Cracking the case of Fracking - James Woodruff

Fracking: what is it anyway? What does it really mean for the energy sector? Questions like these are becoming increasingly relevant as the costs and benefits of this new technology continue to reveal themselves."Hydraulic fracking" is a processes in which pressurized chemically infused water is used to fracture deep rock formations in order to extract previously unremovable natural gas, petroleum, and brine. This new technique has already stimulated the energy industry, bringing new hopes to a previously declining sector. In the last three years alone, the United States has seen a 60% increase in oil production; producing 3 millions barrels per day in the last two years. These depths have expedited the United States's journey towards energy independence. Additionally, the US is now the #1 producer of natural gas, and the #1 producer of oil (excluding OPEC), to the the point where we only import less than 10% of our oil from OPEC. 

However, fracking has its consequences. Although this technology has only recently been implemented, we have already started to see ramifications. Environmentalists claim that chemically infused water can reach underground reservoirs, potentially polluting water that is arguably becoming more and more important (ask Californians). Not only that, but fracking near fault lines is correlated with increasing earthquakes in surrounding regions. Although it is too early to prove that fracking is the cause of increased quakes in said regions more and more cases are "breaking the surface". What does all of this mean? Well, decreased  dependance on OPEC gives us more control over energy prices, hopefully decreasing the volatility of energy prices. A larger energy sector provides more jobs for US citizens. Yet, as with any new great technology (nuclear energy and its wastes for example), we must be conscience of what we do and how we affect our surroundings. 

Uber- Matthew Wilkes

For those of you who do not know what Uber is, it is a ride sharing program that uses smart phone technologies to allow a customer to easily be connected with a driver, who will then pick up the customer and drive them to the desired location. The customer is able to track where the driver is and how far away he may be. Currently, Uber is in over 45 different countries in over 100 cities and is valued at $15 billion. Uber has absolutely revolutionized the "taxi" industry. Uber is safer, easier, smarter, and often cheaper. It is a game changer. As great as it is, there is a negative that deters potential customers: "surge pricing". Surge pricing occurs during heavy traffic times when many of the Uber drivers are busy. It changes the price to multiple times the normal fare depending on how busy it is. Simple microeconomic theory would suggest that these surges would hurt Uber and drive customers away. Despite that, what Uber is creating overall should be treated as a positive as it creates an even more dynamic, free marketplace that is determined by supply and demand.

In many cities across the country, the cab industry is far from ideal. It is marked by monopoly, driving license, car license, regulation, and many more factors that create an absurd, unfair barrier to entry. Uber uplifts the whole industry. It allows anyone who passes their simple test to join. In fact, I would wager that anyone with a driver's license in our class would be able to apply and drive for Uber. The marketplace that Uber creates is essentially being the middleman between a customer (the demand) and a willing driver (the supply). So as more demand occurs, the higher the surge price may become, but ultimately this will attract more drivers who want to cash in on the surge pricing, thus effectively bringing back down price as the supply increases. This creates a fluid, functional market place that allows customers to participate in a higher quality good that functions as a normal, quality marketplace. Additionally, if the surge occurs lets say on a Friday night at 2 am, and Uber drivers aren't willing to be up that late, taxi drivers will react and be more likely to provide the service, thus fitting into the supply and demand model.

I believe that Uber is an incredible service that provides a superior market for the taxi industry. Not only does it uplift the traditional market but it increases overall economic efficiency.

http://www.forbes.com/sites/ellenhuet/2014/10/14/ubers-f-rating-at-better-business-bureau-isnt-for-surge-pricing-just-for-unresponsiveness/
http://www.economist.com/news/finance-and-economics/21599766-microeconomics-ubers-attempt-revolutionise-taxi-markets-pricing-surge

The Economic Benefits of Online Gambling

It appears that online gambling is suffering a similar fate to that of marijuana or alcohol during prohibition. Consumption of the good is pretty much inevitable as Americans continuously express a strong desire to be able to gamble online. Since the passage of the Unlawful Internet Gambling Enforcement Act in 2006 and the events of United States v. Scheinberg in 2011 arguing that online poker sites were illegal, there has been an upswing in American usage of international, unregulated websites as a means of online gambling. This shift is taking millions of dollars away from domestic companies and putting it in the hands and questionably-legitimate black market sites overseas. Aside from this economic trade-off, it has also been documented that these offshore accounts are a very convenient source of money laundering for international organized crime syndicates. The ability to wager on card games allows criminals to make fake bets and intentionally losing as a means of transferring money between two parties. The IMF published a new report earlier this year bringing to light the massive problems with money laundering and how simple it is to destabilize financial institutions via easy-to-access back channels. 

A very clear solution in the case of online gambling is similar to the arguments being made for marijuana--legalize it. A legalized market for online gambling would create a regulated system within the US and would force unregulated international operators to leave the market, as they would not be able to compete with US companies. A multinational anti-money laundering symposium held earlier this year came to the same conclusion. Regulation would prevent the under-the-table atmosphere necessary for criminal money laundering to thrive. Thus, legalization would not only bring all of this money back into the US, providing a much-needed economic boost, but would also prevent the illicit trading of funds between international criminal syndicates. 

-Amit Bilgi

Sources:

http://mississippilawjournal.org/wp-content/uploads/2012/04/1_Rychlak_Final_Edit.pdf

http://www.imf.org/external/np/exr/facts/aml.htm

http://www.wiso.uni-hamburg.de/fileadmin/bwl/rechtderwirtschaft/institut/Ingo_Fiedler/Online_Gambling_as_a_Game_Changer_to_Money_Laundering_01.pdf

http://www.antimoneylaundering.us/inter_det.php?id=44

Drug Policy: Seeing Positive Effects in California and Colorado Post-Decriminalization/Legalization

            A study conducted by the Center on Juvenile and Criminal Justice aided the growing amount of evidence that legalization or decriminalization of marijuana does not lead to rampant drug abuse and have suggested some interesting and positive trends. Since decriminalization went into full effect on January 1, 2011, the study found that decriminalization “has not resulted in harmful consequences for teenagers, such as increased crime, drug overdose, driving under the influence or school dropout” (Ingraham, Washington Post). The study actually concludes that California teenagers showed improvements in all of these areas. The most notable numbers are the drop out rates, arrests, and drug overdose deaths. This would suggest that the government would be saving money as they would need to focus less resources on marijuana related crimes. Also, many opponents have suggested that higher marijuana use leads to greater drop out rates. However, drop out rates have fallen by 22% so the government should keep a watchful eye these trends.

            On top of this, there has been very little evidence of increased social harm in states where marijuana has been decriminalized. While more people have had marijuana detected in their blood, it can be attributed to the fact that marijuana can stay in the system for up to a month among heavier users. Despite this fact, traffic fatalities have fallen quite a bit as marijuana is much safer to drive on than alcohol. This was a trend observed in Colorado as well. We can clearly observe that there has been some positive trends since the decriminalization of marijuana in California and the legalization of marijuana in Colorado. It should be very interesting to see if other states follow suit as a more definitive trend is displayed over a longer period of time.

Jason Chiu

A 35-hour Workweek

The OECD’s data on hours worked per year show that in the last twenty years, on average, people in nearly all countries have worked less hours per year, implying they enjoy a greater amount of leisure time. Despite this, the US has decreased at a slower pace than most other developed western countries. From 1993 – 2013 they dropped from 1,829 hours to 1,788. Meanwhile Germany has dropped from 1,547 to 1,388 and Switzerland from 1,686 to 1,585.  We can see that not only did Germany and Switzerland start lower, but also their pace of descent is much higher. Another finding reported by the Economist is that within the US, the rich now work more hours than the poor. This opens up two important questions: first, is this a problem and second, is there any policy solution that can reduce the number of hours worked without negatively effecting welfare.

The first question comes down to whether or not people are happier because of their ability to work extra hours. We need to ask first why the rich work more hours. Economic theory provides a background on the labor-leisure trade off. It might suggest two opposing outcomes depending on a person’s utility function. If wealth effects are large, we can imagine that since it requires fewer hours to earn just as much money, they should reduce the number of hours and maintain the same lifestyle with more leisure time. Alternatively we could imagine that an increase in wage rate may make leisure a more expensive choice thus meaning workers stay later.  These questions may altogether be irrelevant though. It is likely the case that this is partially coercive long hours where high paying jobs require this amount of hours and the only choice is to accept or reduce hours to zero. If this is the case, then we can certainly imagine a policy intervention to reduce the number of hours permissible. France has taken a step with their 35-hour workweek policy, but it’s likely damaging for some employers. Moreover some of the poor need to work more hours to support their families and this policy would be unfairly binding. Barring this, we leave open the question of whether there is any way to fight against these forced long hours without restricting the ability to work longer hours when the decision in unforced. It seems though that targeting these groups separately would be hard, and there would necessarily be high costs for businesses that have roles which lose efficiency when split into separate parts.

-Mac

Sources: 

http://stats.oecd.org/index.aspx?DataSetCode=ANHRS#

http://www.economist.com/news/finance-and-economics/21600989-why-rich-now-have-less-leisure-poor-nice-work-if-you-can-get-out

Ebola's Economic Implications - Brian Bernstein

The hot news topic around the world for the past couple months has been the spread of Ebola throughout west Africa -- and recently onto U.S. soil.  As a deadly outbreak of this potential has not occurred in generations, it scares a large percentage of the population in the U.S., despite the fact that only one person has died (as of today).  For this reason, I thought it would be interesting to look into the economic implication of the Ebola outbreak.

According to Forbes, Ebola has already accounted for over 4,000 deaths and counting  - with most deaths occurring in Liberia, Guinea, and Sierra Leone (Forbes).  From an economic perspective, the International Monetary Fund has estimated that the Ebola outbreak will shave more than 2% off of the projected 8% growth rate this year, with estimates at 3.5%.  This would obviously be devastating to the small country, which post-conflict has experienced relatively strong growth.  This economic impact is mostly driven by the quarantine of the country's in the region, with many exports halted, including rubber, oil palm and iron ore.  This has led to concerns that government revenues will fall and that foreign exchange shortages could be impending, especially concerning for a government with such a small budget already.  With so much money already being invested in the healthcare sector in order to combat the spread of this disease, the governments in the region have been less puzzled as to what actions to take.  

This is something that we must plan ahead for in the United States, as policy makers must begin to take preventative actions in order to prepare for what could be the impending economic impacts.  I believe the best way for us to prepare is by increasing health care research spending on Ebola cures and vaccines.  Furthermore, we should prepare a provisional budget which would account for the potential economic costs of decreased taxed dollars and increased public health spending that would be associated with an increased outbreak in the United States.  Though Ebola may just seem to be the hot topic, it is a topic that carries serious potential economic implications on our home soil, and is therefore something that must be analyzed by policy makers.             

Sources:

http://www.forbes.com/sites/jvchamary/2014/10/13/ebola-trends/

http://www.economist.com/blogs/baobab/2014/09/costs-pandemic

Brian Wolgast - Nashville Teachers Fired Over Evaluations

After back-to-back years of low performance on state-mandated teacher evaluations, five Metro Nashville teachers are facing termination, while this same threat also led 23 others to resign or retire. These would be the first teachers fired under Metro's new system that relies on annual teacher evaluations to dismiss low-performing teachers. Steps were taken to ensure that principals had qualified replacements for these teachers. However these evaluations themselves have faced heavy criticism, mostly due to the fact that 35 percent of the evaluation is based on student gains on tests, comparing student scores to projections for future scores (50 percent from principal evaluations, 15 percent from other student achievement metrics). On top of that, principals are worried about the effects of replacing teachers in the middle of a school year. Katie Cour, executive director of talent strategy at Metro Nashville Public Schools (MNPS) acknowledges that it will cause a disruption, but also points to her belief that “whoever we replace them with will be better than the teachers we currently have.”

Considering our discussion in class regarding public versus private education, I support this move. The ultimate goal of this move is to improve inner-city schooling by creating accountability for teachers. As we found in the Seoul, Korea example, creating accountability for teachers significantly improved their ability and motivation to teach. If teachers are more motivated to teach their students, then maybe we will see a decrease in the stratification that the current education system causes. I understand that the current Nashville system might not be perfect considering it might not be the best idea to force teachers to tailor lessons towards test scores. However the goal of creating accountability seems to be working. As later noted by the article, MNPS notified 70 teachers of their low performance after the 2012-13 school year and 42 improved in the 2013-14 school year (20 just resigned, 8 failed to improve).

Source: http://www.tennessean.com/story/news/education/2014/10/13/nashville-teachers-face-firing-evaluations/17234427/