Week in Review September 19

Key terms:

(fiscally) Liberal: Connected to Keynes’ view of economics. Follows the belief that supply creates its own demand, prices and wages respond slowly to changes in supply and demand, and it is the government’s responsibility to kick-start the economy.

(fiscally) Conservative: Connected to Hayek and Friedman’s views of economics. Follows the belief that the government has a role in examining the amount of money in the economy and that government spending can cause quick changes in the economy.

Inflation: The act that with more money an individual will be able to buy less than they were able to before. As prices go up, the value of the physical dollar goes down.

Speculative bubble: The bubble refers to predicted events that cause demand growth of a product. As the events are predicted, more trades go on that are associated with the product, which leads to more buyers allowing for the price to increase but will then dramatically decrease.

Economic freedom: The belief that every individual has the right to spend their money how they choose. Each individual is protected by the government to work to make their money and then consume, adding to the economy.

Return on Investment (ROI): Typically described as a percentage detailing the amount of money (profit) that an individual gets out of a situation they made an investment in (cost of good). In the context of price of college, the ROI can both be physical and theoretical as it can be described as an individuals profit they make from a job they got out of college, but can also be characterized as the intangible experiences obtained through college.

Circular Flow model: A model that describes how money moves around in a society, benefiting the economy. The model includes both supply and demand, monetary values and intangible values of labor, and revenue and goods and services.

Invisible Hand: An abstract representation of capitalism to describe individuals’ benefits considering distribution of income and manufacturing.

Zero Sum game:  The idea that when gains (income) is added to losses (spending) the sum will be zero. Economists do not believe in this as someone’s gains do not always equal another person’s losses.

Greater good: Pertains to all individuals totaling the whole economy, the people producing and spending.

 Current Events:

http://money.cnn.com/2016/09/16/pf/college/college-criminal-records/index.html?iid=hp-stack-dom

This article from CNN by Octavio Blanco describes the new admissions practices that some universities have agreed to which will allow for hopeful students with criminal records a shot at admission. This past July the Department of Education developed a new pilot program which allows for $30 thousand of grants to be made in order to provide incarcerated students a chance at secondary education. This new program will add to the economy in the long run as it will change the fact that a high percentage of incarcerated people end up on the streets. By furthering people’s education, they will then be able to go out and get jobs increasing the production thus increasing the amount that is able to be consumed. Another fact shared by Blanco is that if people who have been incarcerated go through secondary education, they are 43% less likely to end up back in jail. Thus, supplementing the economy even more. Along with the initiatives made by schools, certain large companies such as American Airlines, Coca-Cola, Facebook, and Google have pledged to not have a criminal history act as an immediate barrier to an applicant during the job process. Even though the cost of a university is extremely high, the ROI for a student with a criminal history will be huge as they are much less likely to end up on the streets or back in jail. They now have a better chance of being re-affiliated with their communities.

http://www.nytimes.com/2016/09/19/business/economy/coming-soon-economists-hope-big-spending-on-roads-bridges-and-ports.html?ref=business

            This article by Conor Dougherty explains in the increase in construction specifically in California, but also connects this spending to the presidential election as both nominees have agreed that there needs to be an increase in spending on improving the nations infrastructure. We see this everywhere we turn in Portland with old buildings being torn down and new building going up. On average, there are 111 people that move to Portland everyday, which is why there is such a need for more housing which connects to supply and demand. Along with the fact that both presidential nominees, democrat and republican, agree that an increased investment in infrastructure is necessary is a point in the argument that an individual can be socially liberal and fiscally conservative or vice versa. This increased investment into infrastructure connects to the circular flow model as more labor is necessary there will be more jobs offered thus having more people capable to spend and add to their communities and the economy.

Takeaways:

One of my takeaways from this week is the Circular Flow model. It is interesting to see how the economy works in such a domino effect and a clear image to help put it all together. It is noteworthy to look at the model from the perspective of the housing market, as that is something that is rapidly changing in Portland. As more people move here, they will be adding to our local economy and thus does that raise or lower quality of life for each individual in the area? With the housing market, it is interesting to think about as a home goes on sale at a high price, the owners will want to sell at that price or close to it, but the consumer or the hopeful buyer may not want to or be able to buy at that price. This is relevant to Portland because at some point supply is going to run short, but demand continues to grow.

https://justdan93.files.wordpress.com/2012/06/111.jpg

         My biggest takeaway from this week is how much the economics of college has changed in the last half a century. The price of college has increased so much that students average interest they have to pay on student loans is $6,700 and the average loan debt is $28, 950, both of these numbers continue to increase. It is also interesting to think about the Return on Investment for students who do have to take out loans for school. For students that do not have to take out loans and are more financially supported through school they have the freedom to follow a passion as a major whether or not that passion be dependable in the future. On the other hand, students who do have to take out loans need to be more strategic about the major they are pursuing as their Return on Investment can be seen as more important and beneficial to them in the long run. So, who is the cost of college worth it for? I believe that college is worth the cost for the majority of students as that is a way to maximize your utility as a young person still growing and learning. Though, the college does not need to be an ivy league. A student that is motivated to learn and pursue a dream can also enroll in a community college, which is much less expensive. While being enrolled in a community college, since it is part time, they can further their experiences with work. Even if a student does need to take out loans, I believe that college is worth the cost because as a society we continue to move further away from the route of secondary education being a choice and move closer to it becoming a direct path. By furthering your education, you open many more doors and stay eligible for a much wider range of jobs.

**Connecting to the conversation of education, it is worth watching the documentary “Ivory Tower” on CNN, which speaks about the unsustainable rate college tuition is increasing at and the ROI for the average student who does need to take out loans to go to a big name school.