tag:www.pbs.org,2007-10-02:/newshour/businessdesk/9 2009-07-10T16:33:03Z Movable Type Pro 4.24-en tag:www.pbs.org,2009:/newshour/businessdesk//9.1808 2009-07-10T16:13:25Z 2009-07-10T16:33:03Z

Yesterday, we posted the latest segment from Paul's Making Sen$e series. In it, he spoke to two very distinct groups -- laid-off white collar executives and ex-cons looking for work -- and was struck by what he heard from both...

Business Desk Admin _And since we posted the resumes of the group of ex-convicts we spoke to in Chicago, we thought it only fair to also post the resumes of the out-of-work executives. We were also able to film them making short introductions about their past work experiences and how long they've been searching for work._ Resumes: "Chris DeMaio":http://www.pbs.org/newshour/businessdesk/RESUMES/DeMaio.pdf, "John Frech":http://www.pbs.org/newshour/businessdesk/RESUMES/Frech.pdf, "John Kessberger":http://www.pbs.org/newshour/businessdesk/RESUMES/Kessberger.pdf, "John Leone":http://www.pbs.org/newshour/businessdesk/RESUMES/Leone.pdf, "John Lopata":http://www.pbs.org/newshour/businessdesk/RESUMES/Lopata.pdf, "Peter Sturdivant":http://www.pbs.org/newshour/businessdesk/RESUMES/Sturdivant.pdf, "Bharath Tolappa":http://www.pbs.org/newshour/businessdesk/RESUMES/Tolappa.pdf, "Barbara Tomczak":http://www.pbs.org/newshour/businessdesk/RESUMES/Tomczak.pdf. ]]> tag:www.pbs.org,2009:/newshour/businessdesk//9.1807 2009-07-10T13:50:08Z 2009-07-10T14:08:06Z

Question: During a recent story about the demise of the auto industry, there was clip of a Model T Ford driving through the Ford Museum. The narration made the point that one of the things that made Henry Ford...

Business Desk Admin **Question:** During a recent story about the demise of the auto industry, there was clip of a Model T Ford driving through the Ford Museum. The narration made the point that one of the things that made Henry Ford successful was that he intentionally built a car that the workers in his factory could afford to buy. That got me to thinking about recent trends in the current economy. Increasingly, it seems, people are employed making goods and providing services they themselves cannot afford. We move manufacturing facilities offshore in search of cheap labor, and some companies move them from country to country as living standards rise overseas. In many cases, the workers there will likely never be in a position to purchase the products they help make. Even in this country, many service economy jobs (e.g. at high-end hotels and restaurants) are filled by people who could not afford to be customers of those establishments. What's worrisome is not that this occurs, but that it appears to occur more often than in the past. Have we really reversed the trend that Henry Ford started? If we push an ever larger portion of the country into underemployment, is it even possible to have a consumer-driven economy? Being able to produce a shoe or a shirt or a car at a lower cost with a higher margin, doesn't help if there's nobody able to purchase the product. What tools do economists have to help decide what's "efficient" from a "systems" perspective? We need a discussion about optimizing the results for the country, and since we're too far down the globalization path to stop, we need to think about optimizing the results for the planet. Where do we start? **Paul Solman:** One place to start, at the moment, is Ellen Shell's book "Cheap":http://www.amazon.com/Cheap-High-Cost-Discount-Culture/dp/159420215X/ref=cm_cr_pr_product_top, which makes your point quite explicitly. Her basic thesis, in fact, is that by "saving money" on cheap goods and services, we may wind up paying more in the end. And she uses your example: Henry Ford paying his workers an at-the-time-unheard-of wage so that they could afford the cars they produced. "Fordism," this approach has been dubbed, and it is often pointed to as the alternative to the discount "race to the bottom." Another starting point might be a Harvard "inequality project":http://www.hks.harvard.edu/saguaro/ that political science professor Bob ("Bowling Alone":http://www.bowlingalone.com/) Putnam helps lead. He and fellow researchers blame the financial crisis, in part, on the well-documented economic split between the haves and have-nots (or, as President Bush II put it, the haves and have-mores). The logic: The greater the inequality, the less money the bottoms have to spend on goods and services provided by the tops. So what makes sense? The tops lend to the bottoms, and "make their money" thus. And again, everyone winds up worse off than they otherwise might be when the bottoms can't pay their debts. Inequality is also bad for our collective health, which brings with it various costs to the society as a whole. See "our piece with British epidemiologist Michael Marmot":http://www.pbs.org/newshour/bb/business/jan-june07/income_02-23.html for the argument. The problem, of course, is what to DO about inequality -- how to mitigate it. Here, the progressive consumption tax of "Bob Frank":http://www.robert-h-frank.com/ is thought-provoking. A brief "write-up of the idea":http://www.pbs.org/newshour/businessdesk/2009/06/which-taxes-offer-an-opportuni.html#more, from Frank, appeared on this page last month. ]]> tag:www.pbs.org,2009:/newshour/businessdesk//9.1806 2009-07-09T21:09:00Z 2009-07-09T21:18:24Z

Robert Frank: A British reader posted the following query on my UK publisher's web site: "Why do tube drivers get paid so much more than bus drivers?" An American economist trying to field questions about markets in the UK...

Business Desk Admin "**Robert Frank:**":http://www.robert-h-frank.com/ A British reader posted the following query on my UK publisher's web site: "Why do tube drivers get paid so much more than bus drivers?" An American economist trying to field questions about markets in the UK operates at an obvious handicap. Market outcomes hinge on myriad facts on the ground, and having never lived in England, I'll often be completely ignorant of many of the most relevant ones. But since the spirit of the economic naturalist exercise is to come up with plausible hypotheses suitable for further testing, I'll forge ahead, taking inspiration from the retired American tennis legend Jimmy Connors. If Connors had a glaring weakness, it was his serve. Even his first serve would be considered a weak second serve by the standards of today's men's game. Connors knew it wasn't an offensive weapon, so he just rolled it in, hoping that good things would happen once the point got under way. And that strategy worked well enough. I'll try a similar one here. I have no idea why tube operators earn more than bus drivers. But the general question of why some jobs pay better than others is one that economists have studied extensively. So I'll make a few general observations about some of the most important sources of wage differentials and invite others to share their views. The price of labor, like the price any good or service, is determined by the interplay of supply and demand. On the demand side, the employer's rule of thumb is to hire an additional worker if that worker will generate at least enough extra revenue to cover his salary. On the supply side, the worker must decide whether accepting a particular job at a given wage would be at least as attractive as any other available alternative, including the option of not working at all. These general observations suggest several possible explanations for wage differentials between seemingly similar jobs. One is that potential employees may regard working conditions as less attractive in one job than the other. In that case, the first job would have to pay more or else no one would choose it. For example, when all other relevant factors are equal, risky jobs tend to pay more than safe ones. But the higher wage for tube operators is unlikely to reflect compensation for risk, since driving a bus is actually much more risky. Many studies, for example, document the stress-related health problems that are common among bus drivers whose routes entail heavy urban traffic. If the observed wage differential is rooted in some difference in working conditions, a more promising candidate might be that jobs in dark underground spaces are considered generally less attractive than those that can be performed in broad daylight. Another possibility is that for every job opening in each category, there are fewer potential candidates qualified to be tube operators than there are to be bus drivers. This explanation also sounds promising, since most people who can drive a car could be trained to drive a bus relatively quickly. A final possibility I'll mention is that wages would tend to be higher for tube operators if for some reason they were represented by a stronger union. I look forward to hearing your thoughts about which, if any, of these possibilities seems most promising. _Robert Frank's latest book, "The Economic Naturalist's Field Guide: Common Sense Principles for Troubled Times":http://www.amazon.com/Economic-Naturalists-Field-Guide-Principles/dp/0465015115, was published last month._]]> tag:www.pbs.org,2009:/newshour/businessdesk//9.1803 2009-07-09T14:26:39Z 2009-07-09T15:08:17Z

On last night's NewsHour, Paul Solman got some perspective on the difficult job market from two very distinct groups: former executives and former prison inmates. What was striking when he met with the two groups of job seekers was just...

Business Desk Admin _When Paul was interviewing the group of ex-convicts in the job search program at Chicago's Safer Foundation, one asked, perhaps jokingly, if we might post their resumes on the web. But we take all jokes seriously and thought this a particularly interesting idea. We, at least, were interested in their resumes and thought you might be too. We'll post resumes from the group of former executives, plus extended interviews with them, tomorrow._ Resumes: "Marcus Adams":http://www.pbs.org/newshour/businessdesk/RESUMES/Adams.pdf, "Dimitrious Johnson":http://www.pbs.org/newshour/businessdesk/RESUMES/Johnson.pdf, "Philip Turner":http://www.pbs.org/newshour/businessdesk/RESUMES/Turner.pdf, and "Cephas Wright":http://www.pbs.org/newshour/businessdesk/RESUMES/Wright.pdf. ]]> tag:www.pbs.org,2009:/newshour/businessdesk//9.1797 2009-07-08T14:45:15Z 2009-07-07T14:55:18Z

Robert Frank: Why does the public transport system in London charge significantly more for a tube or bus journey if you buy a paper ticket than it does if you use their Oyster prepaid card? In most cities around...

Business Desk Admin "**Robert Frank:**":http://www.robert-h-frank.com/ Why does the public transport system in London charge significantly more for a tube or bus journey if you buy a paper ticket than it does if you use their "Oyster prepaid card":https://oyster.tfl.gov.uk/oyster/entry.do? In most cities around the globe, the price of an urban transit ride depends on how you pay for it. In London, for example, the 2007 cash price of a single tube ride was 4 pounds, but if you bought a prepaid Oyster Card, the same journey would cost you only 1.50 pounds. Similarly, the cash price of a single bus ride in London was 2 pounds in 2007, while the same ride with an Oyster Card was only 0.90 pounds. Why do travelers pay less than half as much with an Oyster Card? Because ticket revenues in urban transit systems generally fall short of covering total system costs, operators are constantly on the lookout for ways to boost their receipts. Relative to the alternative of charging the same price to all travelers, a seller can generally generate substantially more revenue by charging high prices to those who are willing to pay them, while offering discounts to those who would be unwilling to buy without them. The Oyster Card is a simple hurdle that helps segregate buyers in this way. The hurdle buyers must jump in this case is exceedingly simple: They must fill in a form and buy a card in advance, which they can do either online or in person at any tube stop. Transport for London knows that those who are unwilling to clear even this simple hurdle can hardly be very sensitive to price, and hence the relatively steep cash fare of 4 pounds per ride. Had Transport for London charged everyone that much, it would have lost most of its travelers. But by offering the Oyster Card option, it keeps the system affordable for its price-sensitive travelers, while collecting a substantial premium from about 20 percent of its travelers. _Robert Frank's latest book, "The Economic Naturalist's Field Guide: Common Sense Principles for Troubled Times":http://www.amazon.com/Economic-Naturalists-Field-Guide-Principles/dp/0465015115, was published last month._]]> tag:www.pbs.org,2009:/newshour/businessdesk//9.1800 2009-07-08T13:00:52Z 2009-07-07T19:31:23Z

Paul Solman: Sometimes described as a "centrist" Democrat, Congressman Eric Massa, a former Republican, represents a district of New York state that includes Rochester. Recently, this press release of his came our way. Since part of what we're trying...

Business Desk Admin **Paul Solman:** Sometimes described as a "centrist" Democrat, "Congressman Eric Massa":http://massa.house.gov/, a former Republican, represents a district of New York state that includes Rochester. Recently, this press release of his came our way. Since part of what we're trying to do with the Business Desk is make it a place for the wisest economists I know to weigh in on hot issues, I sent Massa's "Why I Voted 'No' on the Cap & Trade Bill" to Harvard environmental economist "Rob Stavins":http://ksghome.harvard.edu/~rstavins/, whose commentary on cap & trade I've been reading assiduously of late. His comments are in CAPS below, and his recent posts are linked near the end. **Press Release from the office of** "**Rep. Eric Massa**":http://massa.house.gov/: Subject: Why I Voted "No" on the Cap & Trade Bill On Friday, June 26th, the 111th Congress voted on, and passed the Cap & Trade Climate Bill (H.R. 2454). I did not vote for it, and as my constituents and supporters, you have the right to know why. Let me first start off by saying that I believe that global climate change is real, and that man and the industrial activities of man are largely to blame for it. I also believe that as a Congress and as a people it is imperative that we act to address this crisis, and that we act sooner rather than later. That said, I do not believe that this Bill is the right solution to the problems that we are facing. I stood opposed to this Bill for four primary reasons. 1) This plan, as it is designed, presents the potential for new energy costs with unproven positive results. During this recession I cannot support a plan that will raise costs for American families, and I think we should be focusing on investing in the clean technologies of the future that do hold promising outcomes. Hydrogen Fuel Cell technology is one of these solutions, however there is much to do to place this technology in the research and development portfolio. This is a step in the wrong direction. **Robert Stavins:** COSTS WILL NOT OCCUR DURING THE RECESSION. THE BILL'S MANDATES WOULD BEGIN IN 2012, AND WOULD NOT BEGIN TO REALLY BITE UNTIL 2016. SO, ANY TALK ABOUT THE RECESSION IS A RED HERRING. IN ANY EVENT, HOW "INVESTING IN CLEAN TECHNOLOGIES" WOULD BE COSTLESS IS BEYOND ME. 2) I am deeply concerned about the potentially negative impact of the Cap and Trade system on major companies in my district which would likely encounter difficulties acquiring the "carbon credits" necessary to do business. This will force our companies to make investments in foreign offsets like purchasing rainforest lands. **Robert Stavins:** ANOTHER RED HERRING. FOR THOSE FEW SECTORS THAT ARE BOTH ENERGY-INTENSIVE AND TRADE-SENSITIVE (CEMENT, ROLLED STEEL, ALUMINUM, BULK GLASS, PAPER, FOSSIL FUELS), THE BILL PROVIDES VERY STRONG SUPPORTS TO ADDRESS CONCERNS ABOUT INTERNATIONAL COMPETITIVENESS: IN THE SHORT TERM, AN OUTPUT-BASED UPDATING ALLOWANCE ALLOCATION MECHANISM, AND IN THE LONG-TERM A REQUIREMENT THAT IMPORTS OF THESE COMMODITIES FROM COUNTRIES WITHOUT COMPARABLE CLIMATE POLICIES MUST HOLD EQUIVALENT NUMBERS OF ALLOWANCES. However, much like the banking bailout, I fear there will not be enough oversight into how these funds are spent overseas by foreign governments. I disagree with a plan that puts in place hundreds of billions of dollars of foreign offsets, which will drain American funds to corrupt overseas Governments where there is little or no oversight to ensure that the funds will be used for the actual planting of trees or rebuilding of tropical forests. **Robert Stavins:** I REALLY DON'T KNOW WHERE THE "HUNDREDS OF BILLIONS OF DOLLARS" COMES FROM. IN FACT, THE BILL ALLOCATES 5 PERCENT OF ALLOWANCES TO PREVENTING TROPICAL DEFORESTATION FROM 2012 THROUGH 2025, FROM 2026 THROUGH 2030 THIS DROPS TO 3 PERCENT, AND IN 2031 AND THEREAFTER THE ALLOCATION IS 2 PERCENT OF ALLOWANCES. RETARDING DEFORESTATION IN TROPICAL AREAS IS AN IMPORTANT AND COST-EFFECTIVE MEANS OF ACHIEVING EMISSIONS REDUCTIONS, AND SAVES MONEY FOR AMERICAN BUSINESSES. 3) I strongly disagree with the process by which Congress was forced to take this vote. This bill did not stop changing until 3 AM on the night before the vote when a 300-page amendment was added. I did not feel there was enough time to research, review, and fully digest the contents of this massive bill. With so much at stake, rushing the vote was unacceptable to me. "Robert Stavins:":http://ksghome.harvard.edu/~rstavins/ I ALSO DID NOT LIKE THE 3 AM PROCESS OR -- MORE IMPORTANTLY -- THE SUBSTANCE OF SOME OF THE 3 AM AMENDMENTS, BUT THE FINAL BILL -- WITH ALL ITS FLAWS -- REMAINS A SOLID FOUNDATION FOR MOVING ON TO THE SENATE. ON THIS, PLEASE READ MY THREE MOST RECENT POSTS AT MY BLOG, "AN ECONOMIC VIEW OF THE ENVIRONMENT":http://belfercenter.ksg.harvard.edu/analysis/stavins/. 4) My final reason for opposing this bill was you, the constituents of New York's 29th Congressional District. In the week leading up to the vote, our offices received hundreds of phone calls urging a 'no' vote. In fact, after we tallied the responses, the "vote no" calls outnumbered the "vote yes" calls by a ratio of 19 to 1. My job is to represent you, and that's exactly what I did in casting my vote. While voting based only on polling data is not in concert with my vision - representing this District is my job and I take your concerns very seriously. "Robert Stavins:":http://ksghome.harvard.edu/~rstavins/ OK, THE CONGRESSMAN CHOSE TO FOLLOW THE POLITICAL WINDS. Now the conversation must move forward. I stand fully committed to crafting and implementing solutions that will move us in the right direction on this issue, and I hope you will work along side me as we do the hard work that is required. There will certainly be times when you disagree with my votes or my stances on issues, but as your Representative in Washington, I will always level with you and tell the truth. I believe that open and honest dialogue should be the norm, and I welcome your input, your opinions, and your expertise as we work through the countless issues that come before Congress. Thank you for taking the time to read this email, and please know that I am no one's Congressman but your Congressman, and I thank you for your support. Very Respectfully, Eric Massa]]> tag:www.pbs.org,2009:/newshour/businessdesk//9.1796 2009-07-07T14:30:37Z 2009-07-07T17:45:01Z

Whether it's tackling why brides buy outfits and grooms rent to explaining why drive-up ATMs have Braille dots and freezers don't have lights, Robert Frank has been guest blogging fascinating answers to the world's economic ironies for the past...

Business Desk Admin Whether it's tackling why "brides buy outfits and grooms rent":http://www.pbs.org/newshour/businessdesk/2009/07/why-do-brides-buy-dresses-whil.html to explaining why "drive-up ATMs have Braille dots":http://www.pbs.org/newshour/businessdesk/2009/06/why-do-drive-up-atm-machines-h.html and "freezers don't have lights":http://www.pbs.org/newshour/businessdesk/2009/07/why-does-your-refrigerator-hav.html, "Robert Frank":http://www.robert-h-frank.com/ has been guest blogging fascinating answers to the world's economic ironies for the past week. **Now, it's your turn to send him your most vexing and befuddling questions about the economic world.** He's addressed questions from his students and readers in the past such as: _Why did kamikaze pilots wear helmets?_ _Why do brown eggs cost more than white ones?_ **Leave your questions in the comments or in the question box to the right and Robert Frank will address them soon right here.** ]]> tag:www.pbs.org,2009:/newshour/businessdesk//9.1795 2009-07-07T14:18:30Z 2009-07-07T14:30:04Z

Robert Frank: Why has Apple restricted its popular iPhone to just a single wireless network in both the United States and the United Kingdom? Apple was shrewd to take this step. When it first hit the market in the...

Business Desk Admin "**Robert Frank:**":http://www.robert-h-frank.com/ Why has Apple restricted its popular iPhone to just a single wireless network in both the United States and the United Kingdom? Apple was shrewd to take this step. When it first hit the market in the United States several years ago, the iPhone offered capabilities that no other smart phone could match. Its technological edge is somewhat smaller now, but remains significant. The upshot is that if a wireless service provider had an exclusive contract to provide iPhone service, it could trumpet that fact to attract new subscribers. That's a huge advantage, because most of the costs of providing wireless service are independent of the number of customers served. Additional revenue from new subscriptions thus boosts company profits almost dollar for dollar. But why should Apple provide that advantage to an Internet service provider free of charge? After all, it's the iPhone, not anything the service provider does, that's pulling in new subscribers. Apple has considerable bargaining power here. By signing an exclusive service contract with one service provider, it can insist on a sizable quid-pro-quo. The terms of such contracts are not public information, but I'm guessing that Apple claims a substantial share of the monthly service fees paid by all new iPhone subscribers. If Apple had instead made the iPhone available to every wireless service provider, no company would have had a uniquely attractive offering with which to attract new customers away from rival providers, and Apple wouldn't have been able to claim any share of the iPhone subscription fees. That may help explain why Apple has been signing exclusive contracts. _Robert Frank's latest book, "The Economic Naturalist's Field Guide: Common Sense Principles for Troubled Times":http://www.amazon.com/Economic-Naturalists-Field-Guide-Principles/dp/0465015115, was published last month._]]> tag:www.pbs.org,2009:/newshour/businessdesk//9.1794 2009-07-06T20:17:54Z 2009-07-06T20:29:21Z

Robert Frank: Economic naturalists often find that many interesting new questions are stimulated by the experience of living in an unfamiliar environment. That's always been my experience during sabbaticals spent away from Ithaca. One Saturday last December during my...

Business Desk Admin "**Robert Frank:**":http://www.robert-h-frank.com/ Economic naturalists often find that many interesting new questions are stimulated by the experience of living in an unfamiliar environment. That's always been my experience during sabbaticals spent away from Ithaca. One Saturday last December during my sabbatical at NYU, my wife and I headed out for lunch in Greenwich Village. As we were walking up University Place, we passed numerous displays of Christmas trees for sale along the sidewalk. Almost every tree had a flimsy wooden stand affixed to its trunk. I'd never seen Christmas trees with stands like that anywhere I've lived or traveled--not in Miami, not in Atlanta, not in Ithaca, not in Washington, not in the Bay Area, not in Paris. "Why," I asked my wife when we sat down to lunch, "do they sell trees that way in New York?" She thought about it a moment. Then her eyes lit up and she said, "If you had a stand like the one we have in Ithaca, where would you keep it all year?" Some years ago we bought an elaborate stand with powerful spiked arms that grip the trunk, a reservoir that holds several quarts of water, and a foot pedal that lets you adjust the vertical angle of the tree's trunk. It's a winner. And although it's pretty big, we have plenty of room to stash it in our basement. But we'd be hard pressed to find a spot for it in our NYC apartment. Most New Yorkers live in considerably smaller apartments than ours, and hence the attraction of disposable Christmas tree stands in the Big Apple. _Robert Frank's latest book, "The Economic Naturalist's Field Guide: Common Sense Principles for Troubled Times":http://www.amazon.com/Economic-Naturalists-Field-Guide-Principles/dp/0465015115, was published last month._ ]]> tag:www.pbs.org,2009:/newshour/businessdesk//9.1792 2009-07-06T01:14:31Z 2009-07-06T01:23:20Z

Paul Solman: A provocative response, via the PBS Ombudsman, to Thursday's story about undercounting unemployment. The emailer said it was okay if her name was posted. I assume that means it's okay to post her email here and use it...

Business Desk Admin **Paul Solman:** A provocative response, via the PBS Ombudsman, to Thursday's story about "undercounting unemployment":http://www.pbs.org/newshour/bb/business/july-dec09/undercounted_07-02.html. The emailer said it was okay if her name was posted. I assume that means it's okay to post her email here and use it to elaborate. Never pass up an opportunity of more time to expand on a TV story. _Re: McLehrer NewsHour July 2, Paul Solman on the "REAL" unemployment numbers. Usually his parts are great, this was too much guesswork._ _Count all the disabled, guess at how many are now too worn out to look for work, the part-timers who want fulltime, etc. Why not throw in all the stay-at-home Moms & teens who'd like to have some extra $?_ _Everyone would like more $, just look at the bank CEOs, etc. Be honest, if a guy is on disability, he can't work & so can't be counted as a potential worker just because he'd like (& needs) more $. This piece was really too much speculation, and not enough real journalism. Shame on Solman, get back to what you do best: explaining tough economic concepts so anyone can get them._ Let me begin by sharing another email, from one Richard Milewski, "the second Editor-in-Chief of InfoWorld, Chief Technology Officer of a 1990's Silicon Valley start-up that hit the wall when the bubble burst, and someone who had (until last autumn) been making an OK living doing strategic consulting in the educational (K12) technology space." He wrote: _"There is little or no coverage, and virtually no statistics that I can find, on what the current recession has done to independent contractors (workers whose earnings are reported on IRS form 1099 instead of form W2). I suspect that the recession has hit them far harder than even the members of the UAW (who at least have a fairly articulate spokesperson, and congress-people who care)....There was a one-line mention on MSNBC a week or 10 days ago that said they expect 1099 workers to be 40% of the post-recovery economy. I suspect that number is too high, but if it's anywhere near correct it means that our current unemployment rate it closer to 15% or 20%, than to the roughly 10% 'official' number (I live in California)."_ Okay, now it's my turn. The official unemployment rate, seasonally adjusted, was just announced as 9.5 percent, a mere .1 percent higher than last month's 9.4 percent. Yet to America's 14.5 million officially unemployed, some 450,000 more people were added in June -- again, seasonally adjusted. Both numbers are higher, unadjusted, but assuming the adjustment is accurate, that's still a roughly 3 percent increase in total people. But 9.5 percent is only 1 percent more than 9.4 percent. You see the discrepancy? How can the number of unemployed go up THREE TIMES as much as the official rate? Or, as the Bureau of Labor Statistics put it: "Nonfarm payroll employment continued to decline in June (-467,000), and the unemployment rate was little changed at 9.5 percent." Huh? Actually, the answer seems to be mainly that 200,000 or so people who say they want a job moved from "unemployed" to "out of the workforce," because they didn't look for work in the past four weeks, or even the past year. And that was in fact the main point of our story, Ms. Jensen: that the official unemployment number doesn't count people who, in the past, WOULD HAVE BEEN counted as unemployed and arguably should be; that the broader government numbers, U-4, U-5 and U-6 (which last number includes contract workers like your fellow emailer Richard Milewski) may be more indicative of just how bad the situation really is: 16.5 percent for June, going by U-6. At the very least, people ought to know what those numbers are. As to those on disability, it certainly seems that, since applications vary directly with unemployment, there are many who, like Bob Zawacki in our story, would be officially unemployed were it not for Social Security. How many? That's open to debate. But it's hard to believe the official numbers wouldn't be higher if not for disability, which didn't even exist before the 1950s and didn't become widely used until the '80s. As for prisoners, we may soon see their effect on the official data, as there's a real possibility state budget crunches will force the release of many. For the government's definition of the various unemployment categories, simply "go here":http://www.bls.gov/cps/cps_htgm.htm#unemployed. For a look at how unemployment in the Great Recession compares to the Great Depression, you might want to check out Time Magazine's Justin Fox, who has posted an "interesting chart":http://curiouscapitalist.blogs.time.com/2009/07/02/job-losses-in-the-great-recession-vs-in-the-great-depression/. I appreciate the chance to go on at greater length about this issue, so thanks for the email. I stand behind the story -- and its importance -- fiercely. tag:www.pbs.org,2009:/newshour/businessdesk//9.1789 2009-07-03T14:00:24Z 2009-07-02T21:26:27Z

Robert Frank: Here's another product-design question, this one posed by my former student Brendan Quigley. "Why," he asked, "are newspapers, but not soft drinks, sold in vending machines that allow customers to take more units than they paid for?"...

Business Desk Admin "**Robert Frank:**":http://www.robert-h-frank.com/ Here's another product-design question, this one posed by my former student Brendan Quigley. "Why," he asked, "are newspapers, but not soft drinks, sold in vending machines that allow customers to take more units than they paid for?" If you put four quarters into a soft drink vending machine and push the Coke button, a cold, twelve-ounce can of Coke will tumble down the chute. If you want a second one, you'll need to deposit four more quarters. In contrast, if you put four quarters into a newspaper vending machine, the front door of the machine opens, providing easy access to the entire stack of today's edition of the New York Times. You're entitled to take only one, of course, and most customers observe that limit. But why are newspaper machines built to such low security standards? The obvious advantage is that such machines are much less costly to build. There is no need for complex mechanical devices to feed a single newspaper out through a slot. The coins trip a simple lever that releases the latch on the machine's front door, which resets once the door is closed. Soft drink vending machines would also be cheaper if constructed in a similar way. So the reason for the difference in design must reside on the benefit side. The key distinction between the two products is that whereas a dishonest consumer would benefit from taking more soft drinks than he paid for, he would have little reason for taking more than one newspaper. Having ten copies would make him no better off than having only one. _Robert Frank's latest book, "The Economic Naturalist's Field Guide: Common Sense Principles for Troubled Times":http://www.amazon.com/Economic-Naturalists-Field-Guide-Principles/dp/0465015115, was published last month. He is guest-blogging for the Business Desk for the next few weeks._]]> tag:www.pbs.org,2009:/newshour/businessdesk//9.1787 2009-07-02T14:49:56Z 2009-07-02T15:41:14Z

Robert Frank: Today's question was posed by my former student Karim Abdallah. "Why," he asked, "does a light come on when you open the refrigerator but not when you open the freezer?" The cost-benefit principle offers a promising framework...

Business Desk Admin "**Robert Frank:**":http://www.robert-h-frank.com/ Today's question was posed by my former student Karim Abdallah. "Why," he asked, "does a light come on when you open the refrigerator but not when you open the freezer?" The cost-benefit principle offers a promising framework for thinking about this question. In both compartments of the appliance, the cost of installing a light that comes on automatically when you open the door is essentially the same. It is also what economists call a fixed cost, which in this context means it does not vary with the number of times you open the door. The benefit of having a light inside either compartment is that it becomes easier to find things. Since most people open the refrigerator far more often than the freezer, the benefit of having a light in the refrigerator is considerably larger. So with the cost of adding a light the same in both cases, the cost-benefit test for whether to add a light is more likely to be satisfied for the refrigerator than for the freezer. Of course, not all consumers place the same value on the convenience afforded by a light in the freezer. In general, the benefit of such features, as measured by what people are willing to pay for them, tends to increase as income increases. The cost-benefit principle thus predicts that consumers with extremely high incomes might think a light in the freezer well worth the extra cost. And indeed, the Sub-Zero Pro 48 refrigerator has a light not only in its freezer, but also in its separate ice drawer. The price of this unit? $14,450. _Robert Frank's latest book, "The Economic Naturalist's Field Guide: Common Sense Principles for Troubled Times":http://www.amazon.com/Economic-Naturalists-Field-Guide-Principles/dp/0465015115, was published last month. He is guest-blogging for the Business Desk for the next few weeks._]]> tag:www.pbs.org,2009:/newshour/businessdesk//9.1785 2009-07-01T15:41:06Z 2009-07-01T17:21:51Z

Robert Frank: Jennifer Dulski had been married for six months when she enrolled in my introductory economics course in 1997, which may explain the topic she chose for one of her two economic naturalist papers: "Why," she asked, "do...

Business Desk Admin "**Robert Frank:**":http://www.robert-h-frank.com/ Jennifer Dulski had been married for six months when she enrolled in my introductory economics course in 1997, which may explain the topic she chose for one of her two economic naturalist papers: "Why," she asked, "do brides spend thousands of dollars on wedding dresses they'll never wear again, while grooms, who'll have many future opportunities to wear a tuxedo, usually end up renting a cheap one?" Ms. Dulski began with the assumption that women are more likely than men to want to make a fashion statement on big social occasions. It's a strong assumption. But it's also a plausible one. I've described this example in many different countries, and no one has yet objected. If we grant that assumption, one implication is that a rental company would have to carry a huge stock of distinctive gowns--perhaps forty or fifty in each size, to enable brides to achieve their goal. Because each garment would be rented only infrequently, perhaps just once every four or five years, the company would have to charge its rental customers more than the purchase price of the garment just to cover its costs. But if buying were cheaper than renting, why would anyone rent? Conditions are markedly different in a rental market for tuxedos. Because grooms are willing to settle for a standard style, a rental company can serve this market with an inventory of only a few tuxedos in each size. So each suit gets rented several times a year, which enables a rental company to cover its costs by charging only a small fraction of the tuxedo's purchase price. _Robert Frank's latest book, "The Economic Naturalist's Field Guide: Common Sense Principles for Troubled Times":http://www.amazon.com/Economic-Naturalists-Field-Guide-Principles/dp/0465015115, was published last month. He is guest-blogging for the Business Desk for the next few weeks._]]> tag:www.pbs.org,2009:/newshour/businessdesk//9.1783 2009-06-30T17:11:06Z 2009-06-30T17:24:59Z

Robert Frank: As promised yesterday, today's economic naturalist question is one of my two all-time favorites from among the many thousands submitted over the years by former students. "Why," Bill Tjoa wanted to know, "do the keypad buttons on...

Business Desk Admin "**Robert Frank:**":http://www.robert-h-frank.com/ As "promised yesterday":http://www.pbs.org/newshour/businessdesk/2009/06/guest-host-robert-frank-as-the.html, today's economic naturalist question is one of my two all-time favorites from among the many thousands submitted over the years by former students. "Why," Bill Tjoa wanted to know, "do the keypad buttons on drive-up cash machines have Braille dots on them?" It's an interesting question, since the patrons of these machines are almost always drivers, none of whom are blind. The answer, according to Mr. Tjoa, is that because ATM producers make keypads with Braille dots for their walk-up machines anyway, it is cheaper just to make all machines the same way. The alternative, after all, would be to hold two separate inventories and make sure that each machine went to the right destination. If the Braille dots caused trouble for sighted users, the extra expense might be justified. But they do not. Shortly after Ben Bernanke and I described this example in our "introductory economics textbook":http://www.amazon.com/Principles-Economics-Robert-H-Frank/dp/0072503300, I received an email from a professor saying that Mr. Tjoa's answer was wrong -- that the real reason for the Braille dots is that they are required by the Americans With Disabilities Act. He sent me a link to an ADA web page that described the regulation. To be sure, having Braille dots on drive-up machines might be useful on occasion, as when a blind person visits a drive-up machine in a taxi and does not want to reveal his PIN to the driver. I thanked my correspondent but also urged him to consider the possibility that Mr. Tjoa's argument might help explain why the regulation requiring Braille dots was adopted. Had it been costly to require Braille dots on the drive-up machines, my guess is that the rule would never have been enacted. But putting dots on the drive-up machines was costless. And since the dots cause no harm and might occasionally be of use, why not require them? Doing so would enable regulators to claim, at year's end, that they'd done something useful. Tomorrow I'll post the other member of the pair of my all-time favorite questions submitted by former students: **"Why do brides spend thousands of dollars on wedding dresses they'll never wear again, while grooms, who will have many future opportunities to wear a tuxedo, usually end up renting a cheap one?"** _Robert Frank's latest book, "The Economic Naturalist's Field Guide: Common Sense Principles for Troubled Times":http://www.amazon.com/Economic-Naturalists-Field-Guide-Principles/dp/0465015115, was published last month. He is guest-blogging for the Business Desk for the next few weeks._ ]]> tag:www.pbs.org,2009:/newshour/businessdesk//9.1781 2009-06-29T18:41:32Z 2009-06-29T19:19:27Z

Question: What do you make of the Madoff sentence? Paul Solman: I'm tempted to say that, at 150 years, he may have gotten off lightly. In today's email came the regular newsletter of one of the world's most provocative...

Business Desk Admin **Question:** What do you make of the Madoff sentence? **Paul Solman:** I'm tempted to say that, at 150 years, he may have gotten off lightly. In today's email came the regular newsletter of one of the world's most provocative and thoughtful stock analysts, "Albert Edwards":http://www.sgresearch.socgen.com/publication/120F7848A14054AAC12575E40052944F.pdf.html. In it, he links to a story from England's sensationalist _Daily Telegraph_, in which a money manager in Germany who lost his clients' money in Florida real estate investments was kidnapped and tortured. (I tweeted this earlier today.) Also note "the comments to this recent Madoff story in the _Philadelphia Inquirer_":http://www.philly.com/inquirer/business/48990721.html in which not just one, but three different emailers suggest the death penalty for crimes like Madoff's. Now emailers can be an aggrieved lot, as we learned here during the "Edmund Andrews flap":http://www.pbs.org/newshour/businessdesk/2009/05/a-final-thought-on-the-andrews.html, but there could be a defense for these blood-thirsty denizens of the City of Brotherly Love: If capital punishment is significantly about deterrence, well, would YOU fleece your investors if you thought you might be executed for doing so? Then there's the _Forbes_ "photoessay":http://www.forbes.com/2009/06/24/bernie-madoff-prison-sentence-business-beltway-madoff_slide.html, which features a list of recent white collar sentences that anticipated Madoff's de facto lifetime sentence -- a sample of sentences next to which Madoff's pales. (There's also a good intro to the photoessay "here":http://www.forbes.com/2009/06/24/bernie-madoff-prison-sentence-business-beltway-madoff.html.) **No. 1: Sholam Weiss** "_Weiss, 55, from New York, got an 845-year sentence from a Florida federal judge in 2000, plus nearly $300 million of fines and restitution, after being convicted on 78 counts of racketeering, wire fraud and money laundering in the $450 million collapse of National Heritage Life Insurance. Weiss had gone on the lam before sentencing and was apprehended in Austria a year later._" **No. 2: Norman Schmidt** "_Schmidt, 74, is serving a 330-year sentence handed down in 2008 and is currently at a high-security federal prison in Beaumont, Texas. He ran a "high yield" investment scheme under various names..._" Finally, the "proposal of Madoff victim and Holocaust survivor Elie Wiesel":http://www.nbcnewyork.com/news/local/Elie-Psychopath-Madoff-Wieseled-Charitys-Cash.html, whose charity Madoff robbed blind: "He should be put in a solitary cell with a screen, and on a screen, for at least five years of his life, [would be] pictures of his victims." In today's sentencing hearing, according to one account, one of the nine victims who "spoke":http://www.finalternatives.com/node/8374 "blasted the fraudster for betraying his fellow Jews, with special approbation for his looting of famed Holocaust survivor Elie Wiesel's charity, 'as if Elie Wiesel hasn't suffered enough.'"]]>