Roanoke College Economics Program

Roanomics
Volume 2, Issue 2 Winter and Spring 2012

From the Colonel’s Desk
I’m going to tell you something you’re not going to believe-I am writing this column using my new iPad2 I received for Christmas from my sweet wife. Yes, I know, my idea of technology is using colored pens on a white board. And that big black box in my classroom that’s used for PowerPoint presentations I use as a coaster for my coffee cup. But, hey, maybe you can teach an old dog new tricks! After all, I recently learned how to attach an attachment to an email (I guess that’s why it’s called an attachment), thanks to Dr. Kassens. And Dr. Patel taught me how to use Inquire to email my classes. So right now I am using this app called CloudOn, which is part of another app called Dropbox. Amazing! Today I attended a two hour workshop on all of the uses of an iPad. My head is still spinning with information overload. This thing replaces everything! You don’t need a library, a typewriter, a TV, a radio, an alarm clock, or even a cell phone. It tells you the weather, the news, your appointments, and your location. It’s a camera, a notebook, a cookbook, and a whiteboard. Heck, it will even check your vital statistics! So long Dr. Amick! I can test my pulse and blood pressure from the convenience of my office or den. Unbelievable!! There is even an app that will allow Garry Fleming, me to swipe Shannon Chair of Economics your credit card when you buy one of my econ lessons. I imagine in a few years, students will have all of their textbooks loaded on one of these. No more reason to lug around those heavy backpacks. And you can update your Facebook page, if one were to have such a thing. Yep, the old Colonel has finally caught up to 2012. Well, almost anyway.

Advising tips:
 The Economics Program offers a major and a minor  If you major in BUAD, there are only five additional courses left to complete the minor in ECON (one of which can count as the BUAD elective)  Several of the ECON 200-level courses serve as electives in BUAD concentrations  ECON 121 can substitute for an INQ 260

Inside this issue:
News and notes Student Editor’s note Fall courses 2 3 3 4 5 6

Reaching out
This is our third release of Roanomics and it continues to grow in popularity. Several alumni have sent emails or posted on social networking outlets that they enjoy reading through the newsletter. We are thrilled that Roanomics is catching on in this way. Reconnecting with alumni was one of the purposes of the newsletter. If there is something that you would like to see in the next issue, send an email to roanokeecon@gmail.com Remember that you can keep up to date on the Economics Program between issues of Roanomics by following our blog, kassensroanokeecon.blogspot.c om, which is updated several times a month. See you alumni weekend!

Faculty updates Presentations, Publications and Honors Fed Challenge

Feature: Advice for 7 2012 Graduates Economics Faculty in the Roanoke 8 Times Travels with Dr. Bob 10

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News and notes
Dr. Darshak Patel and Conrad Classen have started an Economics Club at Roanoke College. If you are interested, please fill out the interest form http:// kassensroanokeecon.blogspot.com/2012/01/ economics-club-at-roanokecollege.html Shingirai (Chris) Kwaramba `12 has been accepted to both UNC-C (Masters, Economics) and Virginia Tech (MBA) Sara Caudle `12 is presenting her original research at the National Conference for Undergraduate Research (NCUR) at Weber State University. Her paper was accepted from over 3,500 submissions. She is the second RC Economics Major (Tyler Rinko `11) to do this and the first female. Congrats Sara! Congratulations to the 2012 ODE Inductees Nathan Castellano, Chanho Song, Ted Ellis and Tiffany Ingram Economics major Ian KervickJimenez `13 was elected President of the Roanoke College SGA in January. Read what he has to say in a recent interview posted on the Roanoke College blog www.rcnewsblog.com Dr. Alice Louise Kassens ran 2:59:07 to finish 29th at the 2011 Philadelphia Marathon in November and defended her title March 18, 2012 at the Quintiles Marathon. Nathan Castellano `12 and Marko Krkeljas `12 presented their research in a student session at the 2012 Virginia Association of Economists Annual Meeting in March Dr. Alice Louise Kassens was elected President of the Virginia Association of Economists Dr. Darshak Patel will be rejoining the Roanoke College Economics Faculty for the AY 2012-13 Wai Paing `12 and Nomin Baasandavaa `12 earned Honors in the Major for Economics in December 2011 Please let us know what is new with you at roanokeecon@gmail.com or fill out our form at kassensroanokeecon.blogspot.com

Chris Kwaramba

Ian Kervick-Jimenez

Where are our alumni now?
Nomin Baasandavaa

Chris Zachodzki `09 is in law school at the University of South Carolina. He also is a research assistant for Dr. David Linnan, an intern for the South Carolina Court of Appeals, and National Advisory Team Member for the College to Community Pilot Program at the American Cancer Society. Andrew Streaman `09 is an analyst at JP Morgan Chase SJ Brussard `09 is in Institutional Sales at Rodman & Renshaw Deborah Lindsay `02 is the Vice President of Marketing and Lead-

ership at the Roanoke Regional Chamber of Commerce Remember that Alumni Weekend is April 13-15. Feel free to stop by West Hall to say hello! Fill out the alumni survey at kassensroanokeecon.blogspot.com Have career advice or contacts for our current Economics students? Please send an email to roanokeecon@gmail.com. “My overall education at Roanoke College, and particularly my economics education, prepared me for dealing with the extremely varied career and educational experiences I have had throughout my life” -Roanoke College alumna `72 Give us your comments by filling out the alumni survey on our blog and maybe they will be included in the next issue of Roanomics!

Marko Krkeljas

Volume 2, Issue 1

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Student Editor’s Note: Sara Caudle `12
As graduation and the real world approaches, I have spent copious amounts of time polishing my resume to make it perfect, hoping to land my dream career; however, as of late, I have stopped worrying so much about making my resume flawless and started becoming thankful for all of the opportunities I have received while at Roanoke. Over the past three weeks, I was one of four students to serve on the student panel for the Scholars Program. As a student panelist, we answer questions regarding academics, extracurricular activities, and student life for parents whose children have been invited to participate in the Scholars Program and are thinking about attending Roanoke. I was asked numerous times this question: why did I choose Roanoke? After spending much time reflecting on this question, I found the answer that confirmed why I chose Roanoke. The opportunities I have received at Roanoke are unbelievable and endless. I presented as part of a six member student team representing Roanoke in the National College Fed Challenge competition at the Federal Reserve Bank of Richmond in front of a group of senior economists. At the end of March, I will fly out to Utah to present my undergraduate research at the National Conference on Undergraduate Research. Likewise, a few of my peers are presenting their econometrics papers at the Virginia Association of Economists Annual Meeting. I have had the opportunity to serve as the student editor of Roanomics, tackle two Honors projects, and intern for the Athletics Department and Salem Red Sox. In addition, Dr. Kassens, Tyler Rinko, Justin Tuma, and I recently co-authored and submitted a paper for publication to the Perspectives on Undergraduate Research and Mentoring illustrating how a mentor demonstration model helps professors and students conduct research. Any student can obtain these opportunities. However, none of these experiences were handed to me but required a great deal of hard work. Therefore, my advice to the younger students, it is this: in order to reap the fruits of your labor, you must work hard and take advantage of every opportunity that comes your way. In the end, all of the hard work and sacrifices you had to make will be worth it!

(Blogging in Dr. Kassens’ Principles course) “helped me to become more aware of how economics affects so many different areas” “[enabled me] to understand how what we were learning in class could tie in to other economic events in our country and worldwide.”

Fall 2012 Courses
ECON 121 Principles of Microeconomics Patel ECON 122 Principles of Macroeconomics Fleming, Kassens ECON 232 Money and Banking

(WebAdvisor has all official information)
Kassens ECON 321 Intermediate Theory: Microeconomics Patel ECON 448 Introduction to Econometrics Kassens

Fleming ECON 242 Public Finance Nik-Khah ECON 252 Fed Challenge Crook, Stauffer ECON 267 Labor Economics

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Roanomics

Faculty Update: Dr. Alice Louise Kassens
This semester has been a busy one! I have been on sabbatical and have been working on a variety of projects, in addition to working with four undergraduates on research projects. First, I started a blog detailing my journey searching for the optimal balance between two of my greatest passions: running and research. Please take a few minutes to visit the blog (http:// therunningeconomist.blogspot.com) and consider following it on Twitter @RnningEconomist Second, I continue my research project regarding the effects of clinical depression on labor market outcomes of young adults. Recently I received a second external grant to support this research. This most recent award is the Franklin Grant from the American Philosophical Society. This organization was founded in the 18th century by Benjamin Franklin. The grant will help fund my trips to the Research Data Center at CUNY-Baruch College to work with highly secure data from the National Center for Health Statistics. My next trip to work with the data and serve as a Visiting Scholar at Rutgers University’s John J. Heldrich Center is in April. Third, I have several other research projects underway, including one that my research assistant Kerry Murphy `13 is helping me with. We are using Google Insight for Search to analyze the relationship between health and the business cycle. Finally, this is my first year as a Senior Analyst with Roanoke College’s Institute for Policy and Opinion Research. My job is to calculate the Virginia Indexes of Consumer Sentiment. This is an exciting project in which we release our estimates each November and February. Our first two releases generated considerable media attention.

Dr. Alice Louise Kassens, Associate Professor of Economics

Faculty Update: Dr. Darshak Patel
On April, 27, 1993, 18 players and several coaches of the Zambian national soccer team died in an air disaster. This added to the pain and suffering Zambia has gone through, like many African countries, in terms of their political and social unrest and underdevelopment. It has become common to see a popular leader being toppled by another leader through a coup or a revolution promising social change and eradication of poverty. However, nothing changes. The new leader sends the nation through the same downward spiral by increased corruption and ill-managed policies. It’s one of the longest trends faced by many African countries. These policies, enacted in 1968, have mismanaged investor relations. The reforms to nationalize a number of key foreign-owned firms and its dependence on copper sent Zambia into a downward spiral. In the 1970s, oil prices rose, copper prices slumped and the country was stuck with a high level of unemployment, high inflation, and debt. Zambia’s turnaround began with the new government in 1991 that started privatizing and implementing free market principles. The country further moved towards a positive direction last year when the opposition leader Michael Sata won the national election, ousting the incumbent President Rupiah Banda. President Banda did what many African leaders are reluctant to do. He accepted defeat and transferred the power to Sata in a peaceful and civil manner. That, in itself, is a cause for celebration for the African continent as a whole. Zambia has seen an increase in economic growth and the inflation rate fell below 10% for the first time in 30 years in 2009. Sometimes a short-term pain is needed for an overall long-term gain. This gain can be realized through a mixture of the right policies and the hard work of a unified country. Even during hard times, citizens must come together and work hard to prosper – just as the Zambian national soccer team did 19 years ago. The dedication and hard work paid off for the soccer team, as they lifted the African Cup of Nations on February 12, 2012 after beating Ivory Coast in a penalty kick shoot-out. The Zambian people are also starting to taste victory, as their hard work, too, is beginning to pay dividends.

Dr. Darshak Patel, Visiting Assistant Professor of Economics

Volume 2, Issue 1

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Presentations
Dr. Alice Louise Kassens Plenary Session, “Consumer Sentiment and Price Expectations in Virginia”, 2012 Virginia Association of Economists Annual Meeting, Virginia Beach, VA Tiffany Ingram `13 The Management Institute— Session on Health Economics, March 2012 Dr. Darshak Patel "An Exploratory Analysis of the Relationship between Student Earnings and Postsecondary Retention" paper with Chris Jepsen (University of Kentucky), Southern Economics Association Annual Meeting, November 2011

Publications, Awards and Honors
Sharham Amini “Bayesian Model Averaging in R”, 2011, Journal of Economic and Social Measurement, 36(4), 253-87. Dr. Garry Fleming “The Supply Curve Paradox: The Effects of Time on Prices and Production in Micro– and Macroeconomics”, International Journal of Humanities and Social Science (forthcoming) “Tariffs will harm the economy”, Op-Ed, Roanoke Times, 3/4/2012 Dr. Alice Louise Kassens Franklin Grant—American Philosophical Society (March April 2012-August 2012) Elected President—Virginia Association of Economists Virginia Consumer Sentiment and Price Expectations Report—February “Joblessness is hard to shake”, Point/Counter Point (Roanoke Times, 1/1/12) Dr. Bob Stauffer “Protective tariffs would start a trade war”, Op-Ed, Roanoke Times, 3/4/2012

Sharham Amini

APS has selected Dr. Kassens research project for the 2012 Franklin Grant. APS was the first learned society in the United States.

Fall 2011 Academic Honors
President’s List James Bradshaw Dean’s List Yahia Abu Hashem Nomin Baasandavaa
James Bradshaw `13

Dustin DeMaria Wai Paing ODE Nathan Castellano Chanho Song Ted Ellis

Tiffany Ingram Honors in the Major Nomin Baasandavaa Wai Paing

Sara Caudle

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Fed Challenge: Michelle Crook
The Fed Challenge is an academic competition, regionally sponsored by the Federal Reserve Bank of Richmond, and is designed to expand the understanding of the Federal Reserve System's unique role in the economy and the importance of monetary policy conducted by the Federal Open Market Committee. Encouraging a better understanding of the nation’s central bank, the forces influencing economic conditions in the United States and abroad, and the ways the economy affects consumers’ lives, the competition is framed to assist in the development of students' research, group dynamics, presentation, and critical thinking skills. I just completed my fifth year coaching Roanoke College’s Fed Challenge team. Each year I am blessed with bright students who conduct significant economic research, project future actions of the FOMC, and write a prescription for current economic ailments. This year’s team showcased the talents of Nomin Bassandavaa, Sara Caudle, Marko Krkeljas, Nathan Castellano, Dustin DeMaria, and Graham Quadland. Which economic indicator best personifies the 2011 team? The University of Michigan Consumer Sentiment Survey because this team exuded confidence beyond measure! The University of Michigan Consumer Research Center conducts a telephone survey of about 500 consumers who are asked questions about personal finances, business conditions and buying conditions. The survey measures changes in expectations and is seen as a leading indicator of future spending. I am quite certain that the index’s 10% decline from competition day 2010 to competition day 2011 would have been radically altered and improved if all six members of this year’s team been included in the survey sample. Our team competed against colleges and universities throughout the Commonwealth of Virginia, by delivering an oral presentation to a panel of Federal Reserve economists who judge our content, teamwork, and ability to provide impromptu responses to spontaneous questions. Just as each team’s composition and personality changes each year, so has the economic environment. This year’s team dealt with a stagnant U.S. economy as job growth remains slow and Americans continue to cut back on spending. In their remarks to the judges, the 2011 team suggested that the Federal Reserve Bank raise interest rates, while taking off the table the possibility of a third round of quantitative easing. Their collaborative delivery of their research was precise, deliberate, and yes, confident. And this confidence yielded positive results. The 2011 team tied the highest scoring team in Roanoke College Fed Challenge history and was just two points shy of advancing to the championship round. A special thank you goes out to Roanoke College Professor Emeritus, Dr. Robert Stauffer, who ensured that this year’s team was on the right path at several key stages of the semester.

Mrs. Michelle Crook

Fed Challenge: Nathan Castellano `12
In economics classes we learn theories that help explain why the world works the way it does; it is rare to leave a class feeling you have learned anything about the current state of the economy. Participating in the Federal Reserve Challenge taught me how to gather and interpret the economic data necessary to make a well informed policy prescription. The Federal Reserve, or “Fed”, Challenge is a national competition for undergraduate economics majors held every fall semester. Faculty choose a team to prepare and present a monetary policy prescription to members of the Richmond Federal Reserve. The team and their coach analyze economic indicators (unemployment, consumer confidence and exchange rates) to determine the current state and direction of the economy. Next, the team must design and defend its recommendations for future monetary policy. Any experienced economics major can tell you that no other class comes close to this kind of hands on experience in economic policy; not to mention the huge gold star this course places on your resume. Economists analyze data and then use theory to interpret that data and provide a policy prescription. Of the courses that I am familiar with, Labor Economics and Health Economics are the only ones that incorporates any kind of real economic data analysis. The rest of the curriculum is concerned with theory; almost exclusively neoclassical theory at that. Unfortunately, analyzing data is only half of an economist’s job. Knowing macroeconomic theory is practically useless if you do not know how to interpret current data on jobless claims, inflation measures, interest rates, consumer spending, etc. If you are serious about using your degree in economics after college then you must learn to analyze economic data. In my opinion, the Fed Challenge is the best opportunity that the economics department offers to teach that skill.

Nathan Castellano `12

Volume 2, Issue 1

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FEATURE
ADVICE FOR 2012 GRADUATES
A message was sent to alumni and friends asking for advice for the 2012 graduates. Here what they had to say: “Make a budget that includes your "mandatory" expenses (student loan payments, rent, utilities, etc.) and try to save at least 1020% of what's leftover after you pay all the necessary bills.” “Spend less than you earn, do something kind for someone you don't know every day, keep reading and thinking about economics, stay in touch with your alma mater.” “Rent and have responsible roommates.” “Use all of your twenties to get degrees. And then stop.” “The current job market is extremely tough. Don't be afraid to settle for something less in your first fulltime position. Always remember that your first job is rarely going to be your last one.” “Don't be afraid to take risks early in the career and don’t be too narrow minded in terms of the type of job or the type of career you envision yourself in.” “Focus on building your resume. Although starting out it may not be your ideal job and salary. Focus less on the initial salary and more on how or if the job will benefit you in the long run, and put you a step above other candidates. Make yourself marketable.” "Do not use your savings for ‘wants.’ Savings are for emergencies. Wanting a new car or TV is not an emergency. You all understand the Time Value of Money so use it to your advantage.” “Make sure your spouse is your best friend.” GOOD LUCK SENIORS!

Interesting financial information
Alum Scott Rosenblum kindly passed on a useful document addressing investing beliefs of young adults. Email roanokeecon@gmail.com for a copy of the full document. Did you know that a $400 monthly investment at a 5% annual return will amount to over $500,000 during a 40 year period? Most college students believe it will only amount to ~$200,000. At a 10% annual return, the same $400 monthly investment grows to over $2.5 million. Again, most college students believe it will only amount to ~$200,000. Imagining rates of return can be difficult. Younger investors (18-34) report being more conservative than older investors (35-64). This might be due to recent financial volatility.

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Dr. Alice Louise Kassens “Point” in the Roanoke Times
The U.S. labor market looks bleak going into 2012, particularly for older Americans and minorities. The total unemployment rate for the third quarter of 2011 was 9.1%, a reduction of 0.4 points from a year before, but much above the optimal unemployment rate of close to 5.5%. For blacks, the unemployment rate was 16.5%, up modestly from 2010, and is particularly high for blacks ages 20 to 24 (27%). Once blacks lose their job, it takes an average of 47 weeks to find a new one, compared to 41 weeks for the typical American. The average unemployment spell for adults aged 55 to 64 is more than a year compared to 36 weeks for 25- to 34year-olds. Long-term unemployment has severe negative effects on both the economy and the individual. Expenditures for unemployment insurance, Medicaid and other welfare subsidies rise with greater unemployment, while tax revenues fall, adding to our deficit woes. Additionally, the productivity of the unemployed individual is forever lost, reducing national output and income. In addition to lost income, there are substantial indirect costs associated with unemployment, including depression, self-esteem and reduced employability. The longer an individual is out of work, the more his or her skills depreciate. Skill depreciation reduces chances of employment, particularly if competing against those with a shorter unemployment spell. Depression and loss of self-esteem can accelerate skill depreciation, compounding the social costs of unemployment. Going into 2012, the labor force is brimming with individuals, particularly older Americans and blacks, who have been out of work for a year. There is a fear that these individuals, originally unemployed because of the downturn in the economy, will become structurally unemployed. Structural unemployment is due to a mismatch of skills. The skills employers are seeking do not match those of the job seekers. This is a difficult policy issue to address, par-

Roanomics
ticularly when deficit spending would be required to establish additional jobtraining programs. For older Americans, there is an additional worry. A 55year-old experiencing an unemployment spell of a year or more will have little time to work and save for retirement. During the period of job loss, it is likely that savings are depleted to purchase the items typically bought with labor income. Employers will rationally choose to invest in job training for younger workers for whom they have a longer period to recoup their training costs. Financing older Americans' lost retirement savings will be a considerable policy issue in the future. While signs of economic recovery carry us into the New Year, severe labor market troubles continue to lurk and dampen economic growth. Originally in the Roanoke Times as a two part piece on 1/1/2012 http:// blogs.roanoke.com/ roundtable/2012/01/ pointcounterpoint-theeconomy-in-2012/

“The average unemploy -ment spell for adults aged 55 to 64 is more than a year compared to 36 weeks for 25 to 34yearolds.”

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Dr. Garry Fleming’s Op-Ed in the Roanoke Times
I agree whole-heartedly with many of the arguments offered by James Case ("A solution to fixing the economy," Feb. 22) regarding the current problems facing the U.S. economy and how to best fix them. Fiscal stimuli, either by increasing government outlays and/or reducing tax rates, have proven to be expensive failures. If deficit spending promoted economic expansion, wouldn't our economy be booming right now after the Bush/ Obama stimulus packages? Couple that with the current monetary stance by the Fed, with historically low interest rates that have also offered little aid except in helping drive up oil prices to more than $100 a barrel, and one must begin to wonder if there is anything the government can do to extricate us from our economic doldrums. Is protectionism the answer? In that regard, I must wholeheartedly disagree with the solution offered by Case — to increase import tariffs by as much as 30 percent. As usual, the protectionist argument is based on several fallacies that, on the surface, make it seem like a good idea. Fallacy No. 1: The higher tariffs will leave everything else unchanged. Not true on a couple of fronts. Reducing our imports artificially will cause the dollar to strengthen, making our exports more expensive. As export sales decline, jobs will be lost in these sectors, which are the sectors in which we have advantages with respect to our trading partners. We save jobs in inefficient sectors and lose jobs in efficient ones. There is no net gain in jobs, and the ones we lose are the ones we are best at. Fallacy No. 2: Other countries won't retaliate. Not true. They most likely will. Result: Go back to the Great Depression and revisit the Smoot-Hawley Tariff and its effect on global commerce and how it prolonged the Depression. Rather than expanding international trade and promoting our export sectors, we will withdraw from the global economic community, and our welfare will decline. Fallacy No. 3: Tariffs will lead to expansion in government revenues, reducing the deficit. Not true — at least, not in the long run. Because we will import less, a higher tax on a smaller tax base does not necessarily increase revenues. In fact, it is conceivable that tariff revenues may decline as import purchases abate, resulting in a larger budget deficit. Fallacy No. 4: The government can target the tariffs toward the correct goods and countries that deserve the punishment. Again, not true. One area in which the government has shown over and over its weakness has been in picking winners and losers. Do we just hit Chinese imports because we think they are not playing by the rules? Economic principles tell us that government attempts to artificially stimulate the economy are fruitless in the long run, including the use of tariffs and other trade restrictions. If we truly want to fix the economy, the government needs to focus on real factors like education, infrastructure and technology. Initially printed in the Roanoke Times, 3/4/2012 http:// www.roanoke.com/editorials/ commentary/wb/305605

Roanomics

Economic principles tell us that government attempts to artificially stimulate the economy are fruitless in the long run, including the use of tariffs and other trade restrictions.

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Statement from the Economics Club
I am delighted to announce that the SGA has approved the Economics Club of Roanoke College. Since the announcement in the January Economics newsletter, the Club has 24 members, elected officers, and has had a few meetings. Dr. Darshak Patel is serving as the Club’s Advisor, and the officers are Conrad Classen, President, Ted Ellis, Vice President, William Corso, Treasurer, and Charla Henley, Secretary. The revival of the Club ends a 25 year hiatus for an Economics Club at Roanoke. The Economics Club hopes to increase student involvement with extracurricular activities on campus, increase student knowledge of economics outside of class, and provide members the opportunity to apply economics to the real world. An Economics major or minor is not required and all students are welcome to join the Economics Club. As President and founder of the Economics Club, I would like to encourage you to join us and partake in discussions of how you are affected by

Roanomics
the current economy, the economic implications on the job market and how the current economy might affect us both nationally and internationally in the future. We are planning to have speakers, movies and a fantasy stock trading competition. I look forward to seeing you at our next meeting. Sincerely, Conrad Classen President, Economics Club of Roanoke College

Conrad Classen ‘15

Interested in the Economics Club? Fill out the interest form: FORM 26 students already have!

Talking Economics with the Economics Club
As anyone will tell you, China has built its economy on the abundance of cheap labor it possesses. This last year, the average Chinese worker took home slightly less than 200 U. S. dollars every month, just five percent of the American average monthly wage. Even so, the Chinese worker is taking home seventeen percent more than last year. How does this affect us? Like any other asset, the supply of labor, China’s most valuable resource, is not infinite. As the number of 15-29 year old workers falls, producers are encountering shortages of labor, which have led to higher wages for the workers. This is obviously a good thing for the average Chinese citizen, who will be able to more fully enjoy the fruits of his or her labor. Counter intuitively, this is also a good thing for Americans. Although economists estimate that cheap Chinese exports have added about $1,000 additional purchasing power to each American household, through stiffening competition and cheap inputs, it is predicted that higher wages in China will lead to exported inflation. Furthermore, without the increase in wages, there would be a falling supply in the world market for labor. Just like as in the world market for oil, falling supply would benefit no one. Furthermore, increased wages in China will lead to a stronger exchange rate with the U.S. which policymakers have wanted for a good while, as China’s trade surplus falls and consumer spending increases. A hypothetical twenty percent rise in consumption in China could lead to 25 billion dollars in American exports and 250,000 more jobs on our own soil. Theoretically, greater import consumption in China could lead to near full employment on a global scale. Producers may yearn for the days of cheap Chinese labor, but there will still be plenty of unskilled human capital available in other regions of Asia, such as India. You won’t have to forego your Nikes or iPhone just yet. By Ted Ellis

Ted Ellis `14

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Economics Program
221 College Lane Salem, VA 24153 Phone: 540-375-2426 Fax: 540-375-2577 E-mail: roanokeecon@gmail.com

“...Because we view economics as solidly within the liberal arts, we are committed to examining the relationship between economics and other areas of knowledge. Students will therefore find it to be an excellent complement to many other majors, including, but not limited to public policy, sociology, history, environmental policy, mathematics, biology, and business administration, as well as concentrations such as gender studies and peace and justice studies.” For information about the Economics Program contact Dr. Garry Fleming (fleming@roanoke.edu) For comments or suggestions about the newsletter email roanokeecon@gmail.com Read our blog: kassensroanokeecon.blogspot.com Faculty Editor: Dr. Alice Louise Kassens Student Editor: Sara Caudle ‘12

Follow us on Twitter @roanokeecon Tell us what is new with you roanokeecon.blogspot.com Join the BUAD/ECON Facebook page

Travels with Dr. Bob
We recently returned from an early spring break trip to Florida. By traveling in February, we took advantage of Allegiant Airlines super low rates. The roundtrip airfare for two from Roanoke to Orlando/Sanford was $205 (including one checked bag). The non-stop fight took under two hours--which is usually the amount of time you spend at U.S. Air's Charlotte hub when you fly out of Roanoke. We flew into Orlando's smaller airport, avoiding a lot of congestion--except at the rental car counter. We took several actions to avoid various changes: I went to the Roanoke airport to purchase the tickets, thereby avoiding an online booking fee of $40. We also chose open seating wherein you board the plane in the order that you check in (and after those who paid for reserved seats). Unfortunately, Allegiant 's flights out of Roanoke only go to Florida destinations (the same is true of Greensboro). Departures are usually limited to two days a week (we left on a Sunday and returned the following Saturday). Their are no free snacks or drinks on board, including water. Despite these downsides, it is still a great deal. Rates will go up in March and April with spring break demand. The main reason Allegiant is able to offer low fares is that they rely on non-union labor. It is notable that American Airlines finally declared bankruptcy in November 2011-roughly ten years after the other major airlines, allowing them to break expensive union contracts and return to profitability. Keep this in mind this election year as many will be praising the bail-out of the auto industry while portraying the bankruptcy process as the demise of an industry. Here's the real story: the auto bailout was for the unions with their early retirement options and generous retirement benefits. I'm afraid it is human nature to promise generous retirement benefits in the future with little thought as to how they will be paid for. This is the root cause of the coming entitlement crisis in this country with Medicare, Obamacare and Social Security. As was famously said in the Pogo comic strip: "we have met the enemy and they are us." On a more cheerful note, I'm now back in Roanoke: re-

Dr. Bob Stauffer Professor Emeritus

laxed, refreshed and ready to take on the pressures and stress of retirement and I'd like to thank you for your continuing Social Security "contributions " (even though I'm entitled to them). Those funds are a valuable supplement to my travel budget, and I promise to spend them in a responsible fashion.

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