RS 5: GDP

What exactly is GDP? Gross Domestic Product is the accrued measure of how the economy is doing. Is it growing or shrinking? Every penny Americans spend, whether on cocaine or cocker spaniel puppies, counts in the GDP! I think GDP is a pretty simple theory to calculate. You only count the final price, but not each step of the product development! GDP does not have double charges, and services are added to the GDP as well.

I LOVE the idea of comparing Gross Domestic Product to a student’s Grade Point Average. This quote from the National Public Radio article explains it best:

“But just giving out GDP is like talking about your GPA in high school.
Sure, it's useful to apply to college. But your GPA paints a limited picture of what kind of student you really are.”

Sure, a student can have a 3.5 GPA, but how did he or she get it? Did he or she cheat on their test? Were they unethical? Did they put a lot of useless work into getting that GPA that they didn’t have to? Do they even have a 3.5? A country’s GDP is a great way of seeing how much money a country has or is worth, but there are limits to its benefits.

A student’s GPA has many multitudes. It reflects a student’s ability in multiple classes, therefore showing their intelligence, or lack thereof, on different topics and subjects. Just giving out your GPA doesn’t truly explain what a student is like. When regarding a student’s GPA, the means justify the ends. Sure, a 3.5 is great, but an employer won’t hire a student just from looking at a number they’ve earned.

Even though our economic GPA may be a pretty one, Europeans and Americans would argue with each other on whether or not it actually is the most attractive. GDP per capita, the total GDP of a country divided by the number of people in the country, is a controversial measure that many economists say could start a bar fight between an American and a European. Our GDP measures our larger health care spending, our larger our larger military spending, and our expenses on Social Security and tax preparation. Overall, I think GDP is about as important as a GPA. On the cover it gives a person an idea of how to judge a country of a student, but you won’t really know what a country or a student is made of until you delve into the pages of the book! 

RS 4: Would You Let a Coin Toss Decide Your Future?

Daniel Harrington, age 26, was a racecar driver 2 years ago making millions. He felt like he needed a new profession because he was at a place where he didn’t know what to do with himself on a day to day basis. He eventually quit racing and got a master’s at Duke University. He now has a great job for an energy company in Raleigh, North Carolina. But now, he has the same feelings. He’s considering leaving what he is doing now to go somewhere else, or to stay at his current job. He is a VERY indecisive guy.

He flips a coin to make small decisions in his life. When his girlfriend and him decide to go to dinner, they flip a coin or play rock paper scissors to decide where to go.

“Quitting has a bad rap, but strategic quitting could be a great thing!” Sometime quitting has great secondary affects due to the opportunity cost of our jobs, religions, friendships, etc! Freakonomics looks at the benefits of quitting...and flipping a coin? 

A woman who quit running decided to quit her passion for running because she felt like she had gotten the most out of it that she possibly could. She fell into the habit of running and being a runner and didn’t really love it anymore.

A website was created through the Freakonomics webpage. If you have a tough choice or decision, they will walk you through a few steps and if you are still undecided, they will flip a coin for you. Don’t worry, you can even flip for best two out of three. All they ask for in return is for you to fill out a short survey to figure out if quitting or not quitting turns out to be good or bad to be the right decision.

Levitt wants to find out whether or not there are default messages about decision making that people should follow. For example, should we go for the big change or stay safe and remain the same? What is the go to answer or the status quo?

Doesn’t this sound ridiculous? Flipping a coin to decide a decision that could affect you every day? Every year? The rest of your LIFE?! Maybe not. Information is costly! Taking the time to decide what decision should be made based on the pros and cons of the choice you are making is costly. The release that comes from a decision being made is a good one, and not having to waste time thinking about what to do makes it even better.

People may think it is ridiculous that ANOTHER person flips the coin for you. But by filling out information and answering questions to the people at Freakonomics, most people would have hopefully decided what they want to do by the time flipping a coin comes along. There is psychological evidence that if someone else flips a coin for you, you will have less guilt or regret. If you flipped the coin yourself, you would hold regret if the decision ends up not being your most favorable outcome.

When asked if someone brought up a dangerous or potentially violent question, Steve Levvitt didn’t know what to say. He is thinking about adding some more information to the FAQ page. This web page will absolutely become an ethical problem. What if people have questions about whether or not to embezzle money, to kill someone, to put their grandma in a nursing home, to blow up their ex boyfriend’s house, to fail out of a class? I guess they have some more questions to answer before they can answer other people’s questions! 

RS 3: A New Mom And The President of Iceland

The most recent financial crisis in  the small frozen island in the middle of the ocean has been a long standing battle over savings accounts located in a bank that went bankrupt in 2008. NPR Planet Money talks about the recent update on Iceland’s financial troubles.

Before financial crisis, Iceland had become known as a major international banking center. Between 2008 and 2011, when their crisis occurred, people in the United Kingdom and the Netehrlands put their money into Icelandic bank accounts because of good interest rates. The bank suddenly failed and people oversees who had investments could not get their money out of the bank and returned to them. The problem with this was that people from Iceland did have access to do so, stirring trouble with out of nation-ers. A bill was created that promised Iceland would pay back the UK investors, however according to international law the country held no responsibility to actually do so. In 2011, the Prime Minister of Iceland vetoed the bill that meant that it would have to go to a public vote to pass.

David from NPR and his Icelandish NPR intern replay a podcast from Planet Money from 2011 when it was time for the vote to take place.

His issue is a case of secondary effects, in my opinion. As the Icelandic intern said and I agree, not paying back the foreigners could be seen as a case of discrimination, could cause hate towards Iceland, and could eventually could hurt their economy if nobody wants to invest in Iceland or hold deals with them anymore. In this case, the ends do justify the means, and what would the public decides the means were? This was a serious case to be voting on. The people of Iceland had tons of questions…

If Iceland paid back depositors of their own country, so is it discrimination under the law not to bail out foreign depositors?

Is it fair that someone bought shares and was wiped out because of a mistake?

Is it fair that we pay for the bankers’ mistakes?

Will I be paying more taxes to fix this situation?

Everywhere you went people were discussing interest rates. Heida, an Icelandic woman, said that the people of Iceland were well educated and did feel obliged to know what they are voting on, but it was still very strange that they were voting on something like this. It’s a strange situation when a new mom like Heida and the President of Iceland have equal say on the fate of their country’s economy could be.

Now, in 2012, the case officially came to a close. Iceland does not have to pay back their foreign investors and it hasn’t caused any financial upset for the country…so far. The countries still get along fairly well according to the British lawyer for Iceland of the court case (ironic) and Iceland’s economy is slowly turning around.

But, luckily for British and Dutch governments, they are still receiving money from a different investment in Iceland they had made, and that money is worth more than it used to be thanks to Iceland’s re-growing economy.