Government interventions

http://money.cnn.com/2008/11/20/news/economy/jobless_claims/index.htm





This article, talks about the fact that the unemployment rate in the United States is increasing. The US department of labor reported that the number of people signing up for state jobless benefits has increased to 542,000, the highest since 1992. The labor department also reported that the economy lost 240,000 jobs during October alone bringing the total count of jobs lost to 1.2 million for the year. The job losses can be explained by the recent global recession and companies trying to cut down their supply costs. Bob Brusca, an economist, predicted that the job market getting even worse in the near future.



This article has to do with government interventions that take place when third-party effects and income differentials come into play. With reduced employment the positive third-party effects associated with a healthy job market are not felt as prominently. For instance, an employed population with money to spend can afford to pay taxes, and make purchases that will ultimately prove good for the economy. To control the effects brought about with job losses the senate have already taken a vote to extend state jobless benefits at the expense of government taxes. Distributing incomes efficiently is essential to avoid a rising poverty level and a weak economy.



The global recession has created job losses, economic instability, and deficits in numerous countries across the world. The ripple effect and opportunity cost of this recession affected everyone to some extent. The recession which decreased the output of industries forced them to make job slashes, which in turn, made it harder for families and individuals to find new jobs and retain financial stability. The money, which we pay through our taxes, and will now be used to support some of these people could have been used on something more beneficial for everyone. In addition, if the situation continues heading downward as it is now, the world may even be thrown into a depression.

Unstable oil prices

http://news.bbc.co.uk/2/hi/business/7687944.stm




World oil prices continue to decline with the current tag at US$64.15 a barrel despite Opec's (Organization of the Petroleum Exporting Countries) effort to stop recession by slashing down production by 1.5 million barrels. According to Opec, the cuts were an attempt to stabilize oil prices while reducing the supply which outpaced demand. The price of crude oil has fallen substantially from the all time high of US$147 a barrel in July 11. While some people are speculating further price cuts, the president of Opec, Chakib Khelil, is considering further cuts in output. The recession damaged the credibility of Opec as well. As oil analyst Stephen Schork stated that "The power to influence oil prices is moving farther and farther away from Opec".


Economically, oil has over time managed to evolve into a pretty elastic commodity. The growing elasticity of oil stresses the importance of a stable price since even a small increase can have a large impact on the demand. And since oil is a complementary product required for most methods of travelling, lower oil prices will also likely result in higher demands for cars and travelling. Electricity and alternative fuels can be used as substitute products but they aren't necessarily as efficient, and can be quite hard or costly to switch out to. In the end, much like the laws of demand and supply stated, the drop in the price of fuel decreased the quantity supplied and increased the quantity demanded.


Oil is a scarce resource that we should use rationally. Apart from the jolt of satisfaction we experience when sniping a full tank of oil for a cheaper price than yesterday, the cascading prices of oil have other more significant effects on us. First of all, with lower oil prices, we become less conscious of the amount of oil we consume. Clarifying, we will be more inclined towards a ride over a walk now, than when oil prices were up by over a walloping 50%. Secondly, cheaper crude also affects the other markets it is connected to. For example, the tourism and transit industries can make more revenue and afford cheaper deals now than they could before. And finally, the low oil prices are devastating to countries that have an economy dependant on oil, such as Venezuela and Iran. In conclusion, I think that we should try our best to control the consumption and price of oil to avoid an economic crisis.


--Rafaat Mir

Wind and Water

Just last week, after devastating Cuba, Hurricane Ike swirled on to hit Texas. The hurricane had originally caused over 80 deaths in the Caribbean, and damage estimated at $2 to $3 billion at Cuba. Ike had damaged the communist island’s major industries, and tens of thousands of homes, before moving on to hit Texas on Monday, the 15th. The hurricane left thousands of people stranded in Texas while leaving all food, drink, and gasoline in short supply for thousand of miles. In addition, the catastrophe has left more than 2,000,000 people without electricity in Houston. With thousands of people still left in the desolation, nearly two thousand people have already been rescued from the aftermaths of the storm. The conditions are still bad with the death toll at 32 and rising, and it is still expected to be a while before order is seen restored.

Economically, after dealing a devastating blow to Cuba the hurricane had migrated to further disrupt hundreds of thousands of lives in Texas. Not satisfied with paralyzing some of Cuba’s most important industries Ike displayed its Herculean might in the Midwest of the States. In the US, Ike left millions devoid of essential scarce resources such as water, electricity, and food. The estimated direct cost of recovery exceeds the billions. While the opportunity cost includes all the rescue efforts and the millions of people, homes, and businesses that could have generated revenue over the period of the calamity. A disaster of such scale, invokes many important decisions with great opportunity costs, since the scarcity of resources and patience make it impossible to please everyone. Though Ike has finally died down, the economic damage caused by it will be evident for decades to come.

Even though miles away, the hurricane has a profound effect on me. As humans we feel pretty bad after we lose just a portion of our hard earned money, and so how must it have felt, for those who saw virtually everything they have worked for their entire lives get swallowed down into a watery grave? Such a calamity also directly affects the world we live in. For example, the money worth of damage caused by the hurricane could have been used to greatly alleviate poverty, fund new schools, or develop new technology. Disasters are almost like a reminder of how fragile our lives are and of, all the things we tend to take for granted. William Thackerey once quoted that "It is from the level of calamities, not that of every-day life, that we learn impressive and useful lessons."

-Rafaat Mir