The Samaritan's Dilemma

The Samaritan’s Dilemma is an economic concept that has wide-ranging consequences for today’s society. It deals with the economics of philanthropy and donation, and comments on the human nature’s potential to fall into patterns. The Samaritan’s Dilemma is highly related to the moral hazard problem. Adrienne Mitchell wrote a great article that relates moral hazard to senioritis, check it out below.

The Samaritan’s Dilemma is always present when giving need; that is, every time philanthropy or donation occurs to address a need, there is the possibility that it will incur more need. An example of this in a non economic sense is when you give a child candy once, they will ask for more candy. It is more of a psychological concept than an economic one, but because economics is really the study of human behavior there is a great deal of overlap between the two. The Samaritan’s Dilemma as it pertains to economics only occurs when the condition of being in need is in some way controlled by the individual who requires aid. For example, and this is purely theoretical, say there’s a homeless person who can control their homelessness, or at least influence it. They could get a job, but because of the help they get in their present state, they don’t do so, generating more need long-term than if the donor had not given aid in the first place. The Samaritan’s Dilemma is basically weighing the short term benefits of helping against the long-term cost of helping.

The Samaritan’s Dilemma also leads to perverse incentive issues, where instead of inaction, negative action is taken in order to receive aid. This occurs, say, when welfare is income based. If a recipient of welfare understood that the less income they have the more welfare they get, they may be motivated to take the second option, as it means less work for them. The help given has now incentivized against working harder to escape poverty, instead causing a rise in the number of those in need and the degree of their need.

If this is true for almost all philanthropy, how can any donation be effective? The answer is that there is no way to tell for sure, but steps can be taken to ensure that the dilemma has as little effect as possible. One of these steps is private donation. If there is no organizational middleman, that is, if the individual donating has control over how the resources are used, then the Samaritan’s Dilemma can be reduced. Because they are the ones controlling the money, the private donors would be incentivized to make sure that the money is effectively used and not abused for the short-term benefit.

The existence of the Samaritan’s Dilemma does not mean you should stop donating. There are many situations where the condition of need is outside the individual’s control, like the recent wildfires in California. For the people who lost their homes and belongings, it was not by choice. Donating for their benefit will not cause long-term costs, and the Samaritan’s Dilemma does not exist. For donation to other causes, however, you should keep the Samaritan’s Dilemma in mind when you donate. If possible, donate to an organization or individual who you know to be strict about their usage of funds. Philanthropy is an important way to give back, but we should be economically smart about it.

https://fee.org/articles/the-samaritans-dilemma-and-the-welfare-state/

The Tragedy of the Anticommons

I previously blogged about the Tragedy of Commons, and this is a follow up to that post. Briefly put, the tragedy of commons occurs when a common resource is overused. The solution to the tragedy of commons depends on the situation, but the most common is to privatize the property. This usually works, with resources like water being controlled by private companies. However, in certain situations issues with this solution will arise. If there are too many private owners of a resource, each owner can block the other’s use. This phenomenon of common resource underuse was first called the tragedy of the anticommons by Michael Heller, law professor at Columbia University.

The Tragedy of the Anticommons occurs when there are too many private owners of a resource, allowing individual owners to block access to other owners. An example Heller uses is of patents. If 50 people own a patent relating to resources used to create a product, each of them can block access to the resource. As a result, the product isn’t going to be produced AND the resources aren’t being utilized to their maximum efficiency. This underuse of resource is rooted in the social and economic system of the United States. The United States was founded on freedom, and economic freedom is a fiercely protected right. But with such heavy emphasis on private property and individual ownership rights comes the risk of the anticommons. Other examples Heller uses are technology, biomedical research, broadcast spectrum ownership, and even the music industry. All of these industries have a high risk of the anticommons tragedy, because of the wide ownership of key resources needed to produce the goods in those industries.

So, why don’t we learn about the tragedy of anticommons when we learn the tragedy of the commons? The answer is in two parts. One, the tragedy of anticommons is a relatively recent concept, with Heller’s research being published in 2010 compared to our textbook’s publication in 2005. The second part is more alarming. The tragedy of the anticommons is a hidden phenomenon, invisible until identified. It’s not an issue that builds in severity until dealt with, it’s one that is found or not found, and only once it’s found can it be dealt with. This is because opportunity costs are not visible, and the tragedy of the anticommons is essentially what happens when the opportunity costs of not producing. For example, nobody knows about that the anticommons blocked a new drug from being produced for the very reason that it was not produced. As Heller puts it, “Innovators don’t advertise the lifesaving cures they abandon”.

With that in mind, researchers found that the underuse associated with the tragedy of anticommons is more likely to occur than the tragedy of commons, and that fact, coupled with the invisibility of the tragedy of anticommons, makes this phenomenon very harmful to society. If we can’t identify that we’re underusing resources, we can’t fix the inefficiency and society suffers. In Heller’s words, the tragedy of the anticommons “wrecks markets, stops innovation, and costs lives. Our society needs to shift in order to understand the consequences of too much private ownership to address the growing issue of the tragedy of the anticommons.

http://wealthofthecommons.org/essay/tragedy-anticommons

Economics of College Applications (sorry if triggering at this time)

College tuition is not the only high expense related to college. Paying to even just apply to colleges has become crazy expensive. Over the years more and more applicants have been applying to colleges meaning more rejections, but that also means more and more students pay to apply with higher chances of getting rejected. Let's look at Harvard for example. Harvard got about 35,000 applications last year and with an application fee of $75 they made about 2.6 million just from fees. Students end up spending hundreds of dollars on application fees which are basically a fixed cost. The average application fee is $37.88 and let's say you apply to 10 schools; that would cost about $380! The average application fee is the highest it has been in 5 years and I am not surprised. With the increase in the number of students applying to colleges and in the number of colleges, universities have bumped up the prices to apply to gain even more profit. Most families say that the costs to apply are worth it and I agree, you want to keep options open to further your education. But why are there even application fees at all? If you do not end up attending the school why should you have to pay them any money at all? These are questions that do not have reasonable answers but either way, it is important to at least keep in mind how much you end up spending on applications alone.

Opportunity Cost of Tardiness

Everyone has been late to school before, but there are many opportunity costs that people ignore. A clear advantage is that you get more time to rest. Different people value this at different importance levels. Nevertheless, getting more rest is an opportunity cost one has to sacrifice for being on time to school. However, there are several costs that build up as more tardies are accumulated. The first thing is getting mailed warnings to parents, who are likely not going to be happy. The next punishment is a meeting with a school administrator, and then having to attend Saturday School. Finally, after all of that, there is the possibility of being transferred to an alternate school. The opportunity cost of being tardy is not having to worry about all of these.

The Pink Tax

     The pink tax is a phenomenon where products marketed toward girls and women are more expensive than the same products targeted for men and boys.  This applies to all sorts of products: dry cleaning, hygiene products, clothing, and even canes.  It has been found that on average, women pay more than men 42 percent of the time, which adds up to thousands of dollars per year.  Additionally, women already make only about three-quarters of what men make, so they have less income to begin with.  This is a regressive measure because it more heavily burdens the group that has less income.
     The pink tax is seen as a form of price discrimination.  Price discrimination is charging consumers as much as they are willing to pay for an item.  The pink tax is clearly an example of price discrimination because it gives women who are willing the opportunity to pay more for their goods.  In a grocery store, when the same product is packaged in pink and black, those who are willing to pay more for pink have the opportunity to do so.  Though this may seem ridiculous that pink costs more, it makes economic sense for companies if consumers are willing to pay it, which many are.  Oftentimes, women don't know that they are actually being charged more, but nevertheless, their participation in price discrimination allows it to continue. 

Works Cited:
https://www.listenmoneymatters.com/the-pink-tax/

Opportunity Cost of School Sports

 Opportunity Cost is an economic term can be applied to everyday life. Opportunity cost is the loss of potential benefit if one choice is chosen above another. One way this can be used is in school, specifically school sports. Some benefits of doing school sports are that it helps create friendships, you get exercise, experiencing the thrill of competition, and depending on your view, skipping school on some days and not taking PE class for a year. Therefore, choosing not to do school sports has the opportunity cost of everything listed in the previous sentence.
 However, choosing to do school sports also has opportunity costs. Skipping school can be considered as a cost too because of the tests and assignments you have to make up. You could also miss review days or lectures. Furthermore, choosing to do some school sports limits your competition to a few schools. For athletes who are nationally ranked in tennis, for example, electing to NOT participate on the school team could actually be more beneficial because of the opportunity costs. Instead of devoting time to play students from local schools and practicing with students from only the same school they attend, they could travel to other places and participate in tournaments and practice with whoever will optimize their improvement. This could be more valuable than the cost of taking an extra class.

Economics of School Attendance

     When the fires compromised the air quality a couple weeks ago, our school was canceled for a day. I recall someone mentioning the school district facing a loss due to no attendance that day. I previously heard that public schools get paid for the attendance of their students. After some additional research, I discovered that California spends an average of $11,000 per student each year. With a district of 4,300 students shutting down even for a day, the district suddenly loses quite a bit of revenue. 
    Students often complain about not having certain days of school off. However, when we consider the impact of missing days of schools, we can see the financial incentive to have as much student attendance as possible. While we see a 3 day weekend as a chance to relax, the district has to face some heavy losses.
    This can be further related to the emphasis on attendance at our school. If you are constantly absent, you will receive punishments such as Saturday school. These are to incentivize someone to show up to class, as they would not want to face such punishment. In college, for the most part, no one cares whether or not you actually go to class or not. This is because the school already has been paid, and is not going to directly benefit from you being in class.
    It's interesting to see so much economics behind matters like school attendance. After taking this into consideration, I will definitely appreciate our days off more, as the school is sacrificing a massive opportunity cost in order to satisfy us, students.
     

The Economics of Santa Claus

As December is just around the corner, there's only one thing on my mind. Christmas. And with that comes another year of unanswerable questions about the man, the myth, the legend himself, Santa Claus. I’ve left out cookies and milk every year since I was little and somehow when I wake up Christmas morning, they've magically disappeared and there would be big presents perfectly wrapped under my tree. I was fascinated. As I got older, I started to question this process. I began to become more and more flustered every Christmas morning. There was one question that kept popping into my mind. Is Santa Claus real...ly paying for all of these presents? I was so curious on how he got the money and funding to pay for every kid in the world that celebrates Christmas, so I did some research.

With 1.9 billion kids in the world, that means Santa Claus is paying about $610 billion on toys alone. Keep in mind he also has to keep his sleigh repaired and has other costs, so who knows what the total cost becomes. To make sure his sleigh can travel around the world in one night, he has to make sure his energy source (whatever that is) can exert 9.3 million Megawatts. That's just enough energy to travel the world at 60 miles a second! You also have to consider where you would store 1.9 billion presents for a full year. You have to find a rental locker that can hold 8.6 million acres worth of presents, which is probably really hard to find! So this must get you thinking, how can Santa afford all of these?

Coca-Cola spends $3.3 billion each year on advertising, and if you’ve ever seen their Christmas ads, you know Santa is a big part of their holiday campaign. So this got me thinking, maybe Santa Claus uses endorsements to pay off these insane debts, especially his big ones like Coca-Cola. This would explain his frequent appearances in their commercials and explain how he could be putting a dent in those costs he has to pay. From Coca-Cola’s perspective, the potential loss of income for their company without Santa’s brand would make him worth a big paycheck, helping him pay off these extreme prices he has to pay.

Opportunity Cost in Fantasy Football

As we learned in class, an opportunity cost is the loss of potential gain from other alternatives when one alternative is chosen. We may not realize it, but this concept applies to a lot of daily activities we do. I realized that this specific concept is used a lot in one of my favorite weekly activities, fantasy football. For those who don’t know, fantasy football is a virtual ownership of a fantasy team composed of players from different NFL teams. Each owner drafts players to create their own unique roster. The players then earn points for their owner based on their performance in the live games each week. Owners play head to head matchups with other teams in the league every week and whoever gets the most combined points by the end of the week, wins.

Opportunity cost plays a big part in winning your matchups. Every week you are faced with lineup and roster decisions. In fantasy football, you are only allowed to start a certain amount of players. In most leagues, it’s one quarterback, two running backs, two wide receivers, one flex (wide receiver or running back), one kicker, and one defense. Although it’s only a 9 man roster, you can still have players on your bench. So every week you have to look at a players matchup and decide if he will be the best start for your team. For example, if one of your best running backs is going up against the best defense in the league, you have some risks to take.  The best running back versus the best defense may mean a high scoring game, or it may mean that your running back will get very few points. This is where opportunity cost plays a big part in your decision making. You have to figure out the opportunity cost of starting a certain player over another to see what the best decision for your team is.

As you are the owner of this team, you become very involved.  You will find yourself doing weird things like scouting players of the opposing team's defense and finding out small details like forced fumble average to make sure you're running back won't fumble that week.  Doing your research and finding out the opportunity cost every week is essential to building a solid team.  Although for some people with no hope of winning the championship (Kyle), it is better to just wait until the next year to start fresh.

College vs. Trade School

We all know that college is expensive. The average bachelors degree in the United States costs over $127,000. This, in addition to living costs, means that 70% of students end up taking out student loans to cover the cost. Also, spending four years in school means four years not having a steady income.  College is the seen as the default path after high school, and while it you will make more money with a bachelors degree than just a high school diploma, is college actually the best option considered the cost?

Going to a four-year school isn't the only way to make money. Going trade school, which is a school that teaches a specific skill, like how to be mechanic or an electrician, can be pretty lucrative while not having the same costs as regular university. The average trade school degree cost $33,000, almost $100,000 less than a bachelors degree. The time is takes to get a trade school degree is also significantly less.

Technical jobs have a median salary of $35,500, while people with degree make on average $46,000. If you take into account student loans, tuition, college housing, and getting into the job market faster, trade school may be more financially wise in the long run. Also, because it's not really possible to replace your plumber with robot or someone oversees, the job security is much higher. Technical work is in high demand; not everyone will need to hire a computer programmer, but almost everyone will need a mechanic sometime in their life.

While trade school is often overlooked, its definitely not for everyone. While you can make a decent salary in a technical job, someone with a regular degree will, on average, make more money. Also, trade work is more dangerous. Climbing roof or handling live wires is a risk that not everyone is willing to take.

Blue-collar work isn't something that many people dream of, but it can be a smart decision for some. There are pros and cons for college and trade school, but some people just aren't cut out for college and vice versa. While it may not be right for everyone, trade school should be presented as an alternative option.

Work Citied:
https://www.thesimpledollar.com/why-you-should-consider-trade-school-instead-of-college/
https://www.forbes.com/sites/ryancraig/2018/06/14/blue-collar-trade-jobs-are-dangerous-but-not-for-the-reason-you-think/#75704444c639
https://lifehacker.com/trade-school-might-be-a-better-choice-than-college-her-1484086007

How gyms stay in business

    Anyone who has tried to buy their own gym equipment knows how expensive it is upfront and the maintenance is also quite costly, so looking at large gyms that have dozens of these machines it is hard to imagine how they stay in business. The success of gyms mostly has to do with the large market they serve and how little the consumers actually use the product they buy. In fact, only eighteen percent of gym membership holders use the gym regularly.
     The other eighty-two percent of gym membership holders mostly subscribe as a result of New Year's Resolutions and the appeal of the idea of going to the gym. This means that they will sign up for plans and then the gym will use an automatic billing system to continue collecting money from the members without them remembering to unsubscribe.

                                                      
      Gyms know about this habit of people to sign up and forget about memberships so they will often allow many more people to sign up for memberships than the gym has capacity for. For example, most Planet Fitness gyms can only hold about three hundred people at a time but they each have around six thousand five hundred members. These extra members are pure profit for the company because they don't contribute to the wear and tear of the equipment and they don't use the other amenities like showers that the gym provides. So, despite the high upfront costs of owning a gym, the human behavior of most gym customers is what allows them to stay in business and turn such a large profit.

Sources
https://www.fool.com/investing/general/2015/05/23/exorcise-your-ghosts-of-spending-past.aspx

Economics of Procrastination

Procrastination is something that we all do in one form or another. Personally, I am currently procrastinating on my blog assignment, college apps, and an English essay. While procrastination may seem to be counterproductive on the surface, its benefits can be uncovered through analysis from the perspective of economics.

Many people derive utility from the act of procrastinating, even if they do not realize it. The decision to procrastinate comes down to opportunity cost. For example, the opportunity cost of spending time on homework now is the time that could be spent watching Netflix or playing games. Obviously the work must be done at some point in the future, however the instant gratification of wasting time now often outweighs the stress induced by putting work off.

People often justify procrastination through statements such as "I'll be more focused later" or "I just need a quick break." It may seem that these are just weak attempts at rationalizing time-wasting activities, however they are not without some truth. Deadlines have been shown to greatly improve productivity, and procrastination may actually reduce total time wasted. If one spends 3 hours at maximum focus working up to the deadline on an essay after procrastinating on it, they will have wasted less time than if they spent 5 hours working interspersed with distractions.

https://slate.com/human-interest/2008/05/how-economists-think-about-procrastination.html
http://www.cnn.com/2008/HEALTH/12/30/procrastination.economics/

Economic Benefits of Trade School

              The typical educational path for people in the United States is to go from high school to a traditional four-year college or to a community college and then a transfer to a traditional four-year college. This path may not be the best economic choice for every student, depending on the type of career they wish to pursue trade school may be the best option.
              Trade school is a quick way for people to enter the workforce with most courses taking between six week and two years. These quick courses can provide students with the opportunity to make above minimum wage to help pay for college or start earning a good salary sooner than those who chose to take the traditional college path. In fact, these courses offer people a pathway into many fields including, stem, household maintenance, and other office jobs. For example, Phlebotomy (people who draw blood) can make between twenty-five to thirty dollars an hour and the course to get certified is only six weeks long. Eventually, people who have graduated from vocational school can earn close to one hundred thousand dollars, which is similar to what people who have graduated from a four-year college earn because they can occupy the same jobs.
             Additionally, there is a high demand for people who have graduated from vocational school. This means that there are currently more scholarships for people going to these schools, reducing the amount of debt that people graduate from school with. Compared to a four-year college trade school can total thirty-three thousand dollars to complete whereas traditional college can cost upwards of two hundred thousand dollars for tuition alone, meaning that they will graduate with much more debt. This helps to eliminate the income inequality generated by these different types of schools because instead of paying thousands of dollars to the bank per month they can use all of their salaries for their own personal gain. This high demand for vocational workers also means that there are lower unemployment rates for graduates from trade school, providing job security to people in these positions. So, while trade school is not appropriate for every student it may be the best option for those looking for an alternative education path.

Sources
https://careerschoolnow.org/careers/trade-school-vs-traditional-college

Opportunity Cost of Homeschooling

Homeschooling is a trend thats growing in the United States. Many parents are choosing to teach their child at home instead of sending them to regular school. It's considered an improvement by some. Children get one-on-one lessons instead of being lost among a classroom of thirty students. Also, when adding up all the cost of sending your child to school, even public school, homeschooling can seem cheaper. However, many people don't realize there is a significant opportunity cost of homeschooling.

The most impactful is the loss of income. At least one parent has to say home everyday to teaching their kids, and it's a big commitment. Any parent that decides to homeschool their child will probably need to quit their job, meaning they will be giving up however much money they make. Making less money may also result in having to adopt a more economic lifestyle, which can be stressful. Whatever cost you associate with happiness may also go up.

The cost of sacrificing time to teach your children yourself instead of sending them to public school can also extend to personal opportunity cost. Having no time to yourself can be a mental burden, and whatever you have to do or buy to make that up is also an opportunity cost.

This makes homeschooling sound pretty bad, but if you think it about there could be similar opportunity costs to sending kids to regular school. The important thing is what you'll have to sacrifice in terms of an income. Though I doubt anyone reading this will be thinking about homeschooling vs regular schooling anytime soon, is homeschooling worth it in terms of opportunity cost?

Work Citied:
http://www.homeeddirectory.com/articles/1_feb10
https://www.wahm.com/articles/the-cost-burdens-of-homeschooling.html
https://millennialmoneyman.com/cost-of-homeschooling/

Review of Spillover Cost and Benefits

In Chapter 30 we are introduced to the topic of spillovers. Spillovers, which can also be called externalities, are defined as either the cost or benefit accruing to a third party that is external to a market transaction. An example would be if you decided to play loud music in the middle of the night, the negative externality may be that your neighbor can no longer fall back asleep. There are also such things as spillover costs and benefits. Spillover costs are when there is an overproduction of a product and an over allocation of resources to this product (wasted resources on producing too much of a good). Spillover benefits are the exact opposite of this, there is an underproduction and an underallocation of resources. One key difference in the graphs between a spillover benefit and a spillover cost curve is the equilibrium output. In a cost curve the equilibrium output is greater than the optimal output, while in a benefit curve the equilibrium is less than the optimal output. I’ve attached below the graphs for both a spillover cost and a spillover benefit curve:

Spillover Benefit:

Spillover Cost:

Cultural Singularity: Losing Innovation in Silicon Valley

Silicon Valley. We’re known by the world for being a tech hub that is constantly stimulated by ideas, creativity, and innovation. We’re known for “thinking different”, thanks to Steve Jobs. In our coffee driven culture that ensues productivity, this is civilization that we promote. We’re not laid back, we constantly work—propelled and sustained by our caffeine. A few byproducts, or negative externalities, of course include mental health symptoms and anxiety, as well as tech workers causing displacement through gentrification.

We’re especially known for all of this, because we’re struggling to find a balance between consumption and production. And the ones to blame are the looming monopoly and oligopoly tech giants. They are part of the problem of why we are finding it so difficult to separate from our lives: from personal assistants of Siri to storing our memories through photos, documents, and other files to becoming stuck down an internet rabbit hole through the endless scrolling of social media and limitless clicking of recommendations on youtube. They are effectively made by tech giants to be dominating and addictive.

As we learned about the Disney and Universal in the “In media universe, the force is strongest with Disney, Universal” Article, parallel exclusion is when two companies dominate an industry and collude to keep barriers of entries high in order to exclude future businesses to compete, making it difficult to jump into the market and deter start ups. This targeting of their competitors discourages innovation. From tablets to smartphones, Samsung, Google, and Apple manages to maintain the oligopolistic market with their high production costs, economies of scale, and ownership of raw materials.

It is individuality and diverse thinking that led to the rise of Silicon Valley, let’s reclaim our iconic culture back. 

Economics of College Football

As we've learned, college football is a large business bringing in millions for their respective schools. Thousands of people flock to the stadiums or to their couches to watch games on Saturdays. Thus, some colleges value their college football team heavily and will spend a lot of money on them. For example, the top 3 schools that spend the most money on their college football team is Alabama, Florida State University, and Auburn. Each of these schools are football powerhouses with each of them consistently being ranked in the top 25 of the country or close to the top 25.

However in order to pull in millions of dollars as revenue, colleges need to maintain high attendance at their stadium and on TV. This has been hard for any school outside of the Power 5 conferences (Pac- 12, ACC, SEC, Big 10, and Big 12) as they aren't as big of names. Even schools in these conferences aren't guaranteed success therefore, team success becomes important for increasing revenue because no one wants to watch a 0-12 team when there are so many other successful teams out there. Therefore, recruiting and bringing in top football players are important in order to improve to team.

High school players do need some incentive to choose specific schools especially highly rated players who have offers from multiple schools. Therefore, many players look at the things such as the coaches, facilities, academics, and more. Thus schools must be willing to maintain and improve these factors in order to pull in players.

However, the opportunity costs of spending so much money on one single sport is that other sports get less attention and thus worse facilities and/or coaches. This may affect players of other sports as they may feel less valued and therefore unhappy. Another opportunity cost is that there is less money to spend on other things that relate to the academics side of universities. This may mean that classrooms aren't as well maintained, teachers aren't as good as they could be, or less educational opportunities in general. These opportunity costs are important to schools and teams that pull in less money from football yet continue to spend large amounts of money on football.

Economics of Holiday Shopping

As Christmas time approaches, and we look back on our purchases from Black Friday and Cyber Monday, it is important to recognize the economics behind these holiday deals. As many of you are aware, many gifts and products will go on sale during this time of year, supposedly allowing customers to get the "best" deal on presents and gifts for loved ones. Yet, these sale items are not all they seem to be.

Let's first start with some background information on basic goods. Let's say a company sells a t-shirt for $30. Obviously, some of this money goes towards paying workers and buying new materials to manufacture more clothes, but what about the rest of it? An average t-shirt costs about $5 to make, which means the company is overcharging the customer $25 for a single shirt. Once you take out some money to pay workers, let's say another $5, the company still profits a significant amount for only selling one shirt. That being said, what happens when that t-shirt goes on sale?

Now, let's assume the t-shirt still costs $5 to manufacture, but the shirt is now on sale for 50% off! (WOW!) If you think anywhere remotely to how I do, this sounds like an amazing deal. In fact, the company HAS to be losing money if the shirt is priced this low! However, it might not seem as great as you originally thought. Running through the same process, we subtract the $5 it takes to make the shirt and another $5 to pay workers. However, with the initial cost being only $15 this time, the company still profits $5 from that shirt.

Taking a step back, this situation is similar to that of a monopoly setting prices for their good. We can assume that the full-priced shirt is the point above MC = MR. As we know, this is extremely expensive, and it more than covers the total cost needed to continue running the company. Now, we take the sale price, and we start to become more efficient in our spending. Now, let's assume the price is where price is equal to MC, or the point of allocative efficiency. While the price is significantly less than the original price, the firm is still profiting off of each sale. Granted, this profit is less, but it is still a profit nonetheless. So, next time you go shopping for a Christmas present, and you see that sale sign outside your favorite clothing store, remember that a sale is not as great of a deal as you might first assume...

When Culture Becomes a Product

In the “The New Rules of the Game pt. 2” documentary, we noted how, with the help of technology, globalization has led to changes in jobs, lifestyles, entertainment, education, and communities.

When celebrated and exchanged respectfully, commodifying culture has the potential to continue opening up opportunities and new doors—like it has in the past with new fashion styles, music genres (kpop), and impacting the inside and exterior of buildings with interior design furniture as well as architecture. It’s also heavily transformed the food industry, from Boba milk tea to falafels. 

The tourist industries of many countries such as Bali, Peru, Africa, India, Hawaii, Cambodia, and Jamaica rely on foreigners buying their goods. Natives and indigenous make a living on the basis of travelers wishing to enhance their authentic experience or remember their trip through souvenirs. In order to financially support themselves and their families, they intricately weave fabric such as carpets, tapestries, or embroidered pillows using their artisan skills. Others specialize in Chinese pots and ceramics, jade antiques, as well as scroll paintings. Loose elephant pants are another popular product sold in Thailand.

Culture becoming products is a way to package, share, and easily disperse or distribute. It has the power to enrich and evolve our tastes, but can also merge into mainstream culture where…the ethics behind this could also be debated—as the monetization, commercialization, and capitalization of culture has devalued and trivialized some goods. 

Applying Economics - Cutting Class

       We have learned many interesting economic concepts this year such as marginal utility and ouportunity cost. I decided to take a look at these economic concepts in a place beside the economy. What better place to apply these concepts then the classroom.
     As seniors, I believe we are very lenient with what we do in class time. Often a study session means watching Netflix, and a bathroom break turns into a "short trip" around the school. In extreme cases, we would rather sleep an extra hour than show up for AP Micro. For these cases, the opportunity cost of wasting time is being educated and learning. When we are in the moment, we often don't think about the opportunity cost of these decisions. If we did, we could clearly see that it does not always add up. 
       We could say that in the short term, the utility we get from wasting class time is greater than that of studying. However, in the long term, this changes. We may end up stressed for exams as we never studied, or because we were not in class while a topic was covered. Furthermore, we may need to make up assignments, therefore the time we waste in the past will only catch up to us in the future. We can see in the long term, we would have more utility from studying than from wasting time. 
      Applying economics in this manner could definitely save us some stress in the future. Considering the potential opportunity cost of watching Netflix in class, and comparing the short term and long term utility gained from taking a nap rather than paying attention could end up saving us big time. I hope the next time you consider sleeping through economics, you do yourself a favor and apply what you learned in that class to make the rational decision.

Opportunity Cost of the Flag Football Tournament

As we have learned in the past, opportunity cost is what you lose from one option when you choose other options. As some of you may know, there is currently a flag football tournament going on during lunch time this week. After participating it in, I realized the opportunity costs that came with this tournament.

The benefits of this tournament is that players get to play against other teams/grades and earn bragging rights over one another. Another benefit is the simple opportunity to play games of organized football with friends for fun.

Although this is a flag football tournament, there is still a lot of contact and opportunities of injuries when participating in this tournament given the nature of the sport. Players are still running full speed around the field whether it's to pull flags, catch the ball, defend a player and much more. Along with the fact that there are 18 players on the field at all time, there is a high possibility of running into someone. Therefore, one opportunity cost of participating in the tournament is that you risk your health and thus increase your chances of injuries. Without participating in the tournament, you have a much higher chance of staying healthy and not suffering an injury.

Another opportunity cost is that you sacrifice the time to eat a good lunch. Given to how the games are set up and the time required to play in them, most players are left with little time to eat lunch. Thus some players are forced to not eat lunch or not enough, which can affect someone's learning ability and health, or forced to eat school lunches or food that they have quickly thrown together that isn't appetizing.

Although playing in the flag football tournament may be fun to play with friends and earn bragging rights, one must be able to weigh the opportunity costs of participating in it and make smart decisions for the benefit of their own health.

Why the Olympics may be a poor economic choice for some athletes

Anyone who has watched the Olympics is familiar with athletes like Michael Phelps and Lindsey Vonn, people who have made fantastic careers out of their sports seemingly by going to the Olympic Games. Athletes like Vonn and Phelps represent the minority of athletes that have earned lucrative endorsement deals, generating the idea that all Olympians are well off and are able to live off of their trips to the games. In fact, many athletes are forced to take on odd jobs when they are training because out of all the funding that team USA has only about 81 million is designated specifically for the athletes. While this may seem like a lot of money when put into perspective and the number of athletes that it needs to cover this doesn't leave enough money per athlete to pay them a salary and their training and travel for the games.
                                              
Athletes that live at the training facilities have to pay to live and train there and even if they qualify for the games their airfare may not be fully covered, something that not all athletes can afford. This problem is especially bad for sports like Judo that don't have the fanbase of sports like skiing or gymnastics because they rely solely on the government to fund their trip whereas other organizations like USA water polo can help fund the training and travel costs of their athletes attending the games. Furthermore, even for those athletes that do win medals, which is highly unlikely, the bonuses they receive are not enough to live on with the payouts being $25,000 for a gold medal, $15,000 for a silver medal, and $10,000 for a bronze medal. With these payout amounts, very few athletes would be able to rely on them for their income. Taken together, the economic costs of being an Olympic athlete are quite high, with very few athletes making a living from these games, which is why it may not be a wise financial move to try and compete in these games especially if one's sport doesn't have the money that more popular sports do.

Sources
http://time.com/money/4428302/2016-rio-olympics-earning-side-jobs/

Why a carbon tax would be effective and why it matters

First of all, what is a carbon tax? A carbon tax is a tax on fossil fuels with the intention of reducing carbon dioxide emissions. A carbon tax is very similar to an emissions tax in that it requires emitters to pay a fee for every tonne of greenhouse gas released into the atmosphere.

Plenty of economists suggest a carbon tax as a good method for cutting down on carbon emissions. Some studies say that a $25 tax would cut carbon emissions by 10% per year. The reason for this is because of basic economics: a carbon tax disincentives companies from emitting a lot of carbon because they have to pay more and no one wants to pay more. While simple, it holds true. An analysis by Donald Marron, former acting director of CBO, finds positive change in the forty countries using carbon taxes.

The positive externality found with a carbon tax is an increased incentive for companies to go green. A study conducted by REMI found that with a carbon tax, coal could be phased out entirely by 2025. Economists predict that because the transition to green energy would be net less expensive in the long run than continuing use of fossil fuels, plenty of companies on the brink of transitioning would actually follow through. The New York Times reports that Ireland’s wind industry boomed after a carbon tax. Similarly, in Australia, renewable energy usage rose by 28%. A study by Copenhagen Economics found that a 1% increase in tax share leads to a 2.4% increase in patenting which indicates that green energy is a possible future.

The issue then is it fast enough? A recent IPCC study reported that we need to massively cut down on emissions by the end of the following twelve years. Moreover, the study reported that it would require an international effort, not just by the US but by multiple countries. Luckily, cherry-picking studies indicate we have some reminiscence of hope. Jerry Taylor, from  Niskanen Center, supports that countries representing 54% of the world’s emissions who have expressed support for a carbon tax but haven’t implemented one. This corroborated by the study that reports complete phase-out by 2025 indicates there still may be hope left.

Are agricultural subsidies a good thing?

Agricultural subsidies in the United States are currently over $30 billion annually according to the WorldWatch Institute. In the United States primarily give agricultural subsidies to corn, wheat, cotton, sugar, and soybeans producers with corn receiving the largest set of subsidies. While the question of agricultural subsidies has been a pretty stock debate in the past, a case for using subsidies to offset the costs of tariffs between China and the United States has thrown a modern twist on the age-old question.

Historically subsidies have been used to help increase production of crops. It has helped to improve the number of crops produced. Some analysts predict that the world will need nine times the amount of currently farmable land by 2050 to be able to properly sustain an exponentially increasing population. Especially in an era when food security is becoming a larger and larger issue, increased production is increasingly important. These subsidies are able to help farmers due to inherently high costs of farming. Studies cite: 1,000 acres of corn requires a “crop loan” of a half-million dollars.

However, some argue that agriculture production in America does not resolve the problem but rather creates new ones. Specifically: World Resource Institute cites that as a result of overproduction developing countries are harmed. The issue is that farmers have to either lower prices to the point that it is below production cost or they get outcompeted and cannot sell exports. We have seen that agricultural subsidies have wrecked the Mexican corn industry as they just get out produced by America. Developing countries are often uniquely sensitive because they tend to rely on one export and most households tend to rely on that one export. For example in Burkina Faso, 85% of the population depend on cotton production, but as a result of US competition, they saw export earnings drop by 12%. In total, subsidies cost developing countries $24 billion each year.

The issue is that while agricultural subsidies may be extremely helpful to American farmers, it hurts developing countries on a global scale, leading to the question: what do we prioritize? Most would probably say to stop agriculture subsidies as it hurts these developing economies, but unfortunately, that logic probably won’t stop the government.

x

Examples of Monopsonies:

Monopsonies are a rare and very abstract term that can be hard to understand if we don't look at examples in real life. To start, we can look at monopolies to understand what a monopsony is. When looking at monopolies, we understand that there is one seller selling to many different buyers, which allows the seller to spike up the price as there is no one else selling. Monopsonies are markets where this are many sellers, however, there is only one buyer. Because of this, the firm can then drive down the price of the product according to the amount of quantity desired.

To further understand monopsonies, it is helpful to look at an example. Most monopsonies occur labor markets, where specialized workers can only work at one specific firm, meaning the firm can drive down wages as they are the only firm that will hire the worker. This often happens in the technology industry, where companies like Cisco and Oracle have been accused of working together to drive down the price. This relates to what we learned about with the NBA and the NFL as the players can get paid less than they believe they are valued. An example of monopsony with products and services is typically found with government products. While there are three different suppliers of fighter jets, the government is the only one who is legally allowed to purchase the fighter jets from the firms, meaning they can drive down the price. This also occurs for many other products the government buys too. Overall, monopsonies are basically just the opposite of monopolies, with one buyer and many sellers, and mostly occurs in labor markets or with government spending.











https://www.investopedia.com/terms/m/monopsony.asp

Opportunity Costs of Senioritis

Recently, I was in English class and I had to make the decision between writing my essay or watching the new diss track that just came out. Obviously, I chose to be productive and watch the diss track, but there were consequences as I won't have as strong a grade and my A will be in jeopardy. In terms of opportunity cost, by choosing to watch the diss track, I had the opportunity cost of not working on my essay and getting a higher grade.

If we take the same scenario and apply it to second semester senior, we can understand why the terrible disease called senioritis occurs. As a second semester senior, the student's opportunity cost of getting a lower grade doesn't affect them as colleges won't care as much about the second semester grades, meaning the student can continuing watching the diss tracks and have a much smaller opportunity cost. This applies to many decisions that will occur during the senior's second semester, and will cause what many of us call senioritis. Overall, it is always important to consider the opportunity costs behind certain decisions, and in the future, I will consider the cost of a lower grade before watching the response to the diss track I was watching in class.

Hypebeasts & Veblen Goods

According to Urban Dictionary, “A hype beast is a kid that collects clothing, shoes, and accessories for the sole purpose of impressing others”. A notable brand that particularly attracts hypebeasts is Supreme. The reason why some millennials spend over $2000 on retailed Supreme, corresponds to the fact that the brand deliberately retains artificial scarcity for their products. In a capitalist society, the production and pricing of goods and services are typically determined by supply and demand. Furthermore, firms usually supply more as demand increases, but that’s not the case for Supreme. The founder, James Jebbia, has openly spoken to the odd practices of the company and his disregard for basic supply and demand considerations to further the exclusivity of his brand.

Nonetheless, Supreme’s business model still fails to explain why kids continue to spend so much on seemingly simple designer items. Norwegian-American economist, Thorstein Veblen, however, can offer insight through his concept of Veblen goods -or goods for which demand increases as their price increases. Veblen also developed the idea of “conspicuous consumption” which defines the purchase of luxury goods and services purely to display one’s wealth and status. Seeing as this definition closely ties to that of a hypebeast, we can clearly correlate the two.

Still, most hypebeasts are not affluent, high-class millionaires who constantly have the funds to feed their wants in the first place. But now with Veblen’s theory in mind, we are able to draw a conclusion. Hypebeasts, usually of lower incomes, spend whatever money they do have on expensive things to imitate the tendencies of the rich who commonly parade their wealth. By attempting to emulate a sense of wealth, hypebeasts counter any perception of lesser status.

Veblen along with his institutional economics are vital in the public’s understanding of consumer behavior. The economy and cultural institutions influence one another in a perpetual feedback loop. All in all, it is essential to account for the general material conditions of society when trying to grasp a middle-class millennial’s outrageous spending habits.

Wastemas?

   Christmas time is generally considered to be a great time of year, by the average person. In some regions, we experience snow. There are lights up all over brightening up cities and bringing joy all around. For many people, it is a chance to see family that we don't always see and people are brought together. However, beneath this joy, there is a hidden side of Christmas that only economists see.
   Christmas time is economically, a very wasteful time. Everyone who celebrates Christmas has experienced the pain of receiving a gift that you do not want. For example, if my grandma were to buy me an ugly sweater I would never wear, there is waste all around. In this scenario, she has wasted her money, and could have spent it on something else that would derive greater utility. Additionally, the resources that went into making the sweater have also been wasted, and could have gone to something more meaningful. Waste is seen in many other areas as well, especially for companies. December is the most shopped time of the year and this causes surpluses in many areas. Workers, resources, and anything needed to produce a good are needed excessively during this time. However, this is only for one month and from an economical standpoint is rather inefficient. Unfortunately, there is no real solution to this problem as many Americans are unwilling to Christmas shop in other times of the year, in a more spread out manner, and it makes sense to not want to do this.
    There is a different side to the increased activity during this time of year. This time of year provides work for many, although limited in time. Additionally, the economy gets a boost during this time of year, which helps everyone. Another reason for this being good is that companies get popularity boosts and sales skyrocket. In the end, whether people decide to support that Christmas time is wasteful, or that Christmas time is good for the economy, there is one thing we can all agree on... no one wants an ugly sweater that their family buys for them and makes the wear.

Freedom of Enterprise in America

Freedom of enterprise.  The idea that firms should be free to obtain and use resources it needs to produce goods of its choosing and sell them to markets of its choosing is an idea fundamental to how Capitalism works.  So is freedom of enterprise everywhere in America?

In the real world, governments often get involved in many markets, and usually for good reasons.  Most people agree that medication and potentially addictive drugs must be regulated by the government to protect consumers from being harmed.  Similarly, guns and weapons sales should also be regulated to avoid having them fall into the wrong hands.  Then there are banks.  Banks should be regulated to make sure protections are in place for people’s life savings in case the bank runs into financial trouble and needs to declare bankruptcy.

So while many products have freedom of enterprise in America, many others don’t, but usually for good reasons.

Opportunity Cost of Writing an Essay

Opportunity cost is an important factor in choosing how we as individuals spend our time each day. As most of you know, opportunity cost is whatever you lost or could have done after choosing a certain option. For example, the opportunity cost of me playing video games is studying for Microeconomics. In some cases, this opportunity cost can be very minimal, such as eating a cookie when I could have eaten a salad. However, in other cases, this opportunity cost can be drastic, such as choosing to social in English class instead of working on an essay.

Recently (as in a couple hours ago), a specific English teacher brought up this important idea of opportunity cost. After reading a long rant written by this teacher, I think it is apparent that many students in my class have been partaking in other activites rather than working on their essays in the given class time. Rather than immediately reacting in a negative way towards my teacher, I thought this could be a good learning experience for not only my classmates, but myself as well.

Opportunity cost never changes, but different individuals react differently to whatever activity they must forgo in order to play video games or socialize with friends. In English class, we were given numerous days to peer edit and write our essays. However, this "free time" was spent different for every student. For those students who believe that that opportunity cost of not writing an essay is very minimal, they are the same students who still have not finished their rough draft (the final essay is due on Friday). Yet, for the students who understand the importance of this grade, and they recognize the generous time given to them by our teacher, they are the same students who have completed essays and numerous peer reviews and will receieve a good grade on their papers.

As our essay process comes to a close, I think it is important to realize that while opportunity cost is a specific value, whether that be monetary or tangible, it has different importances to different people. While I might care a lot about that salad I could have eaten, my friend could easily have no emotional response to devouring that cookie.