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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.

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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

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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.

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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.

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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

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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

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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.

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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

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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