RS 7: George, Lettuce, and CPI

George Minichiello is a professional shopping inquirer. He is sent from location to location, whether it be a grocery store or a shoe store, to check on the prices of items from companies that make up the “market basket.” The market basket is the random mix of items that are being bought on the market by Americans. George is a surveying who figures out with items are being bought.

“George is one of hundreds of federal employees who goes to stores all over the country and record the prices of thousands of different things. A bag of romaine lettuce. A boy's size-14 collared shirt made of 97 percent cotton. A loaf of white bread.”

Since prices are constantly changing, George is constantly working. There are 450 people nationwide that follow prices of goods so that they can keep the CPI information up to date and correct. The CPI is an economic indicator that measures inflation in the United States. It stands for “consumer price index” and it’s value affects everything that costs money, from a price of pizza to health care.

Online prices and in store prices often differ, so it is interesting to me that they have 450 people nationwide checking each store. If a sales clerk at Forever 21 is in a rush, they probably won’t accurately describe the prices to the price inquirer or they will make errors. Their job is vital and accuracy is key!

I think this is definitely the best way to calculate the CPI. By having a worker individually check a price, though repetitive, it ensures that companies cannot forge prices or make errors.

George is described as a methodical man. He has regular stops and places that he checks pricing at. There are certain things he cannot reveal to NPR, such as the name of the owner of the stores or the names of the stores itself. I don’t understand why it’s so secretive! He is checking the prices of lettuce at a grocery store, not undercover drugs. Lettuce tell you George, you need to chill. How many people really care what the CPI is a week before it comes out? I guess nerdy economics people. But you would have to follow all Georges and every price…and I would hope those people aren’t that extremely nerdy! 

P.S. Hearing this guy talks about ribbons and lace on women's dresses = priceless and awkward. 

RS 6: Cliffhanger

If Obama doesn't jump soon, I'm gonna push him off the cliff...the poor guy has dealt with this enough!

In the 2010 mid-term elections, the democrats lost the House of Representatives, and inside the white house President Obama knew things were going to change. 87 new Republican freshmen came to the capital, and they came ready to fight. Many thought all 87 came with fires blazing. The 87 new people came to change Washington but first they had to get through John Boehner, the new Speaker of the House. He was leading a class of insurgents and was no way in hell ready for the ride they were going to take him on. Imagine a dog leading a large group of cats. Cats don’t bite much individually, but 87 cats is scary as hell. The 87 freshmen were just that, ready to bite since the smaller masses of Republicans couldn’t do it before. Republicans rallied together to go against Obama’s stimulus package and took various actions to force Obama to cut spending and raise the debt limit.

The Young Guns were made up of three young Republicans, Majority Leader Rep. Eric Cantor (R-VA), Majority Whip Rep. Kevin McCarthy (R-CA) and Budget Chairman Rep. Paul Ryan (R-WI), who claimed to be the young, new faces of the Republican Party. Paul Ryan, future VP runner, created a manifesto similar to Eisenhower’s times with his idea for a national budget that called for government spending cuts, no more Obamacare, lower taxes, and the privatization of health care. Obama responded to this proposition, with Paul Ryan in the room, and offended most if not all of the Republican Party.

Soon, it was time for Boehner and Obama to form an alliance and make some large changes in the capital to make large changes to our debt. After Boehner promises Obama some tax increases to raise funds, Congressman Cantor, a fiery representative for the Republican Party, breaks hell loose at White House meetings to fix the budget. After offending Obama, Eric Cantors gets thrown to the media wolves and Democrats, gets tucked down a notch or four, and Boehner is given the opportunity to make his Grand Bargain happen. As the bargain closed, a group of senators, split Republican and Democrat, called “The Gang 6” came forward with a bipartisan plan. After trying to fix the Grand Bargain when Obama asked for $400 billion more, Boehner doesn’t take the deal and describes the White House as a bowl of jelly. Angry at each other, they both held press conferences describing the situation. The deal they ended up cutting was what they called a fiscl cliff. It was a temporary plan until after the election; it was a pushback you could call it, that put the issues on a cliff with not much time to make a decision.

After the Republican’s lost the 2012 election, they had some soul searching to do and Obama had a lot of work to do. Obama hammered home his campaign platform that the wealth’s taxes would go up, but by December when the fiscal cliff deadline was soon approaching, Boehner wasn’t ready to make a Grand Bargain. His plan B, after “backing out”, was to direct the House to make the legislation to fix the fiscal cliff and to have them create the plans and make the decisions. Conservatives in the house were angry that Plan B included a tax increase on millionaires. Just before the vote on the plan, there was an emergency meeting of the Republican Caucus meeting. There would be no vote. The Republicans didn’t agree with their own leader.

When will the script change? Biden and McConnell, made a last minute plan…as usual. People who make over $400,000 per year would have tax increases, but decisions on government spending cuts were not made, and policy and political changes that are necessary have not been met either. The script is repeating itself over and over, Boehner makes a bargain, Obama asks for a little more, and Biden and Senate swoop in with a last minute, short-term solution. I think that cuts in government spending need to happen…sure it’s cool that Obama’s kids get to see Bieber perform in the White House, but he’s got to be a pretty expensive gig.

P.S. There were WAY too many good memes on this topic...had to put all my favorites in here!

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.