Financial Methods

10 Principles of Economics

by Yoram Bauman at http://www.standupeconomist.com/

Education is the Key To Income

Tyler Cowen in the New York Times cites a major factor in why different workers earn money at different rates - education.

For the economy as a whole, labor’s share of national income has stayed roughly constant at just above 70 percent. What has changed is that highly skilled laborers earn more labor income than low-skilled workers. ¹

Starting about 1950, the relative returns for schooling rose, and they skyrocketed after 1980. The reason is supply and demand. For the first time in American history, the current generation is not significantly more educated than its parents. Those in need of skilled labor are bidding for a relatively stagnant supply and so must pay more.¹

Income distribution thus depends on the balance between technological progress and access to college and postgraduate study. The problem isn’t so much capitalism as it is that American lower education does not prepare enough people to receive gains from American higher education. ¹

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Source:

1. Tyler Cowen. Why Is Income Inequality in America So Pronounced? Consider Education .
New York Times. May 17, 2007.
http://www.nytimes.com/2007/05/17/business/17scene.html

© 2007 Michael Cale

Mindless Eating

Presentation matters. 

When people are confronted with the same question presented using two different methods, they often respond with different answers.

Cornell professor Brian Wansink has written a book called Mindless Eating that shows how this presentation changes our behavior.

Mr. Wansink gave away five-day-old popcorn — “stale enough to squeak when it was eaten,” he wrote — to moviegoers one day at a theater in the Chicago suburbs. The crux of the experiment lay in the size of the buckets that held the popcorn. Some people got merely big buckets, while others received truly enormous ones. Both sizes held more popcorn than a typical person could finish.

Yet when the Wansink research team weighed the buckets after the movie, there was a huge difference in the amounts the two groups ate. Those with the bigger buckets inhaled 53 percent more on average, suggesting that a lot of stale popcorn is somehow more appealing than a little stale popcorn.¹

This "choice architecture" affects other eating decisions also. Wansink suggests keeping healthy foods in convenient, conspicuous locations while putting sweet and high fat snack out of sight.. ^{1, 2}   Another technique is to serve your meals using smaller plates and bowls, which makes the serving size appear larger.

     Chart courtesy of NYT

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Source:

1. David Leonhardt. Your Plate Is Bigger Than Your Stomach .
New York Times. May 2, 2007.
http://www.nytimes.com/2007/05/02/business/02leonhardt.html

2. David Leonhardt. 5 Tips From ‘Mindless Eating’.
New York Times. May 2, 2007.
http://www.nytimes.com/2007/05/02/business/02davidside.html

© 2007 Michael Cale