The Rising Unaffordability of a College Education

How much has the average cost of college at a four-year degree-granting institution risen since the 1976-1977 school year?

Our first chart below, drawing on data published in the Digest of Education Statistics: 2010 reveals the answer!

We see that the average cost of tuition and required fees at a four-year institution has risen from $1,218 in the 1976-1977 school year to $12,467 through the 2009-2010 school year.

But how affordable is that? To find out, we calculated the ratio of the average cost of tuition and fees with respect to the median household income for each of these years, which will give us a pretty good idea of just how affordable college has become for the years since 1976:

Here, we've shaded the years where the cost of a college education rose the fastest with respect to median household income. These are the times in which the cost of college really inflated beyond the ability of a typical American household to pay for it.

Next, let's look at the cost of college vs median household income, which will really let us see the inflation of the higher education bubble at work:

In this chart, we've estimated the additional inflation in college tuition and fees that has taken place in the 2010-2011 school year.

But what's really making college so unaffordable for the typical American household? The findings of a recently reported study points to the answer:

Perhaps worse for students than a crowding out effect is the Bennett Effect, named for William Bennett, who 25 years ago as Secretary of Education wrote for the New York Times, "Increases in financial aid in recent years have enabled colleges and universities blithely to raise their tuitions."

[...]

There have been mixed findings on the Bennett Effect in recent decades, with some studies finding a dollar-for-dollar relationship and others, none at all. Determining why college costs are rising is a difficult task, after all. Stephanie Riegg Cellini of George Washington University and Claudia Golden of Harvard take a new approach, focusing on for-profit schools. Some of these are eligible to participate in so-called Title IV aid programs (named for a portion of the aforementioned Act) and some not.

After adjusting for differences among schools, the authors find that Title IV-eligible schools charge tuition that is 75% higher than the others. That's roughly equal to the amount of the aid received by students at these schools.

Without such subsidies, college students would pay the full cost of the tuition and required fees for their education out of their own pockets, or through other financial aid, such as through student loans. With subsidies, the average college student is effectively paying the same amount of their own pockets as they would have without the subsidies, but their universities are also collecting the additional amount of the subsidies.

We see this effect especially during years of recession, where the federal government acted to sharply increase the subsidies for college educations. That's why we see the higher education bubble greatly inflate during these years.

It wasn't always that way. Back in 1982, in the depths of the second biggest recession since World War 2, the federal government didn't jack up its subsidies anywhere near like it did in later recessions. As a result, the cost of college remained closely coupled to the incomes of the typical American household.

But as you can see, the federal government has different ideas today. Perhaps because it has become the dominant student loan provider, as student loans have become nearly the full equivalent of taxes.

Data Sources

Digest of Education Statistics: 2010. Table 345. Average undergraduate tuition and fees and room and board rates charged for full-time students in degree-granting institutions, by type and control of institution: 1964-54 through 2009-10. 5 April 2011.

U.S. Census. Current Population Survey. Annual Social and Economic (ASEC) Supplement. HINC-01. Selected Characteristics of Households by Total Money Income in 2010. 13 September 2011.

Group Stages and Reaching Training Objectives

In this post I want to examine how group dynamics affect performance objectives and the implications on syllabus development.  For the past few weeks, I have been searching my university database for applicable research on the subject in TESOL and general adult education.  While the results are clear that collaborative learning benefits training, I have been unable to find references to show how group development impacts results (except in e-learning).  If you are aware of research please let me know.  I’m sure some of the books I see on the MA TESOL reading list must include this subject.

The stages of group development have remained relatively intact since Tuckman’s forming, storming, norming, performing, adjourning framework in 1965.  To this, we’ll add Lencioni’s Five Dysfunctions of a Team, a bestseller now prevalent in management training.  While nearly 50 years apart, these two structures are aligned.  In fact, Lencioni’s dysfunctions seem to reinforce Tuckman’s legendary model.  The dysfunctions result when the stages are not properly resolved.

Tuckman’s Five Stages of Team Development	Lencioni’s Five Dysfunctions of a Team
Forming	Absence of Trust (Invulnerability)
Storming	Fear of Conflict (False Harmony)
Norming	Lack of Commitment (Ambiguity)
Performing	Avoidance of Accountability (Low Standards)
Adjourning	Inattention to Results

Taking it a step further, we can apply the dysfunctions of a team to common class problems, both student-to-student and student-to-trainer.

Dysfunction	Classroom Effects
Absence of Trust	Group and pair work is constrained. Learner opinions are formed only by role-play cues. Poor learner interaction without trainer involvement. Open discussion activities fail. Learners doubt course material and trainer.
Fear of Conflict	Learners withhold opinions until trainer establishes popular views. Discussions are lifeless and students remain passive. Trainer is unable to obtain feedback on training and learning styles. Trainer is unable to assess whether materials fit learners’ needs.
Lack of Commitment	Dropping attendance. Low homework / self-study completion. Learners do not consider or provide material to improve course. Learners do not listen to their classmates. Learners do not use trainer as a resource outside of lesson.
Avoidance of Accountability	Unclear progress, no pressure to improve. Learners merely repeatedly practice the language they already know. Trainer does not introduce or enforce risk taking or improved performance.
Inattention to Results	Learners do not notice what they have learned / do not apply lessons to real life. Training objectives are not defined / reached.

I have provided a long list, but it is certainly not complete.  But we can see that certain course shortcomings can be attributed to group dysfunction, either between the students themselves or within the trainer-student relationship.

If this is the case, it makes sense to ensure we as trainers encourage and allow the stages of group development to occur.  This should be incorporated into syllabus design.  However, most syllabi I encounter (and have made in the past) are linear (meaning we achieve the training objectives at a steady pace), essentially asking the trainer to jump straight to the performing stage.  Naturally, the trainer will front load some team-building activities (forming) and needs analysis, but targeted lessons soon follow.

I advocate an ‘accelerating’ syllabus, in which the course slowly builds toward the can-do statements.  Toward the beginning of the course, the aims of the lessons are aimed at completing the group development stages.  As the course progresses, the learners are able to accomplish more during the performing stage, reaching the same training objectives in the same timeframe.

Here are some considerations for the various group stages:

Forming – Building trust, overcoming inhibitions to speak, listening

·         Allowing extended group small talk at the start of lessons in L1

·         More whole group discussions about jobs, hobbies, personal issues, job issues

·         Cross talk activities about current events within their organizations

·         Interview activities about personal histories

·         Encouraging contact outside the classroom (both T-S and S-S)

Storming – Expressing opinions, setting expectations, identifying learning styles, establishing self-study

·         Negotiated needs analysis

·         Utilize learning styles

·         Test activities to determine what works and what doesn’t (with delayed feedback)

·         Test homework completion level / commitment level

·         Focus on metalanguage and language learning terms

·         Focus on self-study skills / using online resources

·         High lesson feedback from students

·         Start learner journals, lesson feedback forms, learner expectations for the course / trainer / peers

·         Trainer facilitated conversations on controversial topics, encouraging different opinions

Norming – Adopting rules, setting expected commitment level, formalizing goals, establishing activity type balance, formalizing the course plan

·         Establish ‘rules’ of the course (how much time Ss will spend on self-study, goals, behavior, absence notification, trainer follow up, blended learning balance, etc.)

·         Establish preferred activity types based on learning styles, interests, etc.

·         Choosing appropriate resources

Performing – Reaching training objectives, challenging trainer and learners to achieve more

·         Full steam ahead based on materials, self-study commitment, learning styles, and learner interests

Adjourning – Assessing, reflecting

·         Prove what we’ve learned and how we have used it in the real world

·         Reflect on how we can take the training to the next level, both inside and outside the classroom

·         Consider how we are different than when we started

For many trainers this will come naturally, yet all too often I see elements in the wrong stage of group development.  Furthermore, a standard linear syllabus superimposes itself on the stages of group development and pushes the performing stage further to the right.

Actions which fall in the wrong position:

·         Trainer dictates commitment levels expected in course introduction

·         Coursebooks or other materials are determined before the course begins

·         Learning styles are determined by trial and error as the course progresses

·         Homework and self-study expectations fluctuate

The list goes on and on.  The point is, if we slow down at the beginning, we can go faster later.  From a business point of view, a course in the performing stage is more likely to extend the contact or pressure management to continue the program.

Naturally, different groups progress through these stages at different speeds and the group will shift between stages periodically.  For example, when teaching a whole department, the trust level among the students may already be established, only forming the group with the trainer requires effort.  But it is important for the trainer to recognize the stages of development and the dysfunctions of a team.  By doing so we can improve our training and ensure the learners are truly reaching the objectives.

Office Survival Skills (Part II)

At some point during your office-based career, you will be required to run a meeting. And when that happens, it won't just be a large quantity of your time that will get wasted - it will also be the time of all those who attend your meeting.

The Portland Business Journal reports:

A new nationwide survey finds that "runaway" meetings are the biggest time-waster in the workplace. More than 27 percent of workers polled said meetings are the largest culprit for inefficiency and lack of productivity.

The survey was developed by Office Team, a staffing service specializing in skilled administrative professionals. With responses from 613 men and women, all 18 years or older, the findings are part of the "Office Team Career Challenge," a project to help administrative professionals advance their careers.

With today's lean staffing levels, there is increasing pressure for employees to manage their time effectively.

Yet, many employers actually sabotage time management with runaway meetings and interruptions. Industry Week calls meetings "the Great White Collar Crime," estimating they waste $37 billion a year.

So how can you, as someone who will be running a meeting, avoid becoming a white collar criminal?

Fortunately, Dolan Media's David Baugher has developed a list of things that meeting planners can do to avoid wasting too much of the collective time of the people who might attend the meeting, which we've excerpted below (emphasis ours). Although developed for lawyers, whose time might be otherwise used to make money at the rate of $250 per hour or more, the lessons might well be applied for other would-be meeting managers....

1. Undershoot the time.

It seems a no-brainer to schedule a meeting with enough time to ensure everything is covered. Yet Tom Polcyn, a partner at Thompson Coburn in St. Louis and chair of the firm's intellectual property group, says conventional wisdom is sometimes a bust. Instead, try scheduling a little less time than needed to encourage participants to cut to the chase. You can always schedule a follow-up meeting if something truly important is skipped. "Meetings have a way of filling up every last minute of the scheduled time, kind of like the way gas expands to fill a container," Polcyn says. "More often than not, I'm finding that if I would have normally scheduled an hour for this and instead we give 30 minutes a try, it's turning out to be enough time. It's like found time."

2. Don't do back-to-back meetings.

It's easy to stack and pack meetings one after another. But meetings are more productive if you schedule a few minutes between them to collect your thoughts, Polcyn says. "I've found this to be extremely helpful, because maybe I'll get out of an hourlong meeting and we'll all agree on certain action items — but if I go straight from that meeting into another one, I sometimes can forget what we all decided on or I end up at the end of the day with a mess of notes."

3. Ask the key question.

Too many meetings can be as bad as too few. Not every situation calls for a full-scale get-together. Legal management consultant Joan Newman, of St. Louis-based Joan Newman & Associates, says the first question to ask is obvious. "The first tip is deciding whether you need to have the meeting at all," says Newman, whose company is associated with national consultant Altman Weil. "Is there a way to accomplish what you want to accomplish without a meeting, whether it's a phone call, conference call, emails? Make sure you really need this meeting."

4. Be punctual.

Meetings are scheduled at a specific time for a reason. Don't dawdle when getting one under way just because a few stragglers haven't yet wandered in or participants are lingering in conversation over yesterday's softball game. "If you have a meeting, start on time and indicate how long the meeting is going to be," Newman says. "End on time. Nobody wants to sit there and have their time wasted because it doesn't start until five minutes late and doesn't end on time."

5. Don't settle in.

If a meeting can be brief, ensure that it is. Brent D. Green, a collections, commercial and bankruptcy attorney with Evans & Green in Springfield, says a simple lack of chairs at an impromptu gathering can have a positive effect on meeting length. "I had a meeting in my file room the other day on filing, and everybody stood up," he says. "It was a short meeting."

6. Don't let participants ramble.

Dan O'Toole, head of the litigation practice group at Armstrong Teasdale in St. Louis, says he gives meeting attendees a specific timeframe in which to complete their presentations. In a creative twist, he acquired a gong that sits next to the presenter. It's waiting to be struck "The Gong Show"-style if the speaker exceeds his or her allotted time. "I've never had to use it, but it is such a visual reminder to people of the need to stay on topic," O'Toole says. "It works wonders because nobody wants to be the first person to get the gong for having gone over."

7. Get out of your office.

For an important one-on-one meeting, playing host isn't always the best idea. "If it's a meeting with subordinates, you go to their office instead of having them come to you," Green says. "If you're in their office, when the meeting is over, you can just leave. It's hard to get a subordinate to leave if you have them come to your office."

8. Distribute materials ahead of time.

Handing out lengthy items at a meeting causes delays as participants read the handouts on the fly. Newman says a good organizer disseminates information before the day of the confab. "You don't want to be sitting there at the meeting educating them as to what this case is about," she says. "When you have them read things while at the meeting, they can't make an informed judgment."

9. Have an agenda.

Don't just wing it. Efficient meetings aren't organic. They are planned, with participants aware of when they will speak and what they will talk about. "I've been to so many meetings where people just say, ‘Hey, Bob why don't you tell us what's going on with that project?' and Bob has a big chunk of sandwich in his mouth and doesn't even know he was going to be called on," O'Toole says. "He just fumbles through it."

10. Keep the guest roster short.

An all-hands-on-deck approach to every meeting wastes time for both the unnecessary participants and the relevant personnel in the room. Think about who really ought to come to the meeting. "I've found that the more people you have at a meeting, the less tends to get done," Polcyn says. Try to make sure the people you invite to a meeting are the people who need to be there.

All we can say is "Amen!"

Previously on Political Calculations

• Office Survival Skills (Part I)

The 10% Factor

I heard a great message this past weekend and I want to pass a part of it along to my friends here in Live BIG! Die Empty. blog land. The speaker was telling me that studies have been done showing that, in baseball, a .273 hitter can double his salary if he can increase his batting percentage to .300. A 10% increase in effectiveness at his job can double his income! Further, another 10% increase could put that same player into stratospheric levels of income and virtually assure his place in the Hall of Fame! 10% is the difference between a guy you've never heard of and Babe Ruth!

I think the same thing is true in your life. You don't have to get a lot better to be a lot better off. You just have get a little better and be consistent with it. Stop stressing out thinking about how far away you are from being where you want to be. My challenge to you is this: How can you get just a little better at what you do? How about sitting down and writing out a few ideas in your journal? Could you make one extra phone call? Go 10% longer on the treadmill when working out? Could you give one extra hug to your significant other?

A small increase in your activity and have a big impact on your effectiveness! So how can you get a little better today?

Questions From Our Inbox: Why Are Gasoline Prices Rising So Much?

It seems that unlike say a "trained journalist" like the Incredibly Incurious Jonathan Chait, our casual readers are more than capable of asking us questions about our work!

Proof of that today comes straight from our e-mail inbox, which we can attest has still not registered any electronic contact initiated by "trained journalist" Chait, where someone with actual curiosity observed and asked:

Gas prices are about as high as they were in mid 2008 when oil was about 140 per barrel but oil today is about 110. Why the disconnect?

That's a good question - one for which we had no idea what might be the answer before we decided to take it on! Here's our augmented response, where we've expanded upon our original reply to our inquiring reader!...

It's not as disconnected as you might think, given which crude oil and gasoline prices are primarily involved.

Here, the increasing price of Brent crude oil that we've previously discussed...:

Source: livecharts.co.uk - 26 February 2012

... is being pushed upward by geopolitical concerns. That upward price pressure has combined with already falling demand in the U.S....:

... to force the closure of money-losing refineries in the U.S. that refine Brent crude oil, mainly on the East coast.

Matthew Philips of Bloomberg BusinessWeek provides more details from a 23 February 2012 article:

The average price of gas is up more than 10 percent since the start of the year, a point repeatedly made during Wednesday's Republican Presidential debate. Predictably, the four GOP candidates blamed President Barack Obama for the steep increase.

Actually, the President doesn't have that kind of pricing power. The more likely reason behind the price increase, though certainly less compelling as a political argument, is the recent spate of refinery closures in the U.S. Over the past year, refineries have faced a classic margin squeeze. Prices for Brent crude have gone up, but demand for gasoline in the U.S. is at a 15-year low. That means refineries haven't been able to pass on the higher prices to their customers.

As a result, companies have chosen to shut down a handful of large refineries rather than continue to lose money on them. Since December, the U.S. has lost about 4 percent of its refining capacity, says Fadel Gheit, a senior oil and gas analyst for Oppenheimer. That month, two large refineries outside Philadelphia shut down: Sunoco's plant in Marcus Hook, Pa., and a ConocoPhillips plant in nearby Trainer, Pa. Together they accounted for about 20 percent of all gasoline produced in the Northeast.

This week, Hovensa finished shutting down its refinery in St. Croix. The plant processed 350,000 barrels of crude a day, and yet lost about $1.3 billion over the past three years, or roughly $1 million a day. The St. Croix plant got hit with a double whammy of pricing pressure. Not only did it face higher prices for Brent crude, but it also lacked access to cheap natural gas, a crucial raw material for refineries. Without the advantage of low natural gas prices, which are down 50 percent since June 2011, it's likely that more refineries would have had to shut down.

The U.S. refining industry is being split in two. On one hand are the older refineries, mostly on the East Coast, which are set up to handle only the higher quality Brent "sweet" crude–a benchmark of oil that comes from a blend of 15 oil fields in the North Sea. Brent is easier to refine, since it has a low sulfur content, though it's gotten considerably more expensive recently. (Certainly another reason for higher gas prices.)

[Be sure to read the whole article, because it also explains why gasoline prices are so much lower elsewhere in the U.S.]

The combination of rising gasoline prices with reduced quantities being supplied indicate that the relative decrease in supply stemming from the recent refinery closures is currently driving the price of gasoline in the U.S. by more than what would be driven by rising crude oil prices alone:

Price and Available Quantity Data
Input Data	Values
How has the price of the item changed over a given period of time?	The price has increased. The price has decreased.
How has the available quantity of the item changed over that same time period?	The quantity has increased. The quantity has decreased.

What's Behind the Change in Price?

And that, in a nutshell, is why gasoline prices have risen as high as they did back in 2008, even though crude oil prices haven't risen as high as they did then.

We will note however that actual journalist Matthew Philips is incorrect when he suggests that "the President doesn't have that kind of pricing power". The supply disruptions from the closure of money-losing oil refineries on the East coast and their result effect upon gasoline prices could have been minimized simply by subsidizing their operations - much as the President has been willing to subsidize "green energy" companies that were also certain to fail, like Solyndra.

By our estimate, the $500 million of taxpayer money that the President put on the line and lost on that one company would have been sufficient to keep just one of these recently closed refineries going for another 500 days - thus avoiding the supply disruption and massive run-up in U.S. gasoline prices. (And that doesn't include all the other "green energy" business failures where taxpayer money has been permanently lost that could have gone to create or save real refinery jobs!)

At least then, taxpayers might have something more to show for the money the President was so determined to waste, no matter what!

If Something Doesn't Die, You Haven't Made a Decision.

#LiveBIGDieEmpty - Some people are hindered simply because they haven't mastered the ability to make a decision. They try to exercise all options at the same time...or keep one on hold until they've exhausted the other. But that's not how life works. That's small living.

Big living requires you to decide which way you're going and what you're going to do. Then, once you've decided, do it with all your might! (Ecclesiastes 9:10) It's in the very structure of the word! "De" is from the Latin for "away" or "from" while "cis" means "to cut" or "to kill" so putting them together....

To make a DECISION means to cut something away, from or off! To kill it! That means, if something doesn't DIE, you haven't made a decision. As gruesome as it sounds, you have to kill something for the other thing to thrive. Trying to nourish every little business or relationship just a little bit...enough to keep it alive...only ensures that none of what you do will truly thrive!

Let me share something with my friends today. Not only in the spirit of "keeping it real" but in terms of trying to help someone who needs to hear this today. That's my Live Big Die Empty mission anyway...to help people who feel like they've been living beneath their purpose, potential and privilege for too long.

A friend commented recently, "Mark, you're a rock star!" meaning he believes I'm living a great life. I accept the compliment. Thank you, sir! I will agree that things are trending the way I want them to go. However, as my closer friends will tell you, I have a looonnnnnng way to go to get where I need to be. So I press.

But to the point of my post today. I tend to blog from experience and Godly counsel as best I can. That's the genesis of the blog post I wrote and posted last week regarding decision-making. I can testify that nothing began to turn around in my life until I sat down with my pastor, Thaddeus Eastland of Hope Church Pearland and received this one little nugget of wise counsel: make some decisions. I had been feeling despondent, broken and on the verge of tears because I was feeling beaten by life.

The truth is I was being beaten by life because I was allowing life to beat me.

You see, I'd been trying to live too much of my life on the fence subject to other peoples' whims, emotions and decisions. I wasn't drawing clear lines in my ministry, business or personal life and it was halting my progress in all of those areas. "Make some decisions." Those few words have meant so much to me. I remind myself of them whenever I feel like I've stalled in making progress still to this day.

My encouragement to someone who needs it is as follows: MAKE SOME DECISIONS!

As always, I want to hear from you!!! Please leave me your comments so I know how to serve you better!! If this was helpful, forward it to a friend. Talk to you soon!

Can Billy Crystal Sell Movie Tickets?

If you think about it, the Academy Awards ceremony is really just a three to four (or more!) long televised advertisement for the "Best Picture" winner.

Our question about the Oscars this year: Can host Billy Crystal keep enough of the television audience engaged in the broadcast for long enough to be able to sell more tickets than would otherwise be sold to whatever movie wins that title?

Sure, he'll be dressed in a tux and will look like the guy who sells you movie tickets behind the bullet-proof glass at your local cineplex, but why should Hollywood have to count so much on Billy Crystal to sell their movie tickets?

That question is super-relevant this year because of the unmitigated disaster that was the 83rd Annual Academy Awards ceremony last year! That was when so much of the U.S. audience tuned out during the poorly written and directed live broadcast that the movie's box office plummetted by 15%, as the Best Picture winner took in *LESS* money at movie theaters in the week after the Oscars ceremony than it did in the week before.

It's true! We went back and compared the one-week before and one-week after box office totals for all the Best Picture winners announced since 2000 to see just how each did, using the daily box office data for each as reported by Box Office Mojo, and then calculated the percentage increase or decrease in the week after the Oscars as compared to the week before.

Our data is presented in the table below:

Box Office Performance of "Best Picture" Academy Award Winners, One Week Before and After Winning
Academy Award	Ceremony Date	Best Picture Winner	Box Office in Week Before Oscars	Box Office in Week After Oscars	Percentage Change
72	26 March 2000	American Beauty	$5,460,072	$8,190,112	50%
73	25 March 2001	Gladiator	$45,033	$474,174	953%
74	24 March 2002	A Beautiful Mind	$5,499,295	$6,140,030	12%
75	23 March 2003	Chicago	$9,169,194	$10,637,940	16%
76	29 February 2004	The Lord of the Rings: The Return of the King	$2,996,678	$4,094,558	37%
77	27 February 2005	Million Dollar Baby	$10,538,151	$11,748,270	11%
78	05 March 2006	Crash	$70,399	$342,709	387%
79	25 February 2007	The Departed	$367,064	$336,608	-8%
80	24 February 2008	No Country for Old Men	$3,365,401	$5,389,446	60%
81	22 February 2009	Slumdog Millionaire	$11,673,672	$16,669,726	43%
82	07 March 2010	The Hurt Locker	Not in theaters.
83	27 February 2011	The King's Speech	$10,989,524	$9,315,074	-15%

Since 2000, the box office take of the Academy Awards' Best Picture Winner increases by an average of 22% in the week following the Oscars ceremony as compared to the week before, with the best performance being turned in by Gladiator, which was very near the end of its run in theaters when it won.

The worst however was last year's announced winner The King's Speech, which dropped like a rock after it won. Its only competition for losing money was the Best Picture winner announced in 2007, The Departed, the ceremony for which was also negatively reviewed.

By contrast, the years for which we have data in which Billy Crystal hosted the Oscars (2000 and 2004) saw the box office take for the Best Picture winners jump upward by an above average of 43% - more than double the average post-Oscar bump. It's no accident that Billy Crystal is back....

There just aren't many Oscar hosts who are as gifted at selling movie tickets!

Previously on Political Calculations

• Identity of Political Calculations' "Ironman" Revealed


• Anti-U.S. Fervor in Hollywood


• The Anti-War on Hollywood's Box Office


• Reflections on the Oscars and the Most Manipulative Man in Hollywood


• How Men Are Like Bad Movies, and Why Bad Movies Keep Getting Made


• Do the Academy Awards Boost Box Office?


• Does Best Picture Equal Big Box Office?

How Sanctions on Iran Might Affect World Oil Prices

John Iacovelli recently ran some "back of the envelope" calculations on the potential impact of Western country sanctions on Iran upon world oil prices. He estimated:

The U.S. Energy Information Administration in its latest tables stated that the Persian Gulf states produced 23,714 thousand barrels per day of crude as of October 2011, which we'll round to 23.7 million.

At the current time, Saudi Arabia is already producing more than usual to make up for the drop in Libya oil production. Let us arbitrarily state, then, that the other Gulf states will make up no more than 20% of the shortfall in Iranian production; thus, the calculation would be as follows:

• 23.7 million, total Gulf production


• minus .8 million (loss of 1 million Iran, plus .2 additional additional from Saudi Arabia and/or others)


• equals 22.9 million as the new production level.


• .8 divided by 23.7 equals a percentage drop of 3 and 1/3 percent. (-0.033)

Taking our PED formula and the Wikipedia coefficient for world oil, then:

• -.4 times -.033 = +1.33 percent change in the price of Persian crude, based upon the drop in supply.

The January 2012 price of Dubai crude (the benchmark for the region) is $110. Adding 1 1/3% puts the new price at $113.63.

I'm neither a mathematician nor an expert in oil pricing, and so would love to hear from anyone who has experience in the subject regarding this exercise. I know enough to know that my calculations could be hysterically off the mark.

But are they hysterically off the mark? To find out, we'll adapt a tool we originally developed in November 2011 to estimate what the impact would be upon world oil prices if the United States increased its production of oil by 25%.

Here though, we'll use the CIA's current estimate for world oil production in 2010 of 89,346,535 barrels per day, the most recent year for which the data is available (even going by the Energy Information Administration's world data, which as of 12 January 2012, only covers 10 months of 2010.)

The CIA's data indicate that Iran, the fourth largest producer of oil in 2010, produced 4,252,000 barrels per day that year. If sanctions imposed by Western nations only affect 25% of Iran's production, then the effect would be to reduce the daily supply of oil to the world by 1,063,000 barrels per day.

Because most of the oil that would be affected by sanctions upon Iran would be shipped to Europe, we'll use the average January 2012 spot price of $110.69 per barrel for Brent crude oil in Europe as our price reference.

The results may be found by clicking the "Calculate" button below!

Oil Production and Economic Data
Input Data	Values
Daily Oil Production Data
Change in Amount of Oil Production [Positive if increase, negative if decrease]
Oil Price (per Barrel)
Demand Elasticity
Supply Elasticity

Estimated Price Change
Calculated Results	Values
Projected Change in the Price of a Barrel of Oil

As always, you're more than welcome to update our tool with more recent data or to consider other assumptions or scenarios!

Using our tool, we would anticipate that the price of Brent crude oil in Europe would rise by $4.39 per barrel, from $110.69 in January 2012 to $115.08 as a result of Iranian oil being embargoed by Western nations, if not offset by increases in the oil production of other nations. Such as the United States, which is experiencing somewhat of a boom in new oil production.

If Iran's oil production were completely shut off from the world, and no other oil producers adjusted their supplies to compensate, the effect upon European oil prices would be to increase the cost of each barrel of Brent crude oil by by $17.39.

So all in all, we find that John Iacovelli's math appears to be largely on target, as the results are consistent with what we find using slightly different assumptions about the elasticity of oil supply and demand.

The Billionaire Decay Function

Previously, we built a tool to calculate the probability that an individual could keep earning at least $1 million dollars annually after having done it once.

Today, we're headed for the stratosphere of annual income earners to see just how long they can expect to stay on top after they become one of the Top 400 taxpayers in the United States!

Our tool below is based upon data covering the years from 1992 through 2008 about the Top 400 taxpayers published by the IRS. Technically, these individuals aren't necessarily "billionaires", but all have earned anywhere from a low of at least $22,559,000 in 1993 ($20,397,000 in terms of constant 1990 U.S. dollars) to at least $138,815,000 in 2007 ($87,525,000 in constant 1990 U.S. dollars) to be able to be counted among the IRS' "Top 400" in the years from 1992 through 2008!

Time Data
Input Data	Values
Number of Years After Becoming a Top 400 Taxpayer

Probabilility of Being a Top 400 Taxpayer
Calculated Results	Values
Probability of Being a Top 400 Taxpayer After Entered Number of Years

Running the numbers, compared to just making one million dollars in a year, it's a lot less likely that a U.S. taxpayer will make the Top 400 of all U.S. taxpayers more than once! In fact, after 17 years, the IRS data suggests that only one individual made the list in each of the 17 years for which it has been reporting its data.

The IRS notes the high amount of changeover in the Top 400 U.S. taxpayer from year to year:

Over the 17 tax years a total of 6,800 returns were identified for the table. There were 3,672 different taxpayers representing the top 400 returns of each year. Of these taxpayers, a little more than 27 percent appear more than once and slightly more than 15 percent appear more than twice (see columns 2 and 3). In any given year, on average, about 39 percent of the returns were filed by taxpayers that are not in any of the other 16 years (see columns 4 and 5). In each year, 4 (or 1.0 percent) of the returns are for taxpayers who can be found in all 17 years. Thus, the data shown in the table mostly represent a changing group of taxpayers over time, rather than a fixed group of taxpayers.

You know what they say - it's nice to make it to the top, but good luck staying there!

Data Source

Internal Revenue Service. The 400 Individual Income Tax Returns Reporting the Highest Adjusted Gross Incomes Each Year, 1992-2008. 1 August 2011.