Month: February 2014

Thesis Corner: An Introduction to Bitcoin

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Imagine that one day you woke up and someone told you, “Hey, these M&Ms over there have monetary value. Go ahead and buy whatever you want with them”. Okay, so M&Ms may be a bit facetious, but that scenario pretty much describes the origin of Bitcoin. If you’re a millennial like me, our trust in currency has always been anchored in the US dollar. We’ve been trained and conditioned to believe it’s worth something despite being a measly piece of paper. Now we are told these “Bitcoins” are equivalent to money too? Madness! What does this mean to money as we Continue reading Thesis Corner: An Introduction to Bitcoin→

BLS and CPI: Measuring Inflation

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For the unfamiliar, I’ll open with a quick and rudimentary explanation of the term inflation. Economists define it as a measure of changes in the purchasing power of a dollar. Inflation occurs when prices for goods and services increase across the board; almost everything—from hotdogs at baseball games to boxes of pencils—becomes more expensive. Many complex factors interact to affect inflation, but this post will focus on quantifying it, a tricky matter itself. The Bureau of Labor and Statistics (BLS)—a federal agency—works hard to estimate it with their Consumer Price Index (CPI). Their approach centers on a shopping basket, or Continue reading BLS and CPI: Measuring Inflation→

Opportunity or a Trap? The Economic Impact of Scottish Independence

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The contention between Scotland and England is a historical issue and there have been calls for Scottish Independence for hundreds of years. In the past these views have been dismissed, but under Scottish Prime Minister Alex Salmond, Independence has taken a new seat in the headlines. While there are surely deep national and politic issues surrounding this topic, what would succession mean economically? Independence for Scotland would offer a buffet of options that were not available say 60, or even 20 years ago. Unexhausted rich oil reserves along the Scottish coast are a hot topic when talking about potential Scottish Continue reading Opportunity or a Trap? The Economic Impact of Scottish Independence→

On Tails

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Tail events, in probability speak, are extreme events with the potential for a very large impact but which have a very low likelihood of occurring. Many people (I think accurately) view the most recent financial crisis as the occurrence of a tail event: it was highly unlikely that the system would experience such a drastic collapse, but it happened. We might consider the change of nuclear war or alien invasion as a tail risk. In N. Nassim Taleb’s The Black Swan, Taleb discusses the dangers of such risks with an analogy: even if you have encountered thousands of swans in your lifetime, and have never Continue reading On Tails→

Slums, forward and backward mobility.

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Slums are often seen as a property of rapid economic growth in urban areas. Slums form on the outskirts of economic hubs.They are the product of urbanization and are often highlighted for stimulating upward mobility. Marx, Stoker and Suri (2013) pose an interesting discussion into the contemporary ideas on the value of slums. Slums were normally thought as home for migrants seeking economic opportunity. The wealth of a fast growing city can trickle out to the slums, but this might only leave crumbs. Many slums are characterized as having poor quality housing, lack of clean water or sanitation, and the Continue reading Slums, forward and backward mobility.→

Thesis Corner: The Economic Success of Sharing

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One of Adam Smith’s mantras describes self-interest as an ingredient for the wealth of nations. Acts of selfishness creates an economy conducive to trading goods and services in exchange for money. UPS’s very own Shelby Senaga, a senior studying Economics and Business, explored a different dimension to this self-interest story in her thesis. Shelby’s research explored the phenomenon of collaborative consumption (CC), which creates commercial value through the power of sharing rather than ownership. Shelby and I sit down to chat about the concept behind CC and its growing popularity. HR: So what exactly is the idea behind CC? SS: Continue reading Thesis Corner: The Economic Success of Sharing→

How Should Governments Deal With Poverty?

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With all the recent political debate over food stamp cuts and raising the minimum wage, the U.S. government is facing difficult questions of not only how to provide assistance to those living in poverty, but also how much. Brazil, on the other hand, is taking a much simpler approach: Just give people money. According to an article in the Washington Post, in 2002, Brazil began simply giving cash, loaded onto a card, to those living in poverty. Currently, 14 million people in Brazil are receiving these cash transfers. There is only one catch: these benefits are contingent on children in Continue reading How Should Governments Deal With Poverty?→

The Economics of Spite

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What are the motives behind spite? Why are individuals willing to take on large costs in order to exact “revenge” on other? Is spite unique to humans? In an episode of the Freakonomics radio show called Spite Happens, an economics approach is used to explain spite and takes a look at the trade-offs behind the spite mentality. Warning! The beginning of this show contains a graphic example that includes sexual violence. If you’d wish to skip this, jump to 4:12. Imagine an experiment where individuals sit down in front of computers and are randomly paired up with another player. The players do not know each other Continue reading The Economics of Spite→

Bringing Perfect Competition to Life

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Agriculture serves as a perennial example of a perfectly competitive market. This type of market trades in a homogenous product, which means one producer’s output cannot be easily distinguished from another’s. Additionally, a perfectly competitive market has low barriers to entry/exit; beginning or ending production must be cheap and quick. Also, a large set of buyers and sellers participate in these markets, so individual players cannot move the market. Ideal agriculture meets all these criteria: one sack of potatoes is essentially the same as any other, planting decisions are often flexible, and crop markets are mostly well populated. Last semester Continue reading Bringing Perfect Competition to Life→

Congestion May not be the Biggest Problem in Road Development

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Road development is important in ensuring transportation is fast and efficient inside and outside of country borders. In most of the developing world, it would seem speed takes precedence over safety. An article in the Economist, highlights that deaths from road traffic accidents surpassed deaths from Malaria and Tuberculosis in most recent years. This is not the case in the rich countries. In particular Sweden has cut road deaths in half since 2000 and by four fifths since 1970. Banks and donors will fund large road projects, but there is little emphasis on the safety of these roads.The European Union Continue reading Congestion May not be the Biggest Problem in Road Development→