Always The Optimist

Actually, I don’t see myself as a China optimist. I just think the most realistic view is a positive one.

I have several questions for the pessimists. When someone says:

But we do know that the vast global network of mines, roads, agricultural development, and financial speculation built on the assumption that the old Chinese economy would grow at eight percent forever is running on empty.

I have to ask: was there really a lot of money invested on the assumption of 8% growth forever? Sure, some investing is irrational and can create over-capacity. But I doubt that any really big investors used “8% forever” as their basis for decision making.

Is is possible that, having seen the Chinese economy grow quickly for a far longer period of time than expected, investors were acting rationally? That they risked over-shooting by a few percentage points rather than under-shooting because it made sense in an economy that consistently grew faster for longer than had ever happened in recent history?

And does it really matter? So what if the Chinese economy doesn’t grow at eight percent a year? If it keeps growing at all, but on an ever-increasing base, won’t a lot of that demand materialize sooner or later?

But we have not yet hit bottom. The new reality of a much slower growth in China’s demand for basic manufacturing inputs is still young and its impact is only now beginning to be felt.

But…what if it is a good thing that there is “slower growth in China’s demand for basic manufacturing inputs?” What if that just means that, as China’s productivity is growing and its economy is maturing, it’s moving out of basic manufacturing?

That would mean China will demand many more goods produced from “basic manufacturing” relative to the goods it’s producing in basic manufacturing. That sounds like lots of imports to me. Those imports will have to be produced somewhere–probably they will be spread over a number of smaller economies that are able to gain comparative advantage in the manufacture of basic goods.

Really, which is more likely: that global demand for “basic manufacturing inputs” will move from China to…nowhere? Or from China to Bangladesh, Vietnam, India, Ethiopia, Tanzania?

Will that really be a bad thing?

For anyone?

 

 

 

Domestic Market Size and Export Specialization

A puzzle:

Exports have been growing, and China’s global market share has been rising until very recently. So China has generally been steadily becoming a more successful exporter. But as this has happened it has not shown much sign of becoming more specialized in particular types of products, which is usually one of the things that happens in countries that are successful exporters.

A possible explanation:

But perhaps, as Carsten suggests, the issue is more fundamental, and one we have not really encountered before: China’s export industries might already large enough, relative to total world demand, that even a very successful export performance will not show up as much specialization. This is one to ponder further.

(I really want to teach International Economics again.)

Great Video on Growth Rates

How do I work this video into a class?

The subject is just too important to ignore. If you want more health care, more nutrition, more education and more resources for protecting the environment, it’s crazy not to discuss the central role of economic growth:

 

Predict The Unintended Consequences, Part…

Bernie Sanders wants to impose price ceilings:

Speaking just blocks from Wall Street, Sanders vowed…an array of new protections for consumers. Among other steps, the Vermont senator called for capping interest rates on credit cards at 15 percent and capping ATM fees at $2.

I think I know who he’s trying to help. But hopefully my freshmen students can use what they’ve learned and predict some unintended consequences of these price ceilings.

Another Good Thing About On-Line Education

As much as I like teaching students in person, I am also a big fan of online education, for many reasons.

Here’s another one: it reduces grade discrimination based on attractiveness.

Professors differ on how much their grading should be based on tests, written assignments, labs, class participation and other factors.

But students’ looks? Most faculty members would deny that physical appearance is a legitimate criterion in grading. But a study presented Monday at the annual meeting of the American Economic Association finds that — among similarly qualified female students — those who are physically attractive earn better grades than others. For male students, there is no significant relationship between attractiveness and grades. And the results hold true whether the faculty member is a man or a woman.

But not for online education:

The researchers then took advantage of Metro State’s significant online offerings, which appeal to many students who also take courses in person. Comparing similar groups of students, the study found that the grade punishment for unattractive women disappears in online education….The online success of the less attractive students suggests, the paper says, that their lower grades in in-person classes can’t be attributed to some factor that might make them legitimately earn lower grades.

 

Final Microeconomics Course Grades (Preliminary)

It’s late, so I need to double-check these, but it’s looking like this:

Student: 2103, Total Points: 640, Grade: A

Student: 4416, Total Points: 590, Grade: A

Student: 4845, Total Points: 575, Grade: A

Student: 8816, Total Points: 564, Grade: A

Student: 7114, Total Points: 555, Grade: A

Student: 5812, Total Points: 553, Grade: A

Student: 2744, Total Points: 551, Grade: A

Student: 8697, Total Points: 546, Grade: A

Student: 7190, Total Points: 539, Grade: A

 

Student: 7088, Total Points: 523, Grade: B

Student: 9860, Total Points: 520, Grade: B

Student: 4762, Total Points: 483, Grade: B

Student: 9750, Total Points: 483, Grade: B

Student: 2516, Total Points: 482, Grade: B

Student: 1763, Total Points: 481, Grade: B

Student: 8557, Total Points: 478, Grade: B

Student: 2214, Total Points: 467, Grade: B

Student: 8262, Total Points: 463, Grade: B

Student: 2662, Total Points: 462, Grade: B

Student: 2522, Total Points: 454, Grade: B

Student: 3891, Total Points: 453, Grade: B

Student: 2379, Total Points: 442, Grade: B

 

Student: 7690, Total Points: 424, Grade: C

Student: 6195, Total Points: 416, Grade: C

Student: 9041, Total Points: 406, Grade: C

Student: 5280, Total Points: 398, Grade: C

Student: 2924, Total Points: 391, Grade: C

Student: 5432, Total Points: 379, Grade: C

Student: 8755, Total Points: 379, Grade: C

Student: 6555, Total Points: 364, Grade: C (median student, tie)

Student: 9996, Total Points: 364, Grade: C (median student, tie)

Student: 6157, Total Points: 362, Grade: C

Student: 3227, Total Points: 361, Grade: C

Student: 6335, Total Points: 337, Grade: C

Student: 6320, Total Points: 329, Grade: C

Student: 1752, Total Points: 314, Grade: C

Student: 2872, Total Points: 299, Grade: C

Student: 2793, Total Points: 299, Grade: C

Student: 2376, Total Points: 286, Grade: C

Student: 4577, Total Points: 274, Grade: C

Student: 1828, Total Points: 274, Grade: C

Student: 6369, Total Points: 273, Grade: C

Student: 3074, Total Points: 271, Grade: C

Student: 6710, Total Points: 259, Grade: C

Student: 6170, Total Points: 255, Grade: C

 

Student: 2338, Total Points: 240, Grade: D

Student: 3608, Total Points: 233, Grade: D

Student: 7829, Total Points: 230, Grade: D

Student: 8861, Total Points: 230, Grade: D

Student: 1234, Total Points: 228, Grade: D

Student: 6332, Total Points: 210, Grade: D

Student: 7090, Total Points: 195, Grade: D

Student: 7418, Total Points: 187, Grade: D

Student: 1417, Total Points: 171, Grade: D

Student: 2812, Total Points: 156, Grade: D

Student: 6934, Total Points: 156, Grade: D

Student: 5695, Total Points: 149, Grade: D

 

Student: 7145, Total Points: 136, Grade: F

Student: 9501, Total Points: 128, Grade: F

Student: 6023, Total Points: 104, Grade: F

Results of the Microeconomics Exam

Below, the number after “points” is what I will add to your final class score, posted here under Grades Going Into Final Exam. The highest possible number of points you could get from this final is 135.

Student: 2103, Correct Answers: 256, Points Added: 128

Student: 2744, Correct Answers: 248, Points Added: 124

Student: 8816, Correct Answers: 242, Points Added: 121

Student: 4416, Correct Answers: 238, Points Added: 119

Student: 4845, Correct Answers: 235, Points Added: 117.5

Student: 7088, Correct Answers: 230, Points Added: 115

Student: 5812, Correct Answers: 227, Points Added: 113.5

Student: 7114, Correct Answers: 225, Points Added: 112.5

Student: 2522, Correct Answers: 221, Points Added: 110.5

Student: 8697, Correct Answers: 220, Points Added: 110

Student: 7190, Correct Answers: 219, Points Added: 109.5

Student: 1763, Correct Answers: 214, Points Added: 107

Student: 2214, Correct Answers: 212, Points Added: 106

Student: 5280, Correct Answers: 211, Points Added: 105.5

Student: 9860, Correct Answers: 209, Points Added: 104.5

Student: 2516, Correct Answers: 209, Points Added: 104.5

Student: 2662, Correct Answers: 198, Points Added: 99

Student: 8262, Correct Answers: 197, Points Added: 98.5

Student: 7690, Correct Answers: 195, Points Added: 97.5

Student: 2379, Correct Answers: 194, Points Added: 97

Student: 4762, Correct Answers: 194, Points Added: 97

Student: 9041, Correct Answers: 193, Points Added: 96.5

Student: 6195, Correct Answers: 186, Points Added: 93

Student: 9750, Correct Answers: 184, Points Added: 92

Student: 8557, Correct Answers: 173, Points Added: 86.5

Student: 5432, Correct Answers: 171, Points Added: 85.5

Student: 2924, Correct Answers: 155, Points Added: 77.5

Student: 6157, Correct Answers: 154, Points Added: 77

Student: 9996, Correct Answers: 153, Points Added: 76.5

Student: 2872, Correct Answers: 152, Points Added: 76

Student: 8755, Correct Answers: 152, Points Added: 76

Student: 6320, Correct Answers: 148, Points Added: 74

Student: 3227, Correct Answers: 146, Points Added: 73

Student: 2793, Correct Answers: 146, Points Added: 73

Student: 6555, Correct Answers: 141, Points Added: 70.5

Student: 1752, Correct Answers: 135, Points Added: 67.5

Student: 3891, Correct Answers: 134, Points Added: 67

Student: 6335, Correct Answers: 131, Points Added: 65.5

Student: 6710, Correct Answers: 120, Points Added: 60

Student: 1828, Correct Answers: 119, Points Added: 59.5

Student: 8861, Correct Answers: 118, Points Added: 59

Student: 1234, Correct Answers: 118, Points Added: 59

Student: 4577, Correct Answers: 118, Points Added: 59

Student: 3074, Correct Answers: 113, Points Added: 56.5

Student: 6332, Correct Answers: 112, Points Added: 56

Student: 2376, Correct Answers: 110, Points Added: 55

Student: 7829, Correct Answers: 109, Points Added: 54.5

Student: 6934, Correct Answers: 108, Points Added: 54

Student: 6369, Correct Answers: 104, Points Added: 52

Student: 6170, Correct Answers: 100, Points Added: 50

Student: 7418, Correct Answers: 82, Points Added: 41

Student: 7090, Correct Answers: 75, Points Added: 37.5

Student: 2338, Correct Answers: 69, Points Added: 34.5

Student: 1417, Correct Answers: 69, Points Added: 34.5

Student: 3608, Correct Answers: 67, Points Added: 33.5

Student: 5695, Correct Answers: 67, Points Added: 33.5

Student: 7145, Correct Answers: 66, Points Added: 33

Student: 6023, Correct Answers: 61, Points Added: 30.5

Student: 9501, Correct Answers: 52, Points Added: 26

Student: 2812, Correct Answers: 37, Points Added: 18.5

Grades Going Into Final Exam

Here are the class grades, with all adjustments made (except for bonus points–none are added here yet) including adjustments for excused absences.

As I have said many times before, these grades represent 30 data points–30 scores you have earned over the semester! It is highly unlikely that there will be any significant changes to the letter grades based on the final exam. So, do your best, but it’s time to accept that the clock is down to the final seconds. If the score is close, you might make a three-point shot. But don’t expect a miracle.

Student 2103 Points: 512, A

Student 4416 Points: 471, A

Student 4845 Points: 457, A

Student 8816 Points: 443, A

Student 7114 Points: 441, A

Student 5812 Points: 440, A

Student 8697 Points: 436, A

Student 7190 Points: 429, B

Student 2744 Points: 427, B

Student 9860 Points: 415, B

Student 7088 Points: 408, B

Student 9750 Points: 391, B

Student 8557 Points: 391, B

Student 4762 Points: 386, B

Student 3891 Points: 386, B

Student 2516 Points: 377, B

Student 1763 Points: 374, B

Student 8262 Points: 364, B

Student 2662 Points: 363, B

Student 2214 Points: 361, B

Student 2379 Points: 345, C

Student 2522 Points: 344, C

Student 7690 Points: 326, C

Student 6195 Points: 323, C

Student 2924 Points: 314, C

Student 9041 Points: 309, C

Student 8755 Points: 303, C

Student 5432 Points: 294, C

Student 6555 Points: 294, C

Student 5280 Points: 292, C

Student 3227 Points: 288, C (median student, half above and half below)

Student 9996 Points: 287, C

Student 6157 Points: 285, C

Student 6335 Points: 272, C

Student 6320 Points: 255, C

Student 1752 Points: 246, C

Student 2376 Points: 231, C

Student 2793 Points: 226, C

Student 2872 Points: 223, C

Student 6369 Points: 221, C

Student 4577 Points: 215, C

Student 3074 Points: 215, C

Student 1828 Points: 214, C

Student 2338 Points: 206, C

Student 6170 Points: 205, C

Student 3608 Points: 199, C

Student 6710 Points: 199, C

Student 7829 Points: 175, D

Student 8861 Points: 171, D

Student 1234 Points: 169, D

Student 7090 Points: 158, D

Student 6332 Points: 154, D

Student 7418 Points: 146, D

Student 2812 Points: 138, D

Student 1417 Points: 137, D

Student 5695 Points: 115, D

Student 7145 Points: 103, F

Student 6934 Points: 102, F

Student 9501 Points: 102, F

Student 6023 Points: 73, F

Tax Incidence and Elasticity

Here’s a free New Year’s day post to start your 2016 off with some economics!

First, read the news article:

New York state cigarette tax collections have plunged by about $400 million over the past five years, according to figures and estimates from the office of New York State Comptroller Thomas DiNapoli.

And New York has also lost $1.3 billion in uncollected state cigarette taxes each year from alternative sales, according to a separate study.

The state is taxing far fewer packs, as smokers evade taxed packs, shop across state lines or buy smokes from Native American merchants to avoid punitive NY taxes. A typical pack in New York costs $10.60 or more, including the nation’s highest state excise tax, $4.35.

Then, try to answer these questions:

(1) Who do you think the New York state government was trying to put the burden of the tax on: smokers, or sellers of cigarettes?

(2) Who actually seems to be bearing the greater tax incidence? How can you tell? Was that what the state government intended?

(3) Do you remember…when the size of the tax doubles, what goes up by more than double? Does tax revenue always increase?

(4) “If you want ____ of something, tax it.” Do you think the state government intended to have this effect on the cigarette market?

(5) What kind of externalities does cigarette smoking produce? Can you think of other ways the state government could have tried to deal with the externalities?

 

Review Video: Change in Demand vs Change in Quantity Demanded

Here’s the video we discussed in the review class yesterday: