Thanks to Jeewon Oh, Shanghai American School AP Econ student, for posting the link to this excellent article about supply and demand for teachers in Mississippi. Jeewon posted this article and her below summary of it to our class’s “AP Econ in the News” page on the wiki. CLICK HERE to see the other articles and summaries posted by students relating to our current unit on Supply and Demand. Here’s Jeewon’s article:

Teachers: Shortages require pay hikes -The Clarion-Ledger- Real Mississippi

And here’s Jeewon’s summary from the wiki:

In Mississippi, there are not enough teachers in the classrooms. This teacher shortage is becoming a greater problem, as 50 percent of the teachers nationwide are estimated to leave the profession within five years. In August there were 1,270  requests for one-year education licenses, which would result in temporary and unqualified teachers in schools. Despite the fact that 1,400 education majors graduate from Mississippi colleges, only 900 become teachers. The State Superintendent of Education Hank Bounds realized that if wages increased, there would be more teachers willing to work. Bounds currently wants a 3 percent pay raise andaddition of 5 years to the pay schedule for teachers. This is asupply-and-demand issue, as the Legislative Budget Committee is planning to supply, or offer, higher wages, predicting that more teachers will be demanding and willing to take the job, due to the change in their income.

The reason this article jumped out at me is because it relates to so many of the topics we’ve studied in unit 2 of Microeconomics, particularly our last class where we learned about how free, competitive markets lead to an allocatively efficient outcome. In public schools in America, wages paid to teachers are essentially set by the state and local governments; in essence there is a price ceiling in the market for teachers. According to the article:

Mississippi has been on a plan to get pay competitive, but it still lags. Base pay for a starting teacher is about $30,000. The average salary is $40,594, short of the Southeastern average of $42,333. The national average is $47,674.

Given the severe shortage of teachers in Mississippi and the nation as a whole, what does this say about the average salaries being paid to teachers? What can we conclude about the allocation of resources towards education? Is the market for public education in the United States allocatively efficient? How does Jeewon’s article present a solid argument for the privatization of education in the US? How might taking some of the responsibility of providing education out of government hands result in a more efficient allocation of resources towards schools?

Great article, Jeewon, thanks for the link and the nice summary. From now on, when I see an excellent article like Jeewon’s accompanied by a fine summary such as the one above, I will plan to post it to this blog so others can benefit from the research and reading that our AP students are sharing through our class wiki. The AP Econ in the News page is a great place economics teachers and students to come find useful articles for their classes, as well, so I encourage you to bookmark it. A new page is added for each unit, and it can be found under each unit’s main page.

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FT.com / Asia-Pacific / China – Beijing rejects North American pork

Here’s a follow up to the previous post about China’s attempt to keep inflation low by clamping down on rising prices through price controls. The main cause of the record inflation figures is the shortage of pork in the country. This headline’s irony was obvious, only a few articles below the one linked in the last post!

Here’s the thing; pig shortages have driven up the price of pork by around 60-70% in China. What’s one obvious solution to this problem? Import more pork from overseas to meet the excess demand. So, what’s the government doing about it? Playing politics with the US and blocking imports of American pork! Ha! Looks like their concern for the common Chinese may take a backseat to the retaliatory message sent to the US, which has recently threatened new tariffs on Chinese goods in the wake of concerns over product safety and frustration over the persistent trade imbalance between the two countries.

Beijing has rejected consignments of pork from the US and Canada because they contain a banned additive – in spite of a domestic shortage of China’s staple meat, which pushed inflation to a
10-year high in August.

Again, China’s meddling in the market economy seems to only make things worse for the Chinese people.

Chinese officials have said they expect the pork shortage to remain a problem into next year, but prices have already started to come down from their August high, Xinhua, the official news agency, reported at the weekend. Prices decreased by 11.3 per cent in early September from the levels in August because of an increase in supplies of pigs, Xinhua said.

The number of pigs ready for sale was up 9.9 per cent early this month compared with a year ago, said Sun Zhengcai, the agriculture minister.

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Command vs. Market economics in Zimbabwe:
Mugabe’s decree on prices puts Zimbabwe economy in a tailspin – International Herald Tribune

And a blog post commenting on the news:
Managing Globalization » Economics 101 in Zimbabwe

Our first unit in AP Economics (and Friday’s lecture) examined the differences between command economies and market economies. One of the main points of yesterday’s lecture was that markets work because they result in an efficient allocation of resources towards the right products, using least-cost production methods, and putting those products in the hands of the people whose resources command the highest value in the resource market. If too much of one good is being produced and not enough of another, the “invisible hand” of the market will reallocate resources from the over-produced product to the under-produced product.

One of the reasons command economies fail is that central planners who attempt to control output and price, even when their intentions are to help consumers by assuring enough stuff is produced and available at an affordable price, are in essence acting against a basic economic law: that of supply and demand. In Zimbabwe, where inflation has reached nearly 10,000 percent (that means a candy bar that costs $1 today will cost $100 in a year!!) the president recently attempted to place price controls on all products by forcing merchants to slash their prices in half. The result? Food has vanished from the shelves of markets in Zimbabwe:

Essentials like bread, sugar and cornmeal, staples of every Zimbabwean’s diet, have vanished, seized by mobs of bargain-hunters who denuded stores like locusts in wheat fields. Meat is nonexistent. Gasoline is nearly unobtainable. Hospital patients are dying for lack of basic medical supplies. Power blackouts and water cutoffs are endemic.

Manufacturing has slowed to a crawl, because few businesses can produce goods for less than their government-imposed sale prices. Raw materials are drying up because suppliers are being forced to sell to factories at a loss. Businesses are laying off workers or reducing their hours.

As our first AP unit “Basic Economic Concepts” winds down, this article and blog post seem timely to remind us of one of the core principles of Economics: the importance of prices and markets in allocating resources (land, labor, capital and entrepreneurship) towards producing the goods and services society most wants. Later in the year we’ll examine what happens when markets fail, which they often do; but at this point in the course it is important to understand that despite their failures and shortcomings, free markets rarely experience the chaos associated with command economies of the past, and even the present as the Zimbabwe example shows. In the words of Daniel Altman, the blogger linked above:

The Soviets, Chinese and some of their allies kept their tightly controlled economies going for quite a few decades, though not perhaps with unalloyed success (former backyard smelters in China will get the pun). Mugabe’s version hasn’t even lasted through a change of seasons. Now, there are still a few lingering arguments in academia and policy circles about the merits of command economies. But a poorly planned command economy – no one seems to want that. Can anything short of total collapse follow?

Any thoughts? Why did Mugabe’s attempt to help consumers by keeping prices low only make the problem worse? What does this say about markets versus planned economies? Discuss!

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