From the Homeschool Front … The Law by Colleen Hroncich

In a previous post I discussed Frederic Bastiat, a French economist and politician who lived from 1801-1850.  One of his seminal works, The Law, was published not long before his death in 1850. At the time he wrote The Law, socialists in France were proposing government program after government program to “solve” perceived social and economic problems. Bastiat was trying to show people that the law is meant to protect their rights not violate them.

“The law perverted! And the police powers of the state perverted along with it! The law, I say, not only turned from its proper purpose but made to follow an entirely contrary purpose! The law become the weapon of every kind of greed! Instead of checking crime, the law itself guilty of the evils it is supposed to punish!” Bastiat gets off to a roaring start on the first page of The Law.

Bastiat goes on to note, “Life, liberty, and property do not exist because men have made laws. On the contrary, it was the fact that life, liberty , and property existed beforehand that caused men to make laws in the first place.” The law is the “collective organization of the individual right to lawful defense.” Thus the law should not be used for any purpose other than to defend the life, liberty, and property of all.

When the law is used to take from one group and give to another, Bastiat calls this “legal plunder” and denounces the practice. When the law permits the government to do to citizens what would be illegal for citizens to do to each other then the law has been perverted. Bastiat provides numerous examples of the injustices perpetrated by the government under the socialists’ plans: protective tariffs, subsidies, guaranteed profits, guaranteed jobs, and more. Examine these, he says, and you will find they are always based on “legal plunder, organized injustice.”

The best summary of The Law is probably Bastiat’s frequently repeated phrase, “The law is justice.” More precisely, he points out, the purpose of the law is to prevent injustice. If governments could stick to this definition of the law, freedom would abound.

Colleen Hroncich loves that homeschooling allows her to learn right alongside her children. A published author and former policy analyst, Colleen’s favorite subjects are economics/public policy and history. She has been active in several homeschool co-ops and is a speech and debate coach.

econlife - What Census Takers Can Learn From Birdwatchers by Elaine Schwartz

On a South Australian beach, researchers placed thousands of fake terns. Arranging the birds in colonies of 460 to 1020, the scientists orchestrated a count…actually two counts. One would come from drone images and the other from birdwatchers. The goal was to see which was more accurate.

The winner was the drones.

When people counted the birds in the drone snaps, the results were 43% to 96% more accurate than what the birdwatchers reported. Because drones are increasingly used to gather data like whale populations in the Pacific and orangutans in Nepal, their accuracy matters. But we do have a second issue. Eagles have been observed attacking drones and bear populations have responded with heart attacks.

So, there is more behind a bird census than just counting. How you do it affects accuracy and the well being of the population you are measuring.

And that takes us to the 2020 decennial census.

The 2020 Census

We’ve been measuring the U.S. population every 10 years since 1790. Mandated by the Constitution, its basic purpose is allocating seats in the House of Representatives. However, we could say that the census is also an economic document. It costs the Congress money and provides data that tells where to spend money.

Cost

It is expensive to count more than 325 million people who live in 126 million households (2016). In 2000, the census cost close to $8 billion while in 2010, it was in the vicinity of $14 billion. Covering a 12-year life cycle, estimates for the 2020 census have ranged from $12 billion to more than $15 billion.

You can see that cost soars in 2020:



Spending

Whereas the stated goal for the 2020 decennial census is population and housing data, that is only the beginning. From there federal agencies can determine how an estimated $675 billion will be allocated. They just need the data to identify their target communities.

HUD for example uses income and housing information for its assistance programs. One source of that information is the ACS (American Community Survey). But the ACS is an offshoot of the decennial. Published annually, the ACS gets its “sampling frame” from the decennial.

There are countless examples of how the decennial data are used. Federal, state and local governments use the data to make spending decisions about education, highways, Medicaid..the list is unending. Meanwhile, even small businesses can decide where to locate and invest. They can get handy demographic information on customers and even where low income concentrations might get them preferential tax treatment.

Our Bottom Line: Accuracy

The big worry for the 2020 census takers is accuracy. Looking back at 2010, they tell us that they undercounted renters, the black population, Hispanics and children under five years old.

Looking ahead, they cite the following problems:



So, returning to our Australian fake terns, we just need to remember that how you collect the data matters for accuracy and well being.

My sources and more: My top recommendation is this Wired article on the bird watchers. But if you want to learn more about the decennial, the possibilities include articles from Brookings here and here. You also might go to the Congressional Research Service and of course, census.gov, here and here.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

econlife - What a High Social Score Can Get You in China by Elaine Schwartz

In Suining, near Shanghai, China tried out a social credit system in 2010. The whole country might have something similar in 2020.

Suining

In Suining, if you were older than 14, you started with a social score of 1,000 points. Then though, your behavior determined where you wound up. Caring for an elderly parent got you an extra 50 points while helping the poor added another 10. But if you were convicted of drunk driving or bribing an official, you lost 50.

After adding in a host of other criteria like education and even jaywalking, people got a point tally and then a letter grade. Individuals with an “A” could go to the best schools and get the best jobs. But if you were a “D” citizen, you were denied certain licenses and governmental services.

China

Countrywide planning for a social scoring system formally began on June 14, 2014 when the State Council published its “Planning Outline For the Construction of a Social Credit System.” While all is not yet in place, they do have many local experiments (like Suining’s) and several national programs. The national lists have been created by groups that include China’s Supreme Court, the People’s Bank of China and the National Tourism Administration.

One person on the Supreme Court’s “discredited” (also called dishonest) list told of being unable to get a plane ticket or travel on a high speed train. For not paying a fine, he was also prohibited from staying in luxury hotels and buying expensive real estate. More serious offenders have a voicemail saying, “The person you are calling has been listed as a discredited person by the local court. Please urge this person to fulfill his or her legal obligations.”

In a 2016 article, the Wall Street Journal had this perfect summary of what China could create:



The results:

Our Bottom Line: Three Economic Questions

Economic systems need to decide how they will produce and distribute goods and services. A market economy mostly uses a “bottom-up” approach. Based on countless decisions from households and businesses, people get what they want and need. By contrast, China’s social scoring system is “top-down” control.

The one common thread shared by bottom-up and top-down economic systems is the three basic questions they have to answer:

1. What? We have to ask which goods and services should be produced because the supply of all land, labor and capital is limited.
2. How? When making goods and services, we have to select our land, labor and capital.
3. To whom? And finally, we have to know how wealth will be distributed. Will it be equal or market-related…or based on social scoring?

My sources and more: Thanks to marketplace.org for reminding me it was time to take a second look at China’s credit scoring. My first stop was a chock-full-of-facts Wired article. But the Atlantic had the insight and the WSJ link to some resistance while here and here are more from WSJ.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

econlife - Cupcakes and Other Notable Bubbles by Elaine Schwartz

Whether looking at 1637 or 2000, markets and bubbles always seem to find each other.

A Tulip Bulb Calamity

The wealthy merchant had only wanted to say, “Thank you.” He appreciated the information that the seaman had shared and, in return, gave him a juicy red herring to enjoy for breakfast. Thinking that the “onion” bulb resting on the counter would complement the herring perfectly, the seaman popped it into his pocket and left.

Horror is the only word that comes close to describing the merchant’s response to his missing bulb. Rather than an onion, the seaman had consumed a tulip bulb for which the merchant had paid 3,000 florins–a huge sum of money in seventeenth century Holland. At that time, a suit would have cost 80 florins and one thousand pounds of cheese, 120 florins.

The tulip had first been introduced to Europe in 1559 or so—approximately when Elizabeth ascended to the British throne. Gathering popularity, especially in Holland, tulips had been displayed for their beauty. Eventually though, the quantity that was demanded exceeded the amount available. Unwilling to wait for a blossom, the rich and the poor started to trade the bulbs in markets that sprouted where buyers and sellers met. With buyers far outnumbering sellers, bulb prices skyrocketed.

In February 1637, tulip bulb prices plunged. All who had dabbled in the tulip market suffered. Even if the sailor had never appeared, the merchant would have seen his investment evaporate.

Recent Bubbles

Like 17th century tulip bulbs, dot.com stock, housing prices, and cupcakes hit the stratosphere and then crashed.

Dot.com

The 2000 dot.com bubble (Shaded areas indicates recessions):



Housing

The 2007 housing bubble (Shaded areas indicates recessions):



Cupcakes

In 1996 we had first pricey cupcake. At a small NYC shop called Magnolia, the $3 gourmet cupcake was born. But it took an entrepreneur to start a chain called Crumbs for the bubble to inflate. Believing cupcake consumption was unstoppable, Crumbs’s production and prices shot skyward. They even charged $42 for a giant cupcake that fed eight people…and it sold!










The Huffington Post said we had reached “Peak Cupcake” when a Crumbs IPO let all of us join the frenzy. At first the stock was $13.10 a share during June of 2011. By June 30 2014, it had plunged to 4 cents a share and Crumbs was closing all of its shops.

Our Bottom Line: Bubbles

Are we in a bubble with cryptocurrencies? The stock market? The auto industry? Bubbles start with something new that captivates the market. As euphoria builds, so too do demand driven price increases. Then, with speculative purchases escalating, prices move even higher. But always, the euphoria switches to panic, sellers multiply and the market crashes. On the way up, participants like to say “This time it’s different.”

But for tulip bulbs and tech, housing and cupcakes, it wasn’t.

My sources and more: Most of this post was previously published at econlife. Then we’ve brought it up-to-date with FRED graphs and The Huffington Post.


Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

econlife - The Mom Penalty and the Dad Bonus by Elaine Schwartz

Elon Musk has five sons. In 2013, when asked about his time with them, he said, “What I find is I’m able to be with them and still be on email. I can be with them and still be working at the same time…If I didn’t, I wouldn’t be able to get my job done.”

Would most women have said the same thing?

The Mom Penalty

In 1979, women typically earned 63 cents for every dollar that men made. By 2003, the gap had shrunk to 81 cents for each dollar. In 2010, we even had ABC  News announcing that women earned 8% more than men if they were unmarried, under 30 and living in a urban area.

But that subset is small.

You can see below that other categories of women who are comparable to men in every other way get paid less:


The 4% Plunge

The number to remember is 4%. A mom’s wages plunge 4% per child. But it gets even worse because your affluence counts. For the top 10%, the motherhood penalty pretty much disappears. However, with the lower wage earner, it is 6%.

Hypothesizing why, we can cite a list of reasons.

Women could earn less because they…

• Spend more time at home to be with children.
• Select lower paid mom-friendly jobs.
• Have less energy and more distractions at work because of children.
• Experience employer discrimination.

The Dad Bonus

Meanwhile, men benefit from being fathers, especially those at the top. The reason could be that fatherhood implies stability, a wife to take over your responsibilities, and the need for a greater work commitment. For married (or even unmarried) white college-educated men. the daddy bonus can be as much as 8%. But lower wage earners benefit much less.

The fatherhood wage bonus:

Our Bottom Line: Confirmation Bias

A behavioral economist could say that the mom penalty and dad bonus are all about confirmation bias. Because employers expected children to affect the job done by women, they paid them less. Consequently they were reinforcing and perpetuating social norms that constrained women’s careers.

So yes, Elon Musk might be disparaged less for working when with his children than a mom. And, as a white highly educated dad, he has the biggest boost from the fatherhood bonus.

My sources and more: Recently, articles about professional women and children are everywhere. WSJ spoke about female innovators and the NY Times, about the economics profession (as did econlife). Meanwhile, these recent papers, here and here, and summaries of studies, refer to the motherhood penalty. And BusinessInsider had the Elon Musk fatherhood quote.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

econlife - Searching For an Accurate Statistic by Elaine Schwartz

When you measure the height of Mount Everest, it’s tough knowing precisely where the top and bottom are.

At the top, you could include the snow base. But the next day, the wind and weather would shift it. You could drill down to the underlying rocks. And you might or might not include any manmade objects that affect the height.

Similarly, identifying a “bottom” creates dilemmas. For Everest it is sea level but it could have been the center of the earth or the ocean floor. And, even if you agree that sea level is it, again different groups do it differently.

So, when Nepal completes its calculations for Everest, it could agree with 29,029–the most typical number. But the U.S. has said the mountain is 29,035 feet and Italy, 29,022.

Our point here is that seemingly precise numbers aren’t necessarily accurate. Depending on a slew of decisions, they could even be wrong.

Country of Origin

Similar to Everest, some NAFTA numbers are a challenge.

One example (currently being renegotiated) is the “rules of origin.” Where a good was made matters because tariffs depend on the answer. To be duty free, a certain percent of an item needs to have been produced in the U.S., Mexico, or Canada.

Sounds easy?

It’s not.

A car for example has more than 300 pages devoted to the criteria for determining if it has 62.5% content from the three NAFTA countries. Take an electric motor. It could have come from Asia, gone to Mexico and been used in a Mexican-made car seat. Even boxer shorts have more than one entire page in NAFTA’s regulatory tomes. There, the focus is the types of fabric that qualify.

Like the height of a mountain, the origin of the trillion dollars of goods that move among the three nations can be debated:

Our Bottom Line: A Statistical Oxymoron

The numbers matter.

For Mount Everest, climbers are looking for the highest altitudes. When Everest got a lower height from China, they shifted from the Tibet side to other peaks.

With NAFTA, rules of origin create incentives. Increased, the rules can encourage manufacturers to avoid NAFTA entirely. On the other hand, if they result in compliance, efficiency can suffer because the parts might not be optimal and the paperwork multiplies.

All of this leaves us with an awkward conclusion. We have said that a precise statistic is really an oxymoron. And yet we need the numbers for Everest and NAFTA’s rules of origin.

My sources and more: Up-to-date and interesting, the best Mount Everest measuring story was in the NY Times.and also from Newsweek. Meanwhile, a rules of origin podcast actually made one of my walks more pleasant. And, if you want more, the related paper is here.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.