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E.g., Saturday, January 20, 2018
E.g., Saturday, January 20, 2018
Question:
Please advise my going to become an economist. I was an average mathematics major as an undergraduate with a G.P.A. of 3.19 overall with a bachelor's degree in applied mathematics. I have about the average IQ for economists, but I know nothing about economics. Now that I am 41 this year, I am thinking of starting anew in a brand new area of applied mathematics. Is this advisable this late in life to switch careers from mathematics to economics given that the two share a common bond in mathematical economics and are theoretical in microeconomics?

Would the transition be better if I pursued pure mathematics instead, because my experiences has been lately in proof making? What can I look forward to? How and what should I be looking into, to start off, if economics is a good choice? I am a highly curious person. Plus, I have worked hard, I have been doing pure mathematics on my own since 2004 until presently; but, it has been slow going; so, I thought that by going into something that has a better return in investments of my intellectual energy, I should try microeconomics?
Answer:

The prospect of a mid-life career change would be daunting for anyone.  In the end, you’ll have to make that difficult decision on your own.  But I can give you a few tips on how you might begin to explore whether a career in economics...

Question:
A commodity (let's say a vegetable like squash or tomato) that is grown in Mexico and transported to the US and is being sold at 1.29/lb.
After about a month when the commodity has less than 2 weeks of shelf life it may be sold at .69/lb and then discarded after another week.

1) Why would the store not further discount these items at let's say .30/lb to clear the complete stock? ( I understand it is so as not to let the global/US prices of the commodity go down.)
2) Is wasting better for the store than to sell it at a discount?
3) Even if customers stop buying fresh commodity and start to wait until the price goes down to .30/lb. Isn't it economically profitable to the store to actually sell it than waste it ?

Thanks
Answer:

Food waste arises from preferences, incentives, and constraints. Retailers have time and other resource constraints which implies that it simply will not be worth it to sell every last item of food in every instance. It can be said that there is...

Question:
Hi there,

Okay, so this is going to be a really stupid question but I need to know the answer to this. There is a message board about collecting video games and we got into a argument about the definition of the word "rarity." With these games, we all know the exact amount of copies printed for each title. Say Game A has 2000 copies printed and Game B has 5000 copies printed. Assuming that no copies are lost or destroyed, Game A will always be rarer, correct? Someone else is arguing that the availability of copies on the secondary market changes this.

If Game A has 20 copies available on the marketplace right now and Game B only has 2 copies, would Game B be considered to be rarer overall? At that moment in time, sure, but overall, I would say no. Are either of us correct? Would the monetary value of the game on the secondary market change the definition of rarity? Thanks for your time!
Answer:

In the strictest (or standard) sense of the word, you would be correct that game A is “rarer”, given that there are fewer of these in existence than game B. However, the other person is not totally wrong because, in the words of economists, the “...

Question:
If banks create credit from thin air, when they issue loans, and make astonishing interest in doing so, why would it not be beneficial to have their government create the credit? Then the interest collected on those loans could be used to fund goodies for the people, instead of super-yachts for crooks! Cheap loans for the poorest, expensive loans for the richest. Narrow the wealth gap a smidge. I cannot see a down side. Was this not how it once was, to our great prosperity? Is access to credit not the true essence of opportunity. Only people create value, thus, credit can only be created by the people. When did private banks capture our credit? And whom is responsible?
Answer:

There are government owned corporations or government backed corporations that directly lend to households or foster lending to households in other ways, for specific purposes. For example in the US, GNMA (Ginnie Mae), FNMA (Fannie Mae) and FHLMC...

Question:
Hi, quick question: can a tariff be counted as a fiscal policy measure? Currently studying the great depression and curious to know if the Smoot-Hawley act which raised US tariff on 20,000 imports counts as a contractionary Policy fiscal policy. My thinking behind this is it did involve the raising of taxes on imported goods,and increasing taxes are usually considered a contractionary fiscal policy measure. Please help. Thanks.
Answer:

In discussing the impact of economic policy on aggregate demand and the balance of trade in open economies, international economists often talk about two types of (non-monetary) policies: “expenditure reduction policies” and “expenditure...

Question:
What are the fringe benefits of being an economist?
Answer:

Taken literally, fringe benefits are extra, non-monetary compensation, such as health insurance, etc. provided you by your employer.  I suspect, however, that the person who submitted this question is not interested in the package of...

Question:
What is the impact of production being directed towards what appears to be endless product differentiation, for example multiple flavours of toothpaste or shampoo variations which ultimately do nothing to improve individual well being? Does this form of market operation generate employment or is it a waste of productive capacity that might be better directed towards activity that genuinely increases well being. For example, creating products that delivers a real benefit.
Answer:

Does the market provide too many or too few products, relative to some social optimum benchmark? It turns out that this question does not have a simple answer. It depends on whether or not consumers are well (perfectly) informed about products'...

Question:
Hi. I studied economics at undergraduate level and have encountered the profit maximising rule of MR = MC; with the standard premise for such calculations involving the production of goods with a fixed price per unit. I currently work in the construction sector (demolition) where each of our projects have a different cost and revenue from other projects. As such, I would like to know if/how the above measure could be applied to the service sector? My current thinking is that the data must be manipulated to achieve the cost per square foot of a site. However, this will involve significant data manipulation just to run the calculations. Could you tell me if I am on the right track with this direction or whether there is an alternative way that I could calculate the profit-maximising output? My goal in answering this question is to determine the appropriate mark-up for our business when submitting a quote to a client. At present, we are charging a 10% mark-up which I currently believe to be too low to be sustainable. Any assistance on this would be greatly appreciated.
Answer:

Hello:

 

Suppose you have N projects, each of them with possibly different but constant marginal costs (MC). Since the marginal cost for each project is constant, the average variable cost is also constant, and your profits can...

Question:
When health care spending (or military spending or education) is tallied as a "percentage of GDP," doesn't that GDP figure include that same health spending? If you remove all that double-dipping, what would those percentages look like?
Answer:

Thank you for your question. Indeed, part of the expenditure in health expenditure and defense will count towards total GDP. The reason why the total GDP (including health expenditure or defense expenditure themselves) is used as a denominator to...

Question:
I was just thinking about the massive economic dislocations resulting from World War I and their impact on Weimar Germany. But the dislocations spread well beyond there. The War had bankrupted England and France (though not so much the U.S.), to the extent that they forced Germany to pay such enormous reparations that Germany was a basket economic case in the 1920s. The U.S. economy boomed during that period, but it then crashed ten years later. After World War II, somewhat contrariwise, we had an unprecedented and never repeated period of growth and prosperity. After Vietnam, we had galloping inflation, followed (I think) by a recession. After seven years of a ruinous war in Afghanistan and Iraq, we had a Great Recession. Now I'm a political scientist, not an economist, but from the standpoint of political economy, it would seem that there must be correlations between massive military expenditures and economic cycles. The economy, that is to say, does not exist in a vacuum. So, Dr. Economist, is it possible that the famous "economic cycles" are not merely cycles that happen all by themselves, but rather sine waves that correspond with other fluctuations in military expenditures and war? As a political historian, I know that it has always been wars that have bankrupted nations and caused political upheavals. This is not new. Why not in our age? Why do we teach our students that there are recurring economic cycles without, in traditional economics, relating them to the military adventures of our own government, And that of others?
Answer:

There are really two questions here: (1) what are the causes of economic fluctuations, generally? And (2) what role do wars and military spending play in these fluctuations? 

 

Answering the first question is beyond the...

Question:
What percent of hog firms use forward contracting or options? Why do hog producers not use futures or options?
Answer:

Unfortunately data are not readily available on the percent of hog firms using forward contracting or options. What is readily available through Mandatory Price Reporting (MPR) data provided by USDA’s Agricultural Marketing Service is the volume...

Question:
Given the increasing population migration to more urban centers - and maybe the possible validation of Richard Florida's 'creative cities' theory - what viable economic models are we seeing for smaller, rural Iowa communities, most of which are really struggling to maintain population and economic viability? In other words, is there any hope for these once thriving rural towns and, if so, what does that look like?
Answer:

It is useful to begin by noting that Nebraska has a higher proportion of its population living in urban areas (73%) than Iowa (64%). The reason is that Nebraska has only 4 metropolitan areas (Lincoln, Grand Island, Sioux City, Omaha), all of...

Question:
http://imgur.com/4uBj6mc

How do I read what is the most profitable? I want to buy low and sell high. Something called item-flipping.
Answer:

I’m not able to read (too small) the table. Regardless, I think the question relates to flipping stocks. Admittedly, my expertise is much more in commodity futures markets, but I believe the theory/rationale holds across markets. As such, my...

Question:
I have simple question and I hope you could help me with it. Why when someone books for one week for international flight during vacation time, it will be cheaper than two weeks, and two weeks cheaper than three weeks? Why is that from an economic prospective?
Answer:

I always thought that it was the other way around: the closer you are to the departure date the higher the price. Airlines have some market power and use pricing overtime as a way to second degree price discriminate: Consumers who plan long ahead...

Question:
What would be the possible outcome if the President were to initiate a program that would buy up all bad credit for those with credit scores below, say 670. All those who participate would agree to an auto draft of $20 per month or something until they reach 65 to pay back the debt owed the govt via creditors. Would this not help to stimulate the economy with individuals now having more credit power? Most people who get a second chance in the credit score will more than likely take care of it. You said ask right?
Answer:

This is a very intriguing proposal that deserves to be researched. It can have a stimulative effect for sure, at least in the short run. Once the government has paid off the bad debt, presumably banks will start lending again and that help...

Question:
I’m a student at Centennial High School in Pueblo, Colorado. I had a few questions about being an economist. What is it like being an economist? What do you do on a day-to-day basis? What benefits do you get from being an economist?
Answer:

Economics is a science, and the goal of all sciences is to better understand phenomena that we observe in the real world. In social sciences, like economics, the focus is on phenomena related to human behavior; and for economists, the...

Question:
I have noticed that Trillions of dollars of building during the Middle Ages went on in Europe from an agrarian/trading society. How did taxation of millions for farm labor become the basis of trade in Europe? It seems not rational that the food grown during the period 300 AD to 1780 was the basis of wealth. Therefore we know that mining silver, gold, copper allowed for coins but since there was no technology of the era that converts to the Trillions in Building out Paris, London, Prague, Austria, Russia. So, how was farm labor converted to the structures we see still standing today.....which architecturally are still the world standard for greatness.
Answer:

Medieval cathedrals and other structures are indeed impressive works of construction, and to look at them is to marvel at human ingenuity.  Medieval societies were in fact technological quite progressive, a fact documented for example in...

Question:
Here's what seems like a pretty fundamental one: Why do national government's now borrow exclusively from the private sector instead of from their own central banks and as a result pay high interest instead of essentially none, thereby greatly increasing the burden to the public and the national debt?
Answer:

If central banks are to lend to the government, they would have to print money and that is potentially inflationary. Forward-thinking countries try to control such a temptation by legislating in advance that their central bank be independent....

Question:
Does the ISU Economics Dept. have a position on whether the Federal Reserve Board should manipulate the federal fund rate to fight inflation? When I was at ISU there was a difference of opinion among professors due to the negative impact on employment.

When the Federal Reserve announces to the world that it’s going to slow down the economy to hold back inflation that has always meant that unemployment will eventually take a hit. In the three cycles since 1989 the unemployment rate starts declining 2.59-3.09 years after the Federal Reserve starts dropping the federal fund rate. The monthly unemployment rate has been falling at a predictable rate within 2.31% since January 2012. For some reason whoever is in the White House gets the blame or credit.
Answer:

As noted, when the Federal Reserve changes the amount of “monetary stimulus” in the economy, it tends to push inflation and employment in the same direction. Lowering the level of stimulus (by raising interest rates) puts downward pressure on...

Question:
In his answer to my previous question, Dr. Orazem states that 'Iowa's small towns are surviving' (compared to Nebraska). Are they? A vast majority of Iowa school districts have seen declining enrollments for years/decades, many/most of the small rural main streets that I see appear to be in serious decline, and the towns in general seem to be losing both population and vitality. I travel a lot through rural Iowa and it sure doesn't feel like most of these small towns are surviving. Am I incorrect? If my eyeball test and what I think are accurate demographic data aren't sufficient, how do we determine if rural towns are surviving? Thanks much. Just trying to wrap my head around issues related to small Iowa town vitality and the accompanying implications for schools.
Answer:

I think it is important in establishing policy to work from facts and not perceptions. While rural towns are getting smaller on average, not all are. While schools are consolidating in rural areas, they are also consolidating in cities as like...

Question:
I am an Amerian citizen and have been considering applying to graduate school in London for a while now, and have finally found multiple programs of interest and have a plan in motion to raise enough money to be a financially stable unemployed student. Due to recent events (Brexit) I am trying to determine if it is financially feasible to continue pursuing obtaining a degree in London. Would school become more affordable for someone like me being an international student there? What about the cost of living? Or is it too early to determine all of this?
Answer:

It’s hard to answer your question since the situation in Britain is in flux. I can only mention a few considerations that may be relevant.

One is the exchange rate.  The British Pound has fallen in response to the Brexit vote. ...

Question:
I have a question about nomenclature related to resources and commodities. Am I right to say that a natural resource is something that is not refined or changed and sold on as a resource. Am I then also right to say that a commodity is a refined natural resource or product?

If possible could you folks better describe the raw product that comes from the ground as sold, vs the raw product that is transformed (in some way) then sold?

I think of wheat as a resource. I think of cereal as a commodity. Is that right?
Answer:

Here is a definition that I found on an OECD website https://stats.oecd.org/glossary/detail.asp?ID=1740. It is as good as any definition I have seen.

The...

Question:
It's said that printing more money causes inflation. What if the Federal Reserve printed a bunch of money and gave to someone secretly? How would that cause inflation? Thank you
Answer:

If the central bank printed some money and "gave to someone secretly" and that person did not spend it, nothing would happen. If they did spend it, it would add to the money already in circulation, which may or may not (if output went up) cause...

Question:
My wife and I live in the US and are trying to plan for a retirement abroad. We wish to retire to my wife's native Brazil, and one of my principal concerns while we save our nest egg is accounting for the relationship between inflation and exchange rates after retirement, which I do not understand well. The BRL has had fairly high inflation since it's inception in the mid 90's, on average around 7% per year. Due to the inflation of the Real, and my familiarity with investing in the US, I am inclined to leave our assets in USD, and transfer funds into BRL as needed for the duration of our retirement. The exchange rate between BRL and USD also seems to vary wildly, from R$1.50 per USD all the way up to just under $R4.00.

So if we're looking into the future and we predict that the BRL will have an inflation rate of 7% per year, and the USD will have inflation of 3% per year, obviously the cost to live in Brazil will grow much faster than in the US. If that's true, over a period of 30-40 years, in theory, should the exchange rate become more favorable to the USD as the value of the BRL is eroded due to inflation? If so, is there a way I can replicate that effect in my retirement planning? Thank you for hearing my question. Please reach out to my email address if any clarification is needed.
Answer:

First, a disclaimer. Whatever is written below is not actual investment advice; it is general economics discussion, a dinner table conversation, no more.

It is certainly a great thing to be planning your retirement to such a...

Question:
Hi, I gross $52,500 a year in Suffolk County Long Island, NY. How does my personal income compare to other income earners on Long Island? Somewhere in the middle or on the low side?
Answer:

None of us here have direct expertise on this issue. You may look at: http://www.longislandindex.org/data_posts/household-income-distribution/ for more...

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