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Caleigh Wells
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Hungary's economic benefit from importing foreign goods is extremely interesting. I could expect an article wherein the study derives that the lower price of imported goods would benefit the economy, but the act of importing according to this study leads to an increase in productivity, especially for foreign-owned firms. This was surprising to me until it was explained that foreign-owned firms would possess a greater knowledge about finding cheap suppliers abroad, and therefore the difference in price between domestic and foreign imports for them is greater, so the productivity gap can be wider. Of all our articles so far this semester, this was one of the more difficult to understand, but also supplied rewarding information. I appreciated the fact that it required so much knowledge of trends and vocabulary that we've learned throughout the term to understand the findings. Additionally, the concept of a shifting aggregate supply curve is one of my favorite topics from the semester, and so a focus on different import prices as another function of shifting that supply curve is an interesting explanation for a factor in GDP that is more likely to be overlooked when considering shifting curves.
The idea of a balanced budget, as we discussed on Thursday, has always seemed to me to be something for which to strive. This is likely because personal finance and local governments are held to a higher standard that seeks to maintain a balanced budget, and because politicians vying for nominations often promise to have plans to decrease the US debt, thereby aiming for a more balanced budget. Not until class on Thursday and reading this article did I understand the potential consequences for requiring a balanced federal budget. By not allowing the government the freedom to fill recessionary and inflationary gaps in the short-run, long-run recovery becomes significantly more difficult. The concept of balancing a budget is important and, theoretically, worth striving for when the economy is in conditions that do not require saving. However, mandating that behavior indefinitely, even when players in the economy require short-term assistance, seems to lack a forward-thinking outlook to when that might occur, as well as any sight of history where the government has behaved in a way that it could not if that restriction were implemented, and it turned out successful. The article is well-written and explains this point extremely well. I would be curious to know what a rebuttal to his hypothesis would look like, since to me he seems to make perfect sense, but I admit that I only know his side of the story.
Professor DeLong's take on why this will be called the "Longest Depression" is especially interesting. So often, people claim that the economy is self-regulating, and in introductory economics courses when we are taught to understand basic theoretical models, that same concept is repeated. In the context of our macroeconomics course, it is interesting to see what happens when policy makers are less proactive about turning around a recession, as well as why that might have happened this time around. After reading this article I researched and found the history of American recessions, depressions, and panics. Leading up to the Great Depression of the 1930s, it was interesting that these economic events would happen every 15-20 years, almost like clockwork. After World War II, with the exception of a small "stagflation" event in the mid 1970s, we did not experience another one of these until 2007. DeLong blames the fact that we did not apply what we learned in the Great Depression to our current Recession. He also claimed that the economic stability lasted for so long that citizens grew complacent, and eventually, careless. The idea that the longest period of sustained economic growth would lead to our country's longest depression makes a lot of sense. The Great Depression was historic by the time the Recession hit, and it was something current workers were connected to only through their grandparents. It was far enough removed that theories like a long-run, self-regulating economy looked like a more viable option in reality, which led to what DeLong is observing today.
The $15 minimum wage, oddly enough, has been a stimulating topic of political conversation among my friends recently. Coming from Los Angeles and growing up with the price of living there, I'm more likely to support it that some of my peers here, but then again I respect the argument that the high school students working part-time at Sweet Things don't need that minimum wage in the same way that the working class families in Southern California might need it. By that same token, the argument in the article that increasing the minimum wage has not harmed restaurants in the same severity that it is often conveyed, I could see where small businesses in small towns like our ice cream shop might suffer significantly if its wages to its employees nearly doubled. Among the places mentioned regarding the $15 minimum wage were San Francisco, Los Angeles, and potentially New York in the near future: cities that are host to the highest cost of living in the country. These are the locations where a high minimum wage are needed the most, and where I would most support that policy change. I found it interesting that, as the article mentioned, the minimum wage for tipped work has not changed in twenty-five years, which explains why $2.13 seems unreasonably low. I still seek to understand why tipped work has this special exception to the rule. Even though restaurants are required to meet the minimum $7.25 an hour if the tips do not add up to that number, I am forced to wonder if tips harm the worker. For those paid the minimum wage, tips make up more than two thirds of their salary, which means it is comprised of mostly people and their subjective opinion of the service they receive. What's more, to avoid having to pay that legal compensation, I know some waiters and waitresses who had their tips pooled and divided equally, such that those who received higher tips for presumably greater service were not rewarded more than those who did not. The vast majority of jobs in customer service do not have this lower wage for tipped workers, so it seems odd that food service is the exception to that rule. If customers paid more for their meals and the restaurants were held to the same standard that other institutions are in paying their workers, customers and restaurants would both face negligible changes in terms of how much they pay for a meal and for a worker respectively, and the workers might be better off for it.
This article and the conversation we had today regarding structural and cyclical argument is fascinating. More than anything, I am most interested in the arguments made to contradict Krugman’s assertions, both in their logic as well as in the passionate and almost personal attacks on Krugman. At the time that I read this piece, there were 155 user comments on the article, and while some supported and some opposed, they all shared an incredibly strong, unwavering passion for the side they picked. The basic rules of the scientific method dictate that observations must be made before a hypothesis is formed. It appears that so often with any issue related to politics or government policy, an individual forms an opinion, and then seeks to disprove any information to the contrary of that opinion. This method is flawed in that the individual playing the role of “scientist,” to follow the analogy aforementioned, is rooting for one side before the observations have even begun, and the conversation with anyone who disagrees is combative rather than collaborative. The tone in the article almost invites this kind of conversation. By stating in the lede that he won a bet over the unemployment rate, the importance is placed on this competition. It is my opinion that he is right in the argument over structural versus cyclical unemployment regarding the Great Recession, but the long process of finding the truth and convincing the public of that truth is made only longer by fostering the contest mentality that is so encouraged by politically charged debate.
Robert Rubin’s article about climate change accurately addresses the problems associated with global warming and includes a spin regarding the lasting effects it would have on the economy. He states that nearly all scientists and about 60% of the population believe it is a problem, and today, eighteen months later, that number has probably only grown. His article is one of many that call on policy makers and American citizens to change the status quo in an attempt to save us from a greater problem in the future. However, there are a few missing pieces he did not include that pose a bigger threat than United States policy. Rubin did not mention any country other than the United States, and did not consider climate change in terms of global policy. While the United States continues to make changes in policy and efforts to be more “green,” other countries value greater their ability to produce goods and services at a more economically efficient rate today. Climate change is a global issue, and reaching agreement on its importance is vital. However, considering how difficult it is to achieve proper bipartisanship in agreeing on policy in the United States, global plans are significantly more fragile. Rubin’s article, along with many others, is effective in inciting action among Americans, but now the energy would best be focused in inspiring other countries to the same level, so that the changes the United States is making can be made by others, and the effects it has on the planet can be more visible.
Toggle Commented Feb 7, 2016 on ECON 102 at Jolly Green General
Negative interest rates exist in countries other than Japan, including Sweden and Switzerland. It is interesting that the global recession is complicated enough that what was once a relatively rare occurrence is becoming more common, and that one country shifting its interest rates may affect the next one. While the reasoning behind choosing to make this financial move prove to be sound, and the goal of strengthening the Japanese economy is noble, the outcomes presented in the article do not appear promising. Furthermore, the article really demonstrates how intrinsically linked separate domestic economies are. Most of the consequences the article mentions are felt most by other countries’ economies. I admit that the effects and the decision to create negative interest rates is more complicated than I can fully understand. But after reading the article, it appears to me that the move by the Japanese economy to do this is justified by a narrow view of potential outcomes, seeing only the potential benefit for the domestic economy, without noticing that overall it might create more risks than rewards for the global economy as a whole.
Toggle Commented Feb 2, 2016 on ECON 102 at Jolly Green General
Simon Wren-Lewis’s response to Niall Ferguson’s assertion is interesting, but above all his writing style and the level to which he allows his personal feelings towards that assertion to seep into his writing becomes distracting. In his first statement he refers to Ferguson’s “disastrous attempt to [make a] claim” against Keynesian economics as “nonsense.” Lewis’s introduction alone takes away from his reliability as a reputable source. He goes on to belittle Ferguson by stating that his theory garnered media attention only because of his name, which invalidates not only Ferguson, but the author himself, since he never uses a reputable source throughout his article to support his rebuttal. Our only reason to believe his claims in opposition to Ferguson’s “economic quackery” rests on his title of Economics Professor at Oxford, which appears insufficient only because he draws attention to it by criticizing Ferguson using that same fact. The author’s criticism is built on the theme that Ferguson’s claim appears valid only because of the information he fails to provide his audience. Lewis corrects that mistake by enumerating a list of facts that prove Ferguson to be inaccurate. None of these facts come from a cited source, which induces an unintentional sense of skepticism in the reader. Overall his points are interesting and his professional expertise very likely allows him to make an informed opinion on Ferguson’s assertion, but his opinionated, insulting language of Ferguson coupled with a lack of supporting evidence in his article makes this piece appear to be more focused on criticizing one individual than informing those who read it.
Toggle Commented Jan 20, 2016 on Another one for 102 students at Jolly Green General
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Jan 20, 2016