Monday, April 1, 2013

Long Run Aggragate Supply

http://www.nytimes.com/2013/04/01/opinion/on-the-economy-think-long-term.html?hp&_r=0

9 comments:

  1. I found this article to be interesting because its topic is similar to what we were just discussing in class. In class, we discussed the effects of a pigouvian tax on a major source of energy such as coal. We said that there would be negative impacts in the short term associated with the increase in price, but eventually this increase in price would lead to technological advancements and improvements in human capital. This article focusses on the benefits that are possible if adjustments are made to certain aspects of our economy such as education, energy, and infrastructure with the long run in mind. Despite having similar goals, the article used government spending, while our class discussion used taxation to achieve long run economic improvement. I believe the best way to achieve this long run growth is by combining these two methods. In this case, the government may carry some of the pigouvian which will make the transition easier in the short term. Overall, the article and our class discussion both showed the great benefits possible when we focus on the long term. However, I think it is important to recognize the associated short term struggle and find a way to smooth the transition to the long term.

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  2. In this article Sachs outlines strategies to get the US out of the current economic slump by targeting infrastructure, energy and job skills (education) as the three factors that could lead to long-run growth if given appropriate funding. I believe that efforts to fix the economy should be focused on augmenting job skills in the US through funding education. In terms of job skills, Sachs applauds the German model of increasing human capital by offering internships with private companies to young people. Since these skill-building apprenticeships are partly funded by the German government, young people from low-income households that could have otherwise contributed to the unemployment rate are able to secure jobs. If the US government adopted a similar strategy, the increases seen in education could potentially trigger increases in infrastructure and advancement in energy. Increasing not only the quantity of young people receiving an education but the quality of that education would precipitate the development of novel green energy technology. This environmentally sustainable technology would not only address energy needs in the long-term but would also be suitable for incorporation into the construction of modern infrastructure. Although I agree with Sachs’s position on targeting infrastructure, energy and job skills for government funding as a means of boosting the economy, I believe that an emphasis on educational funding will secure the best results for the economy and the country as a whole.

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  3. In this article, the author predicts that three factors will contribute to the expansion of our economy's production capabilities: infrastructure, energy, and job skills. He believes that our country's infrastructure must be rebuilt through the renovation of public transportation. Long-term energy investments will also improve the economy. Lastly, investing in extensive skills training will make high school graduates more suitable for available jobs. The problem with our economy and government now, according to the author, is that everyone is thinking in the short term. In order to push out the long run aggregate supply curve, we must act in the long run. In my opinion, the author has too much faith in government spending. He seems to forget the fear people have of increasing the deficit. Instead, the government should focus their spending on a single area in order to trigger the private sector in the other 2 categories. Right now, firms do not have a lot of incentive to enter these markets. The government must give them some incentive in order to trigger a response that will affect all parts of the economy. As we discussed in class today, energy inputs affect every aspect of our lives. If the government makes it's focus on research for alternative energies and adds an incentive for the private sector, then firms will enter the energy market and spur growth in all markets. If they are successful, infrastructure renovations will be cheaper and more efficient (new forms of energy are used) and firms will have the capital to provide job training.

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  4. I think this article provided excellent insight into possible solutions to the financial crisis in the United States. Sachs puts aside the influence of political parties to develop a new, long-run plan. Sachs basic idea spawns from the model that increases in capital lead to increases in productivity, and therefore an increase in GDP. I definitely agree with Sachs that investments in human capital are the best way to solve the crisis and improve the US economy. Neither pumping money into the system (democratic idea) nor reducing government spending (republicans) have improved the system. We must find ways to better human capital, physical capital, and technology. For Sachs human capital comes in the form of job training, physical capital in the form of infrastructure, and the technology comes in new ways, more environmentally friendly energy sources. By following this plan laid out by Sachs, the United States economy will begin to expand.

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  5. This article provides a plan to address the financial crisis by promoting long run growth through infrastructure, education, and energy. Sachs points out that all of the issues talked about with our economy are too concerned with the short term. As we have discussed in class, in order to push the long run aggregate supply curve out we must be concerned with long run decisions. I think that Sachs idea to invest in human capital and technology is the best way for our economy to improve as we are moving forward. If we carry out Sachs plan to increase human capital through job training, physical capital with infrastructure, and technology by finding new sources of energy then our economy will begin to expand. Although short term problems are important, we should shift our focus to the more pertinent long run issues.

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  6. Not to repeat what has already been said in the comments, but this article puts forward a three point plan to fix- permanently, not temporarily- the economy. The genius in the plan is the simplicity, which really just goes back to the basic long-run aggregate supply curve and the idea that while GDP may have diminishing returns it can still always shift out. How? Education, infrastructure, energy. Talk about an article that lays out essentially our entire semester. The article more or less ignores the current political environment though, which I think serves to understate how difficult gaining support for this plan would be in Washington. Creating a plan is the first step, getting it implemented is a whole other ballgame.

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  7. I think this article touches on the fine line that policy makers have to walk when deciding on how to address our nation's economic issues. It is important for them to try to make the best policies to improve our country, but at the same time do what they think will get them reelected. Because of this, addressing the economy over the long-term is difficult. New parties are elected with conflicting views, and the interests of our politicians seem to be set on improving their political standing over anything else. Sachs, the author of this article, says that if we focus on three long-term priorities, infrastructure, energy, and job skills, our economy will truly start to improve. These three priorities require investments by the private and public sectors. In our current political standing, substantial investments in long-term goals are hard to come by because the public is so set on balancing the budget and reducing the deficit. However, if Sachs can take the next step and explain how these investments will benefit the country and shift the long run aggregate supply curve to the right, people will be more inclined to invest.

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  8. Not much is left to be said after the previous seven comments, but I think Marie made a great point in mentioning this article as basically a summary of our semester in macroeconomics. The three main points of this article are brought up almost every day in class as potential solutions to our slow economy. And I think this article does a great job of summarizing why looking at the long run is so much more important and practical as a whole. Professor Casey has stressed the importance of the LRAS curve and this article supports that.

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  9. I agree with all that has been said. I enjoyed reading this article because it does relate to what we have been discussing all semester. I think investing in the future may be a better solution than just a temporary stimulus. But a lot of people would obviously like results now. I think we need to continue working on decreasing unemployment while also thinking about the economy long term. It is a fine line trying to decide how much to invest in the present economic troubles versus trying to stop this from happening again. overall I think this was an informative, very clearly written article.

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