Economics @ ITT

Diversion of Theory from Reality

Posted in economics, employment, macroeconomics by ittecon on November 7, 2009

The article showcases that commonly accepted economic measurements are divorced from our experiences in the real world. We watch GDP figures and the Dow index (DJIA) going up, and we wonder why we are sharing in the gain.

As noted in the article, Simon Kuznets, the developer of GDP said, “The welfare of a nation can scarcely be inferred from a measure of national income.” Moreover, through the lens of GDP, the rebuilding of New Orleans after Katrina adds to GDP, whilst the destruction caused by the hurricane is not a factor. When you add positives and avoid negatives, it is no surprise the number maintains an upward trend.

The DJIA is another suspect metric. A compilation of 30 large companies is hardly a mirror of how the average person is doing. Even a broader index such as the S&P 500 is entirely focused on corporate growth. Where is the Quality of Life 100 and the Friends Helping Friends 50? These would be based on qualitative factors, and so might not be meaningful, but wouldn’t it be nice to have an index for the commoner?

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Child Labor in the US

Posted in employment by ittecon on November 2, 2009

Wal-Mart and the Kroger supermarket chain have severed ties with one of the country’s major blueberry growers after an ABC News investigation found children working in its fields. At Adkin Blue Ribbon Packing Company in South Haven, Michigan, a five-year-old child was found working alongside his seven- and eight-year-old brothers. As part of the ABC News investigation, four fellows from the Carnegie Corporation spent weeks in fruit and vegetable fields in Michigan, New Jersey and North Carolina.

Source: Democracy Now!

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Income and Tax Redistribution

This is a good article discussing tax redistribution and income inequality from 2000 to 2007. Notice that the top fifth of income earners received about $18,713 in tax breaks, while the bottom fifth only got $706. Well, of course, the high income families woudl be expected to get a larger break because they have more money in the first place; so, notice as well that on a percentage basis, the top quintile received a break of 12.82% versus 6.97%. This is known as a regressive tax policy. The top tier started from a higher base, so mathematically this is not entirely shocking. However, it does depict a trend diminishing the benefits of a progressive taxation system. There are some interesting responses after the main post, too.