Don't Quit Your Day Job…

In early May 2007, a study gained publicity that claimed NBA referees altered their habits of calling fouls based on the racial makeup of the offending players. Maria Rainier helped write an article about discrimination in gender, I felt that it would be appropriate to continue the discussion with a look at racial bias.

Substitution and Income Effect: These two terms are very familiar to anybody who has taken an intermediate course in macroeconomics. With the recent articles regarding volunteerism and labor statistics, I thought that it was very timely to write on these two very important concepts.

Let’s start with a thought experiment: if you were to receive a 10% increase in your hourly wage, would you increase, decrease, or maintain your hours worked? Believe it or not, any answer is correct, despite many assumptions regarding the positive slope of labor supply curves. The reason that any answer is correct lies in an understanding of substitution and income effects.

From the offbeat category comes this awesome data set found through the National Journal. Scarborough USA, a joint undertaking of market research companies Nielsen and Arbitron surveyed 218,000 people between August 2008 and September 2009 to try to figure out the political leanings of sports viewers. Surveyors tried to figure out both how viewers self-identified politically, and also their likelihood to vote. This data has been published, and here is is (on ManyEyes!) for you to play with!

Dollar Cost Averaging (DCA) is touted by some financial planners as the solution to all of investing’s problems. By continuing to invest money at a regular interval, you buy more shares when prices are low and more shares when prices are high. Additionally, dollar cost averaging fits the general schedule of how people normally get paid – every two weeks you get your paycheck, and you also automatically invest in your 401(k), for example.

That’s great… for predictable streams of income. This article will *not* try to convince you to stop your normal recurring investments. However, dollar cost averaging meets its match when introduced to a windfall. When you have extra funds, you shouldn’t tiptoe into the market, you should dive right in with a lump sum investment. Don’t believe me? Let me convince you…

One of Milton Friedman’s most influential and revolutionary theories was his challenge to the traditional Keynesian consumption function, which includes simple after-tax income as a variable in the consumption. Friedman countered, however, that those who consume today take future taxes, price increases, salary increases, and other factors into account. This is summarized in his Permanent Income Hypothesis. More specifically, this counters that people consume based off of their overall estimation of future income as well as opposed to only the current after-tax income.

Next month, the minimum wage in America is going to raise from $6.55 an hour to $7.25 an hour. The $6.55 to $7.25 jump is the last of the increases to the minimum wage under the Fair Minimum Wage Act of 2007. The minimum wage is a sexy law; politicians can stand hand in hand with the lowest income workers and say, “I’m fighting for you!”. Unfortunately, the low income workers are holding the hands that hold them down.