Want to contribute your Undergrad : Op-Ed piece? Published Paper? Short Writing Piece? Mini Lecture Video? Contact Holly Jean Soto at hsoto@masonlive.gmu.edu.
GMU's very own Holly Jean Soto was published in the Orlando Sentinel
Abolishing student aid could force schools to
lower prices
October 5, 2013|By Holly Jean Soto, Special to the Sentinel
Abolish government financial aid for students.
My dear friend, who is a statistics major and a
government-aid borrower, is fearful of this statement.
"Don't try to get rid of that," he says. "I need that money for school."
What he fails to realize, as I am sure many other student
federal-aid borrowers do, is that getting rid of aid would improve the lives of
American students today.
The first harsh reality that student borrowers fail to see
is that any government giving begins with government taking away. Government is
the only institution legally allowed to take by force.
Government does not send a letter to each American saying,
"Hello, fellow American, would you like to take a fraction of your income
to fund another person's education?" No. It is taken, whether I'm willing
to contribute or not.
Another harsh reality of students' taking government aid is that
progress, efficiency and effectiveness don't begin with someone else's money.
If students had to pay for school out of their own pockets,
we would see fewer students hanging around campus on their 100th credit hour
still trying to decide on their majors, fewer students accepting C's and D's as
passing grades, and more students going into successful majors.
Also, we would see a portion of students concluding at a
faster rate that they would benefit more in an occupation than in school.
Why is all this true? Because it is the students' own money
on the line.
Now some people may have concluded that students' providing
the funds for their own education allows them to reach a better long-term
result, but it is still difficult for students to pay out of their own pockets
because tuition is too high.
However, the final harsh reality is that when we participate
in taking away from another to pursue our own dream of a college education, we
engage in the same act that raises the cost of education. Colleges see that
more students than ever before are attending their institutions because the
students are able to pay for it with someone else's money.
The CollegeBoard Advocacy & Policy Center in its
"Trends in Student Aid 2012" report, found that during the 2011-12
academic year, $236.7 billion in financial aid was distributed to undergraduate
and graduate students in the form of grants from all sources. Also, students
borrowed $8.1 billion from private, state and institutional sources to help
finance their education.
The report also states that in 2011-12, undergraduate
students received 98 percent of federal grant aid, 99 percent of state grant
aid and 67 percent of federal loans.
As long as these statistics remain so, colleges will
continue to raise their prices. What do students with financial aid care? They
are not the ones paying those fees.
If we were to abolish financial aid for students, at first
we would see fewer students going to college because of lack of funding.
However, colleges and universities observing a lower student
population on their campuses, and observing that students who pay out of their
own pockets would attend their school when tuition cost is low, would now
compete with other schools to offer the lowest possible price.
Ultimately, even the poorest of families would attend school
at their own expense because getting rid of government financial aid gives
universities the incentive to compete, and just as with any product or service,
when competition breaks out, suppliers lower their prices.
If a 21-year-old student can understand the harsh realities
of federal financial assistance, why can't the rest of American students?
Holly Jean Soto, 21, of Kissimmee is majoring in Economics at George Mason University.
Explaining Gresham's Law With Pocket Change
By Leo Leksang
Edited by Holly Jean Soto
Most of us overlook our pocket change. We allow it
to accumulate, and then get rid of it as fast as we can. Not a lot of value is
placed on U.S. coins, but by reading this post, you might find yourself paying
closer attention to your coins.
U.S. quarters, dimes, and half dollars teach us
something about Gresham’s Law. American Economist, Murray Rothbard, defines
this law as types of money with conversion ratios that are specified by legal
tender laws, and are therefore different than their market value.
Specifically, when coins contain metal of different
value but are given the same legal tender value, the coins made of the cheaper
metal remain in circulation as they are continually used as payment.
Simultaneously, the coins made of the more expensive metal are taken out of
circulation by individuals who hoard the under-valued money.
The fascinating thing about US quarters, dimes, and
half dollars that further exemplify Gresham’s Law, is the
fact that these coins were made out of 90 percent silver, prior to 1965. (Yes,
our coins used to be more than just hunks of metal used as legal tender).
Unfortunately for the American people, supply of silver decreased, caused prices
of silver to soar, and ultimately caused the U.S. government to take step in.
The U.S. government’s solution was to substitute
nickel and copper for the silver that was originally used in our dimes,
quarters, and half dollars.
Following the year 1965, coins contained no valuable
silver content in them. How did this
come to be? Our beloved government
substituted silver with nickel and copper, in dimes, quarters, and half dollars,
cheating Americans of there once valuable coins.
So what happened to all those silver based coins?
People who knew of this substitute, hoarded silver coins and used the new
copper-nickel based coins for their everyday transactions. Take a look at your pocket change next time;
it is rare to find quarters or dimes minted earlier than 1965. But in case you
do find them, congratulations! You have struck gold…I mean silver.
Leo Leksang is
an aspiring Econ Student and sophomore at George Mason University.
GMU's very own: Abdullah B. Khurram was published in Dawn.com
The Iran-Pakistan pipeline: Finding the win-win for Pakistan
The government’s strategy on the IP pipeline has been dominated by the issue of financing the Pakistani leg of the pipeline, public pressure stemming out of acute power shortages and a political consensus that demands standing up to the threat of US sanctions. However, an overemphasis on these three factors should not hamper our ability to analyse other important dynamics involved in this project.
Indeed, the price at which Pakistan would contractually purchase Iranian gas is linked to international crude oil prices. Iran itself imports gas from Turkmenistan at USD 4/MMBtu while the price at which it would export to Pakistan is an exorbitant figure of USD 14/MMBtu. According to a recent report by Sustainable Development Policy Institute (SDPI), this would bring about a “death sentence” for Pakistan’s economy. Thus, if the pipeline project was to continue, Pakistan might end up having surplus supply of gas that consumers and local industry cannot even afford.
Moreover, Turkey, a current importer of Iranian gas still faces trouble getting adequate supply of gas from Iran during winter months, a time when Iran’s own domestic demand for gas peaks. On October 1, Iranian Oil Minister Bijan Namdar Zanganeh himself raised concern about Iran facing serious gas shortage because of slow progress in raising levels of production from South Pars – the field that is supposed to fill the IP pipeline. If such factors were seriously taken into account, the pipeline agreement would likely have never been signed at the first place.
In addition to exploring other options from Pakistan’s indigenous resources and renewable energy sector, the question that policymakers should now be asking is how the IP pipeline project can best come to an end so that Pakistan’s international standing is not damaged. It is thus important to explore the various exit strategies Pakistan could adopt and what implications each of them entails.
First, as Pakistan seems to do with other problems, politicians might be comfortable blaming the potential pullout on US pressure. However, this will not only prove unfavorable for the goal of reviving Pakistani-US ties, but will also seriously hamper the approval ratings of the new Pakistani government.
The second way out is to blame the previous government. While this option might be easy to digest, it has serious long-term repercussions. Holding the previous administration accountable for the failure creates a precedent in which a new Pakistani government can arbitrarily scrap an international agreement. This in turn creates a lack of trust among potential regional and international partners in Pakistan’s ability to see its agreements through from one administration to another.
The third possibility is to keep the project lingering. This will attract more energy aid projects from the United States and cheaper oil offers from Saudi Arabia. However, given that Pakistan will be liable to pay a $3 million per day penalty to Iran if its side of the pipeline is not completed by the end of 2014; this option is also not plausible.
The fourth possibility is to renegotiate the gas prices and the terms of the agreement with Iran. Though this option might be successful in de-linking gas prices from those of international crude oil, it would neither solve the financing issue nor the security concerns in regard to Balochistan.
These flawed options make the situation seem discouraging, in this conundrum lies a tremendous diplomatic opportunity which if articulated well could provide Pakistan with a win-win outcome.
Instead of provoking Iran’s anger by scrapping the gas pipeline deal without offering anything against it, Pakistan should replace it with another contract to import more Iranian-produced electricity. Pakistan is already importing Iranian electricity at Rs.10/unit and could enhance its import to the efficient levels of the current transmission capacity. Even increasing this capacity by building more transmission lines is a cheaper and a more viable option than to proceed with the IP pipeline project.
Furthermore, it will also be in Iran’s interests to establish more power plants within the country which could be used for both, its domestic production and as well as for importing gas to Pakistan.
Meanwhile, pulling out of the project will also give Pakistan greater leverage with the United States and Saudi Arabia – the two staunchest opponents of the pipeline. Pakistan could use this leverage to procure favorable oil prices from Saudi Arabia, as well as assurances of heavy investment from the United States and other international partners to exploit shale gas and renewable energy such as solar, biomass, and tidal energy – sectors that are estimated to have tremendous potential. This will also improve Pakistan’s energy diversity and, in so doing, strengthen its energy security in the long run.
This exit strategy will allow the Pakistani government to save face without having to compromise its relations with either Iran or the United States. Additionally, it will increase the government’s ability to proceed with other necessary yet unpopular steps to put the economy on track. Even Iran will experience no short-term loss as a result of this plan; the 900 km pipeline it has completed on its side of the border is still necessary for its own domestic supply of gas.
Link to article in Dawn.com
Abdullah Khurram is a Research Associate at the Middle East Institute in Washington D.C. and can be contacted at akhurram@gmu.edu.
November 3, 2013 | By James Anderson Edited by Holly Jean SotoThe push and pull relationship between free trade and protectionism date as far back as the Navigation Act. Under the Navigation Act, non-English traders were removed from direct trade benefits when goods were only allowed to be shipped on English vessels. This not only prevented non-English vessels from directly trading with Britain’s American colonies, but also resulted in foreigners paying a heavier fee to acquire English goods.
With the intention of protecting American jobs and decreasing competition on domestic industries, protectionist policies took large effect under the Navigation Act. Such policies have unintentionally decreased innovation and increased prices on American consumers. How? The effects of these policies have stifled competition.
Removal of free trade on the Sugar Industry
An example of a protectionist policy that causes harm on American consumers exists in the Sugar Industry.
1789 marked the year of Congress’s first tariff on imported sugar. Between the years 1789 and 1842, a total of thirty new bills had been passed to benefit domestic producers. Congress then enacted laws that put higher tariffs on already refined sugar to benefit producers who processed raw sugar cane into refined sugar (University of Florida, 2012).
Under the Great Depression, intensified amounts of intervention were enacted, one of which was the Jones-Costigan Act. The Jones-Costigan Act of 1934 subsidized farmers, limited sugarcane supply, set price controls, set minimum wages, and introduced import limitation quotas on sugar cane from abroad (History of US Sugar Protection, 2013).
In addition, time extensions were added approximately every 2 years to prevent the act from expiring. When the bill finally expired, sugar prices fell from 57 cents per pound in 1974 to 7.8 cents per pound in 1978. Prices on sugar continued to fall until 1990 when the act gained ground once again (University of Florida, 2012).
The Farm Bill of 1990, established three main ideas which also set the framework for US Sugar Policy today: Market Price Controls, Tariff Rate Quotas and Price Support Through Government Loans.
Free trade, the Sugar Industry, and Obesity?
1. Market Price Controls
US Department of Agriculture sets a maximum production limit for the sugar industry ever year based on estimated consumer demand (also known as price manipulation).
2.Tariff Rate Quotas
Sugar imports are controlled by Tariff-Rate Quotas that allocate which countries can export sugar cane to the US on low duties (Today’s TRQ system is based off of trade levels that existed from 1975 to 1981 and does not reflect current market supply and demand).
The 2012 quota for Brazil is 155,634 tons of raw sugar with an import duty of roughly 1 cent per kilogram but additional imports would not be efficient under the current system (US Sugar Policy, 2013).
3. Price Support Through Government Loans
Every year the USDA loans money to sugar manufactures. The loans, plus interest, must be paid back after 9 months. If the loans are not paid back as a result of lower than expected prices, the sugar producers can forfeit their sugar as payment for the loans and government acquires the task of distributing the good. Since the Bill requires that the lending program cannot operate at a loss, the USDA must manipulate higher prices (by estimating the yearly demand for sugar) to allow for sugar producers to sell their entire product (Swift Economics, 2010).
Free trade, the Sugar Industry, and Obesity?
These provisions illustrate a form of corporate welfare and harm to American consumers. But where does American Obesity tie in?
Ever notice the different taste in foreign Coca-Cola and US Coca-Cola?
The Coca- Cola Company represents one of many US food companies that substitutes real sugar with High-Fructose Corn Syrup (HFCS) in their products. Companies are now encouraged to adapt to this cheaper and artificial flavor in their products, thanks to sugar supply limitations that have heightened sugar cost.
Since its introduction in 1966, HFCS has replaced real sugar in numerous food products across the country. As a result, every American consumes an average of 62.6 pounds of HFCS every year (Swifteconomics, 2010). In the last decade, the American consumer has saved $3.8B by purchasing the cheaper substitute, but does so at the expense of their health (Cornnaturally.com, 2013).
How do we decrease usage of this cheaper substitute that is contributing to American obesity today? Simple, let the free market work. If restrictions and price manipulation were lifted on foreign sugar, competition will end the grandfathering of domestic sugar companies and ultimately decrease sugar prices. Naturally, more products with real sugar will be put back into the market and consumers will, in turn, benefit from consuming less high-fructose corn syrup that has plagued this nation’s health.
References
19 year old, James Anderson, is pursuing a BS in Economics at George Mason University.
GMU's very own: Abdullah B. Khurram was published in PoliTact.
Pakistan Needs A Diverse View Towards Foreign Policy
September 23, 2013 |By Abdullah B. Khurram
Many analysts from Pakistan demonstrate their resentment towards the United States by cultivating a public opinion in favor of a “Pivot to Asia”, i.e., shift of strategic focus from the United States to China. Whether this external pivot is good or bad for Pakistan is a matter of a separate discussion, but the focus of this article is to demonstrate a need for an internal pivot, i.e., a need for change in the way foreign policy is approached in Islamabad.
Now the question arises, what constitutes an internal pivot? And, why is there a need for it? To answer these questions, we first need to analyze the narratives that currently form the basis of Pakistan’s foreign policy and public opinion.
Firstly, Pakistan’s foreign policy tends to be somewhat influenced by a Cold-War era ‘either/or’ narrative, i.e., choosing between either country A or country B. Foreign policy today is rather governed by creating interest hierarchies; two countries can cooperate, yet disagree with each other at the same time. This requires creating levels of cooperation and levels of disagreement, which should be reviewed and altered with time and national interest needs. This problem might be slowly diminishing in the bureaucratic circles of Islamabad, but it remains prevalent in how the public and media perceive foreign policy.
This has resulted in a far-from-balanced thought process in which the benefits of trade with China are overestimated, despite the obvious economic disadvantages for Pakistan. As a result of such an approach, Pakistan has transformed from a ‘Strong Ally’ to a ‘Frenemy’ of the US. And, this has proven to be quite advantageous for the Chinese. China will benefit greatly from acquiring the strategic Gwadar port, and other mining rights in other parts of the country, without paying the premium prices.
Secondly, foreign policy is not a zero-sum game. India’s gain is not necessarily Pakistan’s loss and Pakistan’s gain is not automatically a loss for India. There can be situations which are completely win-win, or circumstance that are entirely lose-lose. There can also be scenarios where one country benefits more than the other. Consider the recent proposal by the Russian Foreign Minister, Sergey Lavrov, demanding Syria to handover its chemical weapons to the international community.
The agreement appears to be a greater win for Russia who came out looking like a savior and protector of international norms, and opposed to a military solution. However, it is also a win for the United States, which was able to get the Russians to act as a guarantor for Syria. The agreement with Russia also helped US avoid military strikes against Syria in the face of increasingly war weary allies and strong public and Congressional resistance.
Third point to consider is that economics supersedes ideologies. Many in Pakistan are proud of having good relations with their fellow Muslim nations but fail to see what actually strengthen ties is economics. The trade between India and Saudi Arabia alone is greater than the size of Pakistan’s trade with the entire Gulf region.
Majority of the states Pakistan has friendly relations with conduct more trade with India than Pakistan. Understandably, some of this is simply due to the larger size of India. At the same time, it is not to suggest that these countries will also politically support India over Pakistan. However, it does imply that trade is an important factor in establishing ties.
Economic factors are also at the center of US-China ties. No matter how much the ties improve or deteriorate at the political level, the economic stakes continue to have a calming influence on the entirety of the bilateral relation between the two. Similarly, if the economic dimension of the US-Pakistan ties were more developed, it would have a stabilizing impact.
Giving ideologies more preference over economics has not been beneficial for Pakistan. To quote one example, Iranian authorities killed six Pakistanis less than 2 months after the Salala incident in which the NATO (mistakenly) killed 24 Pakistani soldiers. While Pakistan rightly took a strong stance on the Salala incident, but it failed to even bring the Iranian killings to the mainstream media. In a similar manner, Pakistan has also never raised the issue of unfair treatment of its labor force with Saudi Arabia and other Gulf countries. Apparently, mistakes made by Muslim states are treated differently than those made by non-Muslim ones. Such posturing has obviously damaged Pakistan’s ties with western nations.
Concluding the argument, foreign policy can neither be viewed in an ‘either/or’ perspective, nor is it a zero-sum game. Bilateral relations that thrive on the basis of economics are much more stable than those based simply on short-term political considerations.
Pakistan needs to diversify its geo-strategic possibilities and has the ability to improve relations with all three, US, China and Russia at the same time. For a country with a strategic location on the map, external pivot might be an option, but an internal pivot is a necessity.
Link to article in PoliTact
Abdullah B. Khurram is a Research Associate at the Middle East Institute, Washington D.C.
Abdullah B. Khurram is a Research Associate at the Middle East Institute, Washington D.C.
GMU's very own: Holly Jean Soto was published in the Orlando Sentinel.
Want to make a lot of money? Consider supply and demand.
As a part-time worker at a minimum-wage job in retail, I have countless days where co-workers declare they're underpaid. I can't keep track of the number of times a fellow worker has murmured the words "unfair" and "minimum wage" in the same sentence.
Minimum-wage workers, often young adults, receive a low income but have high costs of living.
Even new managers are shocked when they discover how much their employees are being paid, and they believe we should get a higher wage. These comments beg the question: Are we correct in claiming we are underpaid?
Minimum-wage workers, often young adults, receive a low income but have high costs of living.
Even new managers are shocked when they discover how much their employees are being paid, and they believe we should get a higher wage. These comments beg the question: Are we correct in claiming we are underpaid?
What if I told you that I, like most other minimum-wage workers, am overpaid at Florida's minimum wage, and that this is not opinion but basic economic fact?
Simply, it's a matter of supply and demand.
Unlike my minimum-wage job, there are occupations in which people can legitimately claim they are underpaid. One of these occupations is the pharmaceutical industry.
There are more than 8,000 job openings for pharmacists, and according to the Bureau of Labor Statistics, the demand for pharmacist jobs is exploding nationwide with 25 percent more jobs expected by 2020. But the rate at which people are filling up vacant positions is a different story.
It may be hard to believe that any American employer struggles to fill vacant jobs given this economy, but according to HealthAffairs.org, unexpected growth in medication use has escalated demand for pharmacists that has outpaced supply.
In economic terms, there's a higher demand for workers in this market than there are people available to work. This justifies the label of a "shortage" in the pharmacist profession. Pharmacists are correct in stating they are underpaid because of the shortage.
In contrast, consider my job. Like the majority of minimum-wage jobs, for every one worker my workplace is trying to hire, about eight people are applying. Minimum-wage jobs don't require high qualifications, which results in a great number of available workers. Each week, my managers conduct group interviews to deal with the vast volume of people able and willing to work.
In economics, this means there is a surplus of workers; there are far more people available to the company at the price of minimum wage than there are jobs available. My co-workers and I are economically correct in saying we are overpaid at minimum wage because there is a surplus of us.
Surpluses in markets mean the price is too high. At a minimum-wage price of $7.67, eight people come to my company ready to supply their services when my company is demanding only one.
If managers at my job were to lower the price to, let's say, $7.40 an hour, only one person might apply for the job, which equals the one employee my job demands. Lowering the price cools off the surplus of people. At this lower price, my workplace has found market equilibrium, or a more perfect market.
A Gallup poll has found that 43 percent of American workers think they are underpaid. To them I would say: The next time you are asked if you are underpaid, put aside opinion and answer according to the laws of supply and demand.
What you have to do in order to make a lot of money is simple: Focus on supply and demand. Pick a job where the demand for people is high, and the supply of people who can do this job is low.
And if you hear someone say that people can't live on minimum-wage jobs, just ask: Isn't $7.67 an hour better than zero?
Holly Jean Soto, 21, of New York is majoring in Economics at George Mason University.
No comments:
Post a Comment