Category Archives: Economics

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→

The Cobra Effect

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Have you ever tried to help someone but by intervening you just made everyone worse off? Though your intentions were good, your actions had unforeseen and unintended consequences? Are you ever left wondering how your plan could have gone so poorly? If you answered yes to the above questions, then join the club of those who have fallen victim to the cobra effect. The cobra effect refers to instances when the solution to the problem actually makes the problem worse. This is not to say the solutions were shortsighted or based on poor logic. It is merely that people react Continue reading The Cobra Effect→

Fed Chair Zero Bound

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Janet Yellen—recently nominated to be the next Chairperson the Federal Reserve—is certainly breaking new ground. If her nomination is confirmed by the senate, she will be the first woman to lead the institution in its history. Her likely rise is especially significant in the field of central banking. According to CNN,12 of the world’s 160 central banks, only about 6%, had female governors last year. But although her gender shatters the historical norm of Fed chairs, she also carries on a curious pattern in that office—through her stature. It seems that our head central bankers keep getting smaller and smaller. Paul Continue reading Fed Chair Zero Bound→