Christmas Coercion

Christmas gifts can be viewed as just another economic transaction. The warm feeling that comes from giving could hide a mundane investment in social relationships. A gift entails a hidden obligation to treat you nicely, creating a special bond between the giver and the recipient.

And research indicates that small gifts may be more effective than large ones. As economists estimate that big gifts, being too blatant, tend to raise the receiver’s suspicion. They generate suspicion that the benefactor has a hidden agenda, and trigger an impulse to restrain reciprocal behavior.

On the other hand, not giving at all isn’t just neutral on potential recipients: it generates negative behavior in return. This demonstrates that in gift-giving, like so many other social exchanges, too much is bad, but nothing is worse.

Bitcoin Bubble?

How did a currency with scarce global acceptance move from $10 to over $1000 in under a year?’

That answer is quite simple: growing media interest has created a surge in demand. The more the price has moved, the more press coverage it has received and, consequently, the more people have been introduced to – and demanded – the digital currency.

But the system is now straining at the seams. Its computational underpinnings have collectively reached 100 times the performance of the world’s top 500 supercomputers combined: more than 50,000 petaflops. And it is not as secure and anonymous as it seems.

Will Bitcoin’s self-correcting mechanisms, and the enlightened self-interest of its users, be able to address these weaknesses and keep Bitcoin on the rails? Only time will tell.

Season of Giving

Need some holiday gift ideas? Here are a few worthy suggestions.

Buy one year of schooling for a girl in Ethiopia through the International Rescue Committee or a flock of geese for a family through Heifer International.

For $50, you can fund a student’s college savings account, part of the financial literacy element at childrensaidsociety.org.

The Afghan Institute of Learning has been running empowerment and training programs for Afghan women and girls since the 1990's. $65 pays for a year of literacy classes.

Buy a hand-embroidered scarf, made by widows in Afghanistan, for just $50 at GlobalGoodsPartners.org, which has many other inexpensive gifts made by people throughout the world.

HELP, for Haitian Education and Leadership Program, searches Haiti for the most outstanding high school students from disadvantaged backgrounds and sends them to college.

The 47%, or 43%, or...

Recall Mr. Romney's silly utterance regarding taxes? Well, if not, you'll find a nice little video primer below that summarizes his folly fairly succinctly.

Income Redistribution

This paper considers how Social Security’s many benefit and tax features have redistributed income across groups over time.

Using Current Population Survey data from 1970 through 1994 and micro-simulation projections from the Urban Institute’s DYNASIM3 model, research found that for many decades, Social Security redistributed from African-Americans, Hispanics, and other people of color, to whites.

And these transfers will likely to continue in future decades, as findings suggest that future reforms that place the burden of Social Security reform solely on younger, more diverse generations may have undesired distributional consequences if the aim of the program is to provide greater relative protections to more vulnerable groups.

Tax Reform

In The Benefit and the Burden, Bruce Bartlett explores the distributional, technical, and political advantages and costs of the various proposals and ideas that will come to dominate America’s political conversation in the years to come.

Who Pays Income Taxes?

At left, is a typical distribution table for federal income taxes in 2013 from the Tax Policy Center, a joint venture of the Urban Institute and the Brookings Institution, that generally follows the Treasury’s methodology. These data do not include other taxes such as the payroll tax, corporate tax or estate tax.

The table shows the share of total income taxes paid; a negative number indicates that a particular income group gets a net refund from programs like the earned income tax credit. In aggregate, households earning less than $50,000 pay no federal income taxes and those making more than $1 million pay 34.2 percent of all federal income taxes.

Learn More, Earn More

In the last six years, American higher education institutions conferred nearly 3.5 million more degrees than they had over the previous six years. By last year, 29.8 percent of men and 37.2 percent of women ages 25 to 29 possessed four-year college degrees.

In time, it is likely that these young college graduates will find work and earn pay that is significantly higher than they would have earned had they not gone to college.

In 2012, two-year-degree holders earned close to $7,000 more per year than their high-school-diploma-only counterparts. Someone with a four-year degree earned roughly $15,000 more than that same someone with an associate degree. And a professional degree reaped nearly $35,000 more than a four-year college degree, according to the Department of Labor.

Online Gambling

Believe it or not, when gambling online any given day, the chances of emerging a winner aren't too bad—about 30%. But continuing to gamble is a bad bet. Just 11% of players ended up in the black over an extended period, and most of those pocketed less than $150.

The skew was even more pronounced when it came to heavy gamblers. The top 10% of bettors, those placing the largest number of total wagers over two years, about 95% ended up losing money, some dropping tens of thousands of dollars. And big losers of more than $5,000 among heavy gamblers outnumbered big winners by a staggering 128 to 1.

Another Bubble?

Robert J. Shiller, a Yale economist and one of this year’s winners of the Nobel Prize in Economic Science, is known for indexes he created and has used to predict stock market and housing bubbles in the economy.

More recently, he has expressed some fear at the ballooning stock market indices.

Kids Are Too Damned Expensive

Two out of three teens own a cell phone, but they're less independent, more ill-mannered, and many can't define the word "chores", much less perform them for the benefit of their family.

As a result, raising children has become more, and in many cases unnecessarily, expensive as the Wall Street Journal found.

We're Number 8!

The recently released Newsweek/Daily Beast list of the top-ranked countries for women shows the United States in the respectable eighth position.

But as it’s easier to measure rights and achievements than obligations and commitments, it assesses women’s economic success in terms of their ability to emulate men’s traditional gender roles, with no consideration of support for raising children or caring for other dependent family members, burdens with which women are disproportionately more likely to be saddled than men.

Debt, Fear and the Unknown

While the latest debt stalemate could soon be resolved with a short-term fix, the threat of a default is liable to rear its head again before year's end.

Government officials and market observers worry such uncertainty could have an enduring effect on financial markets.

Bankers have been assured by the Fed that the central bank would accept defaulted Treasury securities as collateral for emergency loans in the event of a liquidity crunch, but the Treasury Department of the Obama Administration has yet to commit.

Such mixed signals creates uncertainty and could provoke a panic that would make such a liquidity crunch more likely.

The Wisdom of Warren Buffett

Want to know more about the lifestyle of the Rich and Famous? Then enjoy watching the video profile of the Sage of Omaha, Warren Buffett, who happens to be worth billions.

Never Breaking Even

Two-year community colleges enroll 37 percent of American undergraduates. The Center on International Education Benchmarking reports that only 13 percent of students in two-year colleges graduate in two years and that figure rises to a still-dismal 28 percent after four years.

This elevated completion risk has consequences for both the student and the economy in which he participates. To wit, a student who takes on a typical amount of debt but drops out after two years never breaks even because wages of college dropouts are little better than those of high school graduates. And an economy with undertrained and less wealthy individuals will suffer from low aggregate demand and a limited capacity to produce.

Global CPI

Want to find out the relative cost of living in any city in the world? Then check out this global cost of living index.

When constructing this cost of living index a central reference city, Prague, was assigned a value of 100. Therefore, if a city has a Price Index of 134, it means that living there is 34% more expensive than living in Prague.

Education and Economy at Risk

Four-year college degrees still pay off; however, one-quarter of recent college graduates are unemployed or underemployed. Meanwhile, total student debt now exceeds $1 trillion. And heavily indebted students face risks.

One is that they fall short of their income potential, through some combination of unemployment and inability to find a job in their chosen fields. Research has shown that on average a college student taking on $100,000 in student debt will still come out ahead by age 34. But that break-even age goes up if future income falls short of the average.

Why Do Markets Freak Out?

Economists do not expect the newest members of the Fed to scrap quantitative easing entirely. But even small shifts in policy can have large implications for markets and the economy. U.S. stocks have been on a roller coaster since the Fed broached the idea of scaling back its bond purchases later this year. Investors are obsessed with when it will begin and how large it will be.

Uncertainty is the bugbear of all markets.

A Rich Recovery

During the Great Recession, as things like capital gains temporarily dried up, top income earners took a hit. But the rich have come roaring back, to such an extent that 95 percent of the gains from economic recovery since 2009 have gone to the famous 1 percent. In fact, more than 60 percent of the gains went to the top 0.1 percent, people with annual incomes of more than $1.9 million.

Mega-Banks Get Burgled

At least three US banks in recent months have been plundered by fraudulent wire transfers while hackers deployed "low powered" DDoS attacks to mask their theft.

The DDoS attacks were likely used as a distraction for bank personnel to prevent them from immediately identifying a fraudulent transaction, which is necessary to stop the wire transfer.