No this post is not about Werewolf Elvis...although that would make for an AWESOME novel or an opera (read: classy)...To clarify my last post, I just want to say that I believe that no economic theory can be a "silver bullet". Rather, I believe that rational theories should be examined in relation to one another. My reason for this is my reflection on Keynesian and Supply Side theory and the complimentary relationship they have rather than any sort mutually exclusive relationship. To put it another way I believe that one theory may be best during a peak in the business cycle and the other during a trough of the business cycle.
And Elvis? Well I'm going to Memphis on Thursday and Graceland, baby! I plan on buying a sequined cape, you know, for the ladies...actually the purpose of the trip is not all sideburn related; me and the Mock Trial team are going...to get our asses handed to us. All I have to do is make it through the weekend and I'm done with Mock Trial forever!!! Even though I hated nearly every minute, it sure was fun...
Tuesday, March 24, 2009
Wednesday, March 18, 2009
Keynes v. Friedman
A question was recently posed to me "what do you think about Keynesian Economics?". My response: "it's definitely a viable theory, especially given today's economic climate". The questioner, let's call him Jan Patel, was surprised and argued that Supply Side economics was the superior theory. Now being the type of economics student that studied more David Ricardo (read:comparative advantage theory)than either John Maynard Keynes or Milton Friedman (Supply Side Economist), and even so not even much of him, I had to think about the long run effects of both policies for a little bit.
Here's what I came up with: In Keynesian theory, stimulation of the economy is achieved by a combination of two methods: 1. lower interest rates (to increase spending by decreasing savings/increase borrowing, because, hey, what the hell. Money's cheap); and 2. Increase Government spending.
Conversely, Supply Side Economics stimulates the economy by lowering tax rates, primarily for business and investors, which in turn leads to an increase of available capital.
So you can see the conflict. On the surface both theories seem to make sense. Now here's where it gets tricky - every economic theory is based on, wait for it, assumptions. The first year economics student, if he or she learns nothing else, learns a little bit of latin: ceteris paribus - "all other things being equal", which is the mother of all assumptions in economics.
So short and sweet here's my take: Keynes assumes that, all other things being equal, lower interest rates mean a.)that banks are less willing to lend money. When interest rates are too low banks and investors look for safe investments which have traditionally been government bonds. The Government can then use the proceeds from the bonds to invest in infrastructure which will pump inject capital into the market. Or b.) With lower interest rates more people are willing to borrow and invest in the private sector - which will also pump money into the market.
Supply Side Economics assumes that, all other things being equal, lowering taxes will lead to increased capital, which leads to increased market supply, which leads to higher demand (it's one of the few laws of economics - higher supply = lower prices which drives up demand until equilibrium is reached). The lower taxes lead to increased investment, which leads to cheaper goods and thus higher incomes.
Now here's the kicker: all other things are not equal! Both models when examined separately assume that the consumer is rational - that given the opportunity the consumer acts in his or her best interest. In recent months we have seen the folly of taking this assumption for granted. The consumer is anything but rational! Interest rates are at an all time low and money is indeed available for qualified borrowers. However, the paranoia propagated by the 24 hour media, by the pundits that are ill equipped to comment authoritatively on complex economic issues, but are ever so entertaining, has turned the average consumer/investor into quivering masses of hoarders. With low confidence, people are unwilling to borrow money and they are unwilling to spend the money that is pumped into the economy by the government. In addition, consumers are more likely to save, and thus, not purchase the supply of goods and capital that is produced via Supply Side policy - resulting in an inefficient allocation of resources; a cardinal sin for the economist.
So is it all doom and gloom? The short answer is "no". What is needed is a combination of both policies combined with an effective means of positively influencing the discourse of the media.
So Jeff, I mean, Jan Patel - there's my take on it.
Here's what I came up with: In Keynesian theory, stimulation of the economy is achieved by a combination of two methods: 1. lower interest rates (to increase spending by decreasing savings/increase borrowing, because, hey, what the hell. Money's cheap); and 2. Increase Government spending.
Conversely, Supply Side Economics stimulates the economy by lowering tax rates, primarily for business and investors, which in turn leads to an increase of available capital.
So you can see the conflict. On the surface both theories seem to make sense. Now here's where it gets tricky - every economic theory is based on, wait for it, assumptions. The first year economics student, if he or she learns nothing else, learns a little bit of latin: ceteris paribus - "all other things being equal", which is the mother of all assumptions in economics.
So short and sweet here's my take: Keynes assumes that, all other things being equal, lower interest rates mean a.)that banks are less willing to lend money. When interest rates are too low banks and investors look for safe investments which have traditionally been government bonds. The Government can then use the proceeds from the bonds to invest in infrastructure which will pump inject capital into the market. Or b.) With lower interest rates more people are willing to borrow and invest in the private sector - which will also pump money into the market.
Supply Side Economics assumes that, all other things being equal, lowering taxes will lead to increased capital, which leads to increased market supply, which leads to higher demand (it's one of the few laws of economics - higher supply = lower prices which drives up demand until equilibrium is reached). The lower taxes lead to increased investment, which leads to cheaper goods and thus higher incomes.
Now here's the kicker: all other things are not equal! Both models when examined separately assume that the consumer is rational - that given the opportunity the consumer acts in his or her best interest. In recent months we have seen the folly of taking this assumption for granted. The consumer is anything but rational! Interest rates are at an all time low and money is indeed available for qualified borrowers. However, the paranoia propagated by the 24 hour media, by the pundits that are ill equipped to comment authoritatively on complex economic issues, but are ever so entertaining, has turned the average consumer/investor into quivering masses of hoarders. With low confidence, people are unwilling to borrow money and they are unwilling to spend the money that is pumped into the economy by the government. In addition, consumers are more likely to save, and thus, not purchase the supply of goods and capital that is produced via Supply Side policy - resulting in an inefficient allocation of resources; a cardinal sin for the economist.
So is it all doom and gloom? The short answer is "no". What is needed is a combination of both policies combined with an effective means of positively influencing the discourse of the media.
So Jeff, I mean, Jan Patel - there's my take on it.
Sunday, March 15, 2009
Round 3
Well, the third round of Law School applications is over. Only 2 lucky recipients this time: Seton Hall and Catholic University of America (these are my second choice schools after UT...and, honestly, the more I'm finding out about the International Human Rights Law program at Seton Hall the more I'm rethinking my first choice school). So be sure to send the good vibes to Seton Hall!
The fourth and final round is going out next week, over spring break!
In the meantime I'm still trying to figure out what to do with the rest of my life if I decide not to do law school...you know that ticket to Europe I need to buy pretty soon? It may only be one way...more on that later.
The fourth and final round is going out next week, over spring break!
In the meantime I'm still trying to figure out what to do with the rest of my life if I decide not to do law school...you know that ticket to Europe I need to buy pretty soon? It may only be one way...more on that later.
Wednesday, March 11, 2009
Baylor Bound?
I got my first Law School offer today: $55,000 from Baylor. This is good news, but I'm anxious to see what the other schools that I applied to may offer.
Baylor does have the benefit of being in Texas (read: lower, instate tuition, and well, I LOVE everything about Texas), being a private school, small class sizes, and talented faculty; however, Baylor Law does not have an international law or global policy law program like some of the other schools that I'm considering.
So the wait is on...
Baylor does have the benefit of being in Texas (read: lower, instate tuition, and well, I LOVE everything about Texas), being a private school, small class sizes, and talented faculty; however, Baylor Law does not have an international law or global policy law program like some of the other schools that I'm considering.
So the wait is on...
Monday, March 9, 2009
No Regrets
Still waiting to hear back from Law Schools...I'm a little more enthusiastic, this week, about the idea of another 3 years of school than I have been in a while. I've been getting a lot of positive indications from some really good schools; not Ivy League, but then again, I don't want that kind of life. So with that said, I guess I'll keep studying and wait to see how things work out.
No Regrets? That's my new musical flavor of the week Death on Wednesday! Life's so rad.
No Regrets? That's my new musical flavor of the week Death on Wednesday! Life's so rad.
Thursday, March 5, 2009
That Bug!
The Bug in question is none other than Kim Jong Il, the Glorious Leader of the DPRK, better known as North Korea. (Sidenote: DPRK stands for Democratic Peoples Republic of Korea...of which the state is shooting 2 for 4; the state is neither Democratic nor a Republic...They do have plenty of people though...and it is located on the Korean peninsula, so there you go). Ol' "Kim Fancy Glasses" has not been sighted publicly in quite some time, leading many in the intelligence field to speculate that he is either ill(not a pun), dying, or dead. Nonetheless, the DPRK is wasting no time in breaking in the new US President (so much for honeymoon periods!) by posturing their offensive military capabilities, and saber rattling in the wake of (and prior to) Secy of State Clinton's visit to Asia, even going so far as to threaten all out war against the US and South Korea and calling for the reunification of the peninsula.
What does this all mean? Simple, The DPRK knew that making threats during the Clinton Administration meant US money and food aid...making threats during the Bush (43rd) Administration meant sanctions and, well, death by starvation...The DPRK is simply playing their hand with a new dealer at the table. How will this end? Nobody knows - either in military conflict with a million man army, or a peaceful settlement in which The DPRK agrees to give up their nuclear ambitions in exchange for development assistance. The reason that the outcome is so unpredictable is because anyone that is not the DPRK has asymmetrical information, meaning that The DPRK knows more about us than we know about them and this makes for tough negotiations. The DPRK is a notoriously closed regime, perhaps the most closed of the 193 UN recognized states. They restrict every form of outside communication from entering or leaving the country; only the government officials know what is really happening outside of the state's borders. Everyone else is fed from the propaganda machine. To get a sense of how eerily twisted North Korea is, watch this brilliant short film series by an insane journalist that bribed his way into the state and made a documentary...this will creep you out!
What does this all mean? Simple, The DPRK knew that making threats during the Clinton Administration meant US money and food aid...making threats during the Bush (43rd) Administration meant sanctions and, well, death by starvation...The DPRK is simply playing their hand with a new dealer at the table. How will this end? Nobody knows - either in military conflict with a million man army, or a peaceful settlement in which The DPRK agrees to give up their nuclear ambitions in exchange for development assistance. The reason that the outcome is so unpredictable is because anyone that is not the DPRK has asymmetrical information, meaning that The DPRK knows more about us than we know about them and this makes for tough negotiations. The DPRK is a notoriously closed regime, perhaps the most closed of the 193 UN recognized states. They restrict every form of outside communication from entering or leaving the country; only the government officials know what is really happening outside of the state's borders. Everyone else is fed from the propaganda machine. To get a sense of how eerily twisted North Korea is, watch this brilliant short film series by an insane journalist that bribed his way into the state and made a documentary...this will creep you out!
Tuesday, March 3, 2009
oww-my leg...oww-my ass...oww-my face...
Well I broke in Adelaide this weekend (I've named my new bike Adelaide by the way) and let's just say I remember what it feels like to fall..HARD. I must have hit a root just the wrong way because before I knew it, half way into our Sunday ride, I flew over the handle bars and hit the ground...with my face. I could feel my left cheek smack the cool, hard dirt ground...the only thing I could do after the impact was grit my teeth, close my eyes and roll over on my back. While I was on my back, head absolutely aching, I could feel a sharp pain in my left leg; turns out I skinned my knee and shin. So in addition to having a sore ass from Adelaide's barely padded saddle, I have a sore knee and a cheek that feels like I got punched...all in all, not a bad ride
Sunday, March 1, 2009
Round 2
The second round of law school apps have been sent! This round the lucky recipients are Baylor University, Suffolk University (that's in Boston), and American University in DC. Be sure to send the good vibes!
My new car stereo has been installed and I gotta say that it's pretty sick...now I just need to get some new speakers :p However, I must refrain from any major purchases so that I can have a good time in Europe this summer.
My musical flavor of the week is Billy Bragg. I love his blend of folk, punk, romantic, and protest rock.
Starting tomorrow we'll be hitting the Mock Trial practice hard in preparation for Memphis so see ya on the flip side.
My new car stereo has been installed and I gotta say that it's pretty sick...now I just need to get some new speakers :p However, I must refrain from any major purchases so that I can have a good time in Europe this summer.
My musical flavor of the week is Billy Bragg. I love his blend of folk, punk, romantic, and protest rock.
Starting tomorrow we'll be hitting the Mock Trial practice hard in preparation for Memphis so see ya on the flip side.
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