Alejandro Enamorado: Posting Summary

19 06 2011

All Journals

Journals (already marked):

Woe is the TTC

Sink or Swim: The Underwater Mortgage

Patient: The Economy of Canada

Journal (newly submitted):

 Economics Class: A Bid Farewell

 

All Comments:

To Be Marked

Carolyne Wang’s Wal-Mart: The Poisoned Apple 

Mike Seo’s What should we do about our export and income inequality?

Ngodup Yakhla’s Should Students be paid for getting good grades?

Joey Keum’s TTC is at it AGAIN!

Additional Comments:

Ilia Merkoulovich’s The TTC shouldn’t Hesitate to slash Unused Bus Routes

Chris Li’s Let’s Not Pay for Grades

Kevin Yeo’s Studying for Cash?

Chris Lee’s Chicken Soup for the Economy’s Soul (Or Lack Thereof)

Nahee Kim’s How Much Milk Is Too Much Milk

Benjamin Gray’s The Rationality of Prices, Humans and Our Decisions

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Income Inequality Summary Component

3 06 2011

Key Concerns/Issues

1. The gap between the rich and the poor is growing in Canada, since those earning the highest incomes are experiencing greater increases in their incomes than lower wage earners.
2. The economic recession has worsened income inequality in Canada. After the recession, high paying blue-collar manufacturing jobs have been replaced with low paying service sector jobs that offer fewer work hours, so although it appears that jobs have been recovered and unemployment has gone down, people are earning less money than before.
3. Businesses have been given a lot of wealth in order to create the trickle down effect, either through creating new jobs or expansion of the company. However, businesses are using the money instead in providing large bonuses and higher salaries for executives, keeping the money locked in at the top. Providing wealth to businesses has not benefited the poorer members of society as was expected.
4. Many Canadian jobs that require fewer skills are being outsourced to countries such as China, India and Bangladesh, where workers can be paid less to do the same job. This leaves the people who had the same jobs in Canada with no job or income.

Resulting Challenges to Canadians in the next 10 years

1. With income inequality exacerbated, the government has to dish out more tax dollars to spend on social welfare services. This reduces the amount of tax money available to fund activities that can stimulate real economic growth.
2. People with low incomes or reduced incomes have little money to spend. This reduces consumer spending, which can shift aggregate demand to the left and cause another recession.
3. Generally, extreme income inequality is connected to a lower quality of life. With income inequality becoming a bigger concern in Canada, it is likely that those with a lower-income will experience a lower quality of life e.g. shorter life expectancies, more health problems.

Supporting Statistics and Evidence

1. It costs more to provide emergency housing and hospital care for the homeless for a year than it does to provide supportive housing to the homeless for a year. Also, it costs more for a homeless person to stay at the hospital than for a non-homeless person:
http://www.theglobeandmail.com/news/national/how-paying-peoples-way-out-of-poverty-can-help-us-all/article2011940/
2. Income of the top wage earners in Canada, and a graph showing increasing income inequality in Canada. Also, more people marry others with similar incomes now than before:
http://www.theglobeandmail.com/news/national/the-rewards-of-the-rich/article1819892/?from=1819803
3. Gini coefficient increased in Canada, and number of hours worked by lower-income earners decreased:
http://economix.blogs.nytimes.com/2011/05/03/inequality-rising-across-the-developed-world/
4. Low income earners experienced less growth in income than high income earners, which worsens the income gap between the rich and the poor:
http://www.nationalpost.com/news/Economic+news+Inequality+complex/4782730/story.html

Possible Solutions

1. One solution to worsening income inequality is the Guaranteed Annual Income (GAI), which gives Canadian families with low incomes a guaranteed source of income so that they can provide for themselves sufficiently.
2. Increase income taxes for the rich, who have a large portion of Canada’s wealth. The tax revenue can be redistributed to increase income equality, for example by providing money to low-income families to boost consumer spending and increase aggregate demand. This can be done by increasing the tax rate in higher income tax brackets.
3. Increase corporate taxes. This would essentially have the same aim as increasing income taxes for the rich, as it will help redistribute Canada’s wealth more evenly. Also, corporate revenues may have been given to company executives, who would invest the money instead of spending it, which doesn’t increase GDP. If the government took this money, it would spend it, which would increase aggregate demand in the economy and cause economic growth.
4. Cut income taxes for the poor. This would increase their disposable income, which helps them live more sufficiently and increase their quality of life, as well as contribute to the economy through increased spending.





How paying people’s way out of poverty can help us all

24 05 2011

Article:

http://www.theglobeandmail.com/news/politics/how-paying-peoples-way-out-of-poverty-can-help-us-all/article2011940/singlepage/#articlecontent

Discussion Questions:

  1. Should lower income families be taxed less? Should higher income families be taxed more?
  2. Do you think providing low income families with a set annual income will encourage economic growth? Are there any distorted incentives caused by this solution?
  3. Should the minimum wage be increased to solve the problem of income inequality?




The Question of Marijuana (To Be Marked)

15 05 2011

Justice Donald Taliano found that prohibitions against the production and possession of marijuana in a few sections of the Controlled Drugs and Substances Act as well as Canada’s Marijuana Medical Access Regulations to be constitutionally invalid. The government has up till July 11 to fix these or marijuana will be in effect legal to possess and produce.  It is the most recent of moves towards making pot legal in Canada. Will the government correct laws, thus stopping decriminalization? The reality is quite likely. However, as revealed in the most recent opinion poll done by Angus Reid, 53% of Canadians are for legalization. Shouldn’t the government respond to belief of the public?

But that brings into question of what continues to hold us back from legalizing this substance? Such a substance has been around for so long but only within the last hundred years has it been made illegal in most places around the world. As of late, though, there have been quite a few success stories in terms of decriminalization and legalization, for instance Portugal. However there are many reasons for this inhibition of policy in Canada, all of which are understandable.

To many, marijuana is quite controversial in usage. Quite a few gasp at the thought of this dry plant being used. It is against many religious and moral codes defined by society. There is a feeling that it is wrong to use marijuana. Notice how I have avoided called marijuana a drug and rather opted for the term substance. There is a stigma, a sort of distaste involved with an item categorized as a drug. Some may link this to the views taught throughout the 1990’s that this substance makes you insane and that it is bad for your health. Although one does get the intended high, there are other adverse effects. Abuse of the substance can lead to increased lung problems similar to those associated to tobacco smoking, and increased chances of cancer development. In addition to that, is the negative externality resulting from smoking of any substance including marijuana, is the risk second-hand smoking. Those who did not choose to smoke are being exposed and thus are susceptible to lung problems as well if the exposure becomes regular. Also those under the influence of this substance are more likely to be involved in injuries for instance the most critical one being vehicle accidents. Driving high can be quite dangerous and can put others on the road at risk. With all this in mind, those who smoke marijuana have an elevated risk of being admitted to a hospital. As a result of this, legalization would potentially put more of a burden on the healthcare system.

There is also a fear that comes with legalizing. Once done, what is to say that it would not open the window to drugs to many other people? This statement means many things. First of all, some argue that marijuana could act as a gateway drug to other more intense substances. Secondly, if we legalize marijuana, that would set a precedent for other drugs. We could potentially see a flood of demand for fixing up legislation for other illegal substances.

Earlier on in this blog, it was mentioned that marijuana can be harmful if it is abused. The key word is abused. Yes, one can argue that as a result marijuana is harmful. But the counter argument, McDonalds is also harmful when consumed in copious amounts. Does that merit making it illegal? No. The fact is using the drug is not truly harming anybody. Most studies have concluded that marijuana is not as harmful as initially thought. It is far safer to use than cigarettes and tobacco in terms of health as has proven to be effective in medical treatment, for instance reducing the bad effects of chemotherapy and treating strokes.

Having marijuana continue to be illegal has proven to be inefficient as many are not deterred. It is panning out the way prohibition did. Even thought it was illegal, people still got it and as a result there were higher crime rates in trafficking and violence due to the drug trade. Legalizing would almost destroy the black market that was created because it was illegal. Thus it would reduce drug related crimes and free up the policing and judicial systems that would normally go after those who committed these offenses. In addition to that the system would not be overwhelmed with dealing with crimes for possession and distribution. First of all, this would require no more policing. As a result our police forces can focus on other crimes and also governments can reduce police spending and allocate it to other regions. The judging of cases would also be affected. Since lawyers and judges have to be brought in, these tend to be quite expensive. In 2003 alone, 150 million was spent on court cases. The last area that would be affected is that of detention. Our jail facilities cost quite the pretty penny to detain each breaker of the law. Imagine how much would be saved if those convicted of only possession were not detained. In Canada, drug related crimes may have only made up 3%. But every percentage counts when trying to improve a system. And in terms of government spending to deal with that 3%, one will see, it is not a small number. If anything reduces crime, it’s a good thing.

Now we look upon the most obvious reason to legalize the substance. Every economist seems to drool over the prospects of what the marijuana industry could hold. It is estimated that in Canada alone the industry is as large as $20 billion per year. Thus being the largest agricultural product in the country. The first droolable prospect is taxes. The fact is upon legalization; the government can do what it does to alcohol and tobacco and attach excise taxes to marijuana. This in turn would allow more cash to go to the government and be allocated for various government services. Another tax area that would be utilized is that currently, marijuana growers and distributers are not making a traceable income. However, once legislation allows for it, it opens the window for new people to be counted in income tax, thus giving more back to government funding. This can also be a source for job creation since the population is growing and more and more may be inclined to use it. This would allow more people to go into the work force and make incomes to support themselves. As a result, the marijuana industry could potentially reduce unemployment.

With all these benefits, it seems almost foolish not to go on right ahead and make steps towards legalizing this long been thought to be naughty substance.

Quite honestly, beliefs are what hold us back from legalizing. The economic benefits of freeing up our judicial system and police force and making more tax revenue greatly outweighs the negative. Some may fear that marijuana may still be bad or immoral but the truth is the methods used are not working as the common phrase is that marijuana is easier to access for a teenager than alcohol. It may open up the door to more users, but ultimately it is a choice. Marijuana is not being forced down the throats of the unwilling, no, this is only arguing for the legalization of the substance. From there society will have to decide how it will act. In weighing the crimes caused by the drug trade and the many people jailed for possession of the substance, it makes me wonder. The true crime might actually be continuing to criminalize cannabis.





Coffee Prices on the Rise

5 03 2011

Ah yes, the morning drink. Only recently have I discovered how wonderful it truly is. And as of late, prices have been soaring and it isn’t just because of the spring tradition of Roll up the Rim to Win. The price of Arabica coffee, alone, has increased 48% within the last few months.

Authorities on the issue say that there are two reasons for this. First of all is the ever increasing demand for coffee, especially of high-quality. The global population is in a growth trend so therefore more coffee drinkers (number of buyers), and more members of developing markets (ex. China, India, Brazil) are starting to desire this good. Secondly, supply of coffee has decreased due to poor harvests. The world’s greatest producer of coffee is already forecasting low yields of low quality beans. This has to do with the number of sellers, or in this case the farmers that were able to produce proper yields within this year. Since less producers where able to rack in their typical yields of coffee, the supply has decreased. Both these factors contributed to a higher equilibrium price and the change in quantity which is slightly ambiguous.

As a result, the price of purchasing a nice warm cup of Joe has gone up globally.

Article: http://online.wsj.com/article/SB10001424052748703559604576174841918967636.html





Woe is the TTC [To Be Marked]

3 03 2011

I am almost tired of hearing about the TTC and its problems: service inefficiencies, regular strikes, and a recent slew of public relations issues for instance the unfortunately photographed TTC fares collector who was caught sleeping on the job. And do not get me started on the very common fare hike. Honestly, I am one of many loyalists who are asking “the better way” to live up to its name. Now a budget shortfall of about 7 million dollars threatens the TTC balance sheet. To avoid any fare hikes, the transit commission has proposed reducing and/or eliminating 41 less travelled routes. I will admit, instantly I felt this would be the best alternative. If a route is not being efficient in that it does not serve many riders, it would be a waste of funds.By removing benefits from a small group, a large group will benefit. On my daily journeys I see a bus by the name of the 98 Willowdale-Senlac. Time and time again I fume when I see this much underused bus arrive more frequently than my vital 84 Sheppard. This bus almost makes me want to say cut/reduce all underused bus routes if it will make my route more efficient.

By reducing services to low rider routes, the TTC will be depriving a group of individuals of the public transit service. As Royson James (City columnist) pointed out, this is just Darwinism, a survival of the fittest. We are killing off underused bus routes in favor of ones that are more frequented. The wording may be harsh, but this is the wrong path to take because this so called efficient method will make some individuals worse off. Take the time to examine a meek creature in nature, for instance the beautiful dung beetle. It may just be a small insect but it plays a role in the ecosystem in being like nature’s janitor in that it consumes animal excrement as well as provides a source of prey to larger animals. Just like the small dung beetle, these bus routes may play a small role in helping the system but ultimately it plays a role. Mineta Thomas is a daily commuter of a bus route that is underutilized and she is not the only one. They rely on these buses every day. This is their mode of commute to get to work, activities, home, etc. Removing night service would be problematic because some citizens need transportation at night due to working the night shift, etc. The fact is a large amount of users do not have an alternative to public transit. Many do not have access to motor vehicles due to financial and personal circumstances. It’s either public transit or they walk. For efficiency, are we willing to make people walk?

After a route becomes too infrequent riders may just be turned off from the idea of public transit. When will a waiting become too long? There is a chance that people will start to abandon the ideal that is public transit the moment people’s routes are reduced and cut. There is a threshold when it just becomes far too inconvenient. One can bring up the idea that pollution will as a result increase due to more cars riding the streets. However, most people will not cite saving the environment as their primary reason for riding the rocket. The moment people start to abandon the TTC is the moment the organization has failed them as a public service. The TTC was not designed for a few people in mind, but to serve a city entire. That is why the TTC should not cut or reduce certain bus routes.

If anything, there are 2 simple steps that can remove the shortfall and leave the TTC better than before the lack of money occurred. First of all, one must remove the current problem of those who avoid paying their fare through deception. Recently, the TTC proposed fines and the use of TTC security to make sure people are indeed contributing their “fare share.” I agree with this as one of the solutions because as revealed in a recent report, the TTC lost an estimated 22 million dollars in 2010. That in itself is enough to remove the budget shortfall. However realistically speaking, fare evasion is unavoidable and can only so much be deterred. An additional step needs to be taken, and that step is to do nothing but carry on operating. This may sound like an odd statement but ridership of the TTC is expected to have a 7 million dollar increase due to the trend of customer behavior. More people, non-regular users, are starting to buy tickets and tokens only when needed. The only flaw with this is that it is only a trend and may overshoot or, unfortunately, undershoot its actual predictions. Both are not certain fixes alone but together they stand a good chance to clear the 7 million dollar deficit.

Ultimately, bus route cuts to cover-up the shortfall are a step in the wrong direction because the TTC is a service above all else. The Toronto Transit Commission is by no means  a profitable one. It  needs a 429 million dollar subsidy from the property taxes of the city to keep afloat. It serves all Torontonians, not just ones that live close to Yonge Street and have immediate access to subway stations. And that is key; the TTC is not made for the majority. It is made to service all who need it. The sad reality is that the TTC has been knocked for its quality of service in recent years. Many, including myself cite service and efficiency as major problems with the TTC. Removing more services would be a mistake because it would mean depriving a group of people who rely on the specified routes. The evident problem facing the TTC now is not a 7 million dollar deficit but a loss of quality. By following these recommendations, the TTC can remove the deficit without sacrificing anything; they can modernize without having to cut back. Maybe, this is what the TTC needs to “re-become” a beacon of public transit in North America. Maybe I’m being too optimistic.