the Curmudgeonly Professor will now embark on adding a few facts here and there to enlighten and brighten your lives, beginning with these facts from USA Today, April 6 2011, p. 1:

The total tax burden for Americans (all federal, state, and local taxes) has dropped to 23.6% of income in QI (Q is quarter) of 2011, down from 27% in the 70's, 80's, and 90's.  Note: the U.S. Bureau of Economic Analysis and the Bureau of Labor Statistics compile most of the economic data of importance).

While maybe we should stop whining, those of us who meticulously and honestly pay our taxes wish everyone would do so, and that fat cat corporations and institutions who scrupulously (legally, we presume) avoid paying taxes would pay up their fair share, and that out-and-out tax cheaters would have to pay their share.  Including those who find tax reduction gurus who buy out their IRS debt at a dime on the dollar.