Bernanke Still Ain’t Greenspan

Haven’t posted in an incredibly long time.  Here’s a thought.

Even though Alan Greenspan isn’t Chairman of the FED anymore, doesn’t his opinion still matter? The answer is a resounding “yes”. Despite his stepping down from the FED, the Gospel of Greenspan is still alive today. I dare say that Greenspan may be the only living person whose words alone can affect entire markets. But what about Ben Bernanke? If Greenspan doesn’t choose to keep quiet now, isn’t he kind of stepping on Bernanke’s toes? I think his continued prevalence in the media and his persistent predictions and advocacy makes Bernanke’s job harder. Of course, Greenspan and Bernanke have different visions of the future of the U.S. economy. My question is this: should Greenspan just shut up? Or, should he keep making statements about the U.S. economy?

Gmail Goes Public

After 3 long years of tyranny, Gmail is finally open to the public!

Classes, Krugman, and “Clintonesque”

It’s the first day of classes for Spring semester! I’m taking French because I have a language requirement….And because French is the second official language of the United Nations secretariat.

 Additionally, I’m taking POL 246 – African Politics. My professor used to be a human rights activist in Ethiopia and was sentenced to 15 years in prison. Then, about 1,000,000 people petitioned for his release, so the government let him go. What a cool/interesting story!

As if this wasn’t amazing enough, my International Finance class (ECO 346) is using a textbook written by world-renowned economist, Paul R. Krugman. I almost had an econgasm in the middle of class!

On a completely different note, does anyone else feel that a new U.S. guest-worker program is a terrible idea? President Bush has been lambasted by his own party members for being “Clintonesque” on the issue of amnesty (because, let’s be honest, Clinton didn’t get it right either). The President wants a guest-worker program. No, no, first he wants “technological advances” to help protect our borders. Basically, he wants a BIG WALL. Then, he wants a tiny hole in the wall called a “guest-worker program”. Through this program, immigrants are granted residency in the U.S. for a predetermined amount of time (probably like 3 years). During that time, they get to have the nation’s crappiest jobs. Jobs so crappy that no Americans want them. Then, after 3 years, we send the immigrants back through the nation’s “sphincter”. We tried something similar to this in 1986. It was called the Simpson-Mazzoli immigration reform. It became the largest U.S. legalization program in our nation’s history. Today, however, we’re talking about 11 million illegal immigrants. If the President wants to control immigration, I don’t think this is the best plan.

And that’s the end.

Squirrels On Birth Control

It’s nice to know where Scottish R&D resources are being spent.

No! Stop! Don’t Raise Minimum Wage!

If I may break from neutrality for a moment, I’d like to say that I am fairly liberal when it comes to politics. Now that the Democrats have the House and Senate, one would think that I am very pleased. However, after hearing some of the new Dems’ desired agenda, I am deeply troubled.

The Democrats want to raise the minimum wage…again. It just kicked up to $6.50 about a couple years ago. Why do we need to raise it again? Let me explain using economic reasoning why this is a bad idea.

At first glance, a raise in minimum wage seems like a great idea. Sure, let’s look out for all those fringe, low-income workers out there. Well, it’s not that simple. By raising minimum wage, we’d be increasing one of the major inputs to production–labor. Producers, facing higher costs as a result of the wage increase, will simply increase the prices of their products. What has happened? Did the real cost of labor increase? No, we simply mandated it to be more costly.

Additionally, those “fringe” low-income workers aren’t so “fringe”. About 10% of the American workforce makes less than $7.25/hr (the wage that Democrats want). But we’re not helping those workers. Employers’ willingness to hire employees is going to be significantly decreased if they know that they’re going to have pay each one at least $7.25 instead of $6.50.

As a result, such an increase stands to artificially increase prices, increase unemployment, reduce efficiency, and perhaps even decrease wage equality (ironically). Isn’t this why we have the Earned Income Tax Credit? So we don’t have to keep hiking up wages? Democrats like taxes more than Republicans, can’t we do something with the EITC? After all, not EVERY minimum wage earner is a poor, demoralized individual. In fact, I’ll bet than more than half of them are above the poverty line.

Of course, as a server at a restaurant, I don’t mind the wage increase. Servers’ wages are $3.90, and I’m hoping that a wage hike will in turn raise the “price” of my tips.

Fines vs. Prison

One thing that the United States does not lack is prisons. We love prisons. And it seems that we have a lot of people who love to be in prison too.

We’ve got over 2 million people in prison right now. Some people will read that and think “Hell yes! Lock up those nasty, no-good criminals!” But is this really the most efficient use of our criminal population? Oh, and I’m not about to suggest “license plates”, okay.

It’s reasonable to expect that a lot of criminals are deserving of incarceration. I think that most people would agree that heinous crimes like homicide, for example, are punishable by imprisonment. However, some criminals are being kept behind bars inefficiently.

Let’s say there’s an accountant doing 10 years for fraud. Accounting services are highly valued and often very expensive. From society’s perspective, does it make more sense to lock him up and prevent him from providing these highly valued services, or is there a better alternative? What about fines? Yes, perhaps the accountant’s reputation in his field has been marred by his criminal activity, but what if it hasn’t been completely obliterated? What if we just stick him with some hefty fine–one so big that he’ll be paying it off for quite a while. Isn’t this a more efficient from society’s standpoint?

Even if he’s not an accountant anymore, certainly the guy could do something to benefit society while he pays his debt to society (literally). Paper pusher, office gopher, burger flipper, take your pick. Again, I’m not a big advocate of the license plates idea.

Europe has figured this out already. Europeans use fines considerably more than Americans when it comes to punishment. They even issue fines based on peoples’ incomes. This is brilliant. Think about a multi-millionaire who gets a speeding ticket. A $75 speeding ticket isn’t even a slap on the wrist to her. However, slap her with a $75,000 ticket and she may think twice the next time.

That’s the goal here–deterrance. Can we deter the same amount of crime at less cost? I think so. I’ll save my thoughts on the economics of capital punishment for later.

Electricity Deregulation

I’m typing a 10-page paper for ECO 335 on the deregulation of the U.S. electricity industry, focusing on the California Electricity Crisis of 2000-2001.

 After reading through journal article after scholarly journal article, here’s what I do not understand. Did anyone thoughtfully consider what might happen if we DIDN’T restructure? I know all you little miniature Milton Friedmans out there probably just adore the idea of deregulation because you love free markets so much, but I’m not sold (yes, give in to your anger, turn to the Keynes side). It seems to me that, under regulation, supply kept up with demand, gave consumers reasonably fair prices, and delivered consistently promising returns to investors for a long time. So…why deregulate?

And I understand that many view the electric power industry as “the last major government industry that needs to be deregulated”. You know, like, right out of some John Wayne movie. I understand that some regions of the U.S. have higher energy needs than others (i.e. California). But we probably could not have picked a worse time to deregulate.

Think about where we are the scheme of things. This whole deregulation process is being set against the backdrop of a time when HUGE developments are needed in the area of alternative energy sources. We need to be focusing our efforts on developing those energy sources (and we are, but not enough). THEN, we can worry about deregulation. I am willing to bet that if we ordered our priorities this way, deregulation would be easier.
Energy Information Administration

Exporting Cancer

My Industrial Organization (ECO 320) professor, Dr. Rajeev Goel, has focused a great deal of his research on tobacco and the consumption tobacco related products. His findings are rather interesting.

In class the other day, he began a tangential discussion of tobacco censorship and how its effect on the economy. He noted that, due to tobacco companies’ inability to advertise (i.e. television) and certain advertising constraints (i.e. no more Joe Camels allowed), companies have simply expanded their business in other corners of the world to account for it.

Thus, the overall economic effect of censorship in the United States has been the ”exporting” cancer to other countries. Of course, we’re assuming that consumption of tobacco products strongly increases one’s risk of cancer…and there is a mountain of research to support such a claim. That’s what economics is though–making claims based on assumptions.

This Is My Economics Blog

I’m starting this blog in order to write about my first love in academia: Economics.

The subject of Economics is beautiful in that it applies to just about everything. Everyday, we all participate in Economics even in small ways. I may be only an undergrad, and I may not be the best student whose ever stumbled into an Econ course. However, I have to write about Economics because it simply compels me.

Man, I sure have a flair for the melodramatic.