Friday, November 30, 2007
One can easily understand this if they use an indifference curve analysis. When doing this one will assume that the individual's budget line stays constant as prices for items change. Personally, when I purchase gas to drive my car I have to give up that total cost from my budget. This leaves me with a certain amount to spend on everything else. At this point I am indifferent to the amount of gas I consume and everything else. But as the gas prices rise, my ability to purchase other goods decreases as my budget shrinks or swings inward. This moves me to a different indifferent curve which makes me worse off from my previous preference.
At the end of the article the writer mentioned another interesting factor that seemed out of place. "The concern is that if the economy weakens and layoffs increase, consumers won't have the income growth needed to support spending." Since income is usually needed to consume things, this would not be a good thing. But yet there is something worse, such as the lose of income would decrease the amount of investment and savings which an economy needs to stay "healthy" and strong. It seems that this is the bigger issue that should be addressed more than the fewer consumable purchases and not just thrown in at the end of an article.
Yeay! Possible new laws!
Now that the Kyoto mandates are about to expire there are more talks about what to do once those mandates expire in 2012. Next week there will be a two week long conference on climate change in Bali, Indonesia. The U.S is attending the conference to hopefully get a “roadmap” for further negotiations with the other countries to address climate change. Senior administration officials that are attending the conference say they are not going to find an answer to climate change but to just get the talks started. So far the Bush administration has not agreed to any caps or standards in carbon emissions because it wants to see other big emitters like China onboard with any global agreements.
How ever Sen. Barbara Boxer, D-Calif., has scheduled a vote on a global warming bill for next week. This global warming bill will require a reduction of carbon emissions by 70 percent by mid century. So far any reductions of carbon emissions have been on a voluntary basis. Sen. Boxer wants to show that in Washington there is stronger action wanted. So instead of finding incentives to lower carbon emissions Barbara Boxer wants to use the power of force to achieve the desired out come. I also think that the efforts of this legislation would come too early before other countries hop on the bandwagon if they ever do. Is this bill trying to push the U.S to find new ways of producing goods with lower CO2 emissions before the technology is even there or economically viable? Is the externality of global warming to the point where government intervention is needed? I think that is the question that needs to be answered first before costly legislation is imposed on all of us. I see the bush administration trying to do just that by not setting in stone legislation and going to the Bali talks to make sure that this is the path that needs to be followed.
CLINTON: "Social Security is one of the greatest inventions in American democracy, and I will do everything possible to protect & defend it, starting with getting back to fiscal responsibility, instead of borrowing from the Social Security trust fund. We need to provide some additional opportunities for people to invest, on top of their base guarantee of Social Security, more of a chance to build their nest egg. The risky scheme to privatize would cost between $1 and $2 trillion. That would undermine the promise of Social Security."
Here are a few problems with the program that Clinton is trying to maintain a protect:
People are living longer than the government has originally planned.
The number of retired people will be much higher than the number of workers putting into the program.
The children of today are paying directly for their parents retirement.
The social security program currently is a redistribution program.
There is also an over-estimation of the cost of living so there is an overpayment to the retired.
It is hard to protect and defend a system that is not working the way it should. The idea of letting people put more money into a program that is not working is flawed thinking. Most people will not want to invest anymore of their money into a redistribution program. The money put in is not the same money coming out Maintaining the current program will raise the amount of the money taken out of the workers paycheck. The current workers and future workers will not be able to retire at an reasonable age.
The privatization program would fix the current program. The program would not be the redistribution program that it is now. The privatization program allows the people to choose where there money goes.
Social Security needs to be completely reformed. The problems cannot be fixed through simply not borrowing from the trust fund that virtually does not exist.
Bases, Bats, and Bucks
So is there some negative externality at play that would allow us to apply a corrective tax worthy of bringing A-Rod’s mammoth contract back down to earth? I don’t see one. We define externalities as an unintentional effect of non-market interdependences. The contract itself is obviously market driven and if it’s having some previously unfathomed negative effect on parties who weren’t part of initial negations they’re hiding quite well because I certainly can’t think of who they might be or how they’re effected for the life of me.
The next question seems almost laughable, but is A-Rod a public good? Well he doesn’t even pass the non-rival portion of the definition, as only one team gets access to his services at any given time, so I think we can stop howling with laugher and move on.
Finally there’s the question of monopoly. A lot of people define major league baseball as a government sanctioned monopoly, but I’m not so sure because it really depends on how you define their market. Are they selling entertainment? If so there’s, obviously, many other providers. Perhaps we should narrow it down more and say they market sports. But again there’s several other competitors, including the NFL, NBA and NHL. Okay, okay I hear a few objections still that it’s not just a regular old sport, it’s baseball and there’s no substitute for that. Of course, then there’s little league, high school, college, and all the foreign professional leagues now available through the magic of satellite TV. I guess the MLB is only a monopoly if you’re willing to narrow your market to include only professional level baseball played in North America. And even if one chooses to define the market that narrowly, we’d be applying the term monopoly to the MLB organization which would give them all the negotiating power, likely leaving Rodriguez with a smaller contract then he deserves.
The simple truth is baseball players get paid a lot because consumers are willing to spend a lot on baseball. Think of all the money people spend on tickets, apparel, and basically anything you can cram a logo onto. Then there’s the ad revenue available to teams because so many of us are willing to watch on television driving up the price of that commercial time. And the better the team the more money we’ll spend. And of course the best way to improve your team is to get better players, and often the best way to do that is to pay them a heck of a lot of money. Baseball may be a sport to us viewers, but it’s important to keep in mind it’s a business to people involved.
November 7th proved to be a very difficult day for our American currency as some Chinese officials, who are not even responsible for foreign exchange policy, commented against the strength of the dollar. One official urged his country to diversify its reserves away from weak currencies such as the dollar while another official stated that as a reserve currency the dollar was shaky. These comments combined with record losses from GM, the eminent threat of $100 per barrel oil and the unstable mortgage industry caused the Dow to fall by 2.6% and the S&P 500 index to fall by 3% on November 7th. The situation grew worse when French President Nicolas Sarkozy, on visit to
I am an economics major and became very interested after reading this article. Being the largest consumer market gernerally makes most economic models very easy to understand. Considering indifference curves, supply and demand, and budget line analysis, it is actually very interesting to attempt to apply models to real world situations such as this.
One thing the article mentioned is that overall salaries have only increased by the slightest of margins. This is probably the main reason that consumer spending has only gone up .2%. This relates specifically to budget line analysis. The budget line has only shifted up a little for consumers and therefore, they can only move up to a slightly higher indifference curve.
I know this realization probably wont be published in an economics journal anytime soon, but it was interesting to apply some of the things i have learned to the real world. THIS WAS WRITTEN BY: DAVID BIONDO
Planning out retirement is essential if you want it to be a good one. There is not one clear cut easy plan to the perfect retirement, but rather multiple plans and avenues in case another fails. You should never rely on social security to take care of you. Even if the program is made into what it should be, an insurance program, it is not intended for you to rely on. Planning for retirement might be stressful but we must relax, after all retirement is a good thing.
The government is supposed to be in a protective state. That is, protecting its citizens from harm. In all honesty, I think this law would fall somewhere in between a protective state of government and an infringement on the rights of U.S. citizens. Looking at all possible angles, it is possible to see how this law would be protecting citizens from harm. Cars with low miles per gallon burn more gas and therefore hurt the environment more. So higher standards would help with pollution and the effect it has on people. However, this law would also force producers to make cars a certian way and force consumers to purchase those cars. That is obviously an infringement on personal freedoms given by the constitution.
So, it seems that the government is trying to protect its citizens by taking away some personal freedoms. This is an issue that could be argued both ways and Im not quite sure where I stand on it. THIS WAS WRITTEN BY: DAVID BIONDO
Station wagon anyone?
Coase In Action
There was a neighborhood where a developer wanted to construct a three story building, but there was a restriction that nothing higher than two stories could be built. So, in a sense, the developer didn't have the property rights to build. Through the homeowners association, however, the builder was able to negotiate with the people. In the end the homeowners came out with improvements to the neighborhood (new trees, fences, etc.) and the developer, of course, was able to add their third floor.
Looking at the problem initially, it is somewhat easy to guess that the highest valued use is the developer's, as the only apparent reason for this regulation is aesthetics. This is highly normative though, and if the transaction costs did in fact turn out to be too much to overcome, it would be a very difficult decision for a government (e.g. a city council) to make. What is the most valued, the third story or the view? It's very fortunate that the Coase Theorem works at this high of a level.
Thursday, November 29, 2007
On 19 December 2007 a new tariff will be imposed on all imported socks. The tariff was part of an agreement to pass CAFTA during a deadlock in congress. Congressman Robert Aderholt struck a deal that he would vote for the agreement so long as the congress included language to reverse its position of duty free imports coming from Honduras. The expected effects of the tariff is that the price of socks will increase by around 13% the imposition of the tariff. The major reason behind this push is a small town Fort Payne the United States sock capital. Since 2005, the passing of CAFTA, the town lost a majority of its sock industry; however, most, if not all, of the losses have been replaced by new and different industries. (NRP: World Sock Capital Suffers From Duty-Free Imports http://www.npr.org/templates/story/story.php?storyId=16661333)
The entire purpose of the tariff, in 2005, was to save an industry from destruction within the United States. During the two years that CAFTA has been in operation the town did lose a majority of its sock industry, but that industry was replaced by several different industries. The town and people may have suffered in the short run and this may be regrettable, but they are doing as well today, no better. Today, that town now has a more diverse working environment and outsiders see the town as a possible place to invest. What effects does it have on those whom buy socks (presumably everyone)?
The tariff is placed upon imported socks the first response for the industry would be to charge the price pervious plus the tariff. However, consumers will lower their purchases of the goods, thus lowering the quantity demanded from manufactures. Manufactures will respond to the change lowering their price. The lower price will result in less goods brought to market, a larger price for each sock to the consumer, and a lower price to the producers. Therefore, consumers will be worse off because they will pay a higher price than they would otherwise, the producers (Imports) will be worse off because they will receive a lower price per unit and have less units produced and sold. The tax incidence is now shared by both the producer (imports) and the consumer.
“...to pay the debts and provide for the common defense and general welfare of the United States; but all duties, imposts and excises shall be uniform throughout the United States”
The constitution grants the power to tax, but that tax is to go for the common defense and general welfare of the United States. Was the action taken during that deal really for the better meant of the general welfare of the people? Yes the foreign producers are not bound to the rights or duties of the constitution, however, citizens purchasing the goods with the tariff are worse off. The the general welfare better off supporting a dying industry in Fort Payne or the millions of consumers within the United States? The current ruling is that the people of Fort Payne are more important than the rest of the country.
Thursday, November 15, 2007
How Your Rights Go Away.
Public vs Private
I am a big fan of a limited government whenever possible. One of the latest pet peeves of mine is the subsidies that government gives to Amtrak, nuclear power plants and to a degree, student loans. It seems that since the beginning of the establishment of our government, the elected have always courted the short-term results in favor of staying in office as opposed to focusing on the long term results. Amtrak has been subsidize for too long and has never turned a profit, college student loans can be accomplish more effectively by private companies same for financing nuclear power lants.
It’s seems that the bigger the government gets the lesser our GDP growth becomes despite the lowering of tariffs and taxes and the Cold War being over. When the GDP growth decreased from 3.70% since the United State was founded to 2.95% from 1990-2006. The one trend that keeps on going up is government spending. How soon will we find our standard of living and our rights going down the trend because of ineffective political leaders? At this rate eventually all of America is going to be owned by the government and we will become our founders own worst dream. .
Sunday, November 11, 2007
Ladies and gentlemen... Dr. Ron Paul!!!
|I don't know it is exactly that I learn the way I do, but sometimes what I learn makes sense because of the associated topics involved. Philosophy with Literature (antiquity, specifically) and History (Western Civ I) led to my understanding of things that all sort of tied together. Currently, I'm studying a lot of Economics with Algebra and World Religions. And it seems that that formula has stirred an interest in me for politics! I suppose a correlation could be inferred, but that would be absurd. |
Maybe it's the current social dynamic of there being a bunch of candidates running for our nation's top office. Maybe I'm just a hater who is looking to rip these rhetoric-spinning, lies-telling, "haves" teling what we "have-nots" what is best for us! Or maybe somewhere in the ingredients of microeconomics, public policy, the notion of gurus and the explanation of the universe combined with just a dash of algebra (that I seemed to have forgotten since my last math class in 1997), lies the recipe for politics!
So, without bashing certain former first ladies who might've turned a lot of income into wealth over the years at the expense of taxpayers, or former mayors who is TIME-PROVEN to say one thing "as he really thinks and feels" just to act in an other manner, I've decided to take off my 'hater' hat and to don one that seems to align with some of my feelings as a fledgling Economist!
I'll admit it, I saw the website on November 5th and made the association to "V for Vendetta" a movie that almost inspired me to carry a crate of barrels of gunpowder under our house of Parliamentary (do we even have one of those here?) and I my curiosity was piqued about this dude, Ron Paul. So, I've started to follow him a bit.
His website, specifically the link towards his words pertaining to taxes, has my mind reeling.
Of course you can simply go read it and buy into the sweet rhetoric he, a politician, weaves, but let's be honest, who really clicks on links within blogs?!
"Whether a tax cut reduces a single mother’s payroll taxes by $40 a month or allows a
business owner to save thousands in capital gains taxes and hire more employees, that tax
cut is a good thing. Lower taxes allow more spending, saving, and investing which helps the
economy — that means all of us."
These sentiments affect me greatly! For one, we happen to be covering the topic of taxes in class, and secondly, the problem in my life about not having enough money is that I don't have enough money! Hopefully my investment of time and money and lack of a dating life into school will pay off when I go on from here, but for now, I work and I go to school. So do a lot of people! I don't know their circumstances, but I know that if I could invest just a little more than I already do into my retirement account, I could feel a little more confident in my spending of money on other things like gasoline for one. I might even be able to set aside a little money to hopefully one day put towards a house or the start-up of a business. I'm livid about the idea that I pay SO MUCH into Social Security, and that one day, I'm not going to get squat back from it! Perhaps it's why I'm putting the money that I could be spending as Consumption or squirreling away for items of the American Dream in the form of business and home ownership, into a retirement.
"In addition, the Federal Reserve, our central bank, fosters runaway debt by increasing the
money supply — making each dollar in your pocket worth less. The Fed is a private bank run
by unelected officials who are not required to be open or accountable to 'we the people.'”
Not to mention, if the money that I have and work for, and am scrounging from the corners of the barrel, is decreasing in value, I wonder about my ability now AND later to turn income into wealth. I suppose that I could abandon some of my beliefs about life, liberty and the pursuit of happiness to ensure my Roth IRA is filled, but why do I even want to live into old age if I've spent all my younger years working just to get to old age?
Granted, my feelings are contingent on whether or not what Dr. Paul says is true or not. But, what if he's onto something? Could an Economist in the White House make a better (a nice value judgement) impact on our nation, and actually align some of our national identity with the beliefs of economics? Could the government actually decrease, regardless of the party affiliation, to the point where it functions as it's supposed to? To me, that efficiency of government would be to provide national defense (as opposed to imperialism) and possibly even clean air (due to the potential and likely effects of positive and negative externalities) and that the markets, the way of things naturally, could allow individuals like me, rationally minded invidivuals like me the opportunity to pursue life, liberty and happiness.
I don't mind competition. In fact, I revel in it! I believe that there are times I can be aggressive with my pursuits and times I can just chill, and in a country that is based on competition, my incentive to be aggressive or to chill could be placed into a market that would reflect a pareto optimality for me, and that would make me happy. But, the fact that I am moving all of my happiness from this stage of my life to some later stage because I am earning a wage that is chopped up before I even see it, irritates the marginal happiness I can have now (consider the idea that I'm glad to be working now to play later).
It comes down to hope that is offered by politicians. Different people vote on different candidates based on the hope that is offered. Being a student of Economics, I am faithful in the ideas of markets functioning to show long run equilibriums and that pareto optimality can be not only potential, but likely. I believe that I can make good decisions for myself and that I can choose as an individual how to spend every single penny I earn and that government doesn't come in and dictate how as much as 30% of it is spent. I believe that my understanding of the necessary role of government will allow me to feel confident on paying SOME sort of tax. The idea that I am free to make my own decisions, is my hope.
So, I believe the shadow puppets that are being presented to me by politicians. And this one in particular seems to be addressing the problems that I believe to be problems, as opposed to all of the other politicians who seem to want to keep me down.
Go Ron Paul!
Friday, November 09, 2007
Our next leader of the public sector
"Many of you are well enough off that [President Bush's] tax cuts may have helped you. We're saying that for America to get back on track, we're probably going to cut that short and not give it to you. We're going to have to take things away from you on behalf of the common good."
This statement is disturbing coming from a potential presidential candidate on so many levels. It stinks of liberal democratic propaganda, making it seem that only the rich benefit from tax cuts, but that is far from the worst insinuation. She thinks as a politician, the revenues collected by a coercive representative democracy, are hers to do with what she will. Her colleagues constantly circumventing the constitution by implementing programs such as social security that are so blatantly economically inefficient and that could be handled easily in the private sector. Instead of continuing to cut taxes and similar programs, she believes that she should take this money away from the citizen on behalf of the common good.
Instead of acting only in cases where market failures could possibly be corrected by government in cases of; externalities, monopolies, or demand for public goods, government is actually creating the problem in the case of FICA with holdings. She uses terms such as common good to make it seem that this spending is justifiable, but it isn't on either a constitutional or economic basis.
The solution to this problem lies within. Freeriding on the civic expertise of those that came before us and created the constituion can continue for only so long. A good citizen, who will be a good consumer, demanding sound economic policy from our government is the solution. And when all else fails, we can consult our instruction manual, the United States Constituion.
Thursday, November 08, 2007
Many foreign investor bought US denomated assets and have discover that the assets they have bought our toxic sub-prime debt. The homeowner who borrowed the money is now defaulting on his loan which causes the bank to foreclose, which causes the hedge fund to close, which causes the investment company to report loses, which causes the country to go into a recession, which causes the dollar to collapse, which causes foreign investor to dump T-bills, which further causes the dollar to get weaker. And eventually, the US economy rebounds but domestic economies are no longer simple because there is no domestic economy just a global one.