ECO LECTURE THIRTEEN 1 OKAY. WHAT WE WANT TO DO TODAY IS CONTINUE DISCUSSING THE

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1 ECO LECTURE THIRTEEN 1 OKAY. WHAT WE WANT TO DO TODAY IS CONTINUE DISCUSSING THE THINGS THAT WE STARTED WITH LAST TIME. CONSUMER PRICE INDEX, YOU REMEMBER, WE WERE TALKING ABOUT. AND I THINK WHAT I WANT TO DO IS TALK ABOUT THE INFLATION RATE. WHEN WE TALK ABOUT THE INFLATION RATE WHAT PEOPLE HAVE IN MIND IS THIS IS THE ANNUAL PERCENTAGE CHANGE -- LET ME NOT SAY CHANGE, BUT LET ME SAY INCREASE IN THE CPI. LET ME GIVE YOU AN EXAMPLE. SUPPOSE THAT THE CONSUMER PRICE INDEX IN I THINK I HAD THAT WRITTEN DOWN, ACTUALLY -- IN 1990 WAS ONE THIRTY POINT SEVEN. WELL, JUST SUPPOSE THAT WAS THE CONSUMER PRICE INDEX IN -- WHAT'D I SAY -- IN WHAT DO I HAVE HERE? IN 1991 IT WAS ONE THIRTY- SIX POINT TWO. THIS IS 1990 AND 1991 IT WAS ONE THIRTY-SIX POINT TWO. SO, FIRST OF ALL, WE CAN SEE THAT THE PRICE LEVEL WENT UP FROM 1990 TO 1991, AND SO THERE WAS DEFINITELY AN INCREASE IN THE PRICE LEVEL AND SO WE DEFINITELY HAD INFLATION. BUT HOW MUCH? WE DON'T WANT TO KNOW THAT THERE WAS JUST INFLATION, BUT WE WANT TO KNOW THE RATE. AND IT'S A FAIRLY SIMPLY THING TO SAY THE CHANGE IN THE PRICE INDEX -- LET ME GIVE YOU A FORMULA. THE INFLATION RATE EQUALS THE CHANGE -- I'M USING THE DELTA SIGN -- THE CHANGE IN THE CPI DIVIDED BY THE ORIGINAL CPI. OKAY. NOW, THE CHANGE IN THE CPI, ONE THIRTY-SIX POINT TWO MINUS ONE THIRTY POINT SEVEN EQUALS FIVE POINT FIVE. THE INDEX NUMBER

2 ECO LECTURE THIRTEEN 2 INCREASED BY FIVE POINT FIVE UNITS. THE ORIGINAL AMOUNT WAS ONE THIRTY POINT SEVEN. BY THE WAY, THAT REMINDED ME TO DO ONE MORE THING. WE NEED TO COME OUT HERE -- WE DID THIS THE OTHER DAY -- AND MULTIPLY BY ONE HUNDRED SO WE GET THIS IN WHOLE NUMBERS RATHER THAN IN DECIMALS. ANYWAY, IT'S FOUR POINT TWO ONE PERCENT. SO IN THAT ONE YEAR, THE PRICE LEVEL WENT UP BY FOUR POINT TWO PERCENT, RIGHT? IS THAT A LOT? NOT VERY MUCH? WELL, A LOT OR NOT VERY MUCH. WHAT WE WOULD DO IS REALLY -- WE COULD COMPARE THAT TO PREVIOUS YEARS OR WE COULD COMPARE IT TO HISTORICAL AVERAGE. WHAT I LIKE TO DO IS, I COMPARE THE INFLATION RATE TO WHAT HAPPENS TO MY PAY. IF MY PAY GOES UP, LET'S SAY, FIVE PERCENT AND THE INFLATION RATE IS FOUR POINT ONE, THAT MEANS THAT I'VE GOT FIVE PERCENT MORE MONEY TO SPEND. BUT THE THINGS I'M BUYING ARE FOUR POINT TWO PERCENT MORE EXPENSIVE THAN BEFORE, SO THEN I CAN BUY ALL THE THINGS I USED TO BUY AND A LITTLE BIT MORE. SO IF YOU COMPARE YOUR PAY, HOW MUCH IT GOES UP -- NOT ITS INFLATION RATE BUT ITS -- YOUR PAY INCREASE AS A PERCENT, IF YOU COMPARE THAT PERCENT TO THE INFLATION RATE, YOU CAN TELL WHETHER YOU'RE SORT OF GAINING GROUND OR LOSING GROUND. IF YOUR PAY GOES UP THREE PERCENT AND THE PRICE LEVEL GOES UP FOUR POINT TWO PERCENT, YOU CANNOT BUY THE SAME BUNDLE OF GOODS AND SERVICES THAT YOU WERE ABLE TO PURCHASE THE YEAR BEFORE BECAUSE THAT

3 ECO LECTURE THIRTEEN 3 BUNDLE IS NOW MORE EXPENSIVE -- ENOUGH MORE EXPENSIVE THAT IT ABSORBS EVERYTHING THAT YOU -- OF YOUR PAY INCREASE AND A LITTLE BIT MORE. LET ME ASK YOU THIS QUESTION. LET'S JUST LEAVE THIS AT FOUR PERCENT AND FORGET ABOUT THE FOUR POINT TWO FOR JUST A SECOND. LET'S SAY THAT THE INFLATION RATE IS FOUR PERCENT. HOW LONG WOULD IT TAKE FOR THE PRICE LEVEL TO DOUBLE? REMEMBER THAT FORMULA? THE RULE OF SEVENTY-TWO, HOW LONG FOR SOMETHING TO DOUBLE? WE KNOW HERE THIS IS FOUR PERCENT. SEVENTY-TWO EQUALS FOUR TIMES T. T IS THE TIME TO DOUBLE -- NOW ITS THE PRICE LEVEL, NOT AN INVESTMENT. DIVIDE BOTH SIDES BY FOUR, THOSE CANCEL, T EQUALS EIGHTEEN. SO IN EIGHTEEN YEARS THE PRICE OUGHT TO DOUBLE IF IT'S GROWING AT FOUR PERCENT A YEAR. HEY, I SMELL A GOOD TEST QUESTION. WHAT IF THE INFLATION RATE IS THREE PERCENT A YEAR? HOW LONG TO DOUBLE THE PRICE LEVEL? ANYBODY? SEVENTY-TWO DIVIDED BY THREE, TWENTY-FOUR. OKAY. SO ANYWAY, KIND OF KEEP THAT IN MIND. HOW DO WE USE THE CONSUMER PRICE INDEX? WELL, I DIDN'T WRITE ANYTHING ON THE BOARD. BUT ONE USE -- I JUST TOLD YOU A MOMENT AGO -- YOU CAN COMPARE THE INCREASE IN PRICES TO THE INCREASE IN YOUR PAY, AND THAT'S HOW A LOT OF PEOPLE USE IT. BY THE WAY, WE CAN DO EXACTLY THE SAME THING FOR THE UNITED STATES ECONOMY. WHAT WE COULD SAY IS SOMETHING LIKE THIS. OH, GROSS DOMESTIC PRODUCT, THAT'S THE TOTAL VALUE OF ALL THE PRODUCTION THAT OCCURS IN THE

4 ECO LECTURE THIRTEEN 4 UNITED STATES. LET'S SAY THAT THE MARKET VALUE OF GROSS DOMESTIC PRODUCT -- IT GOES UP FIVE PERCENT. IF THE INFLATION RATE IS FOUR PERCENT, THEN WHAT WE WOULD SAY IS, "YEAH, THE MARKET VALUE OF EVERYTHING WE PRODUCE HAS GONE UP BY FIVE PERCENT, BUT FOUR PERCENT OF THAT WAS ACCOUNTED FOR BY RISING PRICES. AND IN TERMS OF THE PHYSICAL GOODS AND SERVICES, WE'RE ONLY PRODUCING ABOUT ONE PERCENT MORE." ONE PERCENT MORE GOODS AND SERVICES, FOUR PERCENT HIGHER PRICES, THAT WOULD CAUSE THE GDP TO RISE BY FIVE PERCENT. SO THAT IS ONE APPLICATION. HERE'S ANOTHER APPLICATION. WE CAN BASICALLY CALCULATE WHAT WE CALL A REAL INCOME. REAL INCOME EQUALS MONEY INCOME DIVIDED BY THE CPI DIVIDED BY A HUNDRED. IF YOU REMEMBER, I TOLD YOU WE WERE GONNA HAVE TO COME BACK TO THAT TOPIC LATER ON. WE MULTIPLY BY A HUNDRED WHEN WE'RE CALCULATING THE CPI SO NOW WE HAVE TO DIVIDE BY A HUNDRED TO GET THAT HUNDRED OUT OF THERE. OKAY. BUT TO GIVE YOU AN EXAMPLE, SUPPOSE THAT -- SUPPOSE THAT YOUR INCOME IS TWENTY-TWO THOUSAND DOLLARS. OKAY. AND SUPPOSE THAT -- THERE'S INCOME. SUPPOSE TODAY'S CPI IS, I DON'T KNOW, A HUNDRED AND SIXTY. I'LL PUT ONE POINT SIX ZERO IF IT'S A HUNDRED AND SIXTY CPI, EQUALS ONE SIXTY, AND THEN I'VE DIVIDED BY A HUNDRED. THEN LET'S SEE. TWENTY-TWO THOUSAND DIVIDED BY ONE POINT SIX EQUALS THIRTEEN SEVEN FIFTY. WHAT'S THAT MEAN? TODAY'S TWENTY-TWO THOUSAND

5 ECO LECTURE THIRTEEN 5 DOLLARS IN INCOME WOULD PURCHASE GOODS VALUED AT THIRTEEN THOUSAND SEVEN FIFTY IN THE BASE YEAR, IN THE BASE PERIOD. AND IF YOU REMEMBER, THAT'S 1982 THROUGH '84. OKAY. WE JUST TAKE TODAY'S MONEY INCOME AND WE DIVIDE BY THE CPI. NOW WE'VE CALCULATED THIS REAL INCOME MEASURED. NOW, LET ME TELL YOU SOMETHING. SINCE WE DON'T HAVE, YOU KNOW, LIKE A WAY BACK MACHINE, WE CAN'T DO TIME TRAVELING AND SO FORTH, YOU MIGHT SAY, "I DON'T REALLY CARE WHAT MY INCOME TODAY WOULD'VE PURCHASED IN IT JUST ISN'T INTERESTING TO ME." AND THAT'S NOT INTERESTING TO ME, EITHER. BUT THE POINT IS IS THAT SOMETIMES SOMETHING LIKE THIS WOULD COME UP. MAYBE YOUR INCOME TODAY IS TWENTY-TWO THOUSAND DOLLARS AND THE PRICE LEVEL IS ONE POINT SIX ZERO OR A HUNDRED AND SIXTY TODAY, SO WE KNOW THIS FIRST PIECE OF INFORMATION. SUPPOSE I TELL YOU THIS: "HEY, YOUR PAY IS GOING UP TO TWENTY-FIVE THOUSAND DOLLARS NEXT YEAR." AND NEXT YEAR THE CONSUMER PRICE INDEX WILL BE A HUNDRED AND SIXTY-THREE, LET'S SAY ONE POINT SIX THREE, AND NOW WE CAN DO ANOTHER CALCULATION OF REAL INCOME. THIS IS YOUR MONEY WAGES -- AND NEXT YEAR -- AND HERE'S THE CPI DIVIDED BY A HUNDRED NEXT YEAR. SO WHEN WE DO THIS DIVISION, TWENTY-FIVE THOUSAND DOLLARS DIVIDED BY ONE POINT SIX THREE, THAT'S EQUAL TO FIFTEEN THOUSAND THREE THIRTY-SEVEN. NEXT YEAR'S PAY WOULD BE ENOUGH TO HAVE PURCHASED FIFTEEN THOUSAND THREE HUNDRED AND

6 ECO LECTURE THIRTEEN 6 THIRTY-SEVEN DOLLARS WORTH OF GOODS AND SERVICES BACK IN 1982 THROUGH '84. NOW, HERE'S WHERE WE ACTUALLY USE THESE. NEITHER ONE OF THESE VARY -- AND I SHOULD WRITE DOWN REAL INCOME NEXT YEAR. USUALLY PEOPLE DON'T KNOW WHAT THEIR INCOME'S GONNA BE NEXT YEAR. BUT ANYWAY, WE'RE NOT VERY INTERESTED IN ONE OF THESE OR THE OTHER ONE, BUT WE CAN USE 'EM TOGETHER. AND HERE'S WHAT WE WOULD DO. WE SAY, "LOOK. IN ONE YEAR MY MONEY INCOME WAS THIRTEEN SEVEN FIFTY -- NOT MY MONEY; MY REAL INCOME -- THIRTEEN SEVEN FIFTY. THE NEXT YEAR IT'S FIFTEEN THREE THIRTY-SEVEN. AND SO THE PERCENTAGE CHANGE IN REAL INCOME IS EQUAL TO THE CHANGE IN MY REAL INCOME DIVIDED BY MY ORIGINAL REAL INCOME. THE CHANGE, YOU CAN SAY FIFTEEN THREE THIRTY-SEVEN MINUS THIRTEEN SEVEN FIFTY, AND SO FORTH. THIS COMES OUT TO ELEVEN POINT FIVE PERCENT. NOW, THIS IS THE THING I'M SAYING THAT IS IMPORTANT. NOT ONE OF THOSE NUMBERS OR THE OTHER ONE. BUT WHAT WE CAN SAY NOW IS, "HEY, I GOT A PAY INCREASE FROM TWENTY-TWO TO TWENTY-FIVE THOUSAND DOLLARS. AND FORGETTING ABOUT THE BASE YEAR OR ANYTHING ELSE, THAT MEANS MY PAY WENT UP BY ELEVEN POINT FIVE PERCENT IN TERMS OF ITS PURCHASING POWER. IN TERMS OF PURCHASING POWER, I'M ELEVEN AND A HALF PERCENT BETTER OFF." AND THAT HAS NOTHING TO DO WITH THE BASE YEAR. ALL WE WERE DOING IS TRYING -- HERE'S THE THING. THE TWENTY-FIVE THOUSAND DOLLARS, THAT WAS IN

7 ECO LECTURE THIRTEEN 7 NEXT YEAR'S DOLLARS. AND THE TWENTY-TWO THOUSAND DOLLARS, THAT WAS IN THIS YEAR'S DOLLARS. AND THIS YEAR'S DOLLARS AND NEXT YEAR'S DOLLARS AREN'T REALLY COMPARABLE AND THE REASON THEY AREN'T IS PRICES ARE CHANGING. AND SO WHAT WE WANT TO DO IS, WE WANT TO CONVERT THE TWENTY-TWO THOUSAND DOLLARS IN THIS YEAR'S DOLLARS INTO TERMS, 1982 THROUGH 1984 DOLLARS, BUT WE WANT TO CONVERT THESE INTO DOLLARS THAT CAN BE COMPARED TO THE TWENTY-FIVE THOUSAND. SO WE CONVERT 'EM BOTH INTO DOLLARS IN THE BASE YEAR. AND THEN WE COMPARE THOSE DOLLARS AND WHAT WE SAY IS, WE'RE UP ELEVEN AND A HALF PERCENT. NOW, FORGETTING ABOUT THE BASE YEAR, THAT MEANS THAT YOUR REAL PAY HAS GONE UP. QUESTIONS ABOUT THIS? IF YOUR PAY DOES NOT KEEP UP WITH THE INFLATION RATE, IF YOUR PAY GOES UP, AS I SAY, FIVE PERCENT AND THE INFLATION RATE IS SIX, YOU'RE FALLING BEHIND ALL THE TIME. AND THAT'S SOMETHING, OF COURSE, THAT CAUSES UNIONS AND WORKERS IN GENERAL TO BARGAIN FOR HIGHER WAGES. WHAT I THOUGHT I WOULD DO IS SHOW YOU JUST VERY BRIEFLY THAT THERE'S A PUBLICATION THAT'S IN THE LIBRARY OR YOU CAN SUBSCRIBE TO IT. IT'S CALLED THE CPI DETAILED REPORT. WHAT'S IT SAY? THE CPI DETAILED REPORT. AND I PUT A FEW LITTLE BOOKMARKS IN HERE JUST SO I COULD SORT OF OPEN THIS UP AND MENTION A COUPLE OF THINGS TO YOU. HERE'S A TABLE I SEE THAT SAYS "HISTORICAL CONSUMER PRICE

8 ECO LECTURE THIRTEEN 8 INDEX FOR ALL URBAN CONSUMERS." AND IT GOES BACK TO 1960 UP TILL -- WELL, TO THE PRESENT, AND IT SHOWS MONTHLY NUMBERS FOR THAT. 1960, THE CONSUMER PRICE INDEX WAS TWENTY-NINE POINT THREE. SO TWENTY-NINE POINT THREE, THAT WAS IN 1982; '84 IS EQUAL TO A HUNDRED. SO THAT MEANS THAT PRICES A LITTLE BIT MORE THAN TRIPLED FROM 1960 TO 1982, '84. THERE'S ALL KINDS OF OTHER PRICE INDEXES IN HERE. IT'S JUST TABLE AFTER TABLE -- I'LL SORT OF THUMB THROUGH THERE -- OF VARIOUS INFORMATION ABOUT THE CONSUMER PRICE INDEX. THEY'VE GOT PRICE INDEXES FOR SOME MAJOR CITIES, FOR EXAMPLE. HERE'S ONE THAT I HIGHLIGHTED. IT'S GOT THE U.S. AVERAGE AND I TOLD YOU THAT THERE ARE ACTUALLY HUNDREDS OF GOODS IN THAT MARKET BASKET THAT GETS PRICED. BUT YOU'LL SEE SOMETHING LIKE THIS -- I JUST HIGHLIGHTED ONE THING. HERE'S GROUND CHUCK -- WHICH IS A FORM OF HAMBURGER, OF COURSE -- AND IN JANUARY OF '96 THAT GROUND CHUCK WAS SELLING FOR A DOLLAR SEVENTY-NINE, ONE SEVEN NINE NINE. AND THEN IN FEBRUARY OF '96 THAT SAME HAMBURGER WAS SELLING FOR ONE SEVEN NINE SIX. THAT'S A NATIONAL AVERAGE. THEY PRICED GROUND CHUCK IN DOZENS OF CITIES AND CAME UP WITH THESE AVERAGES. AND WHAT YOU CAN SEE IS THAT THE PRICE OF HAMBURGER OR GROUND CHUCK -- BECAUSE RIGHT BELOW THE GROUND CHUCK IS GROUND BEEF. AND SO THERE'S MANY DIFFERENT GRADES OF HAMBURGER. LET ME JUST KIND OF READ A FEW OF THESE TO YOU. I'M NOT GONNA DO ANY CALCULATION HERE, BUT YOU CAN SEE THAT JUST THAT ONE LITTLE

9 ECO LECTURE THIRTEEN 9 COMPONENT OF CONSUMER PRICE INDEX WENT DOWN BY FOUR-TENTHS OF A CENT IN THAT MONTH. BUT HERE'S A FEW OF THE THINGS. JUST UNDER THE MEAT, POULTRY, FISH AND EGGS CATEGORY IT SAYS, GROUND CHUCK, GROUND BEEF, GROUND BEEF LEAN AND EXTRA LEAN, GROUND ROAST, CHUCK ROAST, CHUCK ROAST CHOICE AND BONELESS, GROUND ROAST CHOICE BONELESS, GROUND ROAST -- OR ROUND ROAST NOW, GRADED AND UNGRADED. RIB ROAST, CHOICE, BONE IN. STEAK, T-BONE, CHOICE, BONE IN. I GUESS THAT MEAN IT'S STILL GOT THE BONE IN IT. STEAK, RIBEYE; STEAK, ROUND; STEAK, ROUND, GRADED AND UNGRADED; STEAK, SIRLOIN; STEAK, SIRLOIN, GRADED AND UNGRADED. THIS JUST GOES ON. AND THEN FINALLY WE GET TO THE PORKS. HAM, SHOULDER; PICNIC HAM. OTHER MEATS, FRANKFURTERS. LAMB AND MUTTON. THIS JUST GOES ON AND ON. HOW MUCH FOR ONE OF THOSE BALONEY STEAKS? IT'S IN THERE. SO ANYWAY, THE POINT IS, THOUGH, THERE ARE HUNDREDS OF ITEMS IN THE BASKET AND THEN EACH ONE OF THOSE ITEMS GETS PRICED IN A LARGE NUMBER OF CITIES AND DIFFERENT STORES WITHIN EACH ONE OF THOSE CITIES. MY BROTHER USED TO WORK AT A RETAIL STORE IN KANSAS CITY, AND I GUESS IT WAS ONCE A MONTH THEY WOULD COME AROUND -- THE LABOR DEPARTMENT, THAT'S WHO DOES IT. IT SAYS HERE BUREAU OF LABOR STATISTICS. THE LABOR DEPARTMENT WOULD COME AROUND TO EACH STORE AND GET A FEW PRICES BUT THEY DIDN'T PRICE EVERYTHING. THEY HAD A VERY SOPHISTICATED METHOD FOR PICKING, SORT OF DOING A RANDOM SAMPLING. AND SO THEY WOULD COME AROUND AND GET A FEW

10 ECO LECTURE THIRTEEN 10 PRICES AND THEN LEAVE. OKAY. SO, HUNDREDS OF ITEMS. AND THEN, OF COURSE, THEY GET INTO SPECIFIC PRODUCT NAMES, DIFFERENT STORES, AND SO FORTH. THIS IS A -- CAN YOU IMAGINE DOING THIS EVERY SINGLE MONTH, YEAR AFTER YEAR? BUT, I MEAN, THERE ARE THOUSANDS OF STORES IN -- HUNDREDS OF STORES, I SHOULD SAY -- THOUSANDS OF ITEMS THAT ARE PRICED IN THAT CONSUMER PRICE INDEX. OKAY. THE SECOND MAJOR TOPIC THAT WE WANT TO TALK ABOUT IN THIS UNIT OF MATERIAL IS THE UNEMPLOYMENT RATE. WE TALKED ABOUT THE CPI AND IF YOU'LL REMEMBER WHAT WE'RE DOING IS, WE'RE TALKING ABOUT KEY CONCEPTS THAT SURFACE OVER AND OVER WHEN YOU TALK ABOUT MACROECONOMICS. OKAY. FIRST OF ALL, LET ME MENTION THIS. TO PRODUCE MORE GOODS, MORE WORKERS ARE REQUIRED AND THAT SUGGESTS A LOWER UNEMPLOYMENT RATE. AND THE REASON I WRITE THIS UP HERE IS JUST TO BRING THIS BACK TO YOU. SOMETIMES YOU'RE THINKING ABOUT UNEMPLOYMENT, SOMETIMES YOU MIGHT BE THINKING ABOUT THE PRODUCTION LEVEL. IS THE GROSS DOMESTIC PRODUCT INCREASING? ARE WE PRODUCING MORE GOODS? AND THIS ISSUE OF UNEMPLOYMENT IS NOT SEPARATE FROM THE ISSUE OF GROSS DOMESTIC PRODUCT AND HOW MUCH DO WE PRODUCE. BECAUSE AS WE PRODUCE MORE, WE NEED MORE WORKERS AND THE UNEMPLOYMENT RATE GOES DOWN. THERE'S AN INVERSE RELATIONSHIP, I'M SAYING, BETWEEN THIS PRODUCTION LEVEL AND

11 ECO LECTURE THIRTEEN 11 THE ECONOMY, GROSS DOMESTIC PRODUCT, AND THE UNEMPLOYMENT RATE. PRODUCTION UP, UNEMPLOYMENT DOWN. SO DURING A PERIOD OF PROSPERITY WHEN THERE'S A LOT OF PRODUCTION AND INCOMES ARE RISING, UNEMPLOYMENT IS DECLINING. LET'S INTRODUCE A FEW TERMS OR CONCEPTS TO BEGIN WITH. FIRST IS THE -- LET'S SEE HOW THIS IS STATED -- THE CIVILIAN NONINSTITUTIONAL POPULATION. CIVILIAN NONINSTITUTIONAL POPULATION, AGE SIXTEEN AND OVER. THIS IS PRETTY STRAIGHTFORWARD STUFF. WHEN WE SAY "CIVILIAN," WE'RE NOT INCLUDING PEOPLE IN THE MILITARY. WHEN WE SAY "NONINSTITUTIONAL," PEOPLE IN JAILS OR OTHER TYPES OF INSTITUTIONS ARE LEFT OUT -- HOSPITALIZED AND SO FORTH. AND THEN "AGE SIXTEEN AND OVER," YOU GUYS KNOW WHAT THAT MEANS: AGE SIXTEEN AND OVER. THIS IS CONSIDERED TO BE BASICALLY THE POOL OF EVERYBODY WHO COULD POTENTIALLY WORK IF THEY WANTED TO. THESE ARE THE PEOPLE WHO COULD WORK IF THEY WANTED TO. IF YOU'RE IN JAIL OR IF YOU'RE IN THE MILITARY -- IF YOU'RE IN THE MILITARY YOU'RE NOT A CIVILIAN; IF YOU'RE IN JAIL YOU'RE INSTITUTIONALIZED. SO YOU CAN'T JUST GET OUT AND GO TO WORK OVER AT THE DAIRY QUEEN OR SOMETHING LIKE THAT. BUT IF YOU'RE AGE SIXTEEN AND OVER AND YOU ARE NOT IN THE MILITARY AND NOT INSTITUTIONALIZED, THEN PRESUMABLY YOU COULD GO TO WORK AT THE DAIRY QUEEN OR BASS PRO SHOP OR SOMEPLACE LIKE THAT. SO THE POINT IS, THIS IS A POOL OF PEOPLE WHO ARE ELIGIBLE TO

12 ECO LECTURE THIRTEEN 12 WORK. POTENTIALLY, OKAY? THIS ALSO INCLUDES PEOPLE WHO ARE EIGHTY. NOW, PEOPLE AT EIGHTY USUALLY DON'T GO AND GET A JOB. BUT THE POINT IS, THEY COULD. THIS IS ALL THE PEOPLE WHO ARE POTENTIALLY OUT THERE THAT COULD GO TO WORK. CIVILIAN LABOR FORCE. THESE ARE PEOPLE WHO HAVE JOBS AND PEOPLE WHO ARE SEARCHING FOR JOBS. AND I DIDN'T WRITE IT DOWN, BUT I MEAN PEOPLE WITHOUT A JOB THAT ARE SEARCHING FOR JOBS. SO THESE ARE EMPLOYED PEOPLE AND UNEMPLOYED PEOPLE. THEY'RE EMPLOYED OR UNEMPLOYED. PEOPLE WITH JOBS, PEOPLE THAT DON'T HAVE JOBS BUT WANT ONE, WHO ARE LOOKING FOR ONE. LET'S PUT A COUPLE OF NUMBERS ON THESE. THIS IS ABOUT -- THIS CIVILIAN NONINSTITUTIONALIZED POPULATION, ABOUT TWO HUNDRED AND TEN MILLION PEOPLE. THAT'S ALL THE BASICALLY ADULTS THAT ARE WALKING AROUND -- YOU KNOW, FREE TO CHOOSE ON THEIR OWN, ABOUT TWO HUNDRED AND TEN MILLION. AND THE NUMBER OF PEOPLE IN THE CIVILIAN LABOR FORCE, ABOUT A HUNDRED AND FORTY MILLION. GOSH, THAT SURE WORKED OUT, DIDN'T IT? ABOUT TWO-THIRDS OF THE POPULATION, THAT CIVILIAN NONINSTITUTIONALIZED POPULATION, ABOUT TWO-THIRDS OF 'EM EITHER HAVE JOBS OR ARE LOOKING FOR JOBS. A THIRD GROUP -- OH, NOT A THIRD GROUP BUT A TERM WHICH I JUST TALKED ABOUT -- LABOR FORCE PARTICIPATION RATE, LFPR. THAT'S THE CIVILIAN LABOR FORCE DIVIDED BY THAT NONINSTITUTIONAL POPULATION. AND SO THAT'S SAYING SIXTY-SEVEN PERCENT OF ALL THOSE PEOPLE

13 ECO LECTURE THIRTEEN 13 ELIGIBLE TO WORK -- AGAIN, THE ADULTS THAT ARE FREE TO COME AND GO AS THEY PLEASE -- ABOUT TWO-THIRDS OF 'EM HAVE DECIDED TO WORK. NOW, I'M NOT SAYING EVERYBODY'S SUCCESSFUL, BUT ABOUT TWO-THIRDS OF 'EM WANT TO WORK. MOST OF 'EM HAVE JOBS, SOME ARE STILL LOOKING. THAT'S WHERE WE'LL PICK UP NEXT TIME AND I'LL SEE YOU LATER. SO LONG.