The wedges between productivity and median compensation growth

http://www.epi.org/publication/ib330-productivity-vs-compensation/

Income inequality has grown over the last 30 years or more driven by three dynamics: rising inequality of labor income (wages and compensation), rising inequality of capital income, and an increasing share of income going to capital income rather than labor income. As a consequence, examining market-based incomes one finds that “the top 1 percent of households have secured a very large share of all of the gains in income—59.9 percent of the gains from 1979–2007, while the top 0.1 percent seized an even more disproportionate share: 36 percent. In comparison, only 8.6 percent of income gains have gone to the bottom 90 percent” (Mishel and Bivens 2011).

Research covered in this publication will be included in the 12th edition of EPI’s The State of Working America, coming this fall. Click here to read more previews from the forthcoming book.

A key to understanding this growth of income inequality—and the disappointing increases in workers’ wages and compensation and middle-class incomes—is understanding the divergence of pay and productivity. Productivity growth has risen substantially over the last few decades but the hourly compensation of the typical worker has seen much more modest growth, especially in the last 10 years or so. The gap between productivity and the compensation growth for the typical worker has been larger in the “lost decade” since the early 2000s than at any point in the post-World War II period. In contrast, productivity and the compensation of the typical workergrew in tandem over the early postwar period until the 1970s. Productivity growth, which is the growth of the output of goods and services per hour worked, provides the basis for the growth of living standards. However, the experience of the vast majority of workers in recent decades has been that productivity growth actually provides only the potential for rising living standards: Recent history, especially since 2000, has shown that wages and compensation for the typical worker and income growth for the typical family have lagged tremendously behind the nation’s fast productivity growth. This paper uses data from EPI’s upcoming The State of Working America, 12^th Edition (Mishel, Bivens, Gould, and Shierholz 2012) to document and explain these trends, particularly those of recent years.

Link to Journal of Economic perspectives archives

http://www.aeaweb.org/jep/contents/index.php

Excellent journal and interesting articles for non-academics and professionals at the same time. 

Excellent paper on India-pre and post crisis and reforms needed

http://www.adbi.org/files/2011.03.29.wp272.crisis.imbalances.india.pdf

Brooking papers on Economics

http://www.brookings.edu/economics/bpea.aspx

Microfinance fraud in India

http://www.bloomberg.com/news/2010-12-28/suicides-among-borrowers-in-india-show-how-men-made-a-mess-of-microcredit.html

Can Europe Be Saved?

http://www.nytimes.com/2011/01/16/magazine/16Europe-t.html?src=me&ref=homepage

Sacrificing Microcredit for Megaprofits By MUHAMMAD YUNUS

Keith Negley

IN the 1970s, when I began working here on what would eventually be called “microcredit,” one of my goals was to eliminate the presence of loan sharks who grow rich by preying on the poor. In 1983, I founded Grameen Bank to provide small loans that people, especially poor women, could use to bring themselves out of poverty. At that time, I never imagined that one day microcredit would give rise to its own breed of loan sharks.

But it has. And as a result, many borrowers in India have been defaulting on theirmicroloans, which could then result in lenders being driven out of business. India’s crisis points to a clear need to get microcredit back on track.

Troubles with microcredit began around 2005, when many lenders started looking for ways to make a profit on the loans by shifting from their status as nonprofit organizations to commercial enterprises. In 2007, Compartamos, a Mexican bank, became Latin America’s first microcredit bank to go public. And this past August, SKS Microfinance, the largest bank of its kind in India, raised $358 million in an initial public offering.

To ensure that the small loans would be profitable for their shareholders, such banks needed to raise interest rates and engage in aggressive marketing and loan collection. The kind of empathy that had once been shown toward borrowers when the lenders were nonprofits disappeared. The people whom microcredit was supposed to help were being harmed. In India, borrowers came to believe lenders were taking advantage of them, and stopped repaying their loans.

Commercialization has been a terrible wrong turn for microfinance, and it indicates a worrying “mission drift” in the motivation of those lending to the poor. Poverty should be eradicated, not seen as a money-making opportunity.

There are serious practical problems with treating microcredit as an ordinary profit-maximizing business. Instead of creating wholesale funds dedicated to lending money to microfinance institutions, as Bangladesh has done, these commercial organizations raise larger sums in volatile international financial markets, and then transmit financial risks to the poor.

Furthermore, it means commercial microcredit institutions are subject to demands for ever-increasing profits, which can only come in the form of higher interest rates charged to the poor, defeating the very purpose of the loans.

Some advocates of commercialization say it’s the only way to attract the money that’s needed to expand the availability of microcredit and to “liberate” the system from dependence on foundations and other charitable donors. But it is possible to harness investment in microcredit — and even make a profit — without working through either charities or global financial markets.

Grameen Bank, where I am managing director, has 2,500 branches in Bangladesh. It lends out more than $100 million a month, from loans of less than $10 for beggars in our “Struggling Members” program, to micro-enterprise loans of about $1,000. Most branches are financially self-reliant, dependent only on deposits from ordinary Bangladeshis. When borrowers join the bank, they open a savings account. All borrowers have savings accounts at the bank, many with balances larger than their loans. And every year, the bank’s profits are returned to the borrowers — 97 percent of them poor women — in the form of dividends.

More microcredit institutions should adopt this model. The community needs to reaffirm the original definition of microcredit, abandon commercialization and turn back to serving the poor.

Stricter government regulation could help. The maximum interest rate should not exceed the cost of the fund — meaning the cost that is incurred by the bank to procure the money to lend — plus 15 percent of the fund. That 15 percent goes to cover operational costs and contribute to profit. In the case of Grameen Bank, the cost of fund is 10 percent. So, the maximum interest rate could be 25 percent. However, we charge 20 percent to the borrowers. The ideal “spread” between the cost of the fund and the lending rate should be close to 10 percent.

To enforce such a cap, every country where microloans are made needs a microcredit regulatory authority. Bangladesh, which has the most microcredit borrowers per square mile in the world, has had such an authority for several years, and it is devoted to ensuring transparency in lending and prevented excessive interest rates and collection practices. In the future, it may be able to accredit microfinance banks. India, with its burgeoning microcredit sector, is most in need of a similar agency.

There are always people eager to take advantage of the vulnerable. But credit programs that seek to profit from the suffering of the poor should not be described as “microcredit,” and investors who own such programs should not be allowed to benefit from the trust and respect that microcredit banks have rightly earned.

Governments are responsible for preventing such abuse. In 1997, then First Lady Hillary Clinton and Prime Minister Sheikh Hasina of Bangladesh met with other world leaders to commit to providing 100 million poor people with microloans and other financial services by 2005. At the time, it looked like an utterly impossible task, but by 2006 we had achieved it. World leaders should come together again to provide the powerful and visionary leadership to help steer microcredit back on course.

Muhammad Yunus, the founder of Grameen Bank, received the Nobel Peace Prize in 2006.

When Zombies Win

When historians look back at 2008-10, what will puzzle them most, I believe, is the strange triumph of failed ideas. Free-market fundamentalists have been  wrong about everything — yet they now dominate the political scene more thoroughly than ever.

How did that happen? How, after runaway banks brought the economy to its knees, did we end up with Ron Paul, who says “I don’t think we need regulators,” about to take over a key House panel overseeing the Fed? How, after the experiences of the Clinton and Bush administrations — the first raised taxes and presided over spectacular job growth; the second cut taxes and presided over anemic growth even before the crisis — did we end up with bipartisan agreement on even more tax cuts?

The answer from the right is that the economic failures of the Obama administration show that big-government policies don’t work. But the response should be, what big-government policies?

For the fact is that the Obama stimulus — which itself was almost 40 percent tax cuts — was far too cautious to turn the economy around. And that’s not 20-20 hindsight: many economists, myself included, warned from the beginning that the plan was grossly inadequate. Put it this way: A policy under which government employment actually fell, under which government spending on goods and services grew more slowly than during the Bush years, hardly constitutes a test of Keynesian economics.

Now, maybe it wasn’t possible for President Obama to get more in the face of Congressional skepticism about government. But even if that’s true, it only demonstrates the continuing hold of a failed doctrine over our politics.

It’s also worth pointing out that everything the right said about why Obamanomics would fail was wrong. For two years we’ve been warned that government borrowing would send interest rates sky-high; in fact, rates have fluctuated with optimism or pessimism about recovery, but stayed consistently low by historical standards. For two years we’ve been warned that inflation, even hyperinflation, was just around the corner; instead, disinflation has continued, with core inflation — which excludes volatile food and energy prices — now at a half-century low.

The free-market fundamentalists have been as wrong about events abroad as they have about events in America — and suffered equally few consequences. “Ireland,” declaredGeorge Osborne in 2006, “stands as a shining example of the art of the possible in long-term economic policymaking.” Whoops. But Mr. Osborne is now Britain’s top economic official.

And in his new position, he’s setting out to emulate the austerity policies Ireland implemented after its bubble burst. After all, conservatives on both sides of the Atlantic spent much of the past year hailing Irish austerity as a resounding success. “The Irish approach worked in 1987-89 — and it’s working now,” declared Alan Reynolds of the Cato Institute last June. Whoops, again.

But such failures don’t seem to matter. To borrow the title of a recent book by the Australian economist John Quiggin on doctrines that the crisis should have killed but didn’t, we’re still — perhaps more than ever — ruled by “zombie economics.” Why?

Part of the answer, surely, is that people who should have been trying to slay zombie ideas have tried to compromise with them instead. And this is especially, though not only, true of the president.

People tend to forget that Ronald Reagan often gave ground on policy substance — most notably, he ended up enacting multiple tax increases. But he never wavered on ideas, never backed down from the position that his ideology was right and his opponents were wrong.

President Obama, by contrast, has consistently tried to reach across the aisle by lending cover to right-wing myths. He has praised Reagan for restoring American dynamism (when was the last time you heard a Republican praising F.D.R.?), adopted G.O.P. rhetoric about the need for the government to tighten its belt even in the face of recession, offered symbolic freezes on spending and federal wages.

None of this stopped the right from denouncing him as a socialist. But it helped empower bad ideas, in ways that can do quite immediate harm. Right now Mr. Obama is hailing the tax-cut deal as a boost to the economy — but Republicans are already talking about spending cuts that would offset any positive effects from the deal. And how effectively can he oppose these demands, when he himself has embraced the rhetoric of belt-tightening?

Yes, politics is the art of the possible. We all understand the need to deal with one’s political enemies. But it’s one thing to make deals to advance your goals; it’s another to open the door to zombie ideas. When you do that, the zombies end up eating your brain — and quite possibly your economy too.

The way out of slump

http://www.nybooks.com/articles/archives/2010/oct/14/way-out-slump/?page=1

China, Japan, America

Last week Japan’s minister of finance declared that he and his colleagues wanted a discussion with China about the latter’s purchases of Japanese bonds, to “examine its intention” — diplomat-speak for “Stop it right now.” The news made me want to bang my head against the wall in frustration.

You see, senior American policy figures have repeatedly balked at doing anything about Chinese currency manipulation, at least in part out of fear that the Chinese would stop buying our bonds. Yet in the current environment, Chinese purchases of our bonds don’t help us — they hurt us. The Japanese understand that. Why don’t we?
Some background: If discussion of Chinese currency policy seems confusing, it’s only because many people don’t want to face up to the stark, simple reality — namely, that China is deliberately keeping its currency artificially weak.
The consequences of this policy are also stark and simple: in effect, China is taxing imports while subsidizing exports, feeding a huge trade surplus. You may see claims that China’s trade surplus has nothing to do with its currency policy; if so, that would be a first in world economic history. An undervalued currency always promotes trade surpluses, and China is no different.
And in a depressed world economy, any country running an artificial trade surplus is depriving other nations of much-needed sales and jobs. Again, anyone who asserts otherwise is claiming that China is somehow exempt from the economic logic that has always applied to everyone else.
So what should we be doing? U.S. officials have tried to reason with their Chinese counterparts, arguing that a stronger currency would be in China’s own interest. They’re right about that: an undervalued currency promotes inflation, erodes the real wages of Chinese workers and squanders Chinese resources. But while currency manipulation is bad for China as a whole, it’s good for politically influential Chinese companies — many of them state-owned. And so the currency manipulation goes on.
Time and again, U.S. officials have announced progress on the currency issue; each time, it turns out that they’ve been had. Back in June, Timothy Geithner, the Treasury secretary, praised China’s announcement that it would move to a more flexible exchange rate. Since then, the renminbi has risen a grand total of 1, that’s right, 1 percent against the dollar — with much of the rise taking place in just the past few days, ahead of planned Congressional hearings on the currency issue. And since the dollar has fallen against other major currencies, China’s artificial cost advantage has actually increased.
Clearly, nothing will happen until or unless the United States shows that it’s willing to do what it normally does when another country subsidizes its exports: impose a temporary tariff that offsets the subsidy. So why has such action never been on the table?
One answer, as I’ve already suggested, is fear of what would happen if the Chinese stopped buying American bonds. But this fear is completely misplaced: in a world awash with excess savings, we don’t need China’s money — especially because the Federal Reserve could and should buy up any bonds the Chinese sell.
It’s true that the dollar would fall if China decided to dump some American holdings. But this would actually help the U.S. economy, making our exports more competitive. Ask the Japanese, who want China to stop buying their bonds because those purchases are driving up the yen.
Aside from unjustified financial fears, there’s a more sinister cause of U.S. passivity: business fear of Chinese retaliation.
Consider a related issue: the clearly illegal subsidies China provides to its clean-energy industry. These subsidies should have led to a formal complaint from American businesses; in fact, the only organization willing to file a complaint was the steelworkers union. Why? As The Times reported, “multinational companies and trade associations in the clean energy business, as in many other industries, have been wary of filing trade cases, fearing Chinese officials’ reputation for retaliating against joint ventures in their country and potentially denying market access to any company that takes sides against China.”
Similar intimidation has surely helped discourage action on the currency front. So this is a good time to remember that what’s good for multinational companies is often bad for America, especially its workers.
So here’s the question: Will U.S. policy makers let themselves be spooked by financial phantoms and bullied by business intimidation? Will they continue to do nothing in the face of policies that benefit Chinese special interests at the expense of both Chinese and American workers? Or will they finally, finally act? Stay tuned.

The Meaning of Basel: Stiglitz

Joseph E. Stiglitz
“It’s a move in the right direction. One should see these actions as part of trying to correct what is clearly a dysfunctional banking sector.”
“While it’s understandable, given the weaknesses and the failings of the banking system, that one would want to be slow in introducing these increased capital requirements, delay is exposing the public to continued risk. Given the high levels of payouts in bonuses and dividends, it seems a little unconscionable to continue putting the public at risk with an argument that they cannot more rapidly increase their own capital.”
“The banks have complained about the fact that increased capital adequacy requirements of this kind would increase the cost of capital that firms would have to pay. But one should recognize that through the bailouts that have been repeated all through the world, not just during this crisis, the public has in effect been subsidizing the banking sector and that represents a very large distortion in the financial system. If the cost of capital is higher as a result, it’s just undoing a distortionary subsidy.”
“Any assessment of the full impact depends obviously in part on the accounting standards. If banks are allowed to continue the kind of deceptive accounting where they can treat non-performing or impaired mortgages as if they were fully performing, it undermines the effectiveness of these attempts to ensure that banks are adequately capitalized.”
The collapse of Lehman Brothers Holdings Inc. in 2008 “provides an example par excellence” because of the gap between its stated capital and actual capital when it went bankrupt.

The slump goes on: Why?

excellent review

http://www.nybooks.com/articles/archives/2010/sep/30/slump-goes-why/

The Real Story

Next week, President Obama is scheduled to propose new measures to boost the economy. I hope they’re bold and substantive, since the Republicans will oppose him regardless — if he came out for motherhood, the G.O.P. would declare motherhood un-American. So he should put them on the spot for standing in the way of real action.
But let’s put politics aside and talk about what we’ve actually learned about economic policy over the past 20 months.
When Mr. Obama first proposed $800 billion in fiscal stimulus, there were two groups of critics. Both argued that unemployment would stay high — but for very different reasons.
One group — the group that got almost all the attention — declared that the stimulus was much too large, and would lead to disaster. If you were, say, reading The Wall Street Journal’s opinion pages in early 2009, you would have been repeatedly informed that the Obama plan would lead to skyrocketing interest rates and soaring inflation.
The other group, which included yours truly, warned that the plan was much too small given the economic forecasts then available. As I pointed out in February 2009, the Congressional Budget Office was predicting a $2.9 trillion hole in the economy over the next two years; an $800 billion program, partly consisting of tax cuts that would have happened anyway, just wasn’t up to the task of filling that hole.
Critics in the second camp were particularly worried about what would happen this year, since the stimulus would have its maximum effect on growth in late 2009 then gradually fade out. Last year, many of us were already warning that the economy might stall in the second half of 2010.
So what actually happened? The administration’s optimistic forecast was wrong, but which group of pessimists was right about the reasons for that error?
Start with interest rates. Those who said the stimulus was too big predicted sharply rising rates. When rates rose in early 2009, The Wall Street Journal published an editorial titled “The Bond Vigilantes: The disciplinarians of U.S. policy makers return.” The editorial declared that it was all about fear of deficits, and concluded, “When in doubt, bet on the markets.”
But those who said the stimulus was too small argued that temporary deficits weren’t a problem as long as the economy remained depressed; we were awash in savings with nowhere to go. Interest rates, we said, would fluctuate with optimism or pessimism about future growth, not with government borrowing.
When in doubt, bet on the markets. The 10-year bond rate was over 3.7 percent when The Journal published that editorial; it’s under 2.7 percent now.
What about inflation? Amid the inflation hysteria of early 2009, the inadequate-stimulus critics pointed out that inflation always falls during sustained periods of high unemployment, and that this time should be no different. Sure enough, key measures of inflation have fallen from more than 2 percent before the economic crisis to 1 percent or less now, and Japanese-style deflation is looking like a real possibility.
Meanwhile, the timing of recent economic growth strongly supports the notion that stimulus does, indeed, boost the economy: growth accelerated last year, as the stimulus reached its predicted peak impact, but has fallen off — just as some of us feared — as the stimulus has faded.
Oh, and don’t tell me that Germany proves that austerity, not stimulus, is the way to go. Germany actually did quite a lot of stimulus — the austerity is all in the future. Also, it never had a housing bubble that burst. And with all that, German G.D.P. is still further below its precrisis peak than American G.D.P. True, Germany has done better in terms of employment — but that’s because strong unions and government policy have prevented American-style mass layoffs.
The actual lessons of 2009-2010, then, are that scare stories about stimulus are wrong, and that stimulus works when it is applied. But it wasn’t applied on a sufficient scale. And we need another round.
I know that getting that round is unlikely: Republicans and conservative Democrats won’t stand for it. And if, as expected, the G.O.P. wins big in November, this will be widely regarded as a vindication of the anti-stimulus position. Mr. Obama, we’ll be told, moved too far to the left, and his Keynesian economic doctrine was proved wrong.
But politics determines who has the power, not who has the truth. The economic theory behind the Obama stimulus has passed the test of recent events with flying colors; unfortunately, Mr. Obama, for whatever reason — yes, I’m aware that there were political constraints — initially offered a plan that was much too cautious given the scale of the economy’s problems.
So, as I said, here’s hoping that Mr. Obama goes big next week. If he does, he’ll have the facts on his side.

Joseph Stinglitz: A real global man

http://www.josephstiglitz.com/



He has wondered all around the world and has seen the conditions all over the world first hand. He does not take sides with United states but critiques where necessary. His book " Making Globalization work" gives a true picture of the downsides of the present form of globalization and its problems and what needs to be done for globalization to work. He definitely thinks that globalization when rightly used can alleviate the poor countries but now the developed countries have greater bargaining power. This needs to be changed.

Its a wonderful book for a lay man to understand the present situation of globalization and to understand what needs to be done to remedy it.

Making It Up

According to Bloomberg, Raghuram Rajan is now getting specific: he wants Bernanke to raise the Fed funds rate by 200 basis points in the face of 9.5 percent unemployment and inflation under 1 percent.
Let me try to explain what bothers me about this sort of thing, aside from the fact that it would be an utter disaster for the economy: it’s the way Rajan — and many other economists — seem to be making up new doctrines on the fly to justify their policy prejudices.
I’m all in favor of innovative thinking. But my view is that what you say about policy at any given time should be based on some kind of model — and furthermore, you should be willing to apply the same model to other situations, not make it a one-off used to justify what you happen to favor right now.

My writing on policy in this crisis has been based on the same model of macroeconomic policy I use in normal times; it’s just that the situation is different. The quick-and-dirty version looks like this:

That is, other things equal, demand is higher, the lower the real interest rate. Do you really want to quarrel with that? But right now, thanks to the aftermath of the financial crisis, even a zero nominal rate, which is a slightly negative real rate, isn’t low enough to produce full employment.
In normal times, when the zero lower bound isn’t binding, this basic framework suggests that conventional monetary policy can play the key role in stabilization. So in normal times I’m all in favor of having the Fed take on the job of managing the business cycle, and basing fiscal policy on long-term concerns.
But now we’re up against the zero lower bound; and that changes everything.
The idea that it would be good if we could raise expected inflation comes straight out of this minimalist framework: the economy “wants” a negative real interest rate, and the only way to get that given the zero lower bound is to have positive expected inflation.
The case for fiscal expansion also comes out of this fairly straightforwardly: if you can’t raise employment by cutting interest rates, deficit spending — which doesn’t crowd out private spending when the interest rate doesn’t change — becomes a way to put unemployed resources to work.
The point is that I’m not making it up as I go along; I have a consistent view here, which yields unorthodox conclusions right now only because we’re in an unusual situation.
So what is Rajan’s model? What’s the justification for raising real rates in the face of high unemployment? How would that model work in normal times?
My sense, obviously, is that a lot of the people who want monetary tightening start from a prejudice — they just dislike the idea of easy money — and then look for some arguments to back up that prejudice. And that’s no way to do economics.

Planning commission's Macro economic models for India

http://planningcommission.gov.in/reports/genrep/rep_macro.pdf

http://mostlyeconomics.wordpress.com/

A mathematician plays the stock market by John Allen paulos

The book touches many aspects of the stock trading and the author show it by referring to his own experience of loosing money in WCOM during the 2000 crash. He shows the deceptiveness of the media, chatrooms, technical analysis, fundamental analysis and the common fallacies of the masses. But the author being a mathematician tries to find any mathematical correlation with stock market reality. The author agrees that there is more to stock market then the random walk theory and efficient market hypothesis. Though each of these theories have their partial truths and moments when they can be applied, exact timing of which hypothesis will work in the future is impossible to be certain of.

It is a fine book but i found that he as underestimated the technical analysis. Indicators such as the volume of stock traded can show the starting of a pattern of upward movement or downward in technical analysis. It has been nicely explained in Secrets for profitting in bull and bear markets by Stan weinstein. This book that i mention has gotten less attention as i would like but it shows how volume and 30 day average can really show the tread for atleast a couple of months.

I also found that there are select periods of stock growth that make the major moves in stock markets either upward or downwards. These are the periods when people really make money or loose everything. And it is during these times of collapse or exuberance that one needs to know what to do and one also needs to when to
ride with the boat of mass hysteria and when to get off the boat and go against the mass opinion.(shorting)

Over all from the mathematical point of view the author agrees that though math as a science is accurate its application to stock movements cannot be accurate. It can happen sometimes but not always. There are too many forces in play in the stock market. It is a chaos but during certain periods the mass psychology moves in certain directions such as the uptrends and downtrends. The downtrend of the recent collapse of the stock market( 2008) the DOW reached 6500  from 14000 and the uptrend of 2009 the DOW came back to 10500. These are the major movements when real profits or losses incur. And it is during this time that technical analysis and knowledge of trend following and indicators is useful. Even otherwise volume indicator is in my opinion a very useful tool in technical analysis and trend following and also the 30 day average as mentioned in Stan's book.

The back logic is to identify these trends and use it for our advantage. Everything in the market cannot be understood because it depends a lot of factors some rational some irrational.

Overall its a good book to read to know the basics of the current theories and speculations in stock market.
It may help the beginner to understand the forces in play and a precaution before losing one's shirt.

Behaviorial finance psychology terms and common errors

1. Conformation bias: refers to the way we check a hypothesis by observing instances that confirm it and ignoring those that don't.

2. Anchoring effect: example is the 52 week high and making sell or buy decisions based on that.

3. Availability error : is the inclination to view any story, whether political, personal, or financial, through the lens of a superficially similar story that is psychologically available.

4. status quo bias: not doing anything in an uncertain situation even though one is losing.

5. endowment effect: is an inclination to endow one's holdings with more value than they have simply becuase one holds them." its my stock and I love it."

1.  passively endured losses induce less regret than losses that follow active involvement.
2.  people feel considerably more pain after incurring a financial loss than they do pleasure after achieving an equivalent gain. In the extreme case, desperate fears about losing a lot of money induce people to take enormous risks with their money.
3. It's not only in casinos and the stock market that we categorize money in odd ways and treat it differently depending on what mental account we place it in.

Microeconomic principles in one song

Charlie Rose interview: Paul krugman