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Caroline Birdrow
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The research presented in this article offered a holistic and comprehensive approach to understanding the effects of tariffs on productivity. Not only did the researchers find that increased imports of inputs lead to higher productivity, but they also qualified this claim by discussing other mitigating factors. These factors include whether or not a firm is foreign or domestic, use of inputs, fixed costs, imperfect substitution, quality, and presence of liberalization policies. Each of these plays an important role in the interaction of tariffs with a firm’s overall performance. As we have discussed in class, many politicians tend to generalize complex issues when debating and proposing policy changes and strategies. They do not consider, or mention, the other related issues (which the researchers claim are extremely relevant). Additionally, this research demonstrates that the models we use in class truly are simplified versions of reality. Yes, the models indicate that increased inputs can positively affect GDP, but they do not offer any information on these outside factors. Thus, these basic models are useful but not all-encompassing.
While this article reports on a valid (and correct based off of what we have discussed in class) argument, the author does fail to fully address counterarguments. Some individuals, especially certain politicians, would fervently oppose an argument against balance budgets, no matter how logical and accurate it is. They are steeped in their own political and ideological views, unable to disentangle the opinions of others from pure logic. The article does quote the letter to President Obama and Congress as having explained that other large and influential nations do not balance their budgets. What they are seeming to ask is, “Why should we?” This, however, was not a sufficient response to critics. I was convinced by Professor Casey’s lecture that balanced budgets are not the solution to a recession. However, if others are to be convinced, articles like this need to adequately address their counterarguments and engage in thoughtful discussion towards establishing agreement. Otherwise, this sort of logic always will be met with opposition, and true economic theory never will be put into practice.
As did the article by Professor DeLong, “Confronting the Fiscal Bogeyman” touches upon the controversy between political ideology and logical economic policy and upon the issue of monetary vs. fiscal policy. Before reading this article, I had not known that Germany also faces this ideological struggle, and I found this to be very interesting. However, it did seem that Germans may have had more of a reason to reject fiscal policy: past hyperinflation. Americans, on the other hand, never experienced hyperinflation, but many still oppose heavy government interference with the economy. This again sparks my interest in learning more about why political ideology often is not compatible with economy theories. Eichengreen did point to a partial answer when he described Southern resistance to government intervention during Lyndon B. Johnson’s presidency. Perhaps, Eichengreen claims, Southerners wanted to protect their rights to segregation and, in turn, rejected opposing government policies. Eichengreen also touches about the fine line between expectation and reality when he provides background on the lowering of the interest rates which was intended to increase consumer demand and spending. The policy did not have the desired effect, as consumers easily could save their money at home and likely would, given the dismal state of the economy (also demonstrating the paradox of thrift). So while Eichengreen is arguing for increased government spending, one does have to wonder if this actually would help the economy or if another issue would surface, as in the case of the lowered interest rates.
“Future Economists Will Probably Call This Decade the ‘Longest Depression’” was an extremely relevant article in terms of what we discussed in class last week and, thus, was a helpful application of some of the concepts we reviewed. Professor DeLong draws upon several now familiar topics: monetary policy, fiscal policy, the balance between unemployment and inflation, NAIRU, the lack of models’ complete accuracy, and the supposed self-correcting nature of the economy. What I found most interesting was DeLong’s call for increased financial regulation and government spending, which typically is a very non-conservative concept, from what I understand. Additionally, DeLong goes as far as implying that those who typically discuss such matters should educate themselves further before making any more recommendations. I think we all can agree that, even in the current presidential race, it is true that politicians speak about economic policies from the perspectives of their parties, without any true understanding of the deeper implications. DeLong claims that “it is only after those ideological and political blockages have been removed that the tasks of economic policy … can be seriously begun.” This makes me want to learn more about the origins of the ideals of each political party and about how these ideals have come to separate themselves from the true facts of economics.
In my microeconomics class, we discussed minimum wages as price floors within a supply and demand model of the labor market, meaning that employers cannot pay employees anything lower than a particular price level. What we saw was that this would result in a level of supply that exceeds demand. At a higher price, employers are willing to hire fewer individuals, but more individuals are willing to work. Thus, there is a surplus of labor. Consequently, the conclusion of this article and the cited research would seem to be counterintuitive or even incorrect, as the authors have explained. Perhaps this demonstrates what Professor Casey described during the first few days of class. He mentioned that we would be learning about models and using those models to understand and analyze a variety of situations. At the end of the day, however, they just are models and the outcome of any given scenario depends on the unique factors involved. What might occur in one situation may not occur in another, and our predictions based off of models may not be completely accurate every time.
In my post about the cyclical vs. structural nature of the rise in unemployment, I wrote that “it is interesting that there might be so much ambiguity in what seems very cut and dry.” The same seems to apply to this article and the regulation of carbon dioxide. Of course carbon dioxide emissions are harmful to our environment so it would seem that the Environmental Protection Agency should have the right to limit those emissions. However, before reading this article, I had not considered, in this context, the difference between “environmental” and “atmospheric.” I also had not given much thought to the stratosphere vs. troposphere debate (or at least the one between Justice Scalia and James Milkey). In spite of Scalia’s mistake in thinking the stratosphere contains carbon dioxide emissions, I still think he raised an important issue. Justice Scalia seemed to have a keen sense of words’ definitions and connotations, one that lends new meanings to political situations. It became clear, after reading the article, that the EPA’s responsibilities and rights are not actually that cut and dry and are open to some interpretation, as demonstrated by Justice Scalia.
Paul Krugman’s commentary on an increasing unemployment rate points to an extremely troubling reality that theories might be trusted and adopted without the public and perceived “experts” demanding any concrete evidence. It also may not be that these individuals did not want or seek evidence. Perhaps they did not know what they were looking for or were lacking a clear understanding of the issue at hand. Whatever the case, Krugman’s article demonstrated what Professor Casey described on the first day of class: politicians and others will propose ideas and policies without truly understanding the economic implications. Many of them lack a nuanced conceptualization of economic principles. Additionally, it is interesting that there might be so much ambiguity in what seems very cut and dry: the cause of rising unemployment. This article showed that what might seem obvious or clear might actually be more complicated. It is one thing to recognize a trend; it is another to identify its cause.
As a Poverty and Human Capability Studies minor, I found this article to be particularly relevant to some of the issues that I have been studying. In my poverty research seminar (capstone) course, we recently read “Environmental Justice” by Mohai, Pellow and Roberts. The authors review the history and debates of the topic of environment justice, which points to the idea that those who are racial minorities and those in poverty often experience more of the negative externalities of pollution, industrial activity, etc.. In class, we discussed the location of industrial facilities in low-income or traditionally black neighborhoods and whether or not the authors successfully address one possible counterargument. The counterargument would be that the location of these facilities spurs economic growth in those neighborhoods by employing the community members and, in general, increasing productivity. The authors did not respond to that claim in the paper, but my classmates and I shared ideas about the flaws in that manner of thinking. While the industrial facilities may increase short-term economic growth, in the long run they will be having extremely negative impacts on real people’s lives, impacts that will cost money to reverse, if at all possible (as Rubin’s article indicated). We also discussed the idea of allowing small, emerging economies to follow more lax environmental regulations, with the goal of growing the economy and only doing a small amount of harm in the meantime. Our conclusion, as Rubin appears to conclude as well, is that the costs of this eventually will outweigh the benefits and that the environment is very relevant in economic policy decisions of today and of the future. Now the question needs to be about how we can lift individuals out of poverty, preserve the dignity of racial and economic minorities, increase economic growth, and protect the environment.
Toggle Commented Feb 3, 2016 on ECON 102 at Jolly Green General
On Martin Luther King, Jr. Day, I attended a student-led discussion entitled "In His Own Words: Lessons from Dr. King for Today" which included conversation surrounding Washington and Lee’s current campus climate and similar issues. One question that came up was about why Caucasians or others with privilege in our society often feel threatened by African Americans, etc. who ask for the same rights and privileges. Would the Caucasians lose as much as they think they would? This article seemed to provide both an answer to that question but also a possible explanation for why it is better for everyone in the long run to have equal rights and opportunities, aside from humanitarian arguments. Timothy Taylor quoted Pete Klenow who claimed that “White men arguably lost around 5% of their earnings… But their losses were swamped by the income gains reaped by women and blacks.” Thus, white men did suffer a loss, as there were less high skilled positions available to them, and therefore lower wages for them to earn. While this may be true, the white men could have invested in their human capital even more so as to remain competitive with newcomers to the labor market. Whatever the case, there is evidence that white men lost something individually, but Taylor presents the idea that everyone is better off due to widespread growth. According to Taylor, “1/6 or 1/5 of total U.S. growth in income per worker may be due to greater economic opportunity.” Thus, Taylor subtly seems to recognize what some Caucasians are feeling in the face of others accessing equal rights but provides evidence that, in the long run, they are wrong. We all gain from equality of economic opportunity.
Toggle Commented Jan 22, 2016 on ECON 102 Reading at Jolly Green General
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Jan 22, 2016