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Davis Alliger
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In the article, the author discusses findings in a study of Hungarian business growth. The study finds that the Hungarian manufacturing sales have grown from 21% to 80%. This is a massive structural shift in the Hungarian economy towards manufacturing. The research also estimates that there have been approximately a 21% increase in productivity in the Hungarian economy. Of this 21%, 5.9% of the growth has come from increased exports.The study analyzes the wide positive effects to not only growth and stimulation of an economy, but also increase quality of goods in the economy. The study also found that if substitute goods were a slightly lower price that there would be a large shift in purchasing towards the cheaper good, regardless of origin of production. This study clearly shows that increased liberalization of trade leads to increased production in the entire economy due to advantaged production of certain goods that leads to trade. Hungary may have also seen extreme returns due to the increased strength of economies of surrounding countries such as Germany. Germany's strong economy leads to strengthening of the Hungarian economy due to trade. Clearly, any protective trade measures taken by the Hungarian government would have severely damaged economic growth.
The article begins by discussing Joe Stiglitz's prediction in 2010 that the recession in 2008 would remain in the United States if there was not an increase in spending and reduction in interest rates. This would increase consumer spending and spur the economy. Joe Stiglitz was absolutely correct that without an increase in spending it would be tough for consumer spending to be boosted. After the crash of 2000 led to a severe drop in the interest rate and an increase in consumer spending. This increase in consumer spending was mostly in the form housing, which led to a housing bubble which burst in 2008. This led to even lower interest rates which have been slowly rising as the economy moves along. Much of the fear expressed by economists is that even small increases in the interest rate at this point could severely contract the economy. Another issue is the growing debt crisis in the United States, but Stiglitz cites countries like Greece and Spain saying that their austerity efforts have been economic suicide. One of the other provisions the author makes is the need for tighter financial constraints and more political organisation. Brad DeLong argues that without an organized political system many of the proper economic decisions that the government should make, can not be made. Once the political system can become organized and decide to spend, regardless of current debt, in order to increase consumer spending. This will spur the economy forward and allow for fiscal restraint in the future once the economy has recovered.
The article discusses the effects of minimum wage on restaurants in regards to their employment level, prices, and profits. The study overall displayed that small increases in minimum wage inherently led to price increases and occasionally small cuts to employment. Overall the customers rarely spent less in the restaurant due to the increase in prices. In addition employee work ethic would increase due to an increase in happiness once their pay increases. This naturally supports the argument to increase the minimum wage, but the question becomes to what level, and where should this minimum wage be determined. Many places throughout the United States have vastly different costs of living, which lends itself to a state lead minimum wage level. In addition, the study states that much of what the study examines is minor increases in the minimum wage. The authors state that increases up to 15$ at the federal level could yield vastly different results then those examined in the study. This supports the argument for a steady increase of the minimum wage to a level that supports local costs of living in addition to consistent increases due to inflation.
In this article Paul Krugman addresses the miraculously continued debate between whether the unemployment following the great recession was structural or cyclical. Obviously, as discussed in class the unemployment is not frictional. It would be unprecedented for unemployment to double solely because people are taking twice as long to switch careers/ find a new firm. Like we discussed in class, for the unemployment to be structural the skills of the labor force must be concentrated in certain fields and lacking in other fields. This would lead to unemployment and low wages in some fields and full employment and high wages in the other. As discussed in class, this is not the case, wages and employment fell across the board. This obviously displays that the rise in unemployment must be predominately or entirely cyclical. This lends itself as support for government lead increase in demand.
The analysis done by Robert Rubin is extremely interesting, but also one sided. It is fair to assume that climate change is occurring, and although many will argue it isn't by human causes science shows that humans are responsible for most, if not all of the effects. Although Rubin does an excellent job of pointing out the many costs and negative effects of global warming he also ignores several positive ones. The first of which is the growth in jobs created as private property is threatened by rising water levels. Private and public property owners will naturally create many cost efficient ways to combat the rising water levels such as man made walls and ditches. Although these methods are costly for land owners it creates more jobs for many low skilled workers (who tend to have lowest employment levels) and in turn stimulate the economy. In addition as temperatures rise much of the areas closer to the poles become much more livable and growing seasons get longer. This makes crop production more efficient, and cheaper for consumers. Rubin ignores these and several other effects in his economic analysis of global warming. In my opinion the argument should not be whether global warming exists/ are humans causing it. The question is whether global warming has more positive or negative economic costs. In my opinion it has more negative economic costs and should be regulated and controlled, but I feel that many people ignore several important aspects of global warming.
Toggle Commented Feb 4, 2016 on ECON 102 at Jolly Green General
As economic struggles for many countries continue to grow as oil prices drop and economic volatility and uncertainty continues to mount. Japan, along with many other countries are dropping interest rates to combat slowing business expansion. Dropping interest rates allows businesses to borrow more money and hire more employees for projects. One problem with this is that businesses must have enough confidence in the market to expand. Additionally many businesses are already sitting on large amounts of cash, lowering interest rates will not entice these businesses to expand much considering they already have large amounts of cash on hand. As Japan lowers its interest rates below zero businesses will be able to borrow money from the banks and return the banks less money. One issue that may arise(similar to the crash in 2008) is speculative borrowing, investing, and lending. This, much like the housing bubble, has potential to bubble and crash. This decision to lower interest rates even further is interesting and is one of the many effective tools that a government can use to stimulate an economy. The future of the Japanese and World economy will be interesting, and the effect of negative interest rates will also be extremely interesting.
Toggle Commented Jan 31, 2016 on ECON 102 at Jolly Green General
The analysis "Some Economics for Martin Luther King Jr. Day" was extremely interesting. I think one of the most fascinating facts that was brought up was the economic growth that was lost due to discrimination. This analysis naturally makes sense, if theoretically all people have an equal chance of being good at providing a good or service then removing a large portion of those people due to racist tendencies hurts primarily the firm, but also the overall economy. This doesn't always hold 100% true, because as the author mentioned many African Americans kids begin to fall behind at a very early age. This is likely due to poor schooling, family structure, and other socioeconomic disparities. As the author points out, many African American students enrolled in charter school from an early age preform on par or superior to their classmates. The question then becomes how to close the gap. Obviously, the gap in education starts from a very young age. Change in the public education system (which account for the majority of the education of minorities) should be a priority. Improving the education is much easier said than done, one of the primary issues is apparent in the gap between whites and minorities in public school. Additionally, job prospects after high school need to improve upon graduation for those who cannot afford or get into college. Discrimination can pose an extreme barrier for blacks and other minorities when looking for a job. Often minorities when competing with whites for the same job face discrimination and often have less of a chance of attaining the job, decreasing minority employment and preventing them from gaining necessary skills. The lack of ability to attain a job and improve their skills perpetuate the wage gap.
Toggle Commented Jan 22, 2016 on ECON 102 Reading at Jolly Green General
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Jan 21, 2016