Conspicuous Consumption, Bitcoin and Covid 19 Effect
Instructions: Begin by selecting a popular periodical (newspaper or magazine – actual or virtual) related to the topics as outlined below.
- Conspicuous Consumption in the Market for Smartphones.
- Bitcoin and its derivatives – how does the market operate?
- COVID economic policies – effect on political economy.
- Perfect competition for information: Why newspapers are dying off
- Demand vs. Supply for Clean Energy: Why the world still runs on fossil fuels
- One topic of your choosing – be sure to indicate what it is.
For each article provide the following information.
- Provide a brief summary of each of the articles in question.
- After the summary indicate the source of the article (where it was published).
- In what way does the article impact the topic and how it is related to the course material?
- Are there specific examples of how this is related?
- What economic principles does the article cover relative to in-class discussions and why is this important? Be specific.
- How does this further your understanding of the course material? Note that you should try to choose an article that you can read and that does not have too much technical jargon in it.
- From your perspective, do you believe the results to be valid and/or justified relative to the material presented?
Once completed include the following general information as it pertains to the collection of articles.
- Discuss how each of the topics is interrelated and what their influence and effects are on stimulating or contracting GDP.
- Comment as to how the topics relate to human well-being in general.
- Would you think it necessary for the government to increase regulation? Does the government have a role in affecting the economic outcome?
Solution:
1.
Conspicuous Consumption in the Market for Smartphones
Thorstein Veblen and Apple
In 2017, Apple gave us a Thorstein Veblen moment by introducing the iPhone X to the market. Thorstein is known for his book “The Theory of Leisure Class 1899” where he described conspicuous consumption. He argues that affluent consumers show wealth and power via excessive leisure shopping. They broadcast their superiority over servants and employees by buying expensive, useless items.
The iPhone X retailed at $1000+ when it was first introduced and the consumers are also sending us a message just like the affluent that Veblen targets. While the message might be quite different from Veblen's, the intent is the same. The consumers of the iPhone x are trying to signal their taste for elite technology.
People have always claimed that Apple has been purposely creating super-premium phone models to generate aspirational excitement. The company says its new technology justifies the base price. While a $300 iPhone 8 will do just fine, it will not make your friends jealous. People in affluent states are more likely to own an iPhone than any other brand. This sounds more like Veblen’s conspicuous consumption,
Source: IPhone Conspicuous Consumption
In what way does the article impact the topic and how it is related to the course material?
In class, we defined conspicuous consumption as the purchase of goods and services to display one's wealth. The article uses Veblen's conspicuous consumption theory to explain why people with social power and wealth will not mind spending over $1000 on iPhone X even though there are cheaper smartphones in the market that works fine. They believe the new and expensive iPhone X will convey their power and wealth.
Are there specific examples of how this is related?
The iPhone 8 retails at $300 and almost works the same as the glitzy $1000 iPhone X. However, affluent consumers still opt for the iPhone x to show their wealth.
What economic principles does the article cover relative to in-class discussions and why is this important? Be specific.
The article covers Oligopoly power. Apple uses product differentiation and its pricing power to target affluent consumers. The company uses emotion-stirring launches and exorbitant prices to target conspicuous consumers.
How does this further your understanding of the course material? Note that you should try to choose an article that you can read and that does not have too much technical jargon in it.
The article has introduced Veblen's conspicuous consumption theory and used real-world examples in the iPhone sector to explain it.
From your perspective, do you believe the results to be valid and/or justified relative to the material presented?
Yes, I believe the material is justified. Apple recently introduced the iPhone 12 which is more expensive than its predecessors. Yet affluent consumers still opted for it.
2.
Bitcoin and its derivatives – how does the market operate?
How To Trade In The Bitcoin Derivatives Market? - Summary
Derivatives are financial products. They can be contracts or securities. Derivatives depend on other assets to have their value. Meaning, they are worthless without any cash flow or other assets. The four types of derivatives are:
- Options
- Forward
- Swap
- Futures
Bitcoin is an example of the future. It is a new tool that traders can use to reduce risk by just signing contracts. All they have to do is identify a cryptocurrency with a low price, purchase it and sell it when the price goes up. The other strategy that they can use is shorting, which is useful when the market is trending down. Shorting involves borrowing assets from third parties and selling them when their price is likely to fall
Spot Market vs Derivative Market
In a spot BTC market, traders can buy and sell bitcoin at any time. However, there are specific limitations such as you can only make money when the price of the bitcoin goes up. A derivative market on the other hand allows you to trade on contracts that follow the price of the bitcoin. You do not have to own a bitcoin.
Trading in the Bitcoin Derivatives Market
It involves signing a contract with a counterparty. Suppose you believe that the price of the bitcoin will go up while other people believe the price will go down, you can sign an agreement with the other speculator. The agreement will state that if the price moves in any direction after a certain period, one party will have to pay the difference in price to the other.
In what way does the article impact the topic and how it is related to the course material?
The article discusses the concepts of trading in the bitcoin derivatives market. It compares the derivative market to the spot market and also explains how bitcoin traders make money in the derivative market. The trading of bitcoin in the derivative market is a potential study of monetary theory in microeconomics (Halaburda, 2020)
Are there specific examples of how this is related?
Bitcoin has a robust nature and a decentralized cash system
What economic principles does the article cover relative to in-class discussions and why is this important? Be specific.
Monetary Theory: Traders can engage in monetary transactions without engaging third parties. This transaction system is known as peer-to-peer
How does this further your understanding of the course material? Note that you should try to choose an article that you can read and that does not have too much technical jargon in it.
Microeconomics aims to explain how economic decisions are made. Before investing in bitcoin, the traders first check the whole blockchain ecosystem to find where the trend is going. The decision they make will depend on the trend.
From your perspective, do you believe the results to be valid and/or justified relative to the material presented?
Yes, the results are valid. While the viability of bitcoin has been continuously questioned, it has successfully weathered the storm despite not being backed by any real asset or governmental claim.
3.
COVID ECONOMIC POLICIES – EFFECT ON POLITICAL ECONOMY.
Summary of Article
The covid-19 pandemic has produced different outcomes across the globe. This has led to questions regarding the factors that determine the national performance and failures of global performance. While the problems associated with standards of the report have made precise comparisons extremely difficult, most people agree that the mortality rate reported in Asia provides a better picture than the reports of America and some parts of Europe.
Renowned proxy measures such as gross national rankings on the Global Health security index and national income per capita do not have a significant association with how countries perform on Covid-19. According to research, places, where the disease has taken hold, have a familiar pattern of substantial outcomes. People of color, migrants, and other victims of racism experience worse morbidity and mortality. This is in contrast to the seeming uncertainty in the national achievement determinants.
The familiar pattern highlights that there is underlying inequality in wealth, education, and access to care. Also, people have been forced to depend on their resources because of the physical distancing policies that have been implemented. Many marginalized citizens are employed in the lower service sector where the risk of disease transmission and economic disruption has affected disproportionately. Meaning, the poor have suffered disproportionately more than the rich. Third-world countries with the least political and economic bargaining power are more likely to be deprived of medical supplies and vaccines. Some of the factors that have fueled this include:
- Low solidarity
Covid-19 has forced super-powers such as the US and the UK to focus on the health system and domestic vulnerabilities. Since third world countries have a poor health system, they exist to serve the rich countries. As a result, their ideas and health strategies rarely get recognized in the mainstream global health discussion
- Economic inequalities
The pandemic has ravaged poor economies and reversed more than two decades of progress. In Africa, it is estimated that in 2020, more than a 100million citizens were pushed into extreme poverty. The World Food program projects as many as 272million people will be forced into acute food insecurity
- Colonialism and political economy of extraction
This factor examines the response of nations towards the pandemic, distribution of the effects, and power relationships. There has been a longstanding pattern of exploitation by the rich countries on the poor countries. The scramble for vaccines and medical supplies has led to a political economy of extraction. The extraction is founded on the benefits for the elite countries at the expense of the poor ones.
Source: Covid Economic Policies
How the article impact the topic
The article discusses the specific problems Covid-19 has posed to the economy and the longstanding patterns that have made countries vulnerable. It points to the need for change in government policies to help countries from going into recession. In the past, governments have made commitments that they have not pursued. For example, in the 2019 United Nations General Assembly, several countries committed to achieving universal health coverage for their citizens. However, very few countries have implemented this. The absence of universal health coverage has worsened domestic inequalities and impeded response to the pandemic. This is because the high cost of health services excludes poor people from seeking care and self-isolating when infected. The article recommends that governments across regions should pool their resources together to provide full population cover.
Specific Examples
- The Universal Health Coverage policy was signed at the 2019 United Nations General Assembly to provide health cover to citizens across the globe. If this is implemented third world countries will also have access to better healthcare during the pandemic
- Low and middle-income countries which have been marginalized by elite countries in the past can advance their participation by advocating for governance reforms at the multilateral institutions.
Economic principles covered by the article and their importance
The covid-19 outbreak has created a serious health crisis and caused significant damage to the global economy (Hafner). National governments are spending trillions to curb the negative impacts the pandemic might have on the economy. The World Health Organization has called for cooperation and solidarity during these trying times. However, the demand for vaccines has divided the economies into the haves and the have not. There is great competition among countries to receive the vaccines first. Yet the priority has been given to the elite.
2. Demand and supply
Early this year, Covid-19 vaccines were rolled out in full swing. However, vaccine manufacturers are facing bottlenecks in the supply chain as they try to keep up with the growing demand. Vaccine supply issues have forced some countries to impose export bans on some vaccines and the components used to manufacture them (Joi, 2021). The article talks about the demand and supply for vaccines to reduce the rate of infection.
These two principles can help the world come up with potential solutions to the sharp vaccine supply challenges and improve sustainability in the future. To scale up the manufacture of vaccines and ensure that demand meets supply, the vaccine companies can improve efficiency, repurpose their existing capacity and also add new capacity.
How does this further your understanding of the course material? Note that you should try to choose an article that you can read and that does not have too much technical jargon in it.
Microeconomics tries to explain how incentives and decisions (policies) made affect the distribution and utilization of resources. Since time immemorial economists have always developed theories that try to explain why entities should be made accountable and the need to share risks effectively (Christian Gollier, 2020). However, in the Covid-19 pandemic context, we have seen that there is a reluctance to share the risk. The pandemic has fueled individualistic and competitive policies which are against the advocacy of civil society groups and UN agencies for an economic vaccine that can be accessed universally. This has amplified economic inequalities and other vulnerabilities among poor countries.
From your perspective, do you believe the results to be valid and/or justified relative to the material presented?
Yes, I believe that the political economy of the Covid-19 is linked to past trends of extraction of resources, marginalization, racial discrimination, and colonialism. Since there is nationalistic competition, the countries with small and medium economic power have been given the last priority of receiving vaccines. Most vaccine trials took place in small and medium economic countries (South Africa, Egypt, and Brazil). However, even though the trials were successful, the countries were not given any guarantees that they will receive the vaccines in any quantity. While in most cases it is the rich countries that pay for vaccines distributed to low and middle-income countries, this financial relationship is unclear. Canada was allowed to order five times the vaccine doses it needed while third world countries were forced to wait in line (Gill, 2020).
Discuss how each of the topics is interrelated and what their influence and effects are on stimulating or contracting GDP.
All five topics exist in an economy that is molded by the policies that are set by the government. Government must regulate some aspects of the economy to grow it and prevent negative conditions that may occur in the future. Bitcoin improves economic growth by providing developing countries with easy access to financial services. Today, several people prefer bitcoin to conventional exchange. Information on bitcoin is readily available on social media and other online sources. When people are equipped with this information, they can make a better investment with their bitcoin. The advancement of technology especially in the smartphone sector has killed newspapers. Now, all breaking news and the latest trends can be found on social media platforms. You do not need to read a newspaper to keep abreast with the latest happenings.
Comment as to how the topics relate to human well-being in general.
Clean energy guarantees environmental benefits by preserving the world's natural resources. Its use eliminates environmental disasters associated with fossil fuels such as natural gas leaks and oil spills. Smartphones make it easy for people to communicate and have quick access to information. Bitcoin offers an investment opportunity and has proven to be valuable. In times of financial crisis, it can be used to store value. Governments across the world are implementing economic policies during Covid-19 to cover their citizens. Getting vaccine doses will ensure that we go back to living normally.
Would you think it necessary for the government to increase regulation? Does the government have a role in affecting the economic outcome?
The government has a great influence on the economic growth of the country. This is important not only to further economic interests but also to preserve the economy. The state of the economy is vital to the citizenry. According to several studies, the economy is one of the major factors that affects how people vote in the US. The fiscal and monetary policies implemented by the government influence the economic activities of the country. For example, the government can adjust the cost of borrowing money by raising or lowering the interest rate. Also, the government can introduce tax incentives or change tax rates. Government regulations are like a double-edged sword. If implemented correctly, the regulations can foster a thriving marketplace and flourish the innovation sector. On the other hand, poor regulations can cripple creativity and limit opportunities for citizens (Broughel, 2017).
4.
Perfect competition for information: Why newspapers are dying off
Print newspapers are dying faster than you think - summary
The latest revenue numbers reveal that the newspaper industry is in structural decline even amid a healthy overall economic situation. The Wall Street Journal revealed that it is trying to cope with dwindling sales by consolidating some sections of the newspaper. They are transitioning to a slimmer paper. The Ithaca journal on the other hand has relieved most of its editorial staffers. The paper that once had an editorial staff of more than 20 people now only has two full-time reporters.
This inexorable downward drag is a result of two major forces:
- Demographics
Newspapers have lost most of their loyal readers to death. Every year a few million newspaper readers born before the 1980s die and are not replaced by new readers.
- Competitive ad market
The ad market now has cut-throat competition which makes it extremely hard for newspapers to charge premium rates.
Source: Print Newspapers Dying
In what way does the article impact the topic and how it is related to the course material?
The article has discussed some of the reasons why print newspapers are dying. While there is perfect competition in the information sector, print media is no longer popular as people are now opting for media platforms such as social media. The companies that offer print media have also tried to evolve by embracing new ways of breaking news.
Are there specific examples of how this is related?
- The Wall Street Journal is trying to consolidate some sections of its newspaper
- The Ithaca Journal has released most of its editorial staffers
These two examples from the article clearly show that newspapers are dying off
What economic principles does the article cover relative to in-class discussions and why is this important? Be specific.
- Competition
There is increasing competition in the advertising market which has proven hard for newspapers to navigate.
- Monopoly
Big newspapers are still thriving online while smaller ones are struggling. Big players in the newspaper industry like the Washington Post and the New York Times have made their websites into viable businesses. This has enabled them to thrive in a post-print world. The small newspaper companies on the other hand have gone through round and round of layoffs.
How does this further your understanding of the course material? Note that you should try to choose an article that you can read and that does not have too much technical jargon in it.
While the information sector enjoys a perfect competition where no single firm controls the market and competitors can enter & exit freely. Changes in technology and demographics have theoretically made it an imperfect competition. Now, only companies can afford to migrate to the new technologies and guaranteed success in the sector.
From your perspective, do you believe the results to be valid and/or justified relative to the material presented?
Yes, print media has indeed become outdated. The internet has made it easy for people to access information in the comfort of their mobile phones at any time. They do not have to wait for the news to be printed. Breaking news can be transmitted in real-time and watched live.
5.
Demand vs. Supply for Clean Energy: Why the world still runs on fossil fuels
Global Energy Demand Means the World Will Keep Burning Fossil Fuels, International Energy Agency Warns
The world may be yearning for a complete shift towards renewable energy but the impacts of worldwide economic expansion and growing population are proving to be a hindrance. The International Energy Agency published a World Energy Outlook 2019 report where it said the world is still heavily dependent on fossil fuels. That the world will only transition to a carbon-neutral society if major policy changes are made.
The agency also argues that while growth in renewable energy – hydro, solar, and will- is forecasted, the pace of growth cannot offset expanding global economies. However, even though the world is trying to cut back on carbon emissions, erratic changes in weather patterns and the rising temperature have not made it easy.
Source: Global Energy Demand
In what way does the article impact the topic and how it is related to the course material?
The article highlights that the renewable energy sector is growing but not fast enough. As a result, its production cannot fully support the ever-growing economies of the world and population. It is related to the course materials because it discusses the theories of economics and policies that should be implemented to control carbon emissions.
Are there specific examples of how this is related?
There is a growing demand for renewable sources of energy coupled with a rise in fuel efficiency. This will flatten the demand for oil over the next decade according to the IEA.
What economic principles does the article cover relative to in-class discussions and why is this important? Be specific
- Demand and supply
There is a high demand for electric vehicles and larger but energy-efficient SUVs. The article says that the number of SUVs being driven on the road across the globe has increased from a 35million to over a 200million in just a decade.
How does this further your understanding of the course material? Note that you should try to choose an article that you can read and that does not have too much technical jargon in it.
There is a big gap between what researchers say needs to be done to control carbon emission and what is being done. Many emerging economies depend on coal. To control carbon emissions, a stricter sustainable plan should be implemented. However, the only problem is this would require trillions in investments.
From your perspective, do you believe the results to be valid and/or justified relative to the material presented?
Yes, the world is still running on fossil fuel and it will take time before we transition to renewable energy. In 2018, carbon emissions still hit an all-time high despite growth in renewable energy sources like solar and wind. Governments will need to understand the implications of their choices and make drastic changes.
6.
Ethical Economy
Ethics and Economics Summary
Ethics & economics is a broad area that covers topics studied by economists (like capitalism, profits, and completion) and concepts that ethicists use such as good, admirable and best. Ethical issues are directly connected to economic issues. Before economists make decisions, they weigh options and measure the cost-benefits against each other. A value framework is a method implicitly adopted by economists when performing a cost-benefit analysis. Economic analysis results can directly lead to ethical issues. For example, the argument of socialism and capitalism in the 19th century. The main issue economists face when dealing with ethics is determining if goodness or badness results from practical real-world consequences or revelation from God, faith in authorities.
Source: Ethics and Economics
In what way does the article impact the topic and how it is related to the course material?
The article analyzes the impact of ethics (virtue, goodness, and values) on economic activity. Ethics increases trust and reduces transactional costs. It is also the foundation of business culture and business ethics.
Are there specific examples of how this is related?
The article talks about the standard of measuring ethics. It tries to explain how to know if something is good or bad. This is what the topic of ethical economy is all about.
What economic principles does the article cover relative to in-class discussions and why is this important? Be specific.
- Cost-benefit analysis
This is a systematic technique used to measure the viability of alternatives. It aims to find the best approach to realizing a benefit. Economists weigh use this technique when making ethical decisions.
- Capitalism and socialism
The concepts of capitalism and socialism have been used in the article to argue that what some people might see as ethical can be deemed unethical by others.
How does this further your understanding of the course material? Note that you should try to choose an article that you can read and that does not have too much technical jargon in it.
Presuppositions of ethical values govern how we approach economic issues. For example, those who think egoistically view the environment as a source of resources that humans should use for their benefit. On the other hand, altruists vouch for human interest’s subordination and sacrifice for other species or the environment as a whole.
From your perspective, do you believe the results to be valid and/or justified relative to the material presented?
I believe that ethics and economics go hand in hand. Our self-interests should be of lower priority than the well-being of the environment(Annett). Saving the environment is a duty that every human should take regardless of the economic consequences it will have on them.