unemployment the real problem

What in the hell is economics? You should probly know.

“The unexamined life is not worth living” - Socrates

Who is Socrates? A Greek teacher/intellect that live around 500bc in Athens “considered the first pure democracy“. Socrates questioned why during his teachings and was always looking for the truth. Along with being credited as the first great philosopher he is also credited as being the first great teacher. Those of Athens around Socrates time were irritated of the change in attitude amongst those who were students in which he was brought to trial for, he was charged for corrupting the youth in which the punishment was banishment or death. Socrates willingly chose death due to the idea behind his famous quote “the unexamined life is not worth living”. What this means to me is that life will become boring and conforming if we are not aloud to think and question why. While on the other hand if we question to much it can be exhausting or consume us. A great example of a superbly focused life examiners would be the Wright brothers. They narrowed in on one single question in life.. Can man fly? As an economist we examine life, its really what economics is all about, human connection is very important to why things are the way they are..

Lets define and explain in full enthusiasm “Economics”

The Science of how and why human decisions will allocate resources, creating winners and losers in the game of life."   

(this makes sense but lets break this down)

Science in this sentence simply means what it always does "the study of". There are few, if any, things we involve in our lives that does not stem from science.

How and why or Cause and effect. This deals with examining human beings.

Decisions cover a wide variety of meaning in the world of economics. but to put it simple, to spend or not to spend. (As you read on you will understand how this can take different meanings as well.) 

Allocate simply means to move and collect but it will answer three questions about a resource, who what and how much. 


Resources will mean the collection of things, items or stuff in total.

Winners and Losers can be subjective, but for the purpose of this lets say a winner does not have to concern them self with how they are going to pay for things. 

Game of life is the time in which one actively participates in the economic systme in one way or another.  

Decisions are important to everyone  

Economics is heavily influence also by the art of persuasion, fallowing the statement that, “The Science of how and why human decisions” we know that the art of persuasion is used on consumers in effect persuasion is playing a large role in economics.

This formula below simply demonstrates how independent and dependent variables interact in decision making. Also we can learn how to control independent variables to get to and perfect dependent variables.

                                                                  Decision Formula

   ^ = change                                      ^ IV>DV ^                          IV = independent variable

                                                                                                      DV= dependant variable

DV= The “or” or “any” decision.

IV= They change or move cause and effect of everything in decisions.

The Five major independent variables = Freedom, Liberty, Scarcity, sacrifice, selfishness.

Freedom          - verbs- ability and power to choose.

Liberty              - nouns- number of choices or alternatives.

Scarcity            - adjective- limited number of liberties. Is a reality of you cant always obtain everything you want. Can always be relevant regardless of the amount of money earned, more money brings more needs wich ups the scarcity.

Sacrifice           - verb- choosing only one.

Selfishness     - verb- positive or negative feelings, either to be rewarded from decision or to avoid guilt of decision.

(Idea expanding on selfishness- Are the envelopes of sex and violence being pushed so far in America that a diminished guilt is effecting the economy?)

DV>Allocate>Resources

keep in mind that dependendant variables allocate resources in short.

This is why independent variable effecting them are so important.

Who gets resources and who doesn’t based on a decision. What is the resource itself. How much  is the quantity at hand.

We can split our macro decisions into two groups 

Buyers- demand “all” and aggregate “decisions”. meaning buyers carry demand to buy resources and decisions on what resources to buy, therefore creating more demand. (example- suddenly yo-yos become very popular and people start buying a specific brand because its better, this shows demand and decisions creating a more specific demand for a product.)

Producers/Sellers- supply “all” profit “decisions”. (example- yo-yo manufacturers take notice that a specific brand “producer” has sold all their products “supply” making record earnings within the industry. Yo-yo manufacturers produce ”or make decisions” a similar product to make more sales “ or profit”.)

Variables That affect buying or selling

Income - The amount of income is crucial to what and what amount someone buys, what is defined to them as excessive, how much or how little sacrifices in buying. In a macro perspective incomes will affect what sellers produce, how much, in some cases the quality and also effects in ways how much they sell them for.

 - (example- a buyer may decide to not buy a speaker set of ten high end audio                equipment and buy a smaller more affordable unit.)

- (example- a seller/producer of high end audio equipment might produce a more       affordable unit “affecting quality of product“, cut down the prices of expensive units and or produce less of the expensive units if they know incomes are to low for luxury buying. The reverse could be in effect if incomes were higher and inflation was not. ) 

Subsidize - Common government tool. A way to “stimulate” or change buying and selling decisions by either: financially supporting an action or organization, paying for or part of the cost of producing something, or paying for or part of a good or service for a buyer.

- (example- the government offers tax breaks for companies hiring employees and tax breaks for non-profit businesses. “Can create more jobs“.)

-(example- the government offers subsidies for solar power, environmentally friendly items or services. “Making the item or service cheaper for consumers and or changing the environment“.)    

-(example- the government subsidies for first time home buyers, offer new car subsidies. “Can make a product directly cheaper“)

  Interest Rates  - A percentage of the total amount of money a product is sold , or total of the loan, that a lender of money charges for the service of lending money. If intrest rates are low a buyer might be more likely to borrow money to buy a home, car, or start a business. If interest rates are low a company might borrow money to expand or buy assets to be more productive. If interest rates are high a buyer might decide to hold off on buying a house (benefiting renters or renting producers/sellers) or buying a car (causing producers/sellers to slow down)

Future expectations - being able to see things yet to come. A company decides to close and stop producing a certain product, this may cause certain individuals to stock up on that product before it is discontinued (buyer sense). A loan company may decide to not lend at fixed rates due to expected inflation (seller sense).

New Stuff - new technologies being developed, things being obsolete or things being more efficient effective ect. (computer companies constantly release new computers making the last model less sellable. Or simply a consumer may want a more efficient or popular item for whatever reason. This affects how much companies produce. More efficient technologies make consumers more apt to buy there product.)

Unemployment - A Government Estimate of the percentage of the Labor force who does not have any Sort Of Job during a Specific Past Time Period.

Governments estimate- the governments roughly calculated value

Labor Force -  to be apart of the labor force-   16 years of age and over

                                                                       have some kind of job or,

Not apart of labor- you have given up           have no job and actively sought                                                              

                              Looking for a job for        a job in the past 6 months

                              You are retired or

                              Do not work by choice

                             You are retired , are a

                              Stay at home wife/husband

                            

Specific past time period - not in real time. Example - estimate of what unemployment is 2 months old.

                          

As demonstrated above there is a deeper amount of  people that account for people not working not just as defined as unemployed. People involved in working off the books “black market” speculated as a large number and a big problem, they still make money and enjoy all of the tax paid ammeneties without paying taxes. There is plenty of movement inbetween all groups as IV of the job market change. Lower taxes and health benefits can lower the number of the black job market and raise the labor force. Higher taxes can have a reverse effect. Joblessness has nearly no way of accurately being measured, inspite of knowing that it exists.

If we take the population and minus out the labor force we have an idea of how large joblessness is.

Types of unemployment  out of a 9.1% UE rate

Seasonal - Adjusted in the unemployment rate to be taken out accounts for 0% of unemployment. This is good type unemployment.  (example- tony works for a watersports adventure company but a cold winter every year slows down the company and tony is forced to be unemployed for a couple of months untill the weather picks back up.)

Structural - worth about .5% of unemployment rates. Jobs that disapear because of technological advances, and then the lack of skillls to fill another job. Jobs that disapear due to a shrinking industry, not to be confused with lack of business. Can be good, it clears way for new jobs, new jobs may contain a better QOL. Can effect RGDP.

(example- billybobjoebob jr. worked for a manufacturing company that produces glass tubes for televisions, due to the change and advancement in television technologies his companies product is obsolete forcing the plant to close down. Billybobjoebob jr. is out of luck for specific skill set, manufacturing plants arent hiring or specifically for his skill set, he is forced to look elsewhere but is not lucky. Presumably He is forced to gain better skills or settle for a job of much lesser pay or obtain skills more marketable in a changed economy. After training billy gets a job as a marketing rep which he makes comparable  money but does not physically sacrafice him self to make money.)

Cyclical - 5% of the unemployment rate. Considered bad unemployment. Due to company lay offs and the snoball effect of unemployment ( more unemployed people means people purchasing less things which makes more businesses force to lay off employees.) simply not enough business top keep someone employed. Including myself we can say we all want this to be as low as we can get it to 0%.(example- ted works for a sandwich shop next to a industrial area where contracters and builders house there shops, construction workers started getting layed off due to the lack of purchases of contracting services, with less contracters around the area the owner of the sandwich shop was forced to lay off ted due to the lack of business.)

Frictional - (aka natural, freedom) accounts for 3.6% of unemployment. People who voluntarily leave a job in hopes to persue a better job. Students going to school breaking from work. In short if we had zero unemployment we would not be leaving our jobs to persue better opportunity if there was no unemployment there would be a serious problem in our system. (tommy works for a sales rep job, he is unhappy with this job and decides to try and make it in a different field, he finds a job and doesn’t like that one and decides to take a break from work to go to school.)

RGDP- A government estimate of real money market value of all final goods and services domestically produced within a past time period.

Real gross domestic product is how we can measure allocation of resources or macro allocation of resources. RGDP is calculated by taking the GDP in total and adjusting it for inflation.

Governments estimate- the governments roughly calculated value

Domestically - in the sentence this means that some portion of the product was produce in the untied states regardless of where it is sold. ( example- solar panels are assembled in the united states by “some company”, four of the parts to make a solar panel are made in Japan, two in China, one in Greece, and 3 in the United States. The united states will only receive calculated RGDP value for the real money value  of the three parts.)

Real - Adjusted for inflation. (example- a mobile car washing provider makes roughly 60 dollars for washing a car with the expense of 20 dollars, over the course of the year his expenses go up about 7 dollars due to the inflation of his market basket for his supplies, so he in turn adjusts his prices up to 67 dollars to make up for the discrepancy.)

Money- a common denominator that can be used as a value for goods and services. (example- to decide how many hours of work is going going to get you stuff, your hour of work must be given a common denominator (money) you then use that money to purchase stuff (goods and services) base on the stuffs value translated into the common denominator (money).)

Final- a completed product purchased by a consumer. Final is stated for the porpose of not counting a product sold to be used in the making of another product, this would be a double count of a good. ( example- a baker buys flower, yeast, paper products and sugar to make some bread, in this case the bread is the final product of all of the previous products, if the ingredients were counted into RGDP and the bread was counted into RGDP that would be a double count and would not accurately calculate RDGP.)

A Past Time Period -  calculations are not made in real time. They are of past time data that was collected over a length of time.

Things That Make RGDP Inaccurate

1.) The pizza or RGDP is has a lot of things in it that can be denominated by money, when we refer to RGDP as a way to calculate QOL there are things that can be added into that pizza like non dollar stuff, in example there is no way to put a dollar value on feeling safe in your own area, there is no way to measure clean air a pretty sunset or better driving conditions. 

2.) black and gray markets- black market can be defined by purchasing or money transactions off the books (example- selling herion, or even street vendors selling items and not paying taxes on them.) The gray market can be described as a trade of goods and sevices (example- a lawyer trades his dentist friend some legal representation for his sons braces.)

3.) There is now way to determine wether the pizza is distributed evenly, and its not addressed. (example- Bill gates may have billions while some else may have only thousands.)

Inflation - The Goverments estimate of the percent of change in the Average total Price of a Weighted and adjusted  market basket of common goods and services from one past time period and another past time period.

Governments estimate- the governments roughly calculated value

Average total price- combined price of all common goods and services in a market basket. ( example- one year the total price for all common goods and services of a market basket was $50,000 next year it was $55,000.)

Adjusted- If things become uncommon they are dropped from market basket and then the weight is adjusted. (example- VCR becomes obsolete and is dropped from the market basket because no one is buying, then they would adjust the weight within the categories to even back out to there 100%.

Weighted-  (budget- what the average household income is). What percentage of your budget is spent on diffrent things. In example- healthcare, gas, education, ect. They take the average amount spent on these items giving it weight.

Common goods and services - what the majority of people buy. Examples- gasoline, food, entertainment. Things that are general not very specific items like start bucks coffee grounds, it would just be considered grocery.

Market basket - a collection of goods and services. used for the purpose   

Past time to other past time-old data in the past compared to a more current but still past data. See if you can buy the same amount of stuff for the same amount of money. When you are comparing past times you have to keep it close to get an accurate depiction of the change.

(When you compare market basket of a past time that costs  $50,000 in 2009 and in 2010 it took $55,000 to purchase the same market basket, that would acount for a 10 percent increase.)

Variables, Effects, Changes

 The market basket is always changing with the way technology changes. Throughout the years people stop buying things or start buying new products based on new technology and technologies that become obsolete. (examples of things leaving the basket would be cord telephones vcrs although those things can be translated into cell phones and dvd players in the next market basket they are changed and the prices and weights are different.) (examples of things entering the basket- lap top computers, videogame systems)

Inflation generally hurts every one, it hurts some more than others. The group that it hurts the most is those that are poor and on a fixed income.  Examples of poor on fixed income are those who work minimum wage jobs. Every one that is on a fixed income regardless of the income is hurt more than those who have COLA’s (cost of living adjustment) through their job or union, and people with COLA’s are not as protected as those who have a more manipulated income like a business owner. A business owner could potential raise his prices higher than inflation hurts him a person with COLA’s  may be adjusted at the beginning of the year but loose on the inflation that rises throughout the rest of the year and a minum wage worker or worker without COLA’s would see the biggest loss from riseing inflation. People who rent are subject to loose money if there rent fluctuates with inflation or CPI (tool used in calculate inflation) when inflation goes up rent goes up.

Weight can change, people now spend much more on rent or morgtages than they did ten years ago so there would be wieght change to represent that.

Interest rates are tied to inflation or CPI when the CPI goes up the interest rates go up in an adjustable mortgage or the interest rate in which loans or mortgages are given. The do this to prevent loss for themselves. If a bank gives out $100,000 and the value of a dollar drops by one percent because of CPI or inflation rising the bank looses $1000. Over time the bank can loose a lot of money if the buyer chooses to carry out the loan or mortgage in a fixed rate over a long period of time. If a loan is given at 5% interest and the value of the dollar decreases by 1% every year  it would only take 5 years and then the loaner would start to take a loss.

Inflation can push the gap between rich and poor, if someone who is rich has a lot of money usually doesn’t let it sit in the bank and has that money invested and owns a lot of material investments as inflation grows there investments hold true value to the dollar also if they invested money which was borrowed at fixed interest rates they pay money back at a devalued dollar. Poor on the other hand usually don’t own a lot of material assets that hold true value and don’t have incomes that have COLA’s causing their income worth less and there savings in the bank to be worth less.   

Inflation can be affected in many different ways, generally when you have RGDP that is at a still or shrinking and a government printing more and more money, inflation rises because the value of the dollar changes.

The Skipping Stone In Macro Economics
In Keynesian economics the key to success is the skipping stone. The idea is simply a multiplier of money that relies on the movement of money over time. If I gave you a dollar for lemonade, after you take away the production cost of your lemonade ( lets say .20), then you buy a pack of  gum for your .80 cents, then the producer of gum take out their cost (lets say .16), they then pay their employee with their earnings from gum and the employee saves that money. This is an example of skipping stone as represented in the figure below.

So the one dollar was skipped through a market to multiply into $2.44. This has been considered a tool and method of simulating economies, It is very simple for governments to deploy this method. It is however risky, such as in the case of the Obama administrations example. In order for a stimulus package to show results it must be a substantial sum of money, and it relies solely on buyer decisions. If it must rely on buyer decisions then that has to calculated, the question is though, can it be done? There is no exact answer to this, but to try and calculate something as subjective as human emotion we all know is very difficult. In the case of the stimulus generated under the Obama administration, it was a failure due to the inability to predict buyer decisions.