Economics in the Media…

…from David Robinson, senior lecturer at Haas School of Business, University of California, Berkeley, published December 28, 2015: “Don’t Forget the ‘Social’ in Social Security”

Robinson writes – in response to this op-ed by Wharton professor Jeremy Siegel – “There is never any expectation that upper-income earners will do as well from the government as they would if they’d invested that money themselves. The system relies on higher contributions from those who are fortunate enough to earn handsome salaries. Social Security is by design a system to transfer wealth to low-wage earners in their retirement. There’s simply no way that a janitor could save enough in his working years to provide a decent retirement.”

Is this true? CafeHayek shines a light:

A janitor’s median annual salary today is $26,586. An 18-year old today who starts work as a janitor, who works until the full Social Security retirement age of 66, and who each year is paid this median salary can expect to receive, upon retirement in 2063, a monthly Social Security check for $1,108.

But suppose that this janitor is relieved of having to pay the now-required 6.2 percent of his wages – $1,648.33 annually – into Social Security and, instead, he invests each year this sum into financial instruments that pay, on average, a real annual return of 5 percent, compounded monthly. Saving and investing no more than this sum each year during his work life, this janitor, when he retires at age 66, will own a pension worth $337,591. Even assuming (unrealistically) that these funds earn no further returns for the rest of the retired janitor’s life, if this janitor lives for another 15 years, every month he can take from his retirement fund $1,875.51 – or 69 percent more than the monthly amount that he would instead have received from Social Security. Looked at differently, in order for this janitor’s monthly payment out of his private retirement account to fall short of the monthly payment he will get from Social Security, he would have to live past the age of 91.


Economics in the Media…

…in May, I posted this tongue in cheek (and excessively long) rewrite of a New York Times investigative report about the nail salon industry in New York City.

NYT’s original thesis: “Manicurists are routinely underpaid and exploited, and endure
ethnic bias and other abuse, The New York Times has found.”

My thesis in the rewrite: Manicurists are routinely underpaid and exploited, and endure ethnic bias and other abuse, [first generation immigrants working their first job, trained and housed for free by employers, hired despite having no language skills and/or being in the country illegally, able to use the skills learned on the job to build a better life] The New York Times has found.

Well, apparently I’m not the only one who reads The New York Times. Within four days, New York State Gov. Andrew Cuomo introduced “”emergency protections for nail-salon workers,” according to

Reason continued to cover the story, as it first seemed to fade back, thanks in part to Assemblyman Ron Kim (D-District 40), then as evidence of factual errors and misquotes surfaced in July, then as the employees and nail-salon owners alike began openly protesting The New York Times five months after the story was first published.

There whole saga has been very interesting and now Reason has an awesome 10 minute video recapping the last seven months.

Economics in the Media…

…from “‘The Big Short’, Housing Bubbles and Retold Lies” by Paul Krugman in the December 18, 2015 issue of the New York Times; as retold by Barron‘s Gene Epstein in a letter to the New York Times (via CafeHayek):

To the Editor:

In his column on the film, “The Big Short” (“‘The Big Short,’ Housing Bubbles and Retold Lies,” Dec. 18), Paul Krugman declares that the housing bubble “was largely inflated via opaque financial schemes that in many cases amounted to outright fraud.”

This causal analysis is directly contradicted by an alternative view previously expressed in the New York Times: that the housing bubble was largely inflated by policies of the Federal Reserve.

“To fight this recession,” wrote a New York Times columnist on Aug. 2, 2002, “the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.”

In a blog on that column posted on June 17, 2009, this same columnist observed: “What I said was that the only way the Fed could get traction would be if it could inflate a housing bubble. And that’s just what happened.”

The columnist who wrote those words: Paul Krugman

Gene Epstein
Economics & Books Editor

Economics in the Media…

…from “After floods, no price-gouging complaints, attorney general says” by Gary Dinges in the May 28, 2015 issue of the Austin American-Statesman.

After flooding in the spring, Dinges apparently found it noteworthy that hotel prices in Hays County, Texas didn’t sky rocket:

The Texas attorney general’s office says it hasn’t received any complaints alleging hotels have jacked up prices in the wake of devastating floods that left thousands homeless in Central Texas and elsewhere throughout the state.

Because, obviously, excess water causes hotel owners to arbitrarily raise prices, and that is bad:

Price gouging is illegal, and the state has, in the past, prosecuted businesses looking to take advantage of people impacted by disasters.

The fact that demand for hotel rooms evidently did not change, seems like an after thought to Dinges:

In Hays County, which was hit especially hard, hotels aren’t reporting a space crunch. In fact, plenty of rooms remain available.

Almost 20 hotels in San Marcos are still taking reservations, according to, with prices ranging from $40 at the Executive Inn & Suites, 930 N. Interstate 35, to $169 at the Embassy Suites San Marcos, 1001 E. McCarty Lane.

“Vacancy” signs are up at many hotels in nearby cities, such as Kyle and New Braunfels, as well.