Colleges Increasing Spending on Sports Faster Than on Academics

Here is a NYT article posted last week regarding athletic spending vs. academic spending:

http://www.nytimes.com/2014/04/07/education/colleges-increasing-spending-on-sports-faster-than-on-academics-report-finds.html?hpw&rref=education&_r=1

Is this a good or bad thing?

Peer pressure and tax dollars

It's old news that we are all under peer pressure to a certain extent. Would you open your wallet to donate $20 to the "Senior Giving" if I tell you that 80% of our senior class have given on average $20 per person? May be not. It's your money and after all no one can tell if  you have or have not donated. Still, our tendency to conform may be stronger than we think. An experiment has been conducted to suggest that peer pressure changed behavior of delinquent taxpayers:

"The British tax agency, Her Majesty's Revenue and Customs (HMRC), has tested different form letters on delinquent taxpayers. In one letter, this sentence - "Nine out of 10 people in the UK pay their tax on time" - increased positive response by 1.5 percent. Adding another sentence - "You are one of the few who have not paid us yet" - raised the success rate 3.9 percent.

HMRC also found compliance rose 6.8 percent when taxpayers were told they were one of few delinquents in their hometowns.The HMRC's work is led by its Behavioral Insights Team, which is advised by University of Chicago professor Richard Thaler, a founder of the field of behavioral finance.

Other tax administrators have caught on to these ideas on their own, without a behavioral economist to guide them.A push for "plain English" in tax forms over the past decade has led the Washington State Department of Revenue toward behavioral ideas of salience, the idea that people focus only on what they understand.After re-writing the department's form letter sent to firms believed to owe tax on the use of goods or services, positive responses from taxpayers increased 43 percent."

http://www.reuters.com/article/2012/10/29/us-usa-tax-behavior-idUSBRE89S0DD20121029

Are you convinced? Can you think of other ways where conformity can be helpful in motivating economic activities?

Index of Economic Freedom

The Heritage Foundation's Index of Economic Freedom is one of my favorite websites to look at for economic research.

Here is the link to the site: http://www.heritage.org/index/

Here is another link that describe what economic freedom is: http://www.heritage.org/index/about

The Heritage Foundation believes that greater economic freedom leads to a stronger economy:

"Economic freedom brings greater prosperity. The Index of Economic Freedom documents the positive relationship between economic freedom and a variety of positive social and economic goals. The ideals of economic freedom are strongly associated with healthier societies, cleaner environments, greater per capita wealth, human development, democracy, and poverty elimination."

I did a regression analysis in Professor McKinney's Econometrics class last spring and during my SIP research. As a result, I found a strongly positive correlation between economic freedom and GDP per capita.

Which is the most optimal economic environment? Strong economic freedom, weak economic freedom, or a balance between the two?

Would 35-hour work week be a great idea, or not?

Starting from today, French employees are required to ignore their work emails after 6PM according to a new labor agreement. It's no exception if you check emails on your smartphone or if you are employed at such fast-paced companies like Google, Facebook, Deloitte, and PwC. French people, who already favored the 35-hour work week introduced in 2000, seem to welcome the change.
http://www.theguardian.com/money/shortcuts/2014/apr/09/french-6pm-labour-agreement-work-emails-out-of-office

With this news, I would like to ask if you think a 35-hour work week is beneficial for an economy. The main reason that France adopted this policy was to reduce unemployment. Employers must hire more workers to run their businesses since each employee works 5 hours less. 35- hour work week may help people achieve work-life balance and actually become more productive. I believe people used to work 6 days a week in America and now only 5 days. What is your take on this matter?

Ps: Proponents of shorter work week: http://www.shorterworkweek.com/econeffect.html.

Deflating the Deflation Myth

In mainstream economics, a low to moderate amount of inflation is considered good for the economy. To shake things up and get people thinking, I'm posting two blogs written by the Ludwig von Mises Institute that argue against the inflation theory and state that inflation is not good for the economy. 

http://mises.org/daily/6709/Deflating-the-Deflation-Myth

http://mises.org/daily/6691/Inflation-Does-Not-Produce-Economic-Growth

In the first article, the blogger states: 

If deflation does not cause recessions (or depressions as they were known prior to World War II), what does? And why was it so prominently featured during the Great Depression? According to economists of the Austrian School of economics, recessions share the same source: artificial inflation of the money supply. The ensuing “malinvestment” caused by synthetically lowered interest rates is revealed when interest rates resort to their natural level as determined by the supply and demand of savings.

I found the authors' evidence of deflation during the 19th century economic booms convincing. Similar events occurred before the 1980s economic explosion. What do you think? Is the inflation the reason for strong economic growth or the cause of economic recessions? 

Anti-corruption campaign slowdowns growth rate in Asia?

It is rather common sense that corruption "contributes" to slow economic growth and financial instability. Yet the battle to eliminate corruption also has a very high cost in itself. This article will give you interesting stories:
http://blogs.wsj.com/economics/2014/04/09/asias-anti-corruption-battle-produces-unofficial-austerity/

Here is a short excerpt:
The anti-corruption campaign launched by Chinese President Xi Jinping after he took power in late 2012 is worsening China’s economic slowdown, economists say, as fearful cadres pull back on everything from lavish banquets to building projects.The sharp cutback in fiscal spending could be a 0.6 percentage-point drag on China’s GDP growth this year, estimates Ting Lu, an economist at Bank of America Merrill Lynch in Hong Kong. That could pull China’s growth rate down to roughly 7.2% in 2014.

“Corruption can hurt growth by undermining property ownership,” said Frederic Neumann, co-head of Asian economic research at HSBC in Hong Kong. “There’s clear evidence that corruption at some point inhibits productivity and the efficient allocation of capital.”
And Asia’s developing economies still suffer from widespread corruption. In Transparency International’s latest survey of perceived corruption, China tied with Greece for 80th (with first being the least corrupt). India tied with the Philippines and Colombia for 94th. Indonesia tied with Egypt for 114th.

What do you think about this trade-off? What are some methods to treat corruption?

The ’77 cents on the Dollar’ Myth about Women’s Pay

The Obama Administration recently announced a series of executives orders to address the gender pay gap issue a few days. Here is an WSJ opinion article written by Mark J. Perry and Andrew Biggs, both from the American Enterprise Institute that advocates conservative policies, arguing against the existence of a gender pay gap:  http://online.wsj.com/news/articles/SB10001424052702303532704579483752909957472?mod=trending_now_1

Here is a key quote towards the end of the article:

"Administration officials are (very) occasionally challenged on their discrimination claims. The reply is that even if lower average female pay is a result of women's choices, those choices are themselves driven by discrimination. Yet the choice of college major is quite free, and many colleges recruit women into high-paying science or math majors. Likewise, many women prefer to stay home with their children. If doing so allows their husbands to maximize their own earnings, it's not clear that the families are worse off. It makes no sense to sue employers for choices made by women years or decades earlier."

What do you guys think of the gender pay gap? Does it exist? If so, what are the causes?