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Marketplace of Ideas

Here’s your guide to some of the key economic stories in the news this week…

  • Shopping MallLike Presidents Day and Columbus Day, Labor Day has morphed from an occasion to honor the achievements of American workers to an excuse for a shopping spree. MarketWatch reports that 65 percent of Americans plan to shop this weekend, up from 59 percent last year. It advises that Labor Day is a good time to buy a car, summer clothes, and housewares at deep discount, but avoid higher-priced fall fashions and electronics. If you do hit the mall this weekend, ruminate on this story from NPR about a mall in California where two different minimum wages prevail: One side of the building is in Santa Clara, where the minimum wage is $9 per hour, while the other side is in San Jose, where the rate is $10.15. Echoing the findings of a 2010 study, the shops holding fast to the lower wage are struggling to hire and retain workers, while the shops paying the higher rate have raised prices a bit but have not reduced their workforces.

  •  This week brought a slew of housing market data: New home sales fell, as did a popular measure of house prices, but the pending home sales index rose by more then expected. What does all of this tell us about the state of the housing market? It depends on who you ask: MarketWatch reports that lower house prices are a sign the housing market is falling apart, while the Upshot claims softer prices are a good thing, suggesting the boom-bust cycle is over. Confused yet? Check out AIER’s recent analysis of the housing market in our Business Cycle Conditions report. According to Bob Hughes, “Rising mortgage rates and restrictive credit conditions are likely to restrain what would otherwise be a more robust growth path” for housing this year.
  •  With the ebola crisis deepening, James Surowiecki takes a look at “ebolanomics” for the New Yorker’s Financial Page. The lack of an effective treatment for the virulent disease is “disturbing” but “predictable,” he says. That’s because pharmaceutical companies consider their market when allocating R&D resources, and drugs geared toward wealthier “developed” countries stand to provide a better return on investment. According to the World Health Organization, neglected tropical diseases kill up to half a million people each year and affect more than a billion. Surowiecki argues that governments should award prizes for new drugs to treat such diseases. He says economists of all stripes see prizes as a cost-effective way to encourage innovation and investment in areas where the market has failed to produce solutions. Currently, the U.S. has an incentive program that awards pharmaceutical companies a transferable voucher for fast-track FDA approval on the drug of their choice if they come up with an approved treatment for one of 16 neglected diseases. Ebola is not currently on that list.

[Photo via Pixabay]

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