SO WE THOUGHT. BUT THEN AGAIN . . .
January 15, 2008
Economic knowledge continues to progress in unexpected ways. Here are a few of the things we learned in the last 12 months, says Tyler Cowen, professor of economics at George Mason University.
First, China may not be as strong as initially thought:
- Many of the prices in China had not been accurately measured since the late 1980s.
- In 2007, new data indicated that food, rent and other items had become a lot more expensive than had been accounted for in official measurements.
- Higher prices, of course, mean lower Chinese real wages and a smaller size for the Chinese real economy.
- Furthermore, poverty in China remains severe; the data revisions imply that China has 300 million workers -- about the size of the entire United States population -- earning less than a dollar a day.
Domestically, there has been plenty of talk about "predatory lending," but "predatory borrowing" may have been the bigger problem:
- As much as 70 percent of recent early payment defaults had fraudulent misrepresentations on their original loan applications, according to BasePoint Analytics.
- In some cases, borrowers who were asked to state their incomes just lied; sometimes reporting five times actual income.
- Other borrowers falsified income documents by using computers.
Lastly, heat waves may receive more publicity, but it turns out that cold periods have more significant and longer-lasting effects on human mortality:
- Spells of extreme cold kill over 27,000 Americans each year, or about 700 people each very cold day.
- 8 to 15 percent of the increase in American life expectancy over the last 30 years comes from people moving to warmer climates.
Heat waves tend to kill people who were already weakened and would have died soon anyway, whereas cold periods bring additional people to the verge of death through cardiovascular stress and heart attacks, says Cowen.
Source: Tyler Cowen, "So We Thought. But Then Again . . ." New York Times, January 13, 2008.
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