Archive for April, 2008

Apr 19 2008

Pick-up lines for Econ students

Published by under Humor

Facebook | It’s time you experienced my positive externalities…

With prom right around the corner, it’s time to think about getting that perfect date. In this arena, it is undeniable that economics students have the upper hand. Our intelligence and wit is unsurpassed among our peers in other subject areas. Not only that, but our subject lends itself to several cunning and effective pick-up lines. Here’s a few from the Facebook group, “It’s time you experienced my positive externalities…”. Thanks to SAS senior David Xu for the tip:

I’ll maximize your utility.

What do you say we expand our production possibility curves?

What do you say I eliminate some dead weight loss and add to your consumer surplus.

Do you work for the Fed, cause your raising my reserves.

You’re like the village commons…*sigh* what a tragedy!

You won’t find any elasticity with my demand, cause there are no substitutes.

It’s OK baby…I’m a price taker.

You’ve been spending too much time with the invisible hand…time for some external intervention.

You can price discriminate against me!

I’m a pure public good…you can free-ride on me any time you want.

We’re like monopolistic competition…all we care about is the short run.

Our society is underproducing…but I’m sure if we hooked up we’d achieve an efficient allocation of resources.

My fiscal policy is all about contributing to your private sector.

Your industry shows promise…time for my firm to break the barrier of entry.

Think you can come up with something better? Follow the link above and join the group, add your own Economics pick-up line!

8 responses so far

Apr 19 2008

The dollar’s weak… no, wait, it’s strong!

I like this commercial. It teaches us nothing about economics, but it’s amusing and brings some light to a rather dismal outlook for the US economy and falling dollar…

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11 responses so far

Apr 18 2008

From the Help Desk: Long-run vs. short-run economic growth, consupmtion and investment…

*Click on the graphs to see full-size versions

The following message was submitted through the AP/IB Econ Help Desk:

Jason,

An AP Macro Question: Comes from the recently published AP Practice Exam

An increase in which of the following is most likely to promote economic growth?

A. Consumption Spending
B. Investment Tax Credits
C The natural rate of unemployment
D The trade deficit
E Real Interest Rates.

The answer is B, and I understand the economic principles of why that would promote economic growth, but what I can’t answer for my students is why A, Consumption Spending wouldn’t work. I know that consumption spending makes up part of the demand in aggregate demand, but I can’t help but think that an increase in it, would promote economic growth.

Thanks, “Econ Teacher”

For what it’s worth, here is my reply:

Hello “Econ Teacher”,

That’s a good question. I would explain to my students that in the short-run, an increase in AD alone will lead to some growth, but would be accompanied by inflation, since AS does not shift out when consumption increases. However, an investment tax credit will result in REAL long-run economic growth (by real I mean nominal GDP will increase while the price level remains stable), since it encourages investment. Investment is a determinant of AD, just like consumption, so AD will shift out, but it is also a determinant of AS, since firms are investing in capital. Increase the quantity or the quality of capital, and labor becomes more productive. Greater productivity shifts out AS, leading to growth AND stable prices.

Economic growth is defined, in terms of the AD/AS model, as an outward shift of both AD and AS. Increases in consumption will increase AD, but this will lead to inflation, and in the long run, workers will demand higher wages, increasing the costs of production and shifting AS leftward, returning the economy to the full employment level of output at an even higher price level, i.e. no economic growth occurs (see graph to the right). Investment, however, encouraged through a tax credit, will have positive demand and supply side effects, resulting in real economic growth and stable prices (see graph below)

Hope that helps!

Jason Welker


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One response so far

Apr 16 2008

SAS student Alice Su critiques John McCain’s tax plan

Shanghai American School Economics Student Blog » You Hate Taxes, I Hate Taxes… Let’s Hug- by Alice Su

I’m repeatedly amazed at the intelligence and maturity of the young economists here at Shanghai American School. After only nine months of econ instruction, these students already know more about sound economic policy than politicians of 40 years! Case in point: SAS senior Alice Su offers an stinging critique of John McCain’s proposed tax plan over at the SAS Economists Blog. Read below…

It’s easy to see how politics and sound economic policy may not mix very well; in fact, trying to put the two together usually ends up in contradiction and confusion that puts economically concerned voters in great distress. (Example: Remember that one econ class when Welker was talking about taxes, trying to decide if he was more liberal or conservative, and then got so agitated that Jeff said “You’re having a midlife crisis” and Welker threw a smartboard marker at him yelling “I’M 29!!”? Case in point. :P)

In this case, McCain’s speech about his economic policies on Tuesday contains so many contradictions, both with classroom economic theory and various parts of his own policy platform, that I find myself questioning whether he is taking a solid stance on the economy at all, or is simply trying to say whatever will appeal to his audience the most.

First, McCain’s economic plan, dripping with supply-side sentiment, is centered around a series of tax cuts. In addition to making Bush’s tax cuts permanent, he also calls for cutting corporate taxes, phasing out the alternative minimum tax, doubling the value of exemptions for each dependent to $7,000 from $3,500, and giving people the option of using a simpler, shorter tax form. As a finishing tax-cut touch,

One of Mr. McCain’s tax proposals would take effect even before the Republican Convention: he called on Congress to suspend the 18.4 cent a gallon federal gas tax from Memorial Day until Labor Day. Mr. McCain said that doing so would provide “an immediate economic stimulus,” but some environmentalists said that the change might encourage more people to use their cars, while Mr. McCain has made combating global warming central to his campaign.

Hmm. Here’s where the first hints of contradiction kick in. Besides the conflict between wanting to end global warming and yet encouraging more cars on the road, we’ve all studied the Laffer Curve, and I think I can speak for all the SAS Economists when I say that the U.S. Economy is not at a place where further tax cuts will lead to an increase in tax revenue or benefit the economy. Furthermore, what about the enormous budget deficit that Mr. Bush has so graciously left us with? As the author of this article discreetly points out, McCain seems to have forgotten that he previously promised to balance the budget by the end of the first term; rather than offer the economic stimulus that McCain is claiming it will, the tax cuts would probably just plunge the nation deeper into debt.

What answers do McCain’s economic policy have to offer these questions? Well, he also proposes a one-year freeze on most “increases in discretionary spending” while he reviews every federal program, department, and agency… with the exception of spending on the military. Supposedly, the money saved from eliminating earmarks as well as getting rid of unnecessary “discretionary spending” will add up to $100 billion annually, and that is how McCain says he will pay for the lowered business taxes. However, he neglected to address the issue of all the money being spent on the wars in Iraq and Afghanistan, and whether any of that might be categorized as unnecessary “discretionary spending”, or whether we should be spending anything over there in the first place.

An analysis by the Center for American Progress Action Fund, a liberal think tank, estimated that the overall cost of Mr. McCain’s tax cuts would be three times as much as the $100 billion he estimates that he can save. And they questioned whether his programs would really save $100 billion a year.

While I’m not saying anything in support of Obama or Clinton’s economic policies, McCain’s plan seems so shaky that I would think twice before buying into how he’s going to save our country. Personally- especially since this tax-cut-focused speech was given on the day of the deadline for filing taxes- it looks to me like another plan designed for the purpose of politics, and not with sound economic policy in mind.

6 responses so far

Apr 16 2008

The world and China – a love/hate relationship

Published by under China

The Guardian.co.uk – Chinese demand Carrefour boycott…

At lunch today I was sitting across from a local hire, Chinese national employee of Shanghai American School, talking shop, when she perked up and announced to the table that we should all NOT shop at Carrefour on May 1st. If you’re not familiar with Carrefour, it’s a French mega-retailer that operates dozens of shops around China, serving basically the same roll here as Wal-Mart does in the US.

My colleague’s enthusiastic declaration of a nationwide boycott of the French retailer caught me off guard. She explained that it was in response to the French president’s announcement that he might not attend the Olympics opening ceremonies in August in Beijing. I didn’t get it… what did the French president’s decision have to do with a giant retailer serving urban residents in China. How are these two entities related, and how does boycotting a French retail chain send a message to the French president?

My colleague didn’t seem concerned with the details, and simply reiterated the urgency of committing to NOT shopping at Carrefour on May 1st (in fact, I’ve shopped there only twice in the last two years, so I can safely say I will be participating in the boycott, by default).

I decided to see if I could find out more about this story, so after school today I did a Google News search, and sure enough, there is a nationwide boycott being planned by pro-Chinese activists though online chat rooms, text messages, and by patriotic bloggers, aimed at sending a clear message to the French. The boycott’s purpose, it turns out, does not really have to do with anything president Sarkozy said about the opening ceremonies, rather,

Supporters of the boycott call said brands under luxury goods group LVMH had “donated a lot of money to the D**ai L**a”. Carrefour is 10.7 percent-owned by Blue Capital, a holding company owned by property group Colony Capital and French billionaire Bernard Arnault, chairman and chief executive of luxury goods group LVMH .

So it turns out the boycott has less to do with Sarkozy and more to do with some tenuous tie between one of Carrefour’s shareholders and the exiled leader of a politically sensitive region in the western part of China. Interesting. This got me thinking more.

Recently, Westerners have been exposed to lots of anti-Chinese sentiments in the news. From CNN commentator Jack Cafferty calling Chinese “a bunch of goons and thugs”, to Lou Dobbs’ regular reports on the “industrial espionage” and the “cyber-warfare” of the “Communist Chinese” against America, the Western media seems to focus on one side of the story, as the Chinese side seems to go unheard. The Carrefour boycott (as ill-devised as it seems, given the tenuousness of the link between Carrefour and any blatant anti-Chinese activities) is an attempt by patriotic, nationalistic Chinese send a loud signal to the West: “mess with China, and we won’t shop at stores owned by you!

…”there is truly no reason to give the French money by buying their goods,” the boycott call said, posted on web portal Chinaren (www.chinaren.com).

“Let them see the Chinese people’s power, and the power of the Internet,” the post said.

Boycotts are funny things. Especially one-day boycotts like the one planned here. So let’s say that a few million Chinese agree NOT to shop at Carrefour on May 1st. First of all, my guess is that most people who support this boycott probably weren’t originally planning on shopping at Carrefour on May 1 (a Thursday), so those people won’t make any difference by continuing to NOT shop at Carrefour. Then there’s the people who would have shopped there. What will they do now? Go to a dozen or so local Chinese shops trying to find the things they would have bought at Carrefour? If so, then the boycott may in fact be effective, as local vendors will see an increase in their sales, Carrefour will suffer huge losses as their revenues cannot cover their operating costs, and a clear message will have been sent to France. More likely, however, shoppers who chose to avoid Carrefour on May 1st to show their patriotism will probably be first in line as the doors open on May 2nd… that’s just my guess.

Besides, as I read the passage quoted from a patriotic Chinese website above, “there is truly no reason to give the French money by buying their goods”, it dawned why this boycott is a dumb idea. Remember, Carrefour is like a French version of Wal-Mart. Hundreds of thousands of items from food to flat-screen TVs to lawn furniture to baby clothes: all made in France… wait a minute… hold on… let me check the label… oh, um, eh hem… I mean… yeah… Okay, so you get the point, NOTHING sold at Carrefour is made in France! Whose economy will be harmed if a boycott successfully dents Carrefour’s sales? France’s? There may be a few rich shareholders who feel the pinch, but more likely it’s factories right here in China, employing the very same patriotic Chinese who may support the boycott, who will suffer most if it is successful.

Finally, I followed a link from the Guardian article above to the website where the quote is from. (www.chinaren.com) Of course, everything was in Chinese, but through the magic of Google Translator I was able to read the headlines on this page. I thought I’d share them here. I didn’t read the articles, that would be tedious, but the headlines themselves are quite revealing:

  • CNN news stigma of violence come from the gas
  • Extremely shameless CNN Beijing Olympic Games does not welcome you
  • Japanese look at how the Western media to demonize China
  • 1000 source refused to admit to seek political asylum in the United States
  • Bai Yansong Carrefour opposition boycott of the United States apologize CNN
  • Million Chinese will be launched on the trans-European anti-T***t independence march
  • Western China angry disdain brand affected France
  • See passage of the Olympic flame safeguard the motherland’s honor dignity

Needless to say, these are headlines that did NOT make it onto CNN or BBC.

6 responses so far

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