Lorraine Black – Sound Economics

The Why Axis: Discrimination in the Workplace

Posted on April 29, 2016 by Lorraine Black — No Comments ↓

Chapters 5 and 6 of the Why Axis focus on economic discrimination. Luckily, overt discrimination and bigotry has been on the decline for a while. However, economic discrimination, discrimination on the basis on economic situation/incentives/opportunities. Economic discrimination includes rejecting a qualified candidate who expresses an interest in starting a family in the future, or charging men 18-24 more for car insurance because they are likelier to get in an accident. Both economic discrimination and certain kinds of animus, or a hostile feeling when engaging with people of different races, orientations or ability, are obstacles to social justice and socially optimal outcomes. Gneezy and List discuss various Continue reading The Why Axis: Discrimination in the Workplace→

Another Finance Post: What is Private Equity?

Posted on April 22, 2016 by Lorraine Black — No Comments ↓

What is private equity? For many, private equity just more financial-ese. For others, it’s an investment arena they’ll never get into. For some it’s the only way to keep a business running, and for the lucky few it’s a way to make big money fast. Equity is the portion of something that you own (a share if many people have own portions). It’s the monetary representation of ownership. More specifically it’s assets – liabilities, essentially the amount you own minus the amount you owe. Own minus owe! For example, if you are working on paying off a boat worth $40,000 but you still need to Continue reading Another Finance Post: What is Private Equity?→

With Big Banks Coming Clean – Should We Start Breaking Them Up?

Posted on April 15, 2016 by Lorraine Black — 1 Comment ↓

With Goldman Sachs and Wells Fargo paying multi-billion dollar settlements after admitting to being less than truthful about their mortgage practices, it’s possible other banks on Wall Street might come clean. There is much debate about whether sub-prime mortgages were a conscious (and idiotic) attempt at making a ton of money, or if the banks were as in the dark about the consequences as consumers were before the financial crisis of 2007-2008. It’s easy to blame the banks, they’re the ones who had the power and they knew exactly what they were doing – right? Steve Eisman, the hot-headed portfolio manager from the Big Short Continue reading With Big Banks Coming Clean – Should We Start Breaking Them Up?→

What is Capitalism Really, and Why Do People Hate it So Much?

Posted on April 1, 2016 by Lorraine Black — 4 Comments ↓

Why do people hate capitalism so much? What’s wrong with the freedom to exchange private goods and services without major intervention by the government? What are people really saying when they denounce capitalism? First, a definition: Capitalism: an economic and political system in which a country’s trade and industry are controlled by private owners for profit, rather than by the state. Synonyms include free enterprise and the free market. I take two issues with the “fuck capitalism” attitude. 1. People don’t seem to know what socialism is (but love it anyway). 2. They’re confusing capitalism for income inequality and/or commercialism. Capitalism is Continue reading What is Capitalism Really, and Why Do People Hate it So Much?→

Bet Against Someone’s Life and Death with Extreme Mortality Bonds

Posted on March 25, 2016 by Lorraine Black — 2 Comments ↓

After the events in Belgium, this post seems in poor taste – but I promise it was written before the tragic events at the beginning of the week, and still offers something interesting. Did you know you could effectively bet that someone won’t lose their life in a catastrophe? And if they don’t – you could make a substantial amount of money? Insurance companies know this – and they’re prepared to offer you a once in a lifetime (literally) opportunity to buy an EMB, an Extreme Mortality Bond. Extreme mortality events are events that result in a substantial loss of life (a Continue reading Bet Against Someone’s Life and Death with Extreme Mortality Bonds→

Are Universities Turning into Hedge Funds?

Posted on March 11, 2016 by Lorraine Black — 1 Comment ↓

A recent article from The Nation claims that university endowments are being heavily invested in hedge funds. This “intersection between higher education and high finance” means that university money is torn between paying hedge fund managers and being spent on actual education resources. This criticism was first brought up regarding Harvard investing 15% of its $38 billion endowment in hedge funds. In reality, public universities are looking to hedge funds as well now that state aid is decreasing. Hedge funds utilize high risk methods for large returns, and often operate in convoluted overseas structures to avoid taxes. Investing endowments in risky hedge funds rather than investing Continue reading Are Universities Turning into Hedge Funds?→

Is There a Student Loan Bubble in the Not-So-Distant Future?

Posted on March 4, 2016 by Lorraine Black — 1 Comment ↓

Take a look at this ticker. Student loan debt is increasing by $2700 a second, with over $1.3 trillion American student loan debt (when I last checked). I’ve been wearing my student loan tin foil hat and ranting about a bubble for a couple years now. Think about it: 70% of students are graduating with some amount of debt and college attendance is increasing by about 0.3% a year since 2009. On average students are graduating with $35,000 in loans. The bachelor’s degree is now argued to be the new high school diploma. Being employable now depends heavily on your education, the higher the better – Continue reading Is There a Student Loan Bubble in the Not-So-Distant Future?→

Your Neighbor Winning the Lottery Might Send You into Bankruptcy

Posted on February 26, 2016 by Lorraine Black — No Comments ↓

Most of us are familiar with the idea that winning the lottery can sometimes backfire: having so much money at once might not allow you to learn how to spend, friends and family can wear you down, the list goes on – but what about how it affects your neighbors? The Federal Reserve of Bank recently released a working paper showing how income inequality can cause financial distress, specifically if it’s caused by exogenous shocks (like winning the lottery). Researchers saw an increase in bankruptcy filings when someone in a neighborhood won a lottery (2.4% to be exact). Homes and cars Continue reading Your Neighbor Winning the Lottery Might Send You into Bankruptcy→

Negative Interest Rates

Posted on February 19, 2016 by Lorraine Black — No Comments ↓

On January 29th, Bank of Japan announced that they would lower their interest rate past the traditional 0% – into the negatives (-0.1% to be specific). I initially wrote this off as more Abenomics, but as I looked further into the concept I discovered that Bank of the Japan was not the only bank to adopt a negative interest rate. The US Federal Reserve had a near 0% interest rate for about a decade to encourage growth and take the edge off the 2008 recession. But what does a negative interest rate mean for banks? Bloomberg asked 63 economists, that focus Continue reading Negative Interest Rates→

Alumni Interview: Ryan Tate

Posted on February 12, 2016 by Lorraine Black — 2 Comments ↓

I interviewed alumni Ryan Tate over Skype about his experiences after UPS and his startup, Venture Equity Exchange. Ryan has a great perspective on entrepreneurship and startups, an often overlooked option for economics graduates (but a potentially very rewarding one if you’re willing to take the risk and put in the work). I’m no dictation machine so I’m going to be paraphrasing Ryan’s answers and our discussion to the best of my ability. Ryan came to UPS (graduating in 2009) from San Diego partly because his father lived nearby in Silverdale and because he appreciated the uniqueness of the school. He majored Continue reading Alumni Interview: Ryan Tate→