Applied Learning Assignment 2
In this Applied Learning, I will examine and analyze the COVID-19 pandemic from a point of view of an economist. The impact of this pandemic has on a economic performance and evaluate public policy created in response to it. Below you are going to review how types of goods can be categorized. There are many terms in economics that will be discussed throughout this article to help you gain a better knowledge of economic terminology such as; Market failure, private goods, public goods, excludable, rivals, club goods and many more. You will be learning the meanings behind these economic words and how it connects to COVID-19 pandemic. The impact of COVID-19 has on gender equality will be discussed, as well as the best methods for dealing with difficult-to-measure costs and benefits, such as the value of time and of human life. Videos, images , graphs, and hyperlinks were all added to this article to help you get a more depth explanation of all the economic terminology being discussed.
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The first terminology that will be discussed is Market failure, in economics it is a situation defined by an inefficient distribution of goods and services in the free market. In market failure, the individual incentives for rational behavior do not lead to rational outcomes for the group. Market failures can be viewed as scenarios where individuals’ pursuit of pure self-interest leads to results that are not efficient–that can be improved upon from the societal point of view.The first known use of the term by economists was in 1958. The four types of market failures are public goods, market control, externalities, and imperfect information
Free rider relates to the pandemic because the government is giving out free testing for COVID-19, which is beneficial for people (Americans) because it determines if they have the virus or not. A free rider problem in this situation may be the fact that policies regarding your out-of-pocket costs for coronavirus testing and treatment rapidly changing.
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Most economic arguments for government intervention are based on the idea that the marketplace cannot provide public goods or handle externalities. Welfare programs, public health and, education, roads, research and development, and a clean environment all have been labeled public goods. Another economic term is externality, which is an economic term referring to a cost or benefit incurred or received by a third party. A third party is an individual or entity involved in a transaction but not one of the main principle actors. In business, a third party could be an outside company who helps to complete a business transaction. For example, If a bank gives a loan to a consumer. If the consumer fails to repay on time, the bank may outsource the recollection of the loan to a third party. However, the third party has no control over the creation of that cost or benefit.
An externality can be both positive or negative and can stem from either waste, which arises from consumption while other externalities, like carbon emissions from factories, arises from production.
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Positive production externalities are positive effects that originate during the production process of a good or service. An example of this could be an orchard placed next to a beehive. In this situation, both the farmer and the beekeeper benefit from each other without. Another example of a positive externalities is when you consume education you get a private benefit. But there are also benefits to the rest of society. You are able to educate other people and therefore they benefit as a result of your education. Lastly, an industrial company providing first aid classes for employees to increase job safety which can potential help save lives outside the factory can be considered a positive externality. A negative externality is a cost that is suffered by a third party as a consequence of an economic transaction. For example, a negative externality arises when one person’s actions harm another. When polluting, factory owners may not consider the costs that pollution imposes on others. Another example is Water pollution by industries that adds effluent, which harms plants, animals, and humans. Water usage from growing plants could impose a negative externality on citizens of counties or states who are harmed by decreased water.
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A rival good is a type of good that may only be possessed or consumed by a single user. These items can be durable, meaning they may only be used one at a time, or nondurable, meaning they are destroyed after consumption, allowing only one user to enjoy it. Sometimes, these goods can be reused by somebody else at a later stage, other times not. For example, durable goods such as a skateboard might be resold after the current owner is finished using it. Most consumer products are rival goods. For example, a coat can be worn by only one person at a time. As well as, A car, for example, can only be driven by one person at a time.
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Non-rivalry means that consumption of a good by one person does not reduce the amount available for others. An example of a non-rival good is a public park. It can be used by many consumers at the same time. Another example is the internet and radio stations, many people can access them at the same time, and they can be consumed over and over again without impacting their quality or running the risk that supply will become drained. Broadcast television is a example of a non-rivalarous good; when a consumer turns on a TV set, this does not prevent the TV in another consumer's house from working. The television itself is a rival good, but television broadcasts are non-rival goods. Another example would be air. Every single person, from whatever sector in society, can actually breathe the same air from wherever they are in the world. One person’s breathing does not affect the amount of air there is left for other people around.
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EXCLUDABLE & NON-EXCLUDABLE
In economics, a good or service is called excludable, if the supplier of that good can prevent people who have not paid for it from having access to it. An example of an excludable good could be a magazine; people who do not pay for the subscription are mostly excluded from obtaining a copy directly from the publisher. Another case is a pay television subscription, such as; Netflix, Amazon Prime Tv, which are both excludable but non-rivalrous. A good is rival in consumption if the same unit of the good cannot be consumed by more than one person at the same time. A good that is both excludable and rival in consumption is a private good which includes food and clothes.
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A product that is non-excludable means that it is difficult or even almost impossible to prohibit any person from using the good. For example, A public park being accessible to everyone, even to people who are not from that city. Also, a fireworks display lets everyone enjoy the show. Another example is a public road, which allows practically everyone to use it regardless of the type of motor vehicle they are using, or even if they are just walking. An architecturally pleasing building, such as Tower Bridge, creates an aesthetic non-excludable good, which can be enjoyed by anyone who happens to look at it. It is difficult to prevent people from gaining this benefit. A lighthouse acts as a navigation aid to ships at sea in a manner that is non-excludable since any ship out at sea can benefit from the light.
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A Private good is another term used in economics, it is a product or service produced by a privately owned business and purchased to increase the utility, or satisfaction, of the buyer. The majority of the goods and services consumed in a market economy are private goods, and their prices are determined by the market forces of supply and demand. Examples of private goods include airplane rides and cellphones. An airplane ticket price may differ depending on where you are traveling to. Your cellphone rate way also different on which plan you have and which phone you purchased based off popularity and high demand. Often, private goods have limited availability, making them excludable in nature. For example, only a certain number of a certain pair of designer shoes are produced, so not everyone can have those shoes.
In regards of private good relating to this pandemic, business owners and entrepreneurs are using the supply and demand mechanism to determine their sales. For example, there has been a huge demand for cleaning products such as; Clorox wipes, alcohol, hand sanitizer, gloves, masks and etc,. Americans are stocking up in case the coronavirus spreads further, and to protect themselves. With that, sellers noticed this and raised their original price rate for each product, making the price higher than it was prior to the pandemic. I believe the government should pay more attention to this controversial policy. Across the board, companies that make or sell cleaning and sanitizing products are seeing spikes in demand and can be a crime. Also known as, "Price gouging," which occurs when a seller increases the prices of goods, services or commodities to a level much higher than is considered reasonable or fair. In a recent article I read that, On March 23, President Trump signed Executive Order 13910 under the Defense Production Act, which, among other things, prohibits hoarding of designated materials for the purpose of price gouging. The federal government is prioritizing use of all available enforcement authorities to take action against suspected price gouging affecting essential medical supplies, other products in short supply as a result of the pandemic, and government procurement. At the end of March, Attorney General Barr also announced the creation of a task force that will address market manipulation, hoarding, and price gouging related to COVID-19. Thankfully, the government has this issue under control, and I think the new rules set are constructive.
If a good / service is not considered a private good then it is considered a public good, which are generally open for all to use and consumption by one party does not deter another party's ability to use it. Many public goods can be consumed at no cost. Public goods have two defining characteristics: they are non-excludable and non-rivalrous. With the non-excludable aspect this means that individuals cannot be effectively excluded from its use, and use by one individual does not reduce its availability to others. Examples of non-excludable public goods include fresh air, knowledge, lighthouses, national defense, flood control systems, and street lighting. There are usually limited quantities of these goods, and owners or sellers can prevent other individuals from enjoying their benefits. Public goods is an example of a market failure because it may bring awareness to a free rider problem. This may then lead to the under-provision of certain goods or services.
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Public goods relate to the pandemic because Governor of New York Cuomo announced the city would give out 100,000 cloth masks in parks across the five boroughs. Under a state order, New Yorkers are required to cover their faces when they’re out in public and in the presence of other people. This is apart of the new normal, that everyone could benefit from being that the mask can help prevent them from potentially getting the virus. The government should keep enforcing this policy to help prevention and its proven to be effective.
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A free rider is a person who benefits from something without expending effort or paying for it. The free rider problem is an economic concept of a market failure that occurs when people are benefiting from resources, goods, or services without contributing their fair share to the costs of a shared resource. Examples include: Wikipedia, a free encyclopedia, faces a free rider problem. Hundreds of millions of people use Wikipedia every month but only a tiny fraction of users pay to use it. A large majority of Wikipedia users do not pay to use the site but are able to benefit from the information provided by the website.
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Here's a video, thoroughly explaining the definition of Rival goods and excludable goods.
But it’s still unclear how much you’ll wind up paying, leaving public health experts worried that people who are sick may hesitate to get medical care because of concerns over bills. I think the government should look into your health care/ insurance public policy and reassure citizens of this country that indeed if they want/need to get tested for the virus they will be able to do so for free given whole pandemic was unpredictable and not caused by us.
Common goods are defined in economics as goods that are rivalrous and non-excludable. The consumption of a good by one person prevents it's consumption by another person which is rivalrous. It is possible to prevent consumers who have not paid for it from having access to it which is considered excludability** Classic examples of common goods are water and air. Water and air can be polluted: water flows can be tapped beyond sustainability, and air is often used in ignition, whether by motor vehicles, smokers, factories, wood fires. In the production process these resources and others are changed into finished products such as food, shoes, toys, furniture, cars, houses and televisions.
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In regards to the tragedy of the commons, it is an economic problem in which every individual has an incentive to consume a resource at the expense of every other individual with no way to exclude anyone from consuming. As the demand for the resource overwhelms the supply, every individual who consumes an additional unit directly harms others who can no longer enjoy the benefits. It results in overconsumption, under investment, and ultimately depletion of the resource. For a tragedy of the commons to occur a resource must be scarce, rivalrous in consumption, and non-excludable. This video below helps better explain this economic term.
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In regards of the pandemic relating to tragedy of commons, everyone gathering in large groups and not social distancing such as; attending parties, and parks during this time can increase the risk of the virus spreading at a faster rate and to more people at one time. The government was doing a good job regulating and putting restrictions on businesses and corporations to decrease the changes of more people checking the virus. As long as they continue to moderate these new rules they set for society and people continue to follow these rules then this policy was stay effective.
A club goods is a resource that many people can use at the same time, where it is possible to exclude people from using it. For example, Facilities such as a them park has a large capacity where many people can enjoy it at the same. Another example is a video game and social media, which are two digital platforms that can played and viewed by many people al at the same time. Club goods are excludable but non-rival. This type of good often requires a “membership” payment in order to enjoy the benefits of the goods. Cable television is an example, It requires a monthly fee, but is non-rival after the payment as well as WiFi service.
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This table breaks down goods and classifies goods, indicating which goods are excludable and non-excludable. As well as, which goods are rival and non-rivals.
Reading the working paper The Impact of COVID-19 on Gender Equality by Titan M. Alon, Matthias Doepke, Jane Olmstead-Rumsey, Michèle Tertilt. I found article to be informative and relatable as it talks about the Impact COVID-19 has on Gender Equality positivity and negativity, during both the downturn and the subsequent recovery. Also, what the main long-run repercussions for gender equality may be. For example, relatively more men work in industries heavily affected by a regular downturn (such as manufacturing and construction), while women’s employment is concentrated in less cyclical sectors such as health care and education. Another important aspect of the COVID-19 crisis that the articles brings awareness to child care needs, as it involves large-scale closures of daycare centers and schools, implying that children need to stay at home, where they have to be cared for and educated. As this pandemic sparked the shift in gender roles reversing as women are likely married, and to men who most likely lost their jobs during this crisis or will work from home. In this case, many men will inevitably begin to take on the responsibilities at home while the women continue to work as medical doctors and nurses. This poses particularly severe challenges for single parents. For parents who raise their children together, the division of childcare will depend on how much work flexibility each parent has in terms of working from home while also taking care of children. It will likely also depend on the current division of childcare within each family as well as the current division of labor on childcare among married couples.
This even factors into an principal difference in which certain sectors of the economy are likely to be most affected. Two factors that are especially important is; whether demand for the sector’s output is affected by stay-at-home orders or whether the nature of the work in the sector allows for telecommuting or not. To assess how women and men in the labor market are exposed to the crisis, there’s a data table that provides an overview of how the dimensions of “critical” and “telecom- mutable” matter for male and female workers. Those numbers suggested that in terms of their occupations, more men than women will easily adapt to the changed work environment during the crisis. Conversely, more women will potentially face loss of employment, which is the opposite of the pattern in normal economic downturns.
Cost-Benefit Analysis
In result of the pandemic, our economy will be negatively affected, economists say the sudden stop in spending could strike a bigger blow to the global economy than the terrorist attacks of September 11, 2001, since nobody knows when it will be safe for people to go out again. Compounding the crisis is the impact to the service sector, which weathered downturns in the past as people continued to get their hair cut and eat out. This time, that sector of the U.S. economy has come to a standstill since most of the jobs in it can’t be performed remotely. Economies across the world are already experiencing a significant contraction in economic activity that will likely last through the first half of the year. JP Morgan economists predicted that the U.S. economy would shrink by 4% in the first quarter and as much as 14% in the second quarter, while the economy of the 19 nations using the euro would contract by 15% in the first quarter and 22% in the second. Economic activity will start to expand again in the second half of the year, it shows even even sooner in China, which they say will see growth in the second quarter of 2020 as life there starts to normalize.
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Another consequence resulting from the pandemic is school closures sending students and families scrambling for solutions. Families who already need financial assistance from the COVID-19 outbreak may not be able to budget the hundreds of dollars necessary for college acceptance deposits. They also might need to rely on their children as an additional source of income, which could prevent some young people from attending college at all. Students are not being separated from teachers, counselors and other staff members who can support them during important developmental transitions. Low-income students might not have someone who can help them navigate college decisions—to decipher complicated financial aid packages, calculate out-of-pocket costs and weigh the best offer.
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An Elective surgery is scheduled in advance because it does not involve a medical emergency. The name "elective" might imply that this type of surgery is optional, but that's not always the case. An elective procedure is simply one that is planned in advance, rather than one that's done in an emergency situation. A wide range of surgical procedures can be considered elective. Cosmetic surgeries fall into this category, but so can things like ear tubes, tonsillectomies, and scoliosissurgery. As a result of the pandemic, it imposes an unprecedented burden on the effectiveness and sustainability of our healthcare system. Challenges include the exponential increase in emergency department visits and inpatient admission volumes, in conjunction with the impending risk of health care workforce shortage due to viral exposure, respiratory illness, and logistical issues due to the widespread closure of school systems. Subsequently the United States, Surgeon General proclaimed a formal advisory to cancel elective surgeries at hospitals due to the concern that elective procedures may contribute to the spreading of the coronavirus within facilities and use up medical resources needed to manage a potential surge of coronavirus cases The announcement escalated to a nationwide debate regarding the safety and feasibility of continuing to perform elective surgical procedures during the COVID-19 pandemic.
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There are a lot of conversations right now that seem to pit economics against life and health. The value of life is an economic value used to quantify the benefit of avoiding a fatality. It is also referred to as the cost of life, value of preventing a fatality and implied cost of averting a fatality. In social and political sciences, it is the marginal cost of death prevention in a certain class of circumstances.The value of a statistical life is, the amount that workers are jointly willingly to pay to reduce the likelihood that one of them will suffer a fatal injury in any given year. The value of a statistical life is the local tradeoff rate between fatality risk and money. When the tradeoff values are derived from choices in market contexts the VSL serves as both a measure of the population’s willingness to pay for risk reduction and the marginal cost of enhancing safety.​​​​​Here's a video to better explain the concept of how the human life is valued. Today, the U.S. Office of Management and Budget puts the value of a human life in the range of $7 million to $10 million. Economists estimate the value of a human life based on the choices we make about risky behavior including; smoking cigarettes, driving a car, eating undercooked meat or working a risky job, and many more scenarios similar to these.
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More than a third of the global population is under some restrictions related to the coronavirus pandemic. Many people's lives were reportedly saved after the lockdown began. Reporters ran a simple one-variable correlation of deaths per million and days to shutdown, which ranged from minus-10 days. China, Germany, and Spain all saw their number of daily infections drop off after lockdowns were instated. In Italy, a team of researchers recently simulated what could have happened if the country's restrictions had been relaxed in March — or not imposed at all. The results showed that the country's lockdown prevented around 200,000 hospitalizations between February 21 (when Italy's first case was reported) and March 25. It also reduced transmission of the virus in Italy by around 45%, according to the study.
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Policy Analysis
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The Federal Reserve has stepped in with a broad array of actions to limit the economic damage from the pandemic, including up to $2.3 trillion in lending to support households, employers, financial markets, and state and local governments.The Fed’s Main Street Lending Program, was also announced on April 9, which aims to support businesses too large for the Small Business Administration’s Paycheck Protection Program (PPP, and too small for the Fed’s two corporate credit facilities. Through three programs—the New Loans Facility, Expanded Loans Facility, and the Priority Loans Facility—the Fed will fund up to $600 billion in four-year loans. Businesses with up to 15,000 employees or up to $5 billion in annual revenue can participate. There also might be issues with borrowers being subjected to restrictions on stock buybacks, dividends and executive compensation.
Due to the Corona Virus outbreak and majority of the country needing financial assistance, President Trump has signed a bipartisan $2 trillion economic relief plan to offer assistance to tens of millions of American households affected by the coronavirus pandemic. Its components include stimulus payments to individuals, expanded unemployment coverage, student loan changes, different retirement account rules and more. Most adults will get $1,200, although some will get less. For every qualifying child age 16 or under, the payment will be an additional $500. It depends on your income. Single adults with Social Security numbers who have an adjusted gross income of $75,000 or less will get the full amount. Married couples with no children earning $150,000 or less will receive a total of $2,400.
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Given the polices the Federal and State government implemented due to the virus, I think they weren't effective enough. I don't believe one stimulus payment of 1,200 is enough for households in this type of crisis, and one are in a frenzy with having to figure out how their going to pay all their bills, debts and still be able to support their families. I think the most direct, and efficient mechanism for delivering economic relief to those most vulnerable during this crisis, particularly low-income families, and immigrant communities is the government implementing providing recurring monthly payments to individuals. Such as the new bill introduced by Senator Harris, Sanders and Ed Markey, which would provide a monthly $2,000 check to every person with an income below $120,000 for the duration of the pandemic and for three months after it officially ends. The plan would also forbid debt collectors from seizing rebate payments, something that has occurred with the Trump administration’s blessing under the CARES Act.
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Overall, this was an article to help inform you on more knowledge about the economic world. Some terminology's were similar, others differed but all together were related to the same concept. They all connect to our everyday lives and this corona virus outbreak. I think the government is doing a productive job trying to prevent the virus from spreading as I've shown evidence of this throughout this article. Although, in the financial aspect of the pandemic, I believe there putting in minimal effect to get people what their rightfully owed. Hopefully this information helps you in this time of crisis.
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