The first artic…

The first article, Donohue and Levitt, agrees with the chapter in Freakanomics.  The state the commonly cited explanations for the drop in crime in the 1980s actually contributed very little.  They agree with Freakanomics in that Roe v Wade was really what dropped crime rates.  It did this by reducing the pool of people most likely to commit crimes.  They conclude that abortion could be responcible for up to half of the reduction in crime seen in this period.  Foote and Goetz disagree with three points of the first article.  First they claim there was a coding error with the regression altering their regressors, second they use total arrests not per capita arrests which causes a major theoretical problem, and finally they have another criticism of functional form in the lack of correction for certain state trends.  These two articles in their contrasting style show that everything must be examined in depth and not taken as true just because it is published.  The same goes for Freakonomics, there are always multiple ways to look at the same thing.

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WHERE DID ALL THE CRIMINALS GO?

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Chapter four of Freakanomics attempts to prove causality between the legalization of abortion and a drop in crime rates.  The theoretical grounding for this is unwanted children are much more likely to be criminal.  They claim this explains the drop in crime when generations born after Roe v. Wade ripen to a criminal age.  The chapter does a great job of arguing their position against many possible alternate explanations, but still cannot prove causality.  They explain their analysis in great depth pointing out specific details for their points.  They also use a great example of Romania to try proving causality going in the opposite direction.  One of my favorite pieces of evidence is the example of the five states allowing legal abortion two years prior to the rest of the states.  The fact their drop in crime rate occurred with the same lag behind the legalization of abortion is strong evidence in my opinion.  An additional piece of proof coming from the effects of abortion is the link between abortion participation and magnitude of decline in crime rates.  The way they refute economic impacts on crime rates is also very convincing.  One part I believe they underestimate the effects of is increased prison use.  It makes perfect sense that people in prison longer for their crimes would reduce crime substantially due to the removal of repeat offenders.  However a further drop should be recorded for lack of criminal influence from these criminals on youths, as well as their inability to conceive potentially criminal children.  All in all, I believe there is a significant causation of reduced crime based on higher abortion rates.

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elevator meeting recap

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What is the relationship between personal consumption expenditure and imports from China?  The answer is not very clear, but I have come up with an estimation of the answer using OLS modeling and analysis.  I use, in addition to PCE, the year and the Yuan-Dollar exchange rate as determinates of the amount of imported goods demanded from China.  The data for PCE and imports was gathered from NIPA data gathered by the Census Bureau, and the IMF reported the exchange rate data I use.  The regression yields the coefficients -.0811, .0004, -.325 for year, PCE, and exchange rate respectively.  The coefficient on year does not necessarily make sense as imports have generally risen over time, however the other two are just what I expected.  As the exchange rate increases Chinese goods become more expensive to us purchasing them with dollars, also as we spend more money, we buy more Chinese products.  Essentially for every $1 increase in PCE, Chinese imports rise by $0.0004.  This is important to policymakers because spending on imports decreases our GDP and sends money out of our economy.  Using this data, foreign trade policy can be created in an effort to keep more of our money in the country.  On the other hand, instead of protectionist programs, incentives could be given to US producers competing with the Chinese in an effort to make them more competitive in their respective markets.

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Inside PCE

The Consumer Expenditure Survey in Comparison: Focus on Personal Consumption Expenditures, by Garner, Janini, Pasero, Paszkiewicz and Vendemia is a comparison of data collected from the Consumption Expenditure survey and other sources.  The aim is to derive an equation for personal consumption expenditure and locate causes or error for correction.  They identify many different categories of goods and derive their trends over time starting in 1984.  All of these consumptions are linear with a negative sloe over time.  However this does not mean PCE is in decline.  PCE is instead being divided among more goods each year with more options of things to buy.  These will not be a problem with my regression because they all follow a linear pattern.  A copy of the entire report can be accessed at: http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cts=1331305820307&ved=0CCUQFjAA&url=http%3A%2F%2Fblsweb1.psb.bls.gov%2Fbls%2Ffesacp1032103.pdf&ei=Ux1aT_bwCe3J0AGEmumcDw&usg=AFQjCNFgdDC6Olej-Kt7_B3KaLHg4Yyp9g

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Imports High, Confidence Expected to Rise

http://www.reuters.com/article/2012/02/10/usa-economy-idUSL2E8DA7C320120210

 

This link refers to a Reuters article evaluating current trends in consumer confidence and international trade.  The article tells the tale of a recovering economy.  Since January consumer sentiment fell from 75 down to 72.5, the first drop in six months.  Last month an additional 243,000 workers were hired giving us 8.3% unemployment, a three year low, as well as a jump in wholesale inventories.  The article then goes on to predict consumer spending to continue rising, as well as the already high level of imports.  At $48.8B the trade deficit is at a six month high, in spite of a rise in exports.  This is exactly what my research paper predicts: as consumer spending rises, imports will rise.  Another variable which I could include is consumer confidence.  Although I had not initially considered it much different from consumer spending, it can help to establish a chain of causation as it historically leads to increased consumer spending.  Our own exports can also be a sign of increased domestic prosperity.  Exports are driven by demand for our products, rising exports should signal increased production to meet this demand.  Although these variables do not help me explain any of the correlation in my prediction, establishing the causation is essential to understanding the reasons driving the similar trends.  This article will surely help me write a more interesting paper.

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Top of the Class

This article addresses the issue of failing school systems in developing countries and cities with high rates of low income families.  Basic public schools are primarily aimed at giving an elite education to students.  This basically means covering a large syllabus in preparation for an exam leading to future opportunities.  However this leaves many students behind because teachers are unable to slow down and address them.  This article stresses the ease with which schools can be provided specifically to educate students in life skills.

http://www.nytimes.com/2012/02/21/opinion/shuttering-bad-charter-schools.html

At this link an article describes the failing state of many charter schools in metropolitan areas.  The article says 37% of charter schools perform worse on tests then their public alternatives.  They attribute this so poor shut-own criteria and lack of  firm oversight.  The book clearly states charter schools, by the nature of their mission should do just the opposite.  Is the oversight really to blame? I think instead of shutting down schools that are failing, address the teaching staff within the school.  Charter schools are supposed to work because they do not have the same syllabus requirements and allow teachers to address individuals.  Therefore the only way it should fail is with poor teachers.  I would like to see data on the teachers credentials at the failing schools.  Are they less educated?  Less experienced?  How else can we really tell why they are failing.  I agree with the book, I believe charter schools are a great way to give chances to many children who otherwise may have been left behind in elementary school.

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Research Paper

Topic – Correlation between rise in income and rise in imports.

Thesis:

As disposable income rises, certain aspects of the consumers’ consumption  bundle will change.  Through country by country analysis of imports and exports a relationship forms.  The more income a person has to consume, people generally prefer higher quality items.  In some cases the quality is found in the US, giving rise to consumption of domestic products.  For other products the best quality comes from abroad.  Overall countries have specific areas in which they specialize in producing, and therefore exporting.  During times of higher consumption spending, in addition to the usual base level of imports, a raised level of luxury goods can be seen.  The additional consumption is higher in areas of where high end products are made.  A correlation is seen between a rise in and higher levels of consumption expenditure.  Along side this correlation, a relationship is also present between higher levels of income and imports from these high end areas.

 

I will be using data from the U.S. Department of Commerce: Census Bureau and Bureau of Economic Analysis.

This is important to many aspects of economics and in tern government policy.  This relationship establishes assumptions about human behavior and choices.  Whenever testing the future effects of a possible policy the one variable with the least grounding is how people will react.  Understanding why people decide to buy one good over another can also be used in advertising.  With net exports in the negative, there are important policy implications.  The GDP suffers and as a result, tax revenues and incomes suffer.  If we can establish a way to understand and reverse the process, booms in the economy could be more concrete and less speculation.

The reason I chose this topic is because I am confident there is plenty of accurate data for me to utilize.  There are certainly more interesting things to write about, but without data nothing can be proven and no real conclusions can be established.  Second, I am a proponent of bringing more manufacturing and industrial jobs to this country.  Too much of the economy is based off of people creating financial value.  In my opinion we need to produce more of the technology we design as well as the tools and materials used in the process.  As a country we might have a horizontal monopoly in certain fields, but this leaves us too exposed to outside shocks.  Vertical integration of the process from beginning to end within the US should create a steadier business cycle.

One problem that could potentially effect my data is the state of other countries when our income is high.  If we are in a boom period and other countries are in recession, their output will be lower and we will inherently receive less imports.  Another source of error could be trade policy.  Data that I may have a tough time finding, but that would surely benefit my research is the composition of exports from each country.
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