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Jodi Beggs

Jodi's Economics Blog

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Fun with Fractional Reserve Banking...

Saturday May 31, 2014
In order to understand how the Federal Reserve controls the supply of money in an economy, it's necessary to understand how a fractional reserve banking system operates. Luckily, I'm happy to help!

Five Easy Ways to Impress Your Friends with Nerdy Knowledge...

Monday May 19, 2014
Now you too can know more than you ever wanted to about inflation statistics. You're welcome.

Fun with Regulation, Cell Phone Edition...

Monday May 19, 2014

In general, economists are okay with regulation when it corrects a market failure, or, in other words, a situation where transactions or features that would be efficient to offer don't happen. Therefore, it's important to ponder when learning about new regulation is whether a market would have reached the same place on its own.

In related news, Minnesota recently passed legislation that requires smartphone manufacturers to equip all phones with "kill switch" functionality that would enable owners to render their phones inoperable if they got stolen. On the surface, it is a bit perplexing that manufacturers wouldn't want to offer this feature on their own, since it clearly has a good deal of consumer appeal. That said, it also reduces the incentives to steal a phone...which, if it decreases the repurchase rate of stolen phones, gives manufacturers an incentive to not offer the feature.

On the Distinction Between Healthcare and Health Insurance...

Monday May 19, 2014

Economists, even when sometimes trying too hard to play devil's advocate, aren't technically wrong when they state that the market for healthcare could function like the market for most other goods and services. (Steve Levitt uses cars as an example in the linked article.) The thing about the market for, say, cars, however, is that people who are not willing and able to pay for a car don't get cars. Therefore, until we as a society are cool with people who aren't willing and able to pay for healthcare not getting healthcare (which I'm not recommending), the market for healthcare is in fact a different beast than most other markets.

It's also important to distinguish between the market for healthcare itself and the market for health insurance- the latter, as with most unregulated insurance markets, is subject to the market failures of adverse selection and moral hazard if left to function on its own. In this sense, Levitt is in fact correct when he points out that inefficiency is created when buyers don't bear the full cost of what they are buying. but the right question should be whether this inefficiency is a tolerable side effect of regulation or a deal breaker.

Economic Growth and the Rule of 70, Now in Video Form...

Monday May 12, 2014
When economists discuss economic growth, they often bring up the rule of 70 as a useful shorthand for determining how long it takes a quantity to double. Technically, there are multiple versions of the rule- usually the rule of 69 and the rule of 72- that vary the parameter used but work in basically the same way. This video is a handy guide to thinking about one of these variations, the rule of 72.

Bias in the Media...

Monday May 12, 2014
It's often noted that media outlets, subtly or not, take a political position via the way that they choose what to cover and the way that they choose to write about what they cover. It's generally assumed that said media outlets are doing so in order to get their readership on board with their positions, but careful analysis suggests instead that such bias generally occurs because for-profit media outlets are catering to their audiences. Does that make the bias more or less problematic? That is unclear, but the knowledge is still helpful.

Fun with Correlation Versus Causation...

Monday May 12, 2014
Economists and policy analysts are often very careful to point out that correlation does not imply causation- for example, while it may be true that increased incidence of drowning correlates with increased ice cream consumption, it is not the case that eating ice cream causes a person to drown (or that drowning causes a person to eat ice cream, I suppose). Here are some great charts that highlight the absurdity that can be achieved if one falsely thinks that correlation implies causation.

Economist Gary Becker, 1930-2014...

Monday May 5, 2014
Nobel-prize winning economist Gary Becker passed away yesterday in Chicago. You can read an official obituary here...or a much more heartfelt and personal one from Steve Levitt here.

Finally, Some Good News from the April Jobs Report...

Monday May 5, 2014
The April jobs report was released by the Bureau of Labor Statistics last Friday, and it shows that the economy added 288,000 jobs last month.

This Year's John Bates Clark Medal Recipient Is...

Monday April 21, 2014

The John Bates Clark Medal, awarded by the American Economic Association to who they feel is the most promising economist under the age of 40, is often referred to as the "baby Nobel" due to its high correlation with future Nobel Prize awards. This year's medal goes to Matthew Gentzkow of the University of Chicago's Booth School of Business for his work in analyzing and understanding bias in the media and its effect on society.

In case you're curious, here's a good roundup of many of the favorites to win the prize.

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