The Debt

I'm often asked about the "problem" our debt represents. Below is a largely good video explaining who holds the debt and the "problem" it presents. One VERY important caveat. While the author gets the idea correct that what matters is publicly outstanding debt, since inter-government debt is merely a wash, he does not accurately address this same issue when talking about bonds as financial assets. Remember that a US government bond is an asset to the holder, but a liability to the tax payer. We care about our net position as tax payers. Also, from an economic perspective, bond holders and tax payers are not the same people, so there are distributional consequences to changes in the level of the debt. But with that said this might help somewhat.

Useful Posts

Here are a few posts that BUS 230 students should find useful over the coming weeks.

Nancy Duarte on "Creating Waves" in presentations.

Seth Godin on making graphs that work.

Garr Reynolds on the art of the "Focal Point" and the art of "Less" in presentation design.

And two on the value of data visualization. Here and here.

Externalities

Wearing helmets while riding a motorcycle can have consequences for the organ donation market. This is an externaility only an economist can love.

Ostrom: First Woman to Win the Nobel Prize in Economics

Here are some links to blogs and other commentaries on Elinor Ostrom's Nobel Prize:

Econospeak

The American Academy of Political and Social Science

Greg Mankiw

Working in Groups

Some advice from the Harvard Business Publisher on working in groups. This is probably good reading for anyone in BUS 230.

The best approach is to go to the source — speak with your colleague directly. This conversation should take place in an informal, private setting and you should always follow good feedback rules. Don't accuse or blame your colleague. Use concrete examples to explain what you are seeing and its impact on you.

Richard Hackman, the Edgar Pierce Professor of Social and Organizational Psychology at Harvard Business School and author of Leading Teams: Setting the Stage for Great Performances says, "We tend to attribute what's going wrong to an individual and specifically to something dispositional about them." This is dangerous because you are then attacking a person — not their behavior. Most importantly, to establish a common ground with your colleague, discuss the issue in context of mutual goals. "You want to ask 'What can we do to achieve our goals?' not 'You screwed up again,'" Hackman says.

Multipliers

In ECO120 you learn about the multiplier. That concept has been used and misused. The Economist puts some of the recent debate about multipliers into context here.

The debate hinges on the scale of the “fiscal multiplier”. This measure, first formalised in 1931 by Richard Kahn, a student of John Maynard Keynes, captures how effectively tax cuts or increases in government spending stimulate output. A multiplier of one means that a $1 billion increase in government spending will increase a country’s GDP by $1 billion.

The size of the multiplier is bound to vary according to economic conditions. For an economy operating at full capacity, the fiscal multiplier should be zero. Since there are no spare resources, any increase in government demand would just replace spending elsewhere. But in a recession, when workers and factories lie idle, a fiscal boost can increase overall demand. And if the initial stimulus triggers a cascade of expenditure among consumers and businesses, the multiplier can be well above one.

The multiplier is also likely to vary according to the type of fiscal action. Government spending on building a bridge may have a bigger multiplier than a tax cut if consumers save a portion of their tax windfall. A tax cut targeted at poorer people may have a bigger impact on spending than one for the affluent, since poorer folk tend to spend a higher share of their income.

Crucially, the overall size of the fiscal multiplier also depends on how people react to higher government borrowing. If the government’s actions bolster confidence and revive animal spirits, the multiplier could rise as demand goes up and private investment is “crowded in”. But if interest rates climb in response to government borrowing then some private investment that would otherwise have occurred could get “crowded out”. And if consumers expect higher future taxes in order to finance new government borrowing, they could spend less today. All that would reduce the fiscal multiplier, potentially to below zero...

There is a lot more here.

Game Theory Explains Uneven Dating Scene

See! Economics can be fun!