The Federal Reserve Bank of Philadelphia just released the first report on a new survey they are conducting quarterly. Some highlights:
Respondents in January 2024 were more positive about their income prospects than respondents a year earlier; one-third believed their income will increase, compared with 29 percent in January 2023
Younger, more affluent, male, or non-White respondents report a more positive outlook, compared with one year prior. Those who are older than 55 or earn less than $40,000 report notably negative changes in their personal outlook, compared with respondents in the same demographic segments surveyed a year ago
When asked about their ability to pay all of their bills in full this month, 23.5 percent of respondents in January 2024 indicated that they could not pay some or any of their bills; this was 1.5 percentage points higher than in January 2023 (22.0 percent) and the highest rate in the last five quarters
Overall, I’d say it shows an economy with mixed performance, but leaning more positive than negative.
Source: My graph of LIFE Survey data
It will be interesting to see if this ends up taking a place in the set of Fed surveys that are always driving economic discussions, like the Survey of Consumer Finances and the Survey of Professional Forecasters. If they keep it up and start putting out some graphics to summarize it, I think it will. My quick impression (not yet having spoken to Fed people about it) is that it will be the “quick hit” version of the Survey of Consumer Finances. It asks a smaller set of questions on somewhat similar topics, but is released quickly after each quarter instead of slowly after each year. If they stick with the survey it will get more useful over time, as there is more of a baseline to compare to.
Thankfully for US consumers, grocery prices have leveled off. They haven’t fallen, of course, which will still lead to viral complaints about egg prices, etc. But over the past 4 years, wages have almost caught up with grocery prices.
Not so with fast food prices (“limited service meals”), which have definitely outpaced wages over the past 4 years, and continue to grow at an annual rate of about 5 percent (also more than wages).
Furthermore, if we go back to 2014, we see it’s not just a post-pandemic effect on fast food. Prices since 2014 are up 54 percent for fast food according to the BLS, more than the 31 percent overall CPI-U increase and more than average wages (46 percent).
An article from FinanceBuzz puts together some more specific data on a dozen fast-food chains in the US. Consumer favorites for a quick, cheap bite to eat like Taco Bell and McDonald’s have seen menu prices increase by 80 or even 100 percent!
Check out the article for even more specific food item data at each of these restaurants. For example, the most famous of fast-food sandwiches is the Big Mac, which is up from $3.99 in 2014 to $5.99 in 2024, a 50 percent increase. A Whopper meal at Burger King is up 79 percent. All the more reason to seek out deals in the apps, or just good-old in-store discounts, like the “buy one get one for $1” promo at most McDonald’s. This deal would get you two Big Macs for $7, or $3.50 each… less than in 2014! Or since today is Wednesday, you might want to head to Burger King, where Whoppers are $3 at most locations (regular price: around $6).
Price discrimination is alive and well at the drive-thru window, and if you are just ordering from the menu without any discounts, you are really going to feel the pain of inflation.
As I noted last month, the crypto lending firm BlockFi has started to send back to its customers some of their funds which had been frozen for over a year, since the demise of Sam Bankman-Fried’s FTX exchange led to BlockFi likewise vanishing into the mists of Chapter 11. As BlockFi emerges from bankruptcy, they are reimbursing customers in two tiers. Those who had crypto sitting in their “wallet” on the platform (not lent out and not earning interest), got back 100%. In my case, nearly all my assets on BlockFi were on the lending platform, earning juicy interest. For that class of assets, only a partial recovery is expected. Also, BlockFi will only send to you the crypto (e.g. Bitcoin or USDC) you owned as the crypto coin itself, not as the liquidated dollar value.
Therefore, you must establish an outside crypto wallet, and give them the external wallet address, so they can transfer the coin over a blockchain. This prospect of a connection between BlockFi (or its bankruptcy agent, Kroll) and your crypto wallet has brought out the scammers in force: if they can trick you into connecting them to your wallet, they can suck it dry in a flash.
The first thing I noticed back in early March was the proliferation of web sites that looked legit, but weren’t. When I browsed for “BlockFi withdrawal” or “BlockFi recovery,” up came a number of sites that had “BlockFi” or “Kroll” somewhere in their names, as clickbait. I don’t see any of these sites now, a month later. I assume that either those sites have been taken down as the thieves move onto the next heist, or the search engines have blotted them out.
Bogus phishing emails have also been sent out. Most insidious was an expertly-crafted email that I and other BlockFi customers received. Here is a screen shot of the now-infamous message:
As folks have pointed out, this looks pretty good. It has got the official company logo, and no misspellings. The return address on the email was BlockFi Holdings at www.everbridge.com. Unless you were vigilant, this address did not immediately raise suspicions like a random Gmail address or .ru address might.
Plus, this email was targeted to BlockFi customers, and came right when we were expecting further emails to tell us what steps to take to recovery our funds. How did the thieves have our email addresses? One speculation centers around the “Mother of All Breaches” (MOAB) when the Mailer Lite database was hacked in January. But we know that Kroll’s database was breached last year, where the lost data includes BlockFi customers’ names, email addresses, and amounts held at BlockFi, so that seems a more direct source.
Anyway, lots of BlockFi customers clicked on the link in this email. The thieves were pretty clever. First, they had you scrawl your signature on the screen. So now they have that archived, in order to do further ID theft mischief. And then, they had you connect their app to your wallet, as a trusted dApp. Over on Reddit (here and here), you can read the howls of pain from folks who got their wallets cleaned out. They are not alone – -as of late March, this scam had netted something like $5 million in digital assets.
An eerie thing about crypto is that the holdings at any address on the blockchain are public knowledge, even though you don’t know who the owner of that address is. So crypto sleuth Plumferno was able to display at least one of the BlockFi scammer’s wallets in the process of accumulating stolen assets:
This wallet (0x6C0e83422cD73fFD3A5EC4506638F6A0A8e22b38) currently holds well over $1million in Eth + various tokens combined, and as you can see, this scam is still very active – new victims are showing up in the transaction list quite regularly. Current holdings on Debank:
I am embarrassed to admit that I got taken in by this email. I tried clicking on the links, but fortunately my wallet was empty and my anti-malware resisted having me connect to the phishing site, so I did not lose any coin. Some takeaways are:
( 1 ) Always be suspicious of emails; especially scrutinize the return address, to make sure it really is from a source you trust. Watch for almost-legit email addresses.
( 2 ) If at all possible, avoid clicking on links in emails; try to go to the actual company website and click links from there.
( 3 ) See ( 1 )
See here for the bittersweet ending to this saga (I did get some money back, but only 27% of my original funds at BlockFi).
The answer is obviously job, right? I mean, I’ve dedicated huge swaths of my life to economics. I love economics. Sacrifices have been made, time and emotional toil committed. I would love to be a 20% better economist. That would mean my labor in the profession would be at least 20% more valuable, likely more. The opportunity cost of my time would skyrocket. I would be in more demand as a consultant, would receive more outside offers that would bring me to new heights of salary, likely other parts of the country, other parts of the world even. My work would receive greater attention and scrutiny. I would be fueled by the pressure to keep up with my past self and past contributions. There would be more speculation as to whether I’ve passed my peak, remain worthy of continuing investment. There would be disserations to be written, careers to be made identifying the errors I’ve committed, both subtly important and catastrophically innocent. I’d feel a greater sense of obligation to my, perhaps unearned, talent. To make good on it through service to the world. Sleep, travel, leisure would all feel that much more costly, that much more selfish. Strangers would feel that much more compelled, that much more rewarded, for publicly impugning my abilities and intentions. I would, ironically, probably receive 1000% more public censure as a result of 20% greater capacity. Would my 20% spike in competence come bundled with a thicker skin, independence of thought, and clarity of identity? Would I still be me? What exactly does come out the other side of the teleporter Mr. Scott?
Yeah, so I told the djinn I’d rather be 100% better at golf.
To be on Cowen’s short list is a compliment. Of all the thinkers and writers in recorded history, Adam Smith is one of only six writers that Cowen gives serious consideration to. Next, readers will ask, “Did our guy win?”
Tyler’s book will make no one happy because he does not take anyone’s side unequivocally. A huge fan of Adam Smith (and I know several) might have wanted a book about why Adam Smith is designated as the GOAT. I don’t want to ruin the book for anyone who hasn’t read it. What you will get is very interesting and thoughtful, so I hope you’ll read the manuscript* sometime, even if your guy doesn’t win.
*completely free – can get it on your Kindle somehow I heard
What We Are Learning about Paper Books – I did write the AdamSmithWorks post in collaboration with the GPT version of the book, as a first step, along with my own memory of having read the book. And then, secondly, I consulted the book manuscript. The GPT performed fairly well… considering that it’s a GPT. I suppose I thought that interrogating the GPT would save me time. However, I can now say authoritatively that Tyler’s actual writing is so much better than what you will get from the GPT. Among other things, the GPT is much more boring than Tyler’s actual manuscript.
I’ve written about coffee consumption during US alcohol prohibition in the past. I’ve also written about visualizing supply and demand. Many. Times. Today, I want to illustrate how to use supply and demand to reveal clues about the cause of a market’s volume and price changes. I’ll illustrate with an example of coffee consumption during prohibition.
The hypothesis is that alcohol prohibition would have caused consumers to substitute toward more easily accessible goods that were somewhat similar, such as coffee. To help analyze the problem, we have the competitive market model in our theoretical toolkit, which is often used for commodities. Together, the hypothesis and theory tell a story.
Substitution toward coffee would be modeled as greater demand, placing upward pressure on both US coffee imports and coffee prices. However, we know that the price in the long-run competitive market is driven back down to the minimum average cost by firm entry and exit. So, we should observe any changes in demand to be followed by a return to the baseline price. In the current case, increased demand and subsequent expansions of supply should also result in increasing trade volumes rather than decreasing.
Now that we have our hypothesis, theory, and model predictions sorted, we can look at the graph below which compares the price and volume data to the 1918 values. While prohibition’s enforcement by the Volstead act didn’t begin until 1920, “wartime prohibition” and eager congressmen effectively banned most alcohol in 1919. Consequently, the increase in both price and quantity reflects the increased demand for coffee. Suppliers responded by expanding production and bringing more supplies to market such that there were greater volumes by 1921 and the price was almost back down to its 1918 level. Demand again leaps in 1924-1926, increasing the price, until additional supplies put downward pressure on the price and further expanded the quantity transacted.
We see exactly what the hypothesis and theory predicted. There are punctuated jumps in demand, followed by supply-side adjustments that lower the price. Any volume declines are minor, and the overall trend is toward greater output. The supply & demand framework allows us to image the superimposed supply and demand curves that intersect and move along the observed price & quantity data. Increases toward the upper-right reflect demand increases. Changes plotted to the lower-right reflect supply increases. Of course, inflation and deflation account for some of the observed changes, but similar demand patterns aren’t present in the other commodity markets, such as for sugar or wheat. Therefore, we have good reason to believe that the coffee market dynamics were unique in the time period illustrated above.
*BTW, if you’re thinking that the interpretation is thrown off by WWI, then think again. Unlike most industries, US regulation of coffee transport and consumption was relatively light during the war, and US-Brazilian trade routes remained largely intact.
It seems like we finally have anti-obesity drugs that are effective and come without deal-breaking side effects: GLP-1 inhibitors like semaglutide (Wegovy). But they are currently priced over $10,000 per year for Americans. Should insurance cover them?
So far Medicare has decided to cover these drugs only to the extent that they treat diseases like diabetes (which these drugs were originally developed to treat) and heart disease (Wegovy reduces adverse cardiac events by 20% in overweight patients with heart disease). Just based on the diabetes coverage, Medicare was already spending $5 billion per year on these drugs in 2022, making semaglutide the 6th most expensive drug for Medicare with prescriptions still growing rapidly. The addition of other indications for specific diseases, like heart disease coverage added last month, is sure to expand this dramatically, especially if trials confirm other benefits.
But with almost 3/4 of Americans now officially overweight, weight loss makes for a bigger potential market than any specific disease. Medicare currently spends about 15k per beneficiary for all medical care; if they actually paid for an 11k/yr drug for 3/4 of their beneficiaries, their spending could rise to 23k per beneficiary per year. The effect on Medicare Part D, which covers prescription drugs and currently spends about 2.5k per beneficiary per year, would be even more dramatic, with spending quadrupling. This would blow a huge hole in the federal budget, where health insurance already accounts for about 1/4 of all spending (and Medicare 1/2 of that 1/4).
Of course, the reality would not be nearly that bad. Not all overweight people would want to take a weight loss drug, even if it were covered by insurance; the side effects are real. To the extent people do take the drugs, the reduction in obesity could lead to lower spending on treatments for things like heart attacks. Rebates can already reduce the cost of these drugs to be less than half of their list price, and Medicare may be able to negotiate even lower prices starting in 2027. Key patents will expire by 2033, after which generic competition should dramatically lower prices. Competition from other brand-name GLP-1 drugs could lower prices much sooner.
Patents always come with a tradeoff: they encourage innovation in the future, but mean high prices and under-use of patented goods today. The government does have one option for how to lower the marginal price of a drug without discouraging future innovation: just buy out the patent. This would likely cost hundreds of billions of dollars up front, but this could be recouped over time through lower spending, while bringing large health benefits because the drug would be much more widely used if it were sold at a price near its marginal cost of production.
Of course, for now supply of these medications is the bigger problem than the cost. Even with the current high prices and insurers tending not to cover drugs of weight loss alone, demand exceeds supply and shortages abound. The manufacturers are trying to ramp up production quickly to meet the large and growing demand, but this takes time. Insurers like Medicare covering weight loss drugs wouldn’t actually mean more people get the drugs in the short run, it would simply change who gets to use them.
But once production ramps up, I do expect that it will make sense for Medicare to cover weight loss drugs. The health benefits appear to be so large that the drugs are cost effective even at current prices, and prices are likely to fall substantially over time. The big restriction I suspect will still make sense is to require that patients be obese, rather than merely overweight, since being “merely” overweight (BMI 25-29) probably isn’t that bad for you:
Update 4/18/24: I started thinking about this question because of an interview request from Janet Nguyen at Marketplace. She has now published an excellent article on the subject that also includes quotes from John Cawley of Cornell, who knows a lot more than I do on the subject.
What’s the connection between social media use and mental health, especially among young people? You’ve probably heard a lot about this recently, in the media, by politicians, and among friends chatting about their kids. Lots of assertions are made, but there is also a bit of research on this topic. As someone who frequently uses social media myself, as well as a parent of young children, and a teacher that works every week with young college students, I am particularly interested in this topic.
Jonathan Haidt and various co-authors have been trying to catalog all the research on the topic and figure out if there is a connection between the decline in teenage mental health and the rise of social media use. Haidt also has a new book on this topic, as well as the decline of “free play” among kids, which I have not yet read but I’ve looked through his documents that contain all of the underlying and summaries of the research he is citing. I’ll read the book soon, as I’m certainly part of the intended audience (see the last sentence of the above paragraph). And while this research is very much outside of my area of expertise, my training as an economist has taught me how to read academic papers and to be convinced by evidence, so once again I’m very much the intended audience on this score as well.
Please read this post as my attempt to understand the evidence and start to form conclusions and/or critique what Haidt is saying. It’s a work in progress, and I’ll write more as I read and think more about it.
Scholars apologize for attributing Western democracy to a make-believe civilization.
WASHINGTON—A group of leading historians held a press conference Monday at the National Geographic Society to announce they had “entirely fabricated” ancient Greece, a culture long thought to be the intellectual basis of Western civilization.
The group acknowledged that the idea of a sophisticated, flourishing society existing in Greece more than two millennia ago was a complete fiction created by a team of some two dozen historians, anthropologists, and classicists who worked nonstop between 1971 and 1974 to forge “Greek” documents and artifacts.
“Honestly, we never meant for things to go this far,” said Professor Gene Haddlebury, who has offered to resign his position as chair of Hellenic Studies at Georgetown University. “We were young and trying to advance our careers, so we just started making things up: Homer, Aristotle, Socrates, Hippocrates, the lever and fulcrum, rhetoric, ethics, all the different kinds of columns—everything.”
“Way more stuff than any one civilization could have come up with, obviously,” he added.
According to Haddlebury, the idea of inventing a wholly fraudulent ancient culture came about when he and other scholars realized they had no idea what had actually happened in Europe during the 800-year period before the Christian era.
Frustrated by the gap in the record, and finding archaeologists to be “not much help at all,” they took the problem to colleagues who were then scrambling to find a way to explain where things such as astronomy, cartography, and democracy had come from.
Within hours the greatest and most influential civilization of all time was born.
“One night someone made a joke about just taking all these ideas, lumping them together, and saying the Greeks had done it all 2,000 years ago,” Haddlebury said. “One thing led to another, and before you know it, we’re coming up with everything from the golden ratio to the Iliad.”…
Around the same time, a curator at the Smithsonian reportedly asked for Haddlebury’s help: The museum had received a sizeable donation to create an exhibit on the ancient world but “really didn’t have a whole lot to put in there.” The historians immediately set to work, hastily falsifying evidence of a civilization that— complete with its own poets and philosophers, gods and heroes—would eventually become the centerpiece of schoolbooks, college educations, and the entire field of the humanities.
Emily Nguyen-Whiteman, one of the young academics who “pulled a month’s worth of all-nighters” working on the project, explained that the whole of ancient Greek architecture was based on buildings in Washington, D.C., including a bank across the street from the coffee shop where they met to “bat around ideas about mythology or whatever.”
“We picked Greece because we figured nobody would ever go there to check it out,” Nguyen-Whiteman said. “Have you ever seen the place? It’s a dump. It’s like an abandoned gravel pit infested with cats.”
She added, “Inevitably, though, people started looking around for some of this ‘ancient’ stuff, and next thing I know I’m stuck in Athens all summer building a…Parthenon just to cover our tracks.”
Nguyen-Whiteman acknowledged she was also tasked with altering documents ranging from early Bibles to the writings of Thomas Jefferson to reflect a “Classical Greek” influence—a task that also included the creation, from scratch, of a language based on modern Greek that could pass as its ancient precursor.
Historians told reporters that some of the so-called Greek ideas were in fact borrowed from the Romans, stripped to their fundamentals, and then attributed to fictional Greek predecessors. But others they claimed as their own.
“Geometry? That was all Kevin,” said Haddlebury, referring to former graduate student Kevin Davenport. “Man, that kid was on fire in those days. They teach Davenportian geometry in high schools now, though of course they call it Euclidean.”
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Happy April Fools…the above excerpt was pasted verbatim from a classic article published in the news-satire site The Onion. I thought it was a clever piece, which did a worthy service highlighting the wide-ranging achievements of a relatively small people group (compared to the teeming masses of ancient Mesopotamia and Egypt) in a relatively short period of time.
Apologies to any Greeks reading this post – -my wife has been to Greece and tells me it is in fact a very beautiful country.
Thailand has a legitimate problem with roving gangs of monkeys that recently achieved significant scale leading to territorial violence in Lopburi :
Biggest news to come out of Thailand since #สุขุมวิท11: The city of Lopburi is experiencing unprecedented violence between two monkey gangs, authorities have been mobilised to quell chaos and are currently attempting to relocate the primates. pic.twitter.com/NUXKlvcPdT
The sophistication of the monkeys in question is such that gangs have been known to take a train two hours to find rival territory that is sufficiently resource rich and for which they have adequate numbers to the challenge the local monkeys. They also seem to have a rudimentary familiarity with firearms that makes tranquilizing them at any scale challenging.
There appears to be some theory behind mitigation strategies, tranquilizing and apprehending group leaders being number 1. What else might a little basic theory suggestion? Any alternative strategies?
The first question that comes to mind is whether there is a means to tilt the resource calculus towards exurban territories. That seems challenging simply given the calorie density of urban groceries and refuse. It’s probably too difficult to raise the price of resources sufficiently on their own (locked garbage cans, closed door supermarkets), but maybe the offering of monkey feeding sanctuaries outside of city limits that are within sight/smell of train lines? That could be useful means of concentrating then populations in an area that would then enable second-level strategies. And yes, I am already imagining small monkey cities wherein we can study their emergent politics. I’ve already titled my 2029 paper “Rhesus Politik” and before you ask, 1) No you can’t have the title, and 2) yes, you can be a co-author.
What about the violence as it stands within Lopburi? Can we shift the payoffs away from Hawk and towards Dove strategies? Can we increase each monkey’s expected cost of violence or decrease their payoff to exerting dominance? Perhaps an evolutionary tax on weight i.e. taking the largest monkeys out of the gene pool, the equivalent of neutering and spaying? Melee violence has signficant returns to scale, so perhaps we could expect less violence if groups were smaller. Can we change the optimal scale of individual gangs through artificial pheremones simply dousing them with knockoff Drakkar Noir? If Big Science has an genetically modified banana high in the amino acids that lead to introversion, now is a great time to share it. Personal experience suggests that if we start blasting Elliot Smith songs through the streets will monkeys begin to break off under the crushing weight of their own ennui.
I’d suggest fomenting another agricultural revolution amongst monkeys, but the initial reduction in violence over rival turf would eventually evolve into feudal violence between stationary bandits, which I fear would lead to a net increase in violence, at least for the first few thousand years. Instead, I believe we would be better served giving groups of monkeys the necessary institutions for establishing and adjudicating property rights, changing the payoffs such that the exchange of resources were preferable to violent expropriation. We’ve lived this evolutionary history before, we know how it goes. Maybe this time we can skip to the democratic peace and pax economica.
Economist Writing Every Day 