Room for Creativity in Economics

By: Janet Rubin

For most of your economics career at Tufts, it may seem like you are learning to follow rules.  For example, in micro you’ll have to learn the functional forms of each type of indifference curve, then you’ll follow the same steps to find the point of tangency with the budget constraint and get the answer.  In macro, you’ll have to learn the differences between Keynes and the classicists and which equations match up to which theories, and so on…

Economics may seem different from the humanities and, indeed, social sciences in that there is little room for creativity.  But once I reached more advanced electives and started working on research projects with the Economics Department, I began to appreciate the immense amount of thought and creativity that is required to apply the principles that are the focus of foundation courses.  For instance, as I work on my thesis, I am trying to figure out worker choices about hours under varying circumstances.  Without the tools of economics, I wouldn’t know how to approach this problem.  But after micro, I know that I’ll want to set up a utility function and maximize it by taking the derivative and setting it equal to 0.  Beyond that, the number of choices I can make is immense (as evidenced by my pages and pages of algebra that eventually led to nowhere).  What variables are important?  What does the worker choose, and what is held constant (and are those determined by more complex interactions with other agents in the workplace?)  Even something that seems as dry as choosing a functional form needs to be related to a conceptual interpretation of the problem.  Should I set up inputs as substitutes?  Complements?  With an exponent to allow for increasing or diminishing effects?

While in foundation courses, these interpretations are abstract and taken for granted, in actual research (either your own or that you will encounter in advanced electives), the framework provided by these models will be applied to real situations and used to figure out something about the world.  The math and theory behind economics can seem rigid and dry at first.  But what I find most rewarding about economics is that being comfortable with these tools gives you a solid technical basis on which to build when you want to analyze situations you care about.

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Thanks for reading! If you’re interested in learning more about various topics relating to economics at Tufts, as well as associated events planned by the Economics Society, sign up for the e-list by emailing tufts.ec.society@gmail.com with your preferred e-mail address and full name.

Dance in the Big Apple

by Kelly Woodruff

New York City is widely recognized as the dance capital of the world. After “weather,” “ballet” is the first topic that appears on a Google search of “New York City.” After all, it has more dance companies, choreographers, and dancers than any other city, and it has been the center of inspiration for new approaches to creating movement for years. While looking for ways to combine two of my passions, dance and economics, I thought it would be interesting to look at the relationship between New York City’s economy and its dance culture.

Although there is limited research on this topic, the Dance/NYC branch of the organization Dance/USA conducted a study on the economic impacts of dance and published their findings in a report titled “The Economic Activity of Dance in New York City” in March 2004. Researchers gathered data for this study in 2002 and 2003, including financial and organizational information from over 40 dance companies based in NYC. The researchers also conducted surveys given to audience members at several dance performances in NYC. Interestingly, 84% of audience members at NYC dance performances have at least a college degree (compared to the city’s average of 33% for adults over 25 years of age), 68% are female (compared to 52%), and 86% are white (compared to 72%). Additionally, 63% of audience members were from NYC, while 11% were from the outside area and 26% were from the metropolitan region.

Based on the survey data, dance in NYC accounts for over $250 million of direct economic activity in NYC and almost $250 million in indirect impacts. During the six months of surveying, direct local spending by dance organizations totaled $121 million. These expenditures were primarily labor related. Spending by audience members totaled $135 million and was most concentrated in tickets and performance-related expenditures. Visitors to New York spent more than twice as much on performance-related expenditures as New York residents did.

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A model for determining economic impact estimates that two additional jobs are created for every equivalent job in the dance sector (e.g. if there are X employees in New York’s dance industry, dance is responsible for creating 2X additional jobs in other industries such as manufacturing and food). This means dance activity in NYC is responsible for the creation of over 2,850 additional jobs and $182 million in labor income. The model used in the study also indicates that spending by dance organizations and audience members has a total impact of $415.7 million as it trickles through the local economy. Furthermore, the study estimated the impact of dance on tax revenues for the state of New York at $23 million ($4 million in audience spending and $19 million in indirect sales and income taxes from the increase in labor income).

Based on this study, Dance/NYC concluded that dance is an integral part of NYC’s economy. Beyond the statistics, dance also has several impacts on the culture and quality of life in New York which are more difficult to quantify. For those of you who are not particularly passionate about dance, I hope that this information has at least given you a reason to appreciate the role of dance in New York City, the dance capital of the world.

Thanks for reading! If you’re interested in learning more about various topics relating to economics at Tufts, as well as associated events planned by the Economics Society, sign up for the e-list by emailing tufts.ec.society@gmail.com with your preferred e-mail address and full name.

The Fiscal Cliff

By Tyler Epstein

The grave topic has blanketed news stations and news articles, CNN to WSJ. The “fiscal cliff” is straight ahead, but can be avoided by taking swift action, working towards a compromise, and a temporary end to the gridlock that plagues our elected officials in Washington.

This fiscal cliff is a decisive, and controversial matter—the process of circumventing the overwhelming budget crisis will remain at the forefront of American economics and politics because there are legitimate concerns that America is heading towards an economic disaster. If Congress is not able to agree upon a compromised solution to the impending crisis, no one will be left unaffected—including us, college students.

If inaction remains in Washington, the government will undergo a combined $607 billion in spending cuts and tax increases on December 31, 2012. The slashed spending will be split between domestic spending and the defense budget. The spending cuts were signed into law by President Barack Obama last year in the “Budget Control Act of 2011,” put in place to incentivize Republicans and Democrats to solve the budget crisis by reducing the massive budget deficit in a rational approach. The spending cuts, referred to as “budget sequestration,” are estimated to be $1.2 trillion over a ten-year period from planned spending, including more than $500 billion from the defense budget.

The impending budget crisis has been on the discussion table since August 2011, and it was brought forth again by House Speaker Boehner and newly re-elected President Obama after the elections on November 6. The election left Boehner, an Ohio Republican, with less leverage to negotiate because there is a greater Democratic majority in the Senate and a smaller Republican majority in the House. Boehner and Obama each stated that they are willing to compromise on the approach to avoid this imminent economic obstacle, yet reiterated their previous entrenched positions.

Controversial tax code legislation enacted by President George W. Bush in 2001 and 2003 are set to expire. Democrats and Republicans agree that we must not raise taxes on the American middle class, defined as families making under $250,000 per year. However, President Obama wants to increase taxes for wealthy Americans (those who pull in over $250,000 per year), while the Republicans want to maintain lower taxes for everyone, though they are willing to discard specific tax loopholes and deductions.

The American economy finally appears to be regaining strength and our nation cannot afford to remain in a stalemate if the approaching fiscal cliff is to be averted. If a dramatic compromise is not reached between the two deeply embedded sides, the American economy will be closer to dipping back into a recession. In the past, neither Republicans nor Democrats have been willing to concede political ground on the issue—this is the delicate predicament where our nation finds itself today.  It is our obligation as affected citizens to demand our elected officials to display rational behavior to resolve the budget crisis while undertaking a sensible approach. We must avoid moving one inch closer to the brink, the edge of the fiscal cliff.

The IPad Mini: What It Reveals About the Industry

By Pierre Chalon

When people first began to hear talks about a smaller version of Apple’s famous IPad, many had trouble understanding the logic behind it. What could a smaller tablet possibly offer that the current generation did not already? Is Apple just being greedy and looking for any way to increase its already absurdly huge profits? The answer to the first question might surprise you. The answer to the second is, unfortunately, yes.

Firstly, let me tell you why this is much greater device than you probably think it is. Take away the retina display and A6 processor of the iPad, shrink it by about a fifth and you essentially have the IPad mini. And this is a good thing. For many people, a 7-inch tablet is the perfect combination of a portable and satisfying experience (it is a huge tablet market across the world). Sure, video content will be comparatively less fun to watch on, but applications like iBooks, Safari and Temple Run still provide the same enjoyment despite the screen reduction. If you think the iPad is already a small enough device, try around its miniature counterpart and you may change your mind.

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The key selling point here is that its price is cheap in comparison to other apple devices. Comparing the 16GB-sized versions, the mini sells at $329 in comparison to the iPad at $499. Being $170 cheaper, it’s a very tempting offer to any apple consumer who has not jumped on the tablet boat. A different way of looking at this is the consumer new to the market, who will be willing to pay that difference in a “might as well” attitude.  With the current iPad considered by many to be the best tablet out there right now, Apple is winning either way.

At the end of the day, does it all really matter? Most consumers are not too concerned with technical specifics and when buying these types of devices, it will simply come down to how you feel about it, and that will vary for everyone. This is something Apple knows. In a similar way to the nano, touch and shuffle, both iPads will simply attract to different types of consumers.

What is, on the other hand, of more interest to us as consumers, is how it reveals Apple’s monopolistic ambition to destroy competitor’s market share. You’ve probably heard of the infamous Apple vs. Samsung lawsuit (going the former’s way); many more are currently ongoing and, in essence, they are ruining innovation in this industry. Things like “search” and “auto-correct” are being (or already are) patented, a real obstacle and threat to software engineers who work hard to update, improve and innovate this industry.

In a fragile economy like the current, where innovation and job creation are crucial to success, the mobile industry’s potential stagnation is becoming increasingly likelier and Apple is, without a doubt, one of the principle culprits.

Social Business or Philanthropy?

Derek Li

The term “Social Business” means different things depending on who you are. And it’s true, there are no boundaries that set apart a business from being “social” or not. But the fundamental message is clear, these are businesses that strive to be a positive force of change than simply a profit maximizing company.

So that sounds like a simple enough idea. Why then, is this idea so current right now? You might think, “that’s cute, but a business is a business after all. How could anyone combine business with development in the same sentence?”

Take Dr. Muhammad Yunus’ Grameen Bank as example, Grameen Bank provides pioneering loan services to impoverished villages in Bangladesh whom were previously thought as uncreditworthy. A more recent example would be Kenya’s M-Pesa, mobile-based transfer and microfinancing service, granting proper bank services to Kenyans who cannot afford to open bank accounts. These businesses create brand new opportunities in markets that never existed before, bridging resources to those in need.

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Social entrepreneur Jacqueline Novogratz exemplifies this concept throughout her career. In her book, “The Blue Sweater”, she shows how dysfunctional businesses arise in developing countries simply because they dependent on non-profit donations. During her time in Africa, she encountered an example where women in Rwanda make merely $2 dollars a day in a bakery that loses $2000 per month, but still operates because there is an NGO that is willing to fund it. With the intention to merge development and business together, she started Acumen Fund, a not-for-profit group that believes in a market-orientated investment policy to invest in impact companies.

Philanthropy has revolutionized in unimaginable ways under Acumen Fund. As of today, various funds such as Acumen invest in a range of businesses spanning from agricultural ventures in Pakistan, electricity projects in Northern India, to mosquito nets in Tanzania. Their investment strategy is no charity at all, but in return provide business consultancy for these businesses to succeed. The concept of “impact investment” is no longer foreign, and these pioneers have shown us the future of what development entails.

Not to dismiss philanthropy quite so easily, but more often, opportunities arise from the entrepreneurial spirit within the human race. We live in a society where problems can indeed be solved by innovative solutions; perhaps this is the key to solving inequality around the world.

Dr. Muhammad Yunus – “I’m encouraging young people to become social business entrepreneurs…Making money is no fun. Contributing to and changing the world is a lot more fun.”

Thanks for reading! If you’re interested in learning more about various topics relating to economics at Tufts, as well as associated events planned by the Economics Society, sign up for the e-list by emailing tufts.ec.society@gmail.com with your preferred e-mail address and full name.

Interning at American Express

By Terence Lam

This past summer I had the opportunity to intern at American Express. After tirelessly searching for an internship, I realized that CONNECTIONS go a long way. During my time here at Tufts so far, I’ve learned that it’s very difficult to get an internship through the conventional resume drop or application. Most of the time, especially for me, many internship opportunities are obtained through connections or networking; this past summer was no exception to that.

There was and still is no formal internship program at American Express for undergraduate students, so I was extremely fortunate to get this opportunity. A family friend, who knew my father and coincidentally was a Senior VP at AmEx, put me in touch with one of his directors for an internship opportunity. Connections. And I know some of you are sitting there thinking, “Well I don’t have any connections!” Maybe you feel that your parents’ jobs aren’t related to finance at all! While your parents may not necessarily work in finance, everyone has connections. Whether it is your parents, a friend of your parents, the parents of a friend, or even just a friend (how you can connect can go on and on), everyone has connections. You just have to think about who you know and explore.

Perhaps your connection cannot give you a job or internship directly. What should you do then? Well, they can still be very helpful. Someone you know can very easily put you in touch with the right people and are usually open in giving you advice or just sharing information about their work. This is extremely important, especially now, when you are still trying to figure out what line of work you want to get involved in and if a particular field is right for you. In the end, the morale of the story is to not be afraid to explore your connections, ask questions, and make sure you make it a point to network early and often.

Thanks for reading! If you’re interested in learning more about various topics relating to economics at Tufts, as well as associated events planned by the Economics Society, sign up for the e-list by emailing tufts.ec.society@gmail.com with your preferred e-mail address and full name.

The Apple DOES Fall Far from the Tree

By Christian Widmer

My iPhone 3G has seen better days. A carrier pigeon may be more reliable than the internal messaging software. The battery lasts a whole hour. Sometimes, when it’s feeling friendly, it will vibrate every twelve seconds for that entire hour. Now I ask myself, should I give Apple more of my money for one of their products?

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