des newsletter - fall 2014
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DES Upcoming Events Please e-mail info@drexeleconomicssociety.com for more details about our events
Table of Contents
DES
Upcoming Events
P. 1
School of Economics
Updates
P. 2
Faculty Spotlight P. 3
Student Spotlight P. 4
Student Articles
The Economics of
Obesity in America
P. 5
Utility Industry Gone
Private: No?
P. 6
New Development
Bank: New Bottle,
Old Wine?
P. 7
Economics
Tutoring Center
P. 8
Select Past Events P. 8
DES Meet and Greet
Date & Time: October 1, 6:00 PM
This event is designed as a chance for the School of Economics incoming
freshmen and master’s students to meet with different people involved in bringing
economics to the Drexel campus. Faculty members, school administrators, and
Drexel Economics Society members will be on hand to welcome the new students
and share their experiences and knowledge of economics and the university in
general. Refreshments will be provided.
General Body Meeting
Date & Time: October 7, 7:00 PM
The General Body Meeting is held to update our student body on the happenings
of the Drexel Economics Society, inform about our upcoming events and
activities, and encouraging students to engage and participate in the various
opportunities that the organization provide. General questions will be answered by
the board members at the end, and the students are welcomed to network with the
board members.
Careers in Economics Panel
Date & Time: October 16, 5:30 PM
Considering the many different career paths someone with a degree in economics
can pursue, it is always helpful to hear from people that have gone the route
before to see what they did with their education. Bringing in people from industry,
recent graduates, researchers, among others, the Drexel Economics Society along
with the School of Economics' M.S. in Economics program hopes to enlighten
undergraduate and graduate students in some of the professional possibilities they
can expect.
An electronic copy of this
newsletter is available on
our website. Copies of
past issues can also be
found there.
2
School of Economics Updates
Introduction of the Master of Science in Economics Program
Fall 2014 marks the inauguration of the Master of Science in Economics program at
the School of Economics within Drexel University. Unlike many other programs, the
Drexel M.S. in Economics will: focus on industry and policy economics, which has
strong appeal for those looking for careers in both industry and the public sector;
emphasize empirical skills desired by employers and applicants; offer strong Ph.D.
preparation tracks emphasizing the theoretical and mathematical skills necessary to
enter such programs. The incoming class, whose average age is 27, consists of over
twenty highly qualified students from nine countries. The School of Economics hopes
to incorporate a BS/MS program for Economics undergraduates in the near future.
Faculty Promotion
Professor Mian Dai and Professor Konstantinos Serfes have been granted tenure and
promoted to Associate Professor starting this September.
Undergraduate Research in Economics Competition
The second annual Undergraduate Research in Economics Competition gives
students a platform to conduct research in any area of economics and have it
critiqued by members of the School of Economics' faculty. DES will be hosting
two Research Seminars, with faculty speakers discussing their research and
economic research in general, during the Fall term as well as a Brainstorming
Session in the lead-up to the beginning of the competition. More details about the
competition will be available on various DES communication channels throughout
the term.
UREC Lecture I: October 14, 12:00 PM
UREC Lecture II: October 20, 6:00 PM
UREC Brainstorming Session: November 5, Time: TBA
Food Economics Panel
Date & Time: Week 8
This panel activity is one of our regular speaker series events, which will focus on
both micro and macro-level environments of agricultural economics. Speakers will
discuss what some food trends are domestically and internationally, how it affects
us as consumers and what will be the future of our food production. Topics
concerning health, large corporations, and local sustainability will also be
discussed.
Dr. Mian Dai
Dr. Konstantinos Serfes
3
Faculty Spotlight
Dr. Matthew Freedman
Dr. Philip Luck
Dr. Matthew Freedman
Dr. Matthew Freedman joins us from Cornell University as an associate professor.
Originally starting on the path to an English degree, Freedman became a bit disillusioned
during his studies at Emory University; eventually, he decided to double-major along
with Economics after taking an introductory course and having an epiphany that it was
something he enjoyed. After graduating with his Bachelor’s Degrees, Freedman decided
to continue his education with graduate school at the University of Maryland. Alongside
his schooling, Freedman also worked as a statistician at the U.S. Census Bureau and
worked on many projects on housing, income and government policy: this work had a
profound influence on Freedman and can be seen in much of what he does today. His
area of expertise thus generally revolves around topics such as public and environmental
policy, labor, and urban development.
During his time here at Drexel, Freedman generally hopes to further the work of the
School of Economics with initiatives like working closely with other departments as well
as entities such as the A.J. Drexel Institute for Energy and the Environment. He is
excited to work within Drexel and Philadelphia in general – he has spent a year here and
already says he loves the city – in the pursuit of knowledge and making the city even
more amazing than it already is. He will begin teaching in the Winter Term with
Intermediate Microeconomics and Labor Economics, so plan accordingly! More
information about Dr. Freedman and his papers can be found at his professional website
http://works.bepress.com/matthew_freedman/.
Dr. Philip Luck
Dr. Philip Luck is a new Assistant Professor joining us from the University of California,
Davis. Hailing from Massachusetts, where he received his undergraduate degree in
Economics from the University of Massachusetts, Amherst, Luck first gained interest in
economics when he noticed parallels in it with physics: both areas of study attempt to
understand the governing dynamics of systems. Dr. Luck went on to study at the
University of California, Davis, completing both his MS and Ph.D. at the
university. Focusing on international trade and macroeconomics, Luck has his research
interests in the topics of global organization of production, and the effect of trade on
workers and firms, among other areas.
While in graduate school, Dr. Luck had the chance to work alongside some great
contemporary trade economists and he is excited to be joining the Drexel School of
Economics. He hopes to contribute to what he described as an amazing group of
economists in their teaching and research efforts here at Drexel. While a Bostonian at
heart, Luck admits that Philadelphia is a fun, up-and-coming city with amazing food and
a great atmosphere. He is going to be teaching two Introduction to Microeconomics
classes in the Winter Term and International Trade in the Spring Term, so make sure to
take his classes and give him a proper welcome to Drexel. To find more information
about Dr. Luck such as his curriculum vitae and research papers, visit him at his personal
website philipaluck.weebly.com.
4
Student Spotlight
Melanie Jeske
Brandon O’Halloran
Melanie Jeske
A senior BS/MS student, Melanie will graduate in June 2015 with a BS in Economics,
BS in Environmental Studies, and MS in Science, Technology, and Society (STS). Her
master's thesis examines the medicalization of obesity with a focus on the evolution of
BMI as a health indicator and its operativeness in medical obesity research.
Melanie has experience working for Econsult Solutions, Inc. first as her co-op and
then part-time while in classes. At Econsult, she engaged in several economic
development projects, econometric analyses, and litigation cases. Melanie has also
worked on campus as a research assistant for faculty in the Department of Political
Science and within the Center for STS.
In terms of academic publication, Melanie has presented work at several workshops
and conferences. Through her unique plan of study, Melanie has realized her passion
for interdisciplinary research. She is planning to pursue a doctorate and continue
research examining health and medicine through social, economic, and political
lenses.
Melanie served as the 2013-2014 President of the DES and was involved since her
freshman year. Concurrently, she served as the President of the Honors Student
Advisory Committee and as the Vice President of the Drexel Sierra Club. In her spare
time, she is a group exercise instructor and personal trainer. She enjoys running,
cycling, and will be running her first full marathon this year!
Brandon O’Halloran
Brandon is a senior graduating December 2014 with a BS in Economics and a minor in
Finance and is the Information Director of DES.
Originally from a 1,200 person historic town in northwest Connecticut, Brandon
transferred from The Colorado College, a small liberal arts school in Colorado
Springs, in the spring of 2013. Having interned at a U.S. manufacturing think tank
while attending a pro-business lobbying program through Georgetown University and
going abroad to Tokyo, Japan to work at a staffing and recruiting agency, he decided
to seek a more professional oriented path.
Following a brief break selling lodging reservations and becoming a certified ski bum
at Stratton Mountain resort in Vermont, he hung up his winter sport equipment and
came to Drexel University to finish his studies.
Brandon currently works at a real estate appraisal firm where he assists in the
valuation of commercial and industrial property across the Philadelphia metropolitan
area. He is excited to navigate life after college and credits the field of economics and
his experience at Drexel for forming his global business perspective.
5
The Economics of Obesity in America Michael Flanagan
For much of American history, an overweight physique was common among the wealthy while the lower class
struggled with hunger and frailty. Obesity was not considered a medical condition, but rather a status symbol; it was
a sign that a man could afford enough food to sustain himself and his family, typically without having to engage in
physical labor for his career. Today, food is abundant in America, even for low income families. Therefore, it is
much more common for Americans to lack quality nourishment rather than quantity of calories. The obesity numbers
are a reflection of this: American adults earning less than $25,000 per year are 50 percent more likely to be obese
than Americans earning more than $75,000 annually ("Why Are Poor People Fat?", 2011). This inverse relationship
between income and health in America is due in large part to the costs of food available to low income consumers.
A New Y ork Times article describes how it costs only five dollars to buy 2,000 calories worth of sandwiches,
fries, and soft drinks at McDonalds (Leonhardt, 2011). On the other hand, expensive fruits and vegetables offer
almost nothing for low income families in terms of caloric satisfaction. How could it be that processed foods with
dozens of ingredients, colossal marketing budgets, and a lengthy supply chain are less expensive than unprocessed,
unlabeled, one-ingredient vegetables? One major factor is subsidies per the United States Department of Agriculture,
a form of financial aid financed by tax revenue that allows farmers to grow crops profitably. Among the most
subsidized plants are wheat, corn, and soybeans, leading to massive overproduction by agricultural giants (not small-
scale farms, as they do not typically receive subsidies). This is the source of America’s high fructose corn syrup,
hydrogenated vegetable oils, and refined carbohydrates, in other words, junk food. All else equal, an increased
supply lowers the price of these goods, providing maximum value to low income shoppers at the expense of their
health.
With that in mind, how much more does it actually cost to bypass subsidized junk food and choose healthier
options? A Harvard study estimates a reasonably healthy diet will cost about $1.50 more per day than the average
unhealthy American diet (Dwyer, 2013). This may seem rather insignificant, but it certainly adds up. Based on
spending data from the USDA, this is asking thrifty families of four to pay an extra 33 percent for foods that are
perishable, unprepared, and in many cases, less appetizing (“Official USDA Food Plans,” 2012). Policies have been
proposed to help curb obesity, and while none of them make Swiss chard any more palatable, they do aim at closing
the price gap between junk and healthy food. At the nonprofit level, an organization called Wholesome Wave
attempts to level the playing field through its Double Value Coupon Program (DVCP). Launched in 2008, DVCP
doubles the purchasing power of Federal Food Stamps used at participating farmers’ markets in 25 states
(“Wholesome Wave Annual Report,” 2013). It aims to bring quality produce to those who need it most, while also
expanding the customer base of small-scale farms. Though still a relatively new organization, Wholesome Wave is
making up for many of the counterproductive policies implemented in the areas of agriculture and public health.
When it comes to government intervention, a common solution is to levy an excise tax on goods that are
perceived as unhealthy. Often called a “sin tax,” excise taxes are meant to discourage bad behavior by increasing the
cost associated with that behavior. In conjunction with the subsidies from the USDA, tax dollars are delivered to the
agricultural industry to produce the types of unhealthy products that will be taxed at the retail level. Essentially, two
separate taxes are levied in the process of making junk food, one to bring the price down, and the other to raise the
price. With all of this taxation, price manipulation, and corporate control, is it any wonder that Americans cannot
afford quality food? In a country where citizens are instructed to “vote with your dollars,” that power is becoming
increasingly difficult for low-income households trying to eat healthy.
*Full bibliography is available on the DES website
6
Utility Industry Gone Private: No? Ryan Kirk
Traditionally, utilities have been seen as a perfect example of when governments should own a specific business.
Economic nomenclature has deemed them “natural monopolies” and viewed utilities as an industry that operates
most efficiently when one firm is the sole supplier. The properties of the utility industry, high start-up costs, and
low marginal costs, create a business environment where it becomes financially undesirable for new firms to enter
the market. This gives a tremendous amount of power to the existing firm and allows them to potentially abuse it.
Public utilities are maintained in an effort to prevent this systematic abuse in an industry that is especially
susceptible to it.
Starting in the 1980s, people began to question whether the utility industry truly was something that should be
handled by the public sector. Critics contended that a private, properly regulated utility industry could serve the
needs of the public more efficiently than any government agency. This sentiment eventually made its way into
policy discussion: the 1992 Energy Policy Act paved the way for states to pass legislation deregulating their utility
industry. By 1996, California and Rhode Island had passed such legislation for their electricity industry (PBS,
2014). The result was one that could have been expected; deregulation led to new firms flooding the market and
becoming extremely profitable as they grew. Pre-existing firms were able to create significant barriers to entry that
prevented new firms from entering the market. However, with proper regulation like price caps and quality checks,
these firms theoretically could still serve the customer base at a sufficiently low cost to consumers.
The much-publicized California energy crisis of the early 2000s presented a worst case scenario for utility
deregulation. Enron, the major supplier of electricity for much of California, was thoroughly proved to have
engaged in price manipulation (Roberts, 2004). By deliberately shutting down power plants it operated, the
company was able to drive up the per unit price of the dwindled supply. Additionally, firms used an intricate power
scheduling plan where they would create the illusion that power lines were overloaded. They would then charge the
government of California fees for the congestion under the guise that they needed the additional funds to provide
adequate service to their customers. However, customers were still often subject to rolling and frequent blackouts.
Millions of Californians were without power for extended periods of time to give the impression that electricity was
in short supply (Federal Energy Regulatory Commission, 2003). Enron would also purchase electricity in wholesale
quantities from out-of-state suppliers and then sell it at a markup to California consumers. Finally, state regulators
who were commissioned to prevent such market manipulation were often ineffective at their duties. This was due to
a variety of reasons including corruption, apathy, and lack of transparency.
The California energy crisis demonstrates the dangers that private utility industries can pose to the public. While
proponents of a public energy sector like to cite this debacle as proof that such a system cannot work, some are still
not convinced. Private utility supporters argue that it was the flawed implementation of the California system that
led to the inevitable corruption. The lack of transparency and lackadaisical attitude of regulatory agencies being
among the chief complaints. However, when you look at the states with the highest electricity costs, three of the top
five are states that have deregulated their electricity industry (Energy Information Institute, 2014). Connecticut,
New York and Rhode Island all pay significantly higher than the national average for their electricity, and they are
all states that deregulated. There are, however, two states in the top five that have public electricity providers:
Alaska and Hawaii. Obviously, these two states have certain environmental and practical concerns that contribute to
their exorbitant electric bills.
Many see the California energy crisis as an example of what not to do, an example that can be studied and
dissected when discussing public policy. However, the utter disaster of California’s private energy industry should
remain as a constant reminder of just exactly how dangerous private electric companies can be.
*Full bibliography is available on the DES website
7
The New Development Bank:
New Bottle, Old Wine? Arnab Bhardwaj
Since the first meeting of Brazil, Russia, India, China, and South Africa or the so called BRICS nations in late
2008, there has been much talk of the “rise of the rest.” With rhetoric suggesting a shift in economic power from the
west to the east, and the newly formed New Development Bank as a competitor to the World Bank and IMF, there
has been much hype in BRICS activities. With a stated objective to build reserves in domestic currencies and
facilitate trade in local currencies, it is easy to see how the developments could be seen as threat to the dominance of
the US dollar. Yet, it is almost easy to forget that all the nations mentioned in the category are middle or low income
developing economies. Some of them like India and South Africa are home to some of the poorest in the world. But a
closer look at even the better performing of the five economies seems to suggest that the cracks are already showing.
Gone are the days of scintillating economic growth of the early 2000s, the world economy has slowed, and so has
the inflow of easy foreign capital into developing economies. This, along with their own unique internal problems,
poses a threat to their economic dreams from the past decade.
The Chinese economy might be well on its way to becoming the largest in the world, but it would be foolish not to
note that China is at the brink of mass transition. In fact, in 2008, the Chinese Premier was himself quoted as calling
Chinese growth “unbalanced, uncoordinated and unsustainable.” China’s second baby boom generation is well on its
way to reaching the Lewis Turning Point, that is, the point at which the number of retired persons outnumbers the
productive in the economy. In 2012, wage inflation for low skilled service industries was 20%, twice as much as their
growth in productivity. Only 5 million people between the ages of 35-54 are set to join the core work force this
decade, as compared to 90 million the decade before. All these factors make it clear that Chinese cheap labour
advantage is dwindling.
To maintain growth the Dragon economy was flushed with credit to the tune of $4 trillion in the 3 years following
the 2008 crisis. As of early 2012, there was $10 trillion in circulation in China, $2 trillion more than in the US.
Although official government debt is low (30% of GDP) debt of Chinese companies (most of which are state-owned
enterprises) and households accounted for 130% of GDP. This along with the growing shadow banking sector could
estimate Chinese debt to about 200% of GDP. Which suggests that the credit ease of the decades before will need to
be checked, thus implying a further impending lag in growth rates.
India, the other driving force amongst the BRICS nations, has always been the land of extreme diversity inhabited
by the world’s poorest and richest alike. Bloated government, crony capitalism and corruption are just some of the
major issues it faces. For an economy now experiencing its lowest growth in a decade (5.1% of GDP in 2012) the
signs of lack of reform were clear when investment by Indian business’ in India declined from 17% of GDP in 2008
to 13% in early 2012, contributing to lower growth. Just between 2007 and 2010, India fell from 74th to 88th on the
Transparency International Corruption Perceptions Index, an annual survey measuring the level of corruption in
nations across the world. Inequality can pose a large threat to India’s growth story, as consumption levels of the
richest 10% grew by 6% higher than the poorest 10% between 2000 and 2010. All the hype of Indian demographic
dividend, with it becoming the youngest country by 2015, could be its biggest downfall if not handled properly.
Worker mobility to higher paying and factory-based jobs has been a good sign for all budding Asian economies,
tapering down inequality and providing jobs to the young and ambitious. However, while since 1950, 23 Chinese
cities have grown from a population of 1 hundred thousand to 1 million, in India, there has been only 6.
With Brazil fighting high levels of inflation and economic slowdown, and South Africa only registering a high of
6% at the top of its economic boom, it might be alright to keep them out of the purview of this brief argument. The
sanctions on the Russian economy and its great income disparities and extreme reliance on commodity sales (oil)
would justify a separate article all together.
8
ECON Tuesday Wednesday Thursday Friday Monday
201 - 321 9 AM - 12 PM 10 AM - 12 PM 9 AM - 12 PM 12 PM - 4 PM 12 PM - 2 PM
Spring 2014 Flashback Contact Us
Website:
www.drexeleconomicssociety.com
Email:
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Twitter:
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LinkedIn:
https://www.linkedin.com/groups/Drexel-Economics-Society-4282818
Washington D.C. Trip, May 2014:
DES at the Congressional Budget Office
It should be noted that even with the lower growth forecasts for the Chinese economy in the future, it still
continues to be the second largest economy in the world, and the fastest growing. The hope might be, that as China
slows down and succumbs to the middle income trap, India takes on the burden of higher rates of growth. With the
BRICS nations already accounting for 20% of the World GDP and home to 40% of the world population, the
augmentation of the right economic policies would surely gain them more international clout. But for now, their
current economic hardships are already manifesting themselves, as noticeable from the relatively low individual
investment of $10 billion per country into the New Development Bank. Therefore, it would be more pragmatic to view
the BRICS nations and the New Development Bank as adding to a more diverse playing field in an existing world
system, than as an immediate challenger to the system itself.
*Full bibliography is available on the DES website
Economics Tutoring Center Struggling with your economics courses? Come to the Economics Tutoring Center to get help with concept
understanding and problem solving. Qualified Economics students serve as tutors for these following sections:
201, 202, 301, 321, free of charge! Tutor ing begins in Week 3 and ends in Week 10, Monday through
Friday, in the Advising Center, 3rd Floor, Gerri C. LeBow Hall.
TUTORING HOURS
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