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Yo Han(John) Ahn
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Halpern, Koren, and Szeidl analyzes evidence from Hungary to explain the exceptional effects importing inputs have on not only productivity but economic growth. The article acknowledges the substantial heterogeneity in firm's import patterns, with half of the firms not even importing at all. Using this information as well as the fact that firms’ spending on imports is concentrated on a few core products, the writers developed a model of firms that used differentiated inputs to produce a final good. In each period of the model, firms paid a fixed cost for each variety they chose to import. The productivity gains that resulted from this model were remarkable, arriving to a conclusion that imported inputs are significant for the firm performance in the Hungarian economy. After quantifying the contribution of imports to productivity growth and determining that import-related gains are due to the increased volume and number of imported inputs, it was evident that imports contributed substantially to economic growth. The article explored and challenged our understanding of the relationship between international trade and economic growth. Throughout reading, I kept thinking about the production possibilities frontier in micro and how trade would be used to produce outside of the limitations of one firm. In many ways, Halpern, Koren, and Szeidl further prove just how beneficial the implications of importing inputs are.
The concept of reaching a balanced budget has always seemed to be the absolute objective for the federal government. The rhetoric of, "We just need to someone who can balance the budget," has commonly been used in the discussion of political affairs pertaining to the national budget. However, leading economists are opposed to an amendment that would mandate the government to balance the budget for a whole host of reasons–to which I fully agree with. In "Balanced Budget Amendment “Very Unsound Policy,” Leading Economists Warn," a group of leading economists critique such an amendment for its unreasonable and anticipated adverse effects. In particular, during recessions unemployment benefits rise for the welfare of people affected by the period. This would increase the deficit but for profoundly good reason. The amendment would also prevent the government from borrowing for the purpose of investing in education, research and development, infrastructure, environmental protection, and other extremely critical causes. Not to mention the restraints the amendment would impose if the government would ever be in a position to enact expansionary fiscal policy. The economists conclude by explaining that a balanced budget is not a necessary for the U.S. but that the economy will perform accordingly to the needs and abilities of our nation.
Brad DeLong, professor of economics recalls the grim and strikingly accurate prediction of economist Joe Stiglitz. The forecast Stiglitz made was that there would be a deficiency of aggregate demand which was the result of growing inequality and negligent fiscal austerity. However, he believes that the solution of increasing aggregate is rooted in reforming politics and ideology. DeLong describes how he taught the concept of a self-regulating economy and believed that long-run trend of economic growth was hardly affected by short-run periods. This model which displays the magic of supply and demand has been learned within the course. Yet, after 2008, the anticipated equilibrium-restoring logic did not come into effect but hardly improved the economy. The harmful effects have seemed to reach even global economic policy and can be manifested in the stunted growth of China's economy – a primary example of how one model may not accurately reflect a particular story. Stiglitz wisely determined the economy would never return to its previous state without aggressive and sustained policies to rebalance the economy. I was curious as to how Stiglitz may have arrived or formed such a prediction which essentially defied core macroeconomic concepts. DeLong advocates that everyone must first be knowledgeable of the current economic condition the U.S. and many other countries are in. He then suggests that debt relief as well as tighter financial regulation will prevent further frailties. But even before reforming economic policies, DeLong argues that politicians and bankers must understand and be aware of the insights of economists like Stiglitz – who embraced the assumption, "it depends," and formed a story beyond the business cycle.
In "Restaurant industry unharmed by modest minimum wage hikes," Susan Kelley analyzes and uncovers the effects of modest wage increases on the restaurant industry. Restaurateurs have deemed higher wages to result only in detrimental effects to their business, forcing them into certain actions such as cutting staff and jacking up prices to offset reduced revenue. However, Kelley dissects the allocation of state tip and the unchanged demand to argue that raising the minimum wage modestly actually increases the total earnings of the restaurant workforce. Arriving to the conclusion that the restaurant industry should support reasonable increases in the minimum wage. The evidence Kelley provides appear to have merit, considering it does seem rationale that better compensated employees will tend to be more productive. I wasn't entirely convinced with the argument until it clarified that industries would be justified in opposing significant hikes in the minimum wage, but that data doesn't support opposition to all wage increases. I wonder how economists can analyze the wage rate to determine an appropriate rate that both fulfills the need of the restaurant and the employee. Surely this figure would differ depending on the location and tip allocations of the restaurant, but I wonder how we can determine this "ideal" wage rate.
The New York Times Article, "Structural Humbug Revisted," by Paul Krugman addresses the potential cause and explanation of unemployment in relation to the low unemployment rate today. Krugman references the speculation and consensus formed to explain the Great Recession, "a large part of the rise in unemployment was “structural,” and could not be reversed simply by a recovery in demand." However, despite this claim that workers just didn't have the right skills, Krugman asks the evident question of, "where was the growth in occupations where they did possess adequate skills?" Many supposedly share this opinion but were proved wrong with World War II, and the doctrine that skills were the issue became significantly stronger opposed to its counterpart that there wasn't enough spending. Krugman claims that the notion of unemployment being a result of primarily a structural problem eventually became fact. My immediate reaction to the article was a confusion of how economists could claim that unemployment – as severe as it was during the Great Depression – was in effect exclusively because, "workers just didn't have the right skills." I was also wondering as to how the structural issue of unemployment would be tackled or fought against without more spending. Would we wait around for workers to simply arrive or cultivate the "right skills?" For me the article was fairly vague, Krugman acknowledges that the rise in unemployment was in part "structural." I'd assume he's just claiming that there are more people seeking jobs than there are jobs available. However, structural unemployment is not a cause of unemployment but a type of unemployment. I'm still wondering what the actual causes of unemployment were and how it relates to the low unemployment rate today.
The New York Times Article, "Structural Humbug Revisted," by Paul Krugman addresses the potential cause and explanation of unemployment in relation to the low unemployment rate today. Krugman references the speculation and consensus formed to explain the Great Recession, "a large part of the rise in unemployment was “structural,” and could not be reversed simply by a recovery in demand." However, despite this claim that workers just didn't have the right skills, Krugman asks the evident question of, "where was the growth in occupations where they did possess adequate skills?" Many supposedly share this opinion but were proved wrong with World War II, and the doctrine that skills were the issue became significantly stronger opposed to its counterpart that there wasn't enough spending. Krugman claims that the notion of unemployment being a result of primarily a structural problem eventually became fact. My immediate reaction to the article was a confusion of how economists could claim that unemployment – as severe as it was during the Great Depression – was in effect because, "workers just didn't have the right skills." I was also wondering as to how the structural issue of unemployment would be tackled or fought against without more spending. Would we wait around for workers to simply arrive or cultivate the "right skills?" For me the article was fairly vague, Krugman acknowledges that the rise in unemployment was "structural," but what does that mean exactly from an everyday perspective?
Robert E. Rubin, co-chairman of the Council on Foreign Relations, argues for the importance of considering future climate-change risks when discussing economic policy, fiscal and business decisions. Although there are disparities in beliefs among the science community, there is a consensus that climate change is a serious threat. Yet, Rubin acknowledges the potential repercussions of a future threat into a present one, identifying climate change as a danger today. He then discusses the debate about climate change in the economy – a trade-off between environmental protection and economic prosperity. In microeconomics we learned how governments often implement incentives to behave in a certain way. Considering that U.S. economy faces enormous risks from unmitigated climate change, I'm curious as to what incentives the government has placed to motivate the private sector to prevent emission of greenhouse gases and pollutants? And in what ways have these incentives affected business/economic growth? Is caring for our environment truly a trade-off from economic prosperity? Or are there ways to protect both our environment and our economy?
Toggle Commented Feb 2, 2016 on ECON 102 at Jolly Green General
The idea of a negative interest rate was entirely foreign to me prior to the New York Times article, "Bank of Japan, in a Surprise, Adopts Negative Interest Rate," by Keith Bradsher. Hence learning that Denmark, Sweden and Switzerland all have had negative interest rates was stunning. I understand that the policy charges depositors to keep their money in the bank, opposed to receiving money on deposits. The intention is supposedly to incentive banks to lend more money and to invest more in the economy, what appears to be an appropriate solution for a country that has struggled through a quarter-century of weak growth. Despite the efforts to spur growth and increase inflation by Japan's prime minister, Shinzo Abe, the article deems Japan's economy to be unpredictable by addressing its sporadic instances of recession. It's interesting how the bank's policy makers attributed the rate cut to global conditions opposed to Japan's economy. Although initially I assumed they were attempting to wrongly charge the global economy for Japan's misfortune, the explanation of the risks China imposed as well as the same approach taken by other countries rationalized Japan's claim. The articles goes on to mention how weak prospects for economic growth in other countries is hindering businesses from investing in "any new projects." However, I found myself still wondering if there were any internal causes that may have stunted Japan's economic growth. And if so, are they causes that also exist in countries such as Denmark and Sweden who have also enforced the policy? Japan's new interest rate is expected to take effect in mid-February and will surely affect the global economy as well as Japans. Would this policy to encourage banks to lend, invest, and spend more stimulate not only Japan's economy but also have a positive effect on other economics? And how this potential effect on other economies be measured?
Toggle Commented Jan 29, 2016 on ECON 102 at Jolly Green General
The article "Some Economics for Martin Luther King Jr. Day," by Timothy Taylor addresses the case for racial equality upon principles of economics. One of the primary thoughts Taylor shares is the economic costs that are imposed on society as a result of racial and gender discrimination. Considering that a consequence of discrimination is its detrimental effect in allowing people to develop their talents, Taylor uses data to acknowledge the ways in which white men dominated high-skilled occupations. He concludes the argument by claiming that diminishing these discriminatory barriers aren't only a matter of justice and fairness, but are crucial for the betterment of the U.S. economy. On the table Taylor uses, there's a drastic increase from 1960 to 2008 in the percentage of minority groups such as black men and women working in high-skilled occupations. However, the writer doesn't address what accounts for this jump in numbers. He assumes that all the groups have similar abilities and therefore discrimination is the cause of the varying percentages. But if he included the efforts and reasons why the occupational gap is closing, I believe it would strengthen the article by providing the reader with an explanation of solutions to discrimination.
Toggle Commented Jan 20, 2016 on ECON 102 Reading at Jolly Green General
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Jan 20, 2016