The Economics of Maquiladoras

The early opening of Mexico’s economy under the North American Free Trade Agreement (NAFTA) widely encouraged foreign investment in the maquiladora industry. Organized shortly before the Border Industrialization Program (BIP) in 1965, maquiladoras are foreign-owned transnational assembly plants that operate mostly tariff-free at the northern Mexican border. Per the free-trade zone established by NAFTA, maquiladoras incur a value-added tax when re-exporting the final goods to the United States. A value-added tax is a duty on the value of the finished product minus the total cost of the parts that had been imported to make it. Economists refer to this model Continue reading The Economics of Maquiladoras

Ecological Debt, Explained

A year ago, the Intergovernmental Panel on Climate Change released a report. Pooling more than 6,000 scientific publications and drawing contributions from 133 authors, a group of over a thousand scientists found that humankind has less than eleven years to stop massive and irreversible climate change. In order to avoid the risk of a global emergency, governments must limit warming to 1.5°C above pre-industrial levels. For the planet to meet or stay below the threshold, fast and far-reaching changes to the traditional models of resource usage need to occur – and for the most part, attempts to assign responsibility have Continue reading Ecological Debt, Explained

The Economics of Protesting

All around the world, countries are experiencing large popular unrest. Responses from government have varied: in Algeria, large-scale arrests are a new norm; in Lebanon, law enforcement counter demonstrators with rubber bullets and teargas; and in Haiti, clashes with police have left at least 18 dead. In order to better discern what forces are motivating citizens and their movements to incur such risks, an examination of the rational individual’s decision making, the free-rider, and spoiling as a deterrent of public support is necessary. The protest decision and the rational individual A rational behaving individual evaluates the benefits and costs of Continue reading The Economics of Protesting

A Circular Economy, Explained

Circular economies are often portrayed as simple combinations of reduce, reuse, and recycle activities as popular definitions have come short of selling the model’s potential to increase economic prosperity, derive more value from inputs, and reduce emissions. Considering our climate emergency and volatile resource markets, a 4R framework, closed-loop production process could be a real contender for transforming our economy.  To understand how this model could reform the current system, a comprehensive explanation of circular economies as a concept is necessary. While there are multiple definitions for the model, the following aims are almost always mentioned: to enable sustainable development at Continue reading A Circular Economy, Explained