Diagrammatic representations provide an important tool to facilitate student's understanding of the outcome of option strategies. Textbook presentations have relied on two types of option diagrams: payoff diagrams and profit diagrams. Both diagrams represent the value of an investment at the expiration date for the option. Payoff diagrams represent the intrinsic value of the option strategy at expiration on a per unit basis at various expiration prices for the underlying asset. Profit diagrams also show the results from an option strategy at expiration on a per unit basis at various expiration prices for the underlying asset.
What is important to any investor is the return that the investor earns. We argue that the per unit comparisons crucially mislead students in comparing the risk-return tradeoff across option strategies. What students need to see and understand is the comparative return patterns offered by various strategies. We argue without this information the student may be veiled from the very high risk and high potential return of option strategies both in an absolute sense and in a comparative sense. So we ask the question: Why not return diagrams? In answer to this query we create a new diagram, a return diagram.
The War on Poverty or the War on the Poor? Alex Tokarev, Alex Burns, Philip Schlosser, Tony Sierra, Kristin Tokarev, and Konstantin Zhukov, North wood University
One hundred and fifty years after the Civil War and fifty years after the Civil Rights Act, the gap between black minorities and the rest of America is still substantial. Black babies are much more likely to be aborted or born out of wedlock and, as President Obama noted, "children who grow up without a father are five times more likely to live in poverty and commit crime; nine times more likely to drop out of schools and 20 times more likely to end up in prison...And the foundations of our community are weaker because of it." What is the cause of poverty and violence in our black communities today? Could it be racism? Yes...and no. An unholy alliance of special interests, political and economic, has created a racist institutional framework for the exclusion of the blacks in the United States. And the irony is that most of those responsible are passionately anti-racist. This paper explores the perverse impacts of well-meaning policies and programs such as minimum wages, occupational licenses, welfare transfers, public education, and the "war on drugs"--racist not by announced intent, but by actual effect.
Diverse Reactions to the Great Recession and Their Global Implications: A Comparative Study of French and American Economic Histories. Chloe Benzer and Todd Yarbrough, Aquinas College
One of the most influential and consequential events of the past century arguably was the financial crash and subsequent Great Recession of 2008 and 2009--this catastrophe impacted the entire world on an economic, social, and political level. The following study sheds light on the overall economic and political differences between the United States and France. After comparing the economic and political histories of these two countries, outlining the economic atmosphere prior to the financial crisis, detailing the recovery efforts and presenting the differences, I draw conclusions about the near future in these countries and the ensuing impacts that may be seen in the rest of the world. The final section is a regression analysis of select macroeconomic variables that have varying effects on income inequality in France and the U.S., suggesting future policy may change in order to influence inequality through these variables.
An Axiomatic Method Applied to the Theory of Urban Evolution. Anders Engnell, Timothy Hodge, and Darrell Schmidt, Oakland University
The goal of this paper is to lay out a clear and specific mathematical method for solving problems that can be directly applied to the field of Urban Economics. This paper will focus specifically on how mathematicians re-develop axioms in a field when research has attained a place in which current knowledge and ideas cannot account for what is known to be true or for new discoveries. As stated, the first field to which a potential Axiomatic Method will be applied is Urban Economics in order to investigate the Theory of Urban Evolution. Currently, the Five Axioms of Urban Economics do not account for the idea that urban areas act as evolutionary entities. By applying an Axiomatic Method to the Theory of Urban Evolution, the goal is to achieve a new way of understanding how urban areas act as evolutionary organisms.
Does Departmental Location Impact Student Perception of the Economics Major? Kristen Collett-Schmitt and Mary Flannery, University of Notre Dame
Previous research is mixed as to whether an economics program being administratively-located in a business school significantly changes the character of the program offered to majors. This paper broadens the scope of this research by considering student perception. As undergraduate students often use rankings when making their college choice, the authors note the administrative location of top bachelor's degree programs in economics, the administrative location of the economics program at universities with the top business schools, and the economics requirements of the top business schools that are administratively separate from an economics program. A small sample of undergraduate survey respondents enrolled in a principles of microeconomics course at a private research university where the economics program is located outside of the business school are also asked to consider a series of questions on major choice. The discernment of major for unique subsets of the survey respondents, such as female students and students double-majoring in economics and business, will also be explored. The authors propose that administrative location has very little effect on choice of major, and rather factors such as gender, preference for quantitative courses, student experiences in principles of economics, occupational choice, and salary expectations matter more.
Education Policy in South Korea: A Contemporary Model of Human Capital Accumulation. Patrik T. Hultberg, Kalamazoo College
In South Korea, a nation with a historical cultural predisposition towards education, the government has implemented multiple policies which have helped improve education over the last 30 years. Korea's educational success has its drawbacks. Excessive competition is producing so many highly productive students that an overqualified workforce struggles to find matching employment; there is significant disparity between demand and supply. As a result, students are driven into a fierce competition for these limited future work places as early as from middle school. This drive for educational excellence comes not only from the top, but also from the bottom in the form of parental choices for their children. In 2012, 81% of primary students received after-school private tutoring at a considerable financial burden. This paper explores private supplementary tutoring in Korea and offers a theoretical explanation that suggests that it might be difficult to change this phenomenon.
The Challenge of Achieving Optimal Environmental Policy in the Presence of Cross-Border Pollution. Patrik Hultberg and Philip Ritchie, Kalamazoo College
The failure of market participants to internalize environmental externalities suggests a large scope for policy intervention. This paper evaluates whether market-based instruments can mitigate global climate change in the presence of cross-border pollution. A partial equilibrium model is developed to determine the optimal environmental policy rate, which is achieved by equating the policy rate to the marginal environmental damage function. Extending the model to multiple countries indicates that an optimal policy is unlikely to be achieved if nations act unilaterally when facing cross-border pollution. Only when nations cooperate, or are forced to cooperate, will an optimal policy rate be achievable. This result advocates for supranational cooperation in developing environmental policy that most efficiently alleviates global climate change.
Normative Economics--Outline of a Possible New Paradigm for Economics. Dennis Hunt, Schoolcraft College
Economists make a distinction between normative and positive economics. Normative economics involves values. Positive economics relates to if-then statements, or statements of fact. Economists try to stay in the positive area of their subject, but admit that it is hard to keep values out. Since they cannot be avoided in discussing economics, and since Don Beck and Chris Cowan developed Spiral Dynamics, a theory that details the development of values in cultures and individuals, it would be of value to start using their work in economics
The application of Spiral Dynamics to economics challenges some of the assumptions and conclusions of current theory in the field. Some examples of how Beck and Cowan's theories can be used in areas of the field, such as labor economics and economic development, are given. At the end of the paper there is speculation and observation about how economics may be altered in the "information age" as technology changes at an ever more rapid pace. The process of looking at how economics may evolve in the future suggested that moving toward non-profit and co-op organizations as providers of goods and services could be an evolution from capitalism to a new economic paradigm.
Heterogeneity and Monetary Policy. Nurlan Turdaliev, University of Windsor
This paper is an attempt to shed more light on effects of monetary policy on different groups of population. One of the main results of the paper reconsiders the famous proposition by Rogoff (1985) that in order to avoid the outcome dubbed "inflation bias," whereby the central bank is tempted to generate inflation in order to boost output, a more conservative central banker ought to be appointed. The paper argues that if attaining Pareto efficiency is desirable, a more conservative central banker should be appointed. The trade-off in this paper arises from heterogeneity in productivity among workers. We use a version of the New-Keynesian model with heterogeneous agents. Some agents are more productive and some less. The central bank preferences are a weighted average of those of households. We show that when the central bank preferences are unbiased, i.e., the weights on the two utilities are equal to the corresponding fractions of population, the Friedman Rule does not hold and thus the equilibrium allocation is not Pareto efficient.
Governance Challenges in a Global Economy in the 21st Century: The Case of Ethiopia and Selected African Economies. Sisay Asefa, Western Michigan University
The purpose of this investigation is to explore the dilemma of governance problem that has trapped Horn of Africa in poverty, food insecurity, foreign aid dependence in spite of the great potential in natural wealth and hardworking people. Governance is a multi-dimensional concept that involves the traditions and institutions under which political authority in a country is exercised. Governance includes the process by which rulers are selected, monitored and replaced, and the capacity of government to effectively formulate and implement sound and inclusive policies, the respect of citizens and the institutions that determine economic and social policies and interaction among citizens. Sustainable development requires good governance that is predictable, open, enlightened, accountable and inclusive of all citizens and operates under the rule of law and justice. According the World Bank, Good governance involves: 1. Voice and accountability, 2.Political stability and absence of violence, 3. Government effectiveness: or the capacity of the state to formulate good policies and deliver services effectively, 4. Regulatory quality, 5. Rule of Law and Justice, and 6. Control of corruption. Using various governance indicators measures, the proposed paper will compare few states in Africa such as Botswana, Ghana, Kenya, and Tanzania, Zimbabwe, South Africa in governance and poverty indicators. It is intended to promote dialogue.
The Economic and Environmental Impact of Sustainable Building: A Life Cycle Analysis Using the Arcus Center as a Case Study. Andrew Laverenz, Kalamazoo College
There is currently a stigma related to the construction of green, sustainable buildings. In the past, sustainable technology was far too expensive to yield a return on investment. This discouraged architects from incorporating sustainable infrastructure, as it was not financially feasible. In recent years, however, the technology necessary to construct a sustainable building has become viable enough to yield a return on investment. Unfortunately, most buildings are still being designed with little thought to their environmental impact. This is due to the lack of awareness and perceived risk of green building.
In order to fully assess the value that green buildings have to offer, a life cycle analysis of the Arcus Center has been conducted. This sustainable building on Kalamazoo College's campus has provided two years' worth of utility consumption data. This helps to more accurately calculate and compare the social, environmental, and financial benefits of sustainable "green" design to the costs of the high performance technology, construction and assessment costs, and operation and maintenance costs. The main goal of this case study is to provide an analytical examination of a sustainable building's lifetime value compared to its past and future costs.
Effects of the Great Recession on Older US Workers and Their Compensation, Including Fringe Benefits. Indrakshi Roy, Wayne State University
Although the economic crisis of 2008, known as the great recession, is now considered over, its impacts are expected to last well into the future. This study examines the prevalence and magnitude of the effects of the recession on the work status of US adults in late mid-life, ages 45 to 64, and the compensation of workers in this age range, including employer-sponsored fringe benefits. Longitudinal and nationally representative data from the ongoing Health and Retirement Study are used for the analysis. For adults ages 45 to 64, their work status, workers' earnings, and the receipt of fringe benefits will be examined biennially over the period 2000-2014- Fringe benefits include the receipt of employer-sponsored health insurance, retiree health insurance among those who were retired, pension benefits, vacation time, and sick time. This study may reveal that in addition to reductions in employment, some older workers experienced an erosion in their fringe benefits. For example, some may have lost employer-provided health coverage or had to pay much more out-of-pocket towards their premiums, and others may have experienced reductions in other fringe benefits. The findings from this study may shed more light on how to strengthen the safety nets in society, especially in the areas of health insurance and pension plans.
The Interdependence of the US Economy and European Countries. Jacob Shepard, Oakland University
This paper analyzes the interdependence of the economies of the United States and Western European countries, using panel data from the years 1979 to 2011. The model specified uses the GDP per capita of the European nation as the dependent variable, and the components of US GDP as testing variables. The countries used include the United Kingdom, France, Germany, Spain, and Italy. The model seeks to establish a relationship between the developed economies of Europe and the United States, in order to better show the correlation between world economies. After developing the model and correcting it for error term violations, the testing variables of US personal consumption, government expenditures, and net exports were found to be significant.
The Consequences of the US's Low Inflation/Low Interest Rate Policy Since 1985. Ronald L. Tracy, Oakland University
By focusing monetary policy on either keeping inflation low or lowering interest rates the Fed has inadvertently slowed economic recovery during the last three recessions as compared to other post WWII recessions. Because of the high inflation period that began in the late 1960s and eventually escalated to double digit inflation in the early 1980s, the Fed became committed to reducing inflation. The result was reduced inflation, and a deep recession. This goal of low inflation continued until it was replaced with a desire to reduce interest rates during the later Greenspan years (the two policies are intertwined), the so called Great Moderation. In the paper I show that recessions prior to 1985 had strong "V" like recoveries using a variety of measures (as does the NBER). In contrast, I show that recoveries after 1985 (1991, 2001, and 2008 recessions) were anemic using the same measures, in fact, the recovery from 2008 was stronger using some measures. Although much has been made of the slow recovery since the deep 2008 recession, the slow recovery from the other two recessions went generally unnoticed. Modeling this behavior using a dynamic aggregate demand and supply model as the starting point, the consequences of this policy are revealed.
Another Look at the Demand for Academic Video Content: Analyzing Viewing Patterns from Around the World. Addington Coppin, Oakland University
This project analyzes data available from YouTube to investigate global aspects of demand for various video lectures made by the author on academic topics that inform courses he has taught. The data, gleaned from daily viewing patterns for periods up to three and a half years, reveal patterns related to the structuring of academic calendars in various parts of the world. Information on search patterns reveals that choice of titles for the video content matters significantly, as do "traffic sources" and "playback locations." Subscribership does not appear important to the demand for any particular video lecture, since additional uploads of academic content might not benefit the same individual student whose "demand" is of a more "short-term" (instant) nature--a "need to know now" type of demand. YouTube continues to improve the access content owners are given to the analytics, and "big data" analytical techniques are becoming more prevalent in the study of demand for YouTube content. Several other interesting findings based on this analysis of the data are observed and the implications of such findings discussed.
Applicability of Bankruptcy Prediction under Uncertainty; Focusing on the Impact of Technological Change on SOEs' Performance. Abedin Khalonezhad, Ritsumeikan University
This study is conducted to tackle a research gap on finding solutions for bankruptcy risk measurement under uncertain economic conditions. It highlights the importance of macroeconomic factors using empirical evidence from bankrupt and non-bankrupt enterprises in Afghanistan as an example of a distressed economy. A sample group of 22 state-owned enterprises (SOEs) is selected and accordingly the primary data are gathered through interviewing the SOEs' executives, government officials, and finance specialists in the country while for collecting the secondary data containing the financial statements of SOEs the Ministry of Finance is approached.
A new hybridized adjusted Airman Z-score model is inrroduced for primary analysis, then the resulr is cross checked with the original Altman Z-score model, with the new model showing more accuracy in prediction. The role of macroeconomic factors is quantified within the AHP method and simultaneously a growth/fall trend in each industrial category is also identified for their impacts on bankruptcy prediction. The findings suggest that in uncertain economic conditions the role of political intervention and market capitalization are very determined while technological change and political intervention has the second rank on prediction of bankruptcy in some specific industrial sectors.