The following is a report I compiled with two friends to determine which factors had the greatest impact on a college graduate’s starting wages. Though the calculations are sound, the report has not been edited for grammatical errors or clarity. Our data was based on publications from 2010.
A Case for Economic Equity and Long-Term Growth (Draft)
Macroeconomic policy issues, as well as the theoretical assumptions underpinning their conclusions, must be considered within a political Liberalism framework that ensures and upholds the democratic values of freedom and equality inherent to the constitution. The complexity of economic development requires a holistic empirical approach that accounts for the historical, political, sociological, and business factors contributing to the makeup of society when crafting and recommending economic policy.
For this paper we will assume that economic growth is the aim for society. Inequality is a product of increased bargaining power resulting from increasingly powerful institutions in the business, financial, and governmental sectors (Kumhof 2011; Barnhizer 2004; Argyres 1999). Research has repeatedly confirmed growing inequality globally and domestically (Hisnanick 2011). Inequality, manifested as widening income and wealth disparity, contributes to domestic and global account imbalances, consumer debt, and economic stagflation, i.e. inflation and unemployment (Kumhof 2012; Rajan 2012). In addition, inequality is linked to key social variables such as political stability, civil unrest, democratization, education attainment, health and longevity, and crime rates (Thorbecke 2002). Greater economic equality always results in greater long run economic prosperity for the whole. (Wilkinson 2009)
The thesis explored in this paper is that bargaining power inequalities causally contribute to economic and socioeconomic inequality due to path dependency, organizational inertia, and habit formation. Bargaining power inequalities increase proportionally with capital accumulation, concentration, and centralization. This paper will show that the restoration of equal bargaining power will rectify financial and labor market imperfections and spur economic growth. In addition, this paper argues that US economic growth over the past several decades has been vastly overestimated due to increases in financialization.
In order to determine the best policy for rectifying inequality and spurring economic growth, this essay provides an overview of current economic and socioeconomic conditions within the US and abroad, identifies problems within those conditions, and details the contributing historical economic policies that shaped them. It then examines the systemic causal mechanisms contributing to current US economic conditions, present potential policy solutions that seek to address these underlying causal mechanisms, and lastly interpret and rank their theoretical effectiveness. This paper addresses the following areas:
Cardiovascular disease, type II diabetes, and other obesity related health complications are among the top killers of American adults today. As these illnesses have grown increasingly more prevalent over the years they have taken the lead as the greatest contributors to rising health care costs. The aim of this paper is to identify how these diseases develop and address ways for preventing the onset of chronic illness in order to improve health and longevity as a means of potentially curbing the rising cost of U.S. health care. Citing strong evidence, I posit that the single-most significant factor for improving national health is the proper maternal nutrition during the critical intrauterine, neonatal, and postnatal periods of child development. Additionally, I hypothesize that while maternal education programs may result in positive changes to a mother’s diet during her pregnancy period, it is the cost, availability and ease of access to quality nutritional foods which are tied to a country’s cultural lifestyles, and individuals’ socioeconomic class that primarily influences the success of this education policy.
Economic Report on Nashville’s Health Care Industry
What is this report about?
This report will summarize the growing importance of the health care industry at large as well as within the Davidson County- Nashville area. We will begin by providing an overview of the health care industry by examining broad cultural trends and detailing recent US political and economic events that have contributed to health care industry growth. We will then focus in on the health care industry specific to Nashville, discussing its current scope and trends, and highlighting its particular importance to the city. Continue reading “City Specialization: The Growth of Nashville’s Health Care Industry”
Abstract: This essay explores whether it is possible or desirable for present-day economic theory to incorporate biological or evolutionary insights of the type suggested by Alfred Marshall but not fully embraced by him.
If the study of economics is to function as a progressive system that guides and explains the behaviors of men as free and creative agents, it is necessary to examine the study in an open and dynamic way that emphasizes the growth of knowledge and qualitative factors as the prevailing force of change and progress. Early on Marshall (2009) discovered the inherent error with rational mechanistic economic systems when he said “economics, like biology, deals with matter, of which the inner nature and constitution, as well as the outer form, are constantly changing” (p. 637). Whether Marshall knew it or not, the problem between statical and biological theories is fundamentally a philosophical one. This essay will explore this problem, delineate its philosophical roots, and build a case in favor of evolutionary economics.
The central thesis of this essay argues that neoclassical economic models operate in the outdated modernist paradigm that utilize rational closed systems which are, as a result, authoritarian and unsustainable with respects to free market innovation and evolution. The argument presented here is that economic models need to shift away from quantitative measures emphasizing ideal equilibrium states and towards a post-modern conception that accounts for freedom and change. In this way economics will reflect nature accurately, i.e. men are individual and free agents acting interdependently within an evolving economic landscape. This will provide holistic and sustainable model for interpreting progress by individuating agents according to inevitable qualitative changes within an economic system.
Schumpeter and Creative Destruction:
The Process of Market Innovation in Capitalist Societies
Joseph Schumpeter was a 20th century Austrian economist who taught at Harvard for several years upon coming to the US. While much of his work was overshadowed by his contemporary Keynes, he made important contributions to macroeconomic theory by developing dynamic models of market change. His work described the nature of market innovation within capitalist societies and emphasized the role of less quantitative measures such as sociology as a major factor for economic development. Much of his inspiration was drawn from the economists Marx and Weber who favored dynamic sociological backgrounds, as well as Walrus from whom he borrowed the concept of the entrepreneur. Despite his emphasis on social factors, however, Schumpeter was one of the leading econometric economists of his day.
In 1942 Schumpeter published Capitalism, Socialism, and Democracy. In this work lies the theory of creative destruction, one of his most notable contributions. Originally a term coined by Marx, Schumpeter employed the “creative destruction” to mean the “process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one”. He wrote that the concerns of capitalism were less about how existing structures were administered and maintained and more about how these structures are destroyed and created. Entrepreneurs, he says, are the sole facilitators of innovation and invention that bring about these structural and market changes in economic systems.
Schumpeter placed much focus on equilibrium and the role of entrepreneurs to facilitate change within an economy. According to Schumpeter, an economy in equilibrium produces products for future consumers who are consuming their present products, and consumers consume products of past producers in a circular flow based on past experience. The expectations and cycles are essentially contained with no new production functions allowing for changes. The entrepreneur operates outside the system and introduces changes to the production function that allow for the creation of new wealth and destruction of the old- hence the term, creative destruction.
In Schumpeter’s analysis, entrepreneurs are the sole agents of change and responsible for the destruction and construction of new markets and wealth within a society. It is the sheer acts of will and leadership, rather than intellect, which characterize the entrepreneur and secure economic progress through successful innovation.
According to Schumpeter, capitalist societies did not operate in a the static circular flow, or equilibrium, proposed by Weber where the production function is invariant and preexisting factors of production are combined according to the technology at hand mechanically. Market activity is much more dynamic and changing. It is the Entrepreneurs who operate as a nonentity outside of this equilibrium and force new combinations of factors that disturb the circular flow as a means of innovative development. Rather than changing the quantity of factors to change the quantity of products produced, this disturbance creates market disequilibrium as their innovative contributions change the form of the production function. This change in production function form introduces new and higher quality commodities which destroys old wealth and creates new wealth.
The recent financial and economic crisis is yet again the result of the same speculative orgy that happened not twenty years prior in the 1987 market crash. When the dust settled, the same inimical features culpably appear as reason for the disaster. As happened so many times in history, there was intense speculation that was fueled by misplaced faith in the lenders and rich. The association with intelligence and money contributed to a speculative boom that lead individuals to risks and over extend their confidence and credit. In addition, financiers at large investment banking companies were hailed for their seemingly innovative, yet unoriginal, practices of leveraging debt through financial instruments taking the forms of derivatives, securities and ARM’s (adjustable rate mortgages).
In the 90’s the US government passed a series of policies allowing home buyers to more easily secure mortgages through government backed debt. As more and more people began buying homes, housing values began to increase all over the countries. In attractive states such as Florida and Nevada, housing prices near tripled their original value. Lending companies began to underwrite mortgages well under standards to meet the demand and soon began pushing sub-prime loans onto home buyers. Many unworthy home buyers maintained poor credit, or bought multiple homes with hopes of flipping the home on speculation that its value will continue appreciating.
The speculative housing mania fostered the creation of massive MDS (mortgage backed securities) and subsequently CDO’s (collateralized debt obligations) which allowed shadow banking systems and credit markets to flourish while operating with little or no oversight. These and other “financial innovations”, nothing more repackaged debt being attractively marketed to meet investor demands, resulted in growing specious debt being incorrectly valued and over leveraged.
To hedge against risk, investors unloaded securities through CDS’s (credit default swaps) to mitigate against potential loss. These CDS’s allowed for more speculation as investors could basis trade on CDS spreads. As more and more loans defaulted, packaged MDS and CDO’s became riddled with unknown risk value and were dubbed toxic. These derivatives soon became worthless as panic stricken investors began selling bonds.
The banks bought these mortgage backed securities with the thought that, being backed by actual homes, they were fairly risk free. They predicted that the home values would sustain and that they could simply turn around and sell the properties at these high prices to compensate for any defaulted debt. In 2006 the crisis was set in motion when the housing bubble began to deflate as economic pressures forced home buyers to walk out on loans, leaving a wake of severely overvalued and ‘toxic’ securities in its path.
Major financial institutions, deemed credible and near prophetic with their steady gains, capitalized on the public’s gullibility for getting rich quick, as well as their short term memory of the financial crash just twenty years prior. These lending and banking institutions were thought to be “too big to fail” and garnered the pollyanna support of investors all over the world. As the housing market evaluations increased so too did the financial and banking markets in exponential disproportion.
In addition, individuals hailed as innovative financial frontiersman possessed the reputations that granted the support of willful and ignorant investors of all over. Such financiers included once NASDAQ chairman Bernard Madoff who masterminded a reminiscent Ponzi scheme that would rob investors of more than $60 billion. Hedge funds and the wealthy elite all over the world became victims of his vacuous enterprise.
As in all major financial disasters to date, the subsequent crash caused a sudden and permanent drop in US wealth as more than a quarter of wealth evaporated from their coffers. A decrease in consumption lead to an increase in unemployment above fourteen percent and the annualized rate of decline in US GDP reached closed to fifteen percent.
As the past has revealed, the aftermath of the crash caused a blind hunt to find and persecute the blameworthy. Everyone from the banks to the investors to the fed chairman and even the president of the US has been subject to scrutiny and called out for not predicting and preventing such an event. While regulation policies and reform measures followed, there was almost predictably no talk to the wide spread delusion and mania persistent throughout society which allowed for such a disaster to take place. Little blame was placed on the mass insanity of those who gullibly entrusted their money to “intelligent investors” of the financial community. Nor was their criticism of the baseless free-enterprise attitudes that the market is a perfect and neutral force absolved from external influences and inherent errors.
Those held responsible, mostly investment bankers and hedge fun managers, found their integrity and confidence completely ruined. As seen in the past, some fled in light of the impending crash, cashing out and leaving with their pockets full before they were apprehended as the cause. Many others, broken and shamed, thought suicide was the more appropriate measure for reconciling their guilt.
In the end euphoric speculation was the crux of the financial disaster as the masses became entranced with the seemingly boundless increases in the market. Vacuous financial innovations that leveraged risky debt were fabricated to promote and continue the growth. Those jumping on the bandwagon only fueled and reinforced the delusion. Caught up in the euphoric mood, many sage and perspicacious people overlooked the risks and the inevitable end that was to come.
This is what a paper written in 1 hour and 20 minutes looks like.
Fundamental America: Free for a Price
Examining the paradoxes of social inequalities within the scope of democratic sentiments
Two hundred and thirty years ago the American people declared their independence from tyrannical autocratic rule. The founders synthesized the enduring democratic rights and truths of the greatest philosophers that ever lived. Despite this, democracy was reserved for a margin of people and out of reach from the vast majority. Since our countries conception, great advances have been made to refine what democracy is and establish who has the right to contribute their voice. Major movements in women’s suffrage and later slavery and African American rights were milestones that helped shape the seemingly exclusive ideal of democracy. Currently America faces several fronts that challenge the legitimacy of our current democracy.
In our readings in Signs of Life in the USA, authors Sonia Maasik and Jack Solomon address a variety of paradoxes that exist within our American culture in chapter six, American Paradox. No paradox is more controversial and relevant than America’s simultaneous declaration of universal human freedom and equality and its long history of racism. This paradox addresses the tip of the iceberg of much larger paradox illustrating an advertised freedom that was not intended to be free.
Examining our American roots we can see that our puritanical Christian forefathers desired a society of their own, free from autocratic dictation. They envisioned this society for the United States. As time went on, these puritanical sentiments persisted and found their way into our legislation. Because their ideals subjugated the rights of women and African Americans, they were prevented from voicing themselves for the first half of American history. Only after massive opposition and generations of change have these become matters of the past.
Xenophobia of Middle Easterners
In our current culture racism seems to be localized to extreme fringe groups. Popular culture has seen women take center stage on political issues, and African Americans dominate multiple industries from entertainment to sports. However, social inequalities are still alive and well, and although racism may be withering, xenophobia continues to blossom with every generation. Most recently our country has been in multiple wars and with every war is an accompanying fear. Middle easterners have been the target of these fears as our government denounced radical Muslims and extremists from the middle east of reeking havoc world wide. While the atrocious crimes were committed by radical sects, the language used to single them out has effectively caused a mass hysteria directed towards the Middle East as a whole. Ignorant Americans forget that the numbers of such extremists are next to nothing.
Xenophobia of Illegal Immigrants
Another xenophobia gripping our nation is that of illegal immigration. The news of illegal immigrants storming our borders, scaling walls, digging tunnels, enduring deserts and dangers has America in a panic. While Americans national security has been called into question, another issue of economic security has been the focus of most news. Illegal immigrants are publicized as taking hard working tax paying American’s jobs. In light of our economic decline, this has been the spotlight of most Americans concern. To compound the issue further, America’s war on drugs is now directly battling the major trafficking of illegal drugs through our southern Mexican border.
Social Inequality of Homosexuality
The last social inequality that challenges the fabric of our constitution and agitates the ethical and moral minds of America is the issue of homosexuality. It seems it would be an inevitable topic given our ‘free’ country was founded by puritanical Christians. While the issue of homosexuality has made much headway in popular culture and open acceptance the past two decades, it has only recently been challenging the roots of America. Proposition 8 and the issue of same sex marriage has been the most widely publicized debate on the issue.
Examining the Paradoxes
Why are these paradoxical? While some might look at these issues and produce valid concerns for their legitimacy, they overlook the very foundations of America. This land, whatever the founder’s initial intent, was established as a haven for the persecuted, a home for those underfoot, those whose rights were molested or stripped. Social inequalities serve to destabilize the creed of freedom. To remove one man his rights would be to undermine the rights of all men. This, however, is what America has done throughout its history as it has attempted to reserve democracy to a select few.
These examples illustrate a major flaw in America’s declaration of freedom and equality: where the line of freedom is drawn. While we hold our relativistic and tolerant values supreme, we are terribly protective and afraid of anybody watering this down and wavering from these values. In the case of illegal immigration, most would think that America, of all places, would be the most receptive and lax about this process. Considering that there are no true natives other than the Indians, we should embrace the people who venture here to exercise their rights. The truth is that earning your citizenship and freedom in America is an arduous test of patience that many people simply do not have the time to pass.
Paradoxes: Generational Entrapment
Democracy is defined as a government by the people; a form of government in which the supreme power is retained and directly exercised by the people. These people make up the common people and dictate the governing rule through the legislative and judiciary process. However, problems arise when one generation’s laws improperly reflect the current generation. As the generation of one common people phases out, another phases in, often met in opposition to outdated traditions and beliefs that made their way in legislation. These tendencies create obstacles for progress, as is seen throughout American history with landowners only being able to vote, women’s rights, and African American rights.
Defining a Free Democracy
Another paradox that exists within these paradoxes is that of a free democracy itself. Any form of government is a form of control. Whether that control is derived from single or multiple sources detracts from that fact that there is a degree of freedom is forfeited. In a democracy this power is derived from the common people, the populous. This causes difficulties among those who compose a margin of the population or any minority with fringe beliefs and philosophies.
Overcoming these paradoxes will be the result of overcoming an inherent part of the human nature: fear, specifically the unknown. That includes all unfamiliarity extending to foreigners, homosexuality, or just change in general. While I would love to say these inequalities have all but disappeared with the advent of the mass media, internet, and other mediums of communication that break down the one sided walls of ignorance, the truth is they remain an enduring part of our culture. Though America once related with the tired huddled masses in Emma Lazarus’s words on the statue of liberty, we have grown alien to these feelings and are less empathetic to those who need it most.