Different Inflation Perspectives of Men and Women

Between society's “haves” and “have-nots”, the former are better positioned to endure cost-of-living increases. As the results, they tend to be less sensitive to price increases, and have the so called "lower inflation perceptions and expectations".

However the gender is also a factor here - study shows that sex can influence inflation expectations too: after holding income, age, education, race and marital status constant, women consistently think inflation is 1.9% points higher than men, and they expect prices to rise 2.1% points more than men.

Now you know why women love coupons and sales.

The price of loved one's death

Economists are good at put price tags on any things. Below is an another interesting example.

Question - if money could buy happiness, how much would it take to bring it back after the death of a partner, child or spouse?

Answer - it would take $220,000 annually to raise someone's happiness to pre-death levels after a spouse dies, $118,000 for a child, $28,000 for a parent, $16,000 for a friend and only $2,000 for a sibling.

Calculation - economists reviewed data collected from 10,000 Britons tracked by the British Household Panel Survey, begun in 1991, which records major life events and includes questions designed to gauge overall mental health. Economists then identified the amount of money, on average, that raised a person's mental health score by the same amount that a loved one's death lowered it.

No need to think above numbers are results of a weired, gruesome exercise. Economists say they hope it will provide legal courts with a way to more fairly award damages.

Marriage makes you rich

The economist.com had a special report on the recent marriage trend in America. I found some numbers in the report clearly demonstrated that marriage is a great "wealth-generating institution":

(1) research have shown those who married and never divorced, end up on average, 4 times richer than those who never marry. This is partly because marriage provides economies of scale—two can live more cheaply than one; partly because marriage encourages the division of labour, couples are complement to each other in their skill set.

(2) research also shown married men drink less, take fewer drugs and work harder, earning between 10% and 40% more than single men with similar schooling and job histories.

Increase in obesity linked to wealth reduction

I found an interesting, but a bit old research news (Economics and Human Biology, July 2005) - overweight Americans who lose a lot of weight also tend to build more wealth as they drop the pounds. The study used data involving about 7,300 people who participated in the National Longitudinal Survey of Youth.

The results showed that a 1 unit increase in a young person's body mass index score (BMI) was associated with a $1,300 or 8% reduction in wealth. But the changes varied dramatically by ethnicity and gender. For example, white women who dropped their BMI score by 10 points saw a wealth increase of $11,880. White men saw an increase of $12,720 for a similar drop, while black women increased wealth by $4,480.

The data in this study can't tell us whether a person's wealth affects obesity, or whether obesity affects wealth. However, researchers thought it is more likely that weight influences wealth. One possible explanation, which I believe is true, would be that overweight and obese people (particularly white women) are discriminated against in the workforce, and don't earn as much money as normal weight people.

You don't have to be smart to be rich

Here is a good news for the rest of us - it doesn't take a rocket scientist to make a lot of money, according to a new research. This nationwide study (published in Intelligence) in found that people of below average intelligence were, overall, just about as wealthy as those in similar circumstances but with higher scores on an IQ test.

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Firstly, this study confirmed data discovered by other scholars that show people with higher IQ scores tend to earn higher incomes. In this study, each point increase in IQ scores was associated with $202 to $616 more income per year. This means the average income difference between a person with an IQ score in the normal range (100) and someone in the top 2% of society (130) is currently between $6,000 and $18,500 a year.

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But when it came to total wealth and the likelihood of financial difficulties, people of below average and average intelligence did just fine when compared with the super-intelligent. The study could find no strong relationship between total wealth and intelligence.

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How could high-IQ people, on average, earn higher incomes but still not have more wealth than others? Researchers suggests that high-IQ people are not saving and investing as much as others. For example, among the smartest people, those with IQ scores above 125, 6% of them have maxed out their credit cards and 11% occasionally miss payments, whereas those with an IQ of 75 and below, 7.7% have maxed out their credit cards.

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The lesson learned ? IQ is not a factor for explaining wealth. I think wealth has lot to do with people's emotional intelligence. Universities Professors tend to be very smart people, but I recall when looking at university parking lots, there were very few Professors having Rolls Royces, Porsches or other very expensive cars. Instead I saw them driving old, low-value vehicles.

The more you pay, the less the fun of buying ?

I copied above graph from Seth Godin's blog. He called this 'Joy/cash curve', and explains:

"It seems that for many products, the more you pay, the less fun the buying is. (Not the shopping, the buying). It used to be true at the bottom end of the scale too - the less you pay, the less fun".

We can all argue what the shape of this curve should be in our real life, but the essence of the message is the same. In his blog, Seth can always find the chemistry between human nature and marketing from everyday experience, which most of us don't see them through at all.

Numbers of the day - 2006 tax return

Today is the last day, in US, to file your 2006 tax return. It was Benjamin Franklin who said in this world nothing is certain but death and taxes, and it becomes harder for being a taxpayer nowadays.

According to The National Taxpayers Union, an advocacy group, average taxpayer spent 24.2 hours in record keeping, boning up on tax law and preparing their 2006 returns, with average cost of $207. In total, 3.18 billion hours in US were spent on individual tax preparations.

Corporations spent an estimated $156.5 billion working on their taxes, that is 44% of the $354 billion in corporate income taxes the U.S. collected last year.

How many millionaires are out there ?

A recent research has found that some 2.9 million people in the United States and Canada have net worth's of $1 million. Majority of them (about 70%) have earned their money by building successful businesses or saving from their salaries. The others inherited (all or part) of their wealth.

However, today's $1 million isn't that glamours as it used to be, based on US Federal Reserve figures, someone who bought $1 million worth of goods in 1957 would need $7.3 million to buy the same goods today.

What You Make = Who You Know

Being "well connected" has long been an aspiration for most people, whether it is to help score tickets to the big game, get a kid into a top school, or give a boost to a career. It turns out, even CEOs, who already are at the peak of power, have an interest in well-connectedness, perhaps even more than most, at least in terms of absolute dollars.

Based on public data collected for all US S&P 1,500 firms between 1996 and 2004, a recent study conducted by Ilan Guedj and Amir Barnea of University of Texas–Austin, find that firms that have more connected directors award their CEOs a higher compensation. CEO of a firm that is in the top 1/5 of connected firms receives a 10% higher salary and 13% higher total compensation than a CEO of a firm that is in the bottom 1/5.

How much do we owe IRS ?

An US Internal Revenue Service (IRS) study last year concluded that government collected only 86% of the tax it was owed in 2001. The tax gap (between what taxpayers owe and what they pay) in 2001 was $345 billion. This translate to $2,680 unpaid taxes per US household. Of that, "$197 billion came from underreporting on individual income tax returns and $88 billion from underreporting by corporations and the self-employed. The rest came from those not filing or not paying the proper amount".