Ask an Economist

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. Is 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:
I have been fascinated by Economics for a couple of years now, it has helped me understand the world in a completely different way.
I am 29 and have worked as a designer/maker in several respects all my adult life, I studied furniture design at University and got my BA, but I don't think my heart is in it, Economics and Politics are what really grip me, when I'm not at work (and when I can AT work), all I want to do is read and listen to books on economics and it's surrounding subjects, politics/philosophy.
I was good at maths when I was doing it in my early teen years but had a setback in my youth due to outside forces and never progressed beyond quite simple stuff compared to what is needed be an Economist I would imagine. Although I graduated with awards and the highest marks in my class in my Furniture Design Degree, I'm worried my academic skills aren't up to scratch to apply to a masters degree as I have not had much academic schooling and my experience has been in much more subjective fields.
Is it too late for me to get an education/find work as an economist in some respect? My academic schooling didn't get that far in my formative years which i regret massively. If there is still hope for me, what subjects would you recommend that I learn and to what degree? Having already done a BA Undergrad degree, I don't think I want to go back to do another Bachelors, but if I wanted to attend a masters degree, how would I get a University to take my application seriously? Should I complete respected online courses in subjects relating to Economics (I fear I cannot afford to attend an in person course at the moment)? Statistics, Mathematics, Probability, ect? Do you know of any resources for these subjects that you would recommend? The internet is crawling with paid online courses for these subjects but it's difficult to know which would be most relevant or even respected by a University I might wish to apply to.
Thank you for taking the time to read this and I appreciate any answer you might give, Beau
Answer:

I commend your interest in Economics as a discipline.  Economics offers powerful insights about many aspects of the way society is organized and provides a helpful way of thinking about many contemporary policy issues.

As you have...

Question:
in Egypt recently the local currency Pound has been going down in value. and i had a discussion with my friend about investing in real estate.

let's say i bought a property in Egypt in 2020 at 100K USD when the exchange rate = 15 Egyptian Pound for 1 USD and i paid in local currency because there is a law that says real estate prices should be in local currency so i paid 1,500,000 Egyptian Pound for the flat.

In 2024 i sold the property at 3,000,000 Egyptian Pound so it looks like i doubled my money. However, now the exchange rate = 60 Egyptian Pound for 1 USD.
Therefore in reality i lost half of my money by this investment.

I said this cannot be possible and the value of the property should go up with the inflation. and I argued that investing in real estate or commodities like gold is one of the safest and best ways to protect your money from inflation.

unless i was in need for the money and sold it at any price, or the market is down due to the low demand and high offers in the market or any other factors. But, in principle the property true value should be at least whatever is 100K USD i paid in 2020 is worth in 2024 which is in this case 6,000,000 Egyptian Pound.

his argument was that this only applies to Gold and inflation and fluctuating exchange rate doesn't affect properties prices.

can you please explain if this is possible or if we both are wrong and give us some knowledge about this scenario and how can i truly secure my invest or money against inflation
Answer:

Let’s start by understanding the numbers (Table 1).

...

 Table 1 

Question:
I'd like to know why a tax on luxury goods exists yet there seem to be no examples of a tax on luxury services such as having a maid, a membership to a golf club or a first class airplane ticket. Also, if we take 'luxury' to mean non-essential, what is the merit or lack of merit in having a tax on other non-essential services like interior design or photography?
Answer:

Like any other taxes, people have different views on luxury tax. Some might view it as a way to raise government revenues without having large impacts on the less wealthy. Others might disagree with this progressive taxation and argue that the...

Question:
Hello, I'm an independent automotive diagnostic technician who analyzes and makes diagnostic decisions on all makes and all models of vehicle ranging from the...geez...I guess the 30s up to the newest models of vehicles (thanks to working with collision shops). I'm sure you are wondering where I'm going with this and maybe I'm trying to correlate something that really doesn't correlate. My very weak understanding of game theory has me considering that the act or auto repair, namely where a diagnostic decision has to be made, could be or is considered an imperfect game. The reason I say that is that the manufacturers do not explain to us, including their own dealer technicians, how systems really work or are supposed to work, do not give us known good data (ie: waveforms, meter readings, expected scan tool data ranges, etc.). So, unlike chess where everything is right there, and even though I may not know what the other player is thinking I can potentially see "all" outcomes, at least in the next few moves. It's more like poker, where I don't necessarily know how a system works, or what all the players are in the system to cause a concern or symptom.

I don't know what I would do with the information you give me if I'm correct in this idea, short of maybe trying to make an argument to the manufacturers about how holding back information is a flaw in their strategy and it can be demonstrated using game theory.
Answer:

Let’s consider the three parties involved with a car sale and its potential repair. The three parties are, the consumer, the firm, and the repairman.

First, let’s try to view this from the firm’s perspective. Within in automobile they...

Question:
Most standard books on economics state that to increase the money supply of a state the state's national bank will buy bonds from the open market . This confuses me a lot as buying bonds should actually reduce the money supply. Suppose the fed bought a bond at price P . This would mean that they have now bought the right to get P + i (i= interest) at the time of bond expiry. They would have put p into the system and taken out P + i from the system , REDUCING the money supply by i (= {P+i} - { P}). Please help me clear the confusion.
Answer:

To understand Open Market Operations (OMOs), we first need to understand, Government securities. Government securities are a tradeable instrument issued by the Government (Treasury securities in case of US). They derive their value from the...

Question:
Like many rural areas, our largest employer is the public school system, 275 employees. We have less than four houses for sale in our county of 7000 citizens that have a sale price of $150,000 or less, which is the price range the majority of our school staff or new residents want to pay. I am proposing a Neighborhood Revitalization tax rebate housing program in order to incentivize our residents to rehab older homes. One commissioner does not believe this will help our residents and will only cost the County money in the long run, The rebate is on the increased appraised value of a house over the current and is only for five years.

I need help on the economic impact of losing our largest employer, which would be detrimental as well as the economic impact of increased construction in our county to include the direct, indirect and induced impact. I know the 7x multiplier is incorrect, but is there a way to estimate the economic impact?
Answer:

The primary issue you have identified is the shortage of houses, especially those priced below $150,000. Since there is not enough information to evaluate the entire situation, let's make a few assumptions and discuss how the tax rebate policy...

Question:
I am analyzing the deferred acceptance algorithm, where I execute this algorithm, then delete the matches from the original preference list (the dataset is large enough that this is not a problem) and execute the algorithm again. I repeat this 5 times to get the first op to fifth best recommendations per person. Then I look at the mean 'ranking' of the first through fifth recommendation (where the person highest on ones preference list would have 'rank' 1 etc.). However, the result I get is the following: [6.798, 8.338, 10.283, 8.904, 12.706]. Can it be possible that the mean rank of the fourth recommendation is lower than the mean rank of the third recommendation? I could find nothing about this online.
Answer:

There is nothing wrong with your findings. What you described may happen. It is about the rejection cycles that form in each iteration. During the running of the algorithm, many rejection cycles may occur. It seems like many rejection cycles...

Question:
US per capita GDP is approximately $70K. The current average number of members of household is in the US is 3.13. Average household income is approximately $74K. How can this be?
Answer:

GDP per capita and average family income are two distinct indicators used to evaluate economic performance. Each has its advantages and disadvantages, which vary based on the specific question and context.

GDP per capita is a measure of a...

Question:
Hello. I would like to start a business that Is ethical in terms of not having any negative consequences for animals, people and the environment. A business that does not have to be of destructive nature in order to make a profit. I know this is possible but I'm still worried that by taking money from customers that work in non ethical industries/businesses I would be actually supporting these industries, making my business nor ethical after all. Shortly said, is it possible to make money in an ethical way all round? Thus in a way that I'm not contributing at all to any practices of destructive nature? Thanx!
Answer:

Your question is nearly as much philosophical as economic in nature.  Philosophy is definitely outside my comfort zone, but, fortunately, I was able to confer with a philosopher.  So let me start by addressing that part of your question...

Question:
Perhaps I don't understand the factors that go into economic growth, but it appears to me that we really, truly want our economy to be constantly actually growing, producing more, selling more, employing more. If this is true, and the economic growth factors aren't leveled out if we make it per capita economic growth - meaning we're in equilibrium with our population - there's no justification for this lack of sustainability. Perpetual economic growth is a short sighted goal. Would you please correct me if I'm wrong, or discuss economic equilibrium as an alternative? Thank you.
Answer:

“Economic Growth” is the year-on-year increase in a country’s GDP, that is, the total market value of goods and services produced in a year. As you rightly said, population is an important factor, and therefore, more meaningfully, we look at the...

Question:
I have run into situations where getting goods from the source (i.e., the farm itself) costs substantially more than what a grocer is asking for for the same product. My understanding is that the grocer would often price up the item to make overhead, so what situations would lead to the source of a product asking for more than the grocer (reseller)?
Answer:

A few reasons livestock producers may be interested in selling locally include having:

  - an available market

  - potential to capture premium prices

  - a direct connection with consumers

  -...

Question:
Does increased local news coverage impact the local economy? Has there been research on the impact of local reporters and positive impact on the economy?
Answer:

There is an extensive research record on the role of information on stock and commodity prices. Among the examples:

Th U.S. Bureau of Labor Statistics has strict rules on how and when they release their monthly reports on unemployment and...

Question:
Why do producers overproduce if there’s a price floor, I understand it had to do with the law of supply, but I don’t get why one would over-allocate resources knowing they won’t sell a large portion of their stock.
Answer:

To start, I’ll clarify a couple pieces of the question. First, from Lacy et al. (2019): A binding price floor is a legal minimum price, set by the government, at which a good can be sold. Second, while we often think of producers as the suppliers...

Question:
I have a wonderful question! We won the housing lottery in New York City (focused on keeping middle income people in the City) and pay $2,500 per mo (which we can afford) for a large apartment that fits (and will always fit) our family. The market rate for this apartment is $5,000 (which we could not afford). We would love to stay for the long term, but I worry that we are not investing in property and will not realize the gains that come from a real estate investment over the long term. Question: How should I think about the economics of this situation?
Answer:

Disclaimer.  The following is not intended as investment advice. You should consult a financial advisor who knows the tax and real estate issues related to New York City as there are likely many factors to consider.

First,...

Question:
In many developing countries, similar types of shops are located in a clumps in the cities, right next to each other. All the motorcycle repair shops will all be on one block, and all the kitchenware stores are all on the next block, etc. Are market forces responsible for this somehow? One source suggested there was a Nash equilibrium at play, but that doesn’t seem to fit. There could be non-market factors like zoning or tradition, but why would that be the case in under-developed countries more than more developed countries?
Answer:

This is an interesting observation.  We regularly see spatial clustering of similar establishments for a number of reasons including natural advantage, agglomeration economies, zoning, social networks, and "norms" shaping location decisions...

Question:
I have a question - regarding the BLS "Consumer Price Index New Release" for July:

https://www.bls.gov/news.release/cpi.htm

Did they make a mistake - in their report of gasoline prices (or have I've misunderstood something)?

They reported a July unadjusted percent change - for gasoline (all types) = .2%
(see link below)

https://www.bls.gov/news.release/cpi.t01.htm

I follow gasoline prices - as reported by the U.S. Energy Information Agency (EIA), and by others like the AAA. The EIA and AAA reports for July - were consistent. Their reports showed a July increase of - approximately 20 cents / gallon.

If the EIA & AAA reports are correct, the July unadjusted percent change (for all types of gasoline) was: .20 / 3.66 = 5.47%
not: .2%

Such a sizable difference - would significantly impact the reported CPI, and other averages.

============================================================================
Here's the relevant EIA data:
============================================================================
https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=EMM_EPM0_PTE_NUS_DPG&f=W

At the beginning of July, EIA reports for U.S. gasoline price [all grades all formulations] were:

On 06/26/2023 - They reported all grades all formulations = 3.685
On 07/03/2023 - They reported all grades all formulations = 3.643

An estimate for 07/01/2023 - using the 06/26 and 07/03 prices - was 3.66
On 07/31/2023 - EIA reported [all grades all formulations] gasoline price = 3.869
So their prices indicate a July increase of 20 cents / gallon.

Note: The same exercise was done using the EIA Regular Gasoline Prices - which also showed an increase of about 20 cents / gallon.

============================================================================
Here's the relevant AAA report (Aug 3):
============================================================================
https://gasprices.aaa.com/increases-at-the-pump-slow-and-more-relief-could-be-on-the-way/

A key statement in their Aug 3rd report says,
"Today’s national average of $3.82 is 29 cents more than a month ago"

Any thoughts you might have regarding my question of the July BLS report - is greatly appreciated…

============================================================================
The EIA website - also has History spreadsheet (with comprehensive data)

https://www.eia.gov/petroleum/gasdiesel/

https://www.eia.gov/petroleum/gasdiesel/xls/pswrgvwall.xls

The following is a snapshot of the EIA report regarding Regular Gasoline Prices on 07/03:
price was 3.527, and change was -0.044 from week ago - from which I noticed about the same 20 cents / gallon increase in July, for regular gasoline.


Answer:

The BLS reports Consumer Price Indices which are different from nominal prices reported by other sources mentioned in the question. The BLS index measures price change from a designated reference date (the reference base for most of the items is...

Question:
If a business grows its revenues by three per cent, but inflation is 6%, isn't that negative growth? They clearly sold fewer units of whatever they are selling, 3% less. I read lots of stock analysts articles about stocks in which they claim that 8% growth in the last twelve months is pretty darn good. However, with inflation at about 8% for most of that time, did they really "grow"? Isn't this a misrepresentation of the true performance of the company?
Answer:

By definition, revenue equals price of product times the number of units of the product sold. If revenue grows by 3% (in dollar terms) and inflation is 6%, it means there is negative "real" growth, meaning the purchasing power of that revenue...

Question:
Has anyone ever researched or considered a nationwide, federally regulated wealth cap? I am ABSOLUTELY certain many fiscal conservatives would oppose this idea, but as an effort to more equitably distribute wealth in the United States without using taxation as a method, why don’t we federally cap personally accrued wealth (all assets - real property, financial investments, savings, etc.)? The cap could be extremely high, even towards the $250M point, but one that moves like our federal interest rate. I believe capping individual wealth would force the top 10% to push the almost 60% if the nation’s wealth to a wider consumer base. I understand issues would exist with couples or families who would consolidate their $250M caps, but that would be okay (I foresee that as resulting in more personal issues with which those individuals would have to contend). I also understand that many wealthy would find legal loopholes to put their assets in the name of a company; but, if we know that, we could take steps to minimize or prevent it.
Answer:

Most economists would start to answer this question by asking a question: what is the objective you have in mind, and why? Specifically, what problem are you trying to solve for which the solution is a wealth cap? Wealth is a stock, of past...

Question:
I am a single mother and kindergarten teacher, completely inexperienced at reselling concert tickets. However seeing a potential opportunity, I was able to secure two tickets to a Taylor Swift concert October 2024 in Miami. I want to sell them for the highest price. Best to sell:
1) Now? The event sold out yesterday. There are likely many desperate and disappointed fans.
2) Close to the concert date? It'll get a lot of hype in the days leading up to the event.
3) somewhere in between?
Answer:

[The following guidance provided herein is of a generic nature and derived from overarching principles of economics. It is not intended to be construed as particularized counsel with respect to Taylor Swift performances or the...

Question:
The Fed decided to raise interest rates again today. While initially when rate hikes were aggressive, there was a large worry of creating a recession. As inflation has cooled, consumer confidence at its highest level in two years, and a continued relatively strong job market the risk/worry for a recession has shrank. There has been some talks of the Fed successfully achieving the 'soft landing' they had hoped for when they first began to raise rates. However, is our risk of recession actually higher with student loan payments beginning again in the fall coupled with the high interest rates? And is the Fed not taking these payments into account in their forecasts? Just as the pause in these payments (among other things) helped contribute to inflation in the first place, it seems to make sense that the restart of these payments will reduce consumer spending and therefore constrict growth in our economy possibly causing a recession. Thanks in advance for any insight!
Answer:

Members of the Federal Open Market Committee (FOMC) take a broad range of information into account when forming their economic forecasts, including considering how changes to fiscal policies may affect the economy.  One way to get a sense of...

Question:
Why is it often argued that population growth (either endogenous or by immigration) is necessary for a country to be economically successful (e.g., have high per capita income) when some of the richest countries and most economically successful countries in the world (e.g., Norway, Sweden, Denmark, Finland, South Korea, Japan, Singapore) have low or even negative population growth, whereas the poorest countries in the world (many African and middle eastern countries) have high population growth? Setting aside the climate and environmental impacts of human population growth generally, does this not at least demonstrate that population growth is not a necessary condition for economic success? I ask as our current federal government in Canada strongly believes high immigration levels are a necessary condition for Canada to be economically successful in the future, and I have not seen any convincing argument that this is the case.
Answer:

Thanks for asking. This is a good and long-lasting debated question in Economics. As reported, the recent fertility rate in Canada is around 1.4, which is relatively low because the subsistence level is 2.1. I believe the Canadian...

Question:
Instead of everybody filing tax returns with the IRS and creating a central point of failure (or hacking), imagine a hypothetical system where the government created a Flat Tax Per Person Living within the State’s boundaries according to the last Census.

For example, $10,000. Every state must provide the Federal government with $10,000 per person, but the Federal government does not care how they put that money together. Important to mention that there is no federal corporate tax rate in this hypothetical. They look at California and send a tax bill for $392 billion (39.24 million people * $10,000)

How California, or any state, comes up with that tax bill is completely irrelevant. They could do an income tax, a sales tax, a levy on product sales, a corporate tax rate, a fee on produce (grapes?), whatever. Every state is then forced into a competition for the most efficient and balanced tax system possible; as well as the most efficient use of spending possible. At least in theory without a lot of exceptions and corner cases (I’d still keep the IRS around for tariffs).

Thoughts? I’m sure it’s a dumb idea but I want to hear the logic why. I’ve asked this question a few places without answers yet, but feel this may give the best answer.
Answer:

This is an interesting thought experiment. Many factors must be considered, and it is difficult to address them all at once, but here are some important ones. First, the regressivity of the lump sum tax would entail equity concerns that have...

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