Controlling Supply Controls Demand: Yeezy and Supreme

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  In 2014, Adidas announced the historical collaboration with Kanye West that brought “Yeezy Season” to fruition. Since then, every announcement of a new boot has led to social media crazes and weeks of the phrase “Sold Out” posted on the Adidas website. Consumers line up for days to get the newest Yeezy gear not because they want to be among the first to own the gear: they might just be some of the few that get to own it. The Yeezy line limits its production purposely, enabling it to charge relatively high prices and enjoy consumer demand that far outstrips supply. The Kanye-Adidas collaboration line starts at $210 (if you can get an item at a store). Since many people cannot get them, the “Adidas Yeezy Boost 750” has a resale value of $2,993, putting these shoes at an even higher price than the Kanye-Louis Vuitton collection of 2009. Chris Kyvetos, owner of a successful sneaker-shop in Australia, gives testimony to this incredible demand: “If you're a sneakerhead, then KEEP READING >>

The Future of Marijuana on Campus

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Marijuana legalization has been a divisive issue in the United States for decades, yet it appears to have finally turned the corner.  While marijuana is still prohibited under federal law, Alaska, Colorado, Oregon, and Washington - and last week, California, Nevada and Massachusetts - have all legalized the recreational usage of marijuana and the commercial sale of marijuana with a license.   Foreign countries are also easing their stances on marijuana.  Canada is poised to legalize the drug in spring 2017, opening itself up to a $5 billion-dollar industry.   For college students, marijuana legalization may seem like a dream come true.  In 2015, daily marijuana usage on college campuses reached its highest percentage since 1980, even as the consumption of alcohol, narcotics, and amphetamines declined.  Moreover, the rapid growth and diffusion of small dispensaries in states that have legalized marijuana has removed barriers to access.  Colorado, for example, has over 900 licensed KEEP READING >>

The Cost of Buying an Election

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Money and politics have always been contentious topics and that fact only becomes more true when you put the two together. Over the past few years, we have seen  spending in the political arena grow rapidly, reaching astronomical level and generating much debate. These conversations inevitably turn to the topic of  wealthy individuals and corporations that pour millions into both supporting candidates through super PACs as well pushing for their agendas through good old-fashioned lobbying. But does this investment actually result in a significant return, whether in votes for candidates or in profit opportunities for firms? It is a universally accepted fact that political spending has risen rapidly. The cost of running for Congress has increased “more than 500 percent since 1984,” a rate which beats even the exponentially rising cost of college. Looking at the exploding figures, it is easy to see why so many people jump to the conclusion that more money equals more votes. After all, KEEP READING >>

Thinking About the New York Wage Hike

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Exciting news for college students who fear their prospects in the job market: Governor Cuomo recently signed a budget bill that raises the minimum wage in New York City to $15 an hour by 2019. The campaign for a $15 wage started in New York City when 200 fast food workers walked away from their registers to protest their paltry wages in 2012. The workers’ campaign, known as Fast Food Forward, gained momentum by expanding their walk-out protests across the nation. Although these demands were met with incredulous disbelief, in the past four years, four major cities have enacted a $15 minimum wage and many have increased their wages toward that level. The path to 15 was sparked in cities like Seattle and Los Angeles, and now has moved beyond cities to state-wide legislation. California narrowly beat New York to be the first state to pass a minimum wage of $15 which will be phased in by 2022 for most businesses and 2023 for businesses with fewer than 26 employees. New York similarly KEEP READING >>

America’s Inferno: A Journey Into the 8 Circles of Monetary Policy

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In the wake of the Great Recession, the U.S. Federal Reserve decided that enough was enough. Instead of allowing individual and institutional investors to blindly speculate on the direction of American monetary policy, the Fed chose to enact a series of verbal assurances, serving as a “forward guide” for interest rates in the future. The hope was that by promising interest rate raises or decreases under very precise labor and inflationary conditions, markets would be dissuaded from intense volatility over Treasury prices. In recent years, for example, the Fed has set a long-term inflation goal of 2% before considering more significant rate rises. For the last decade, the Fed’s policy of “forward guidance” has proven elucidating with regards to the concerns and predictions of Bernanke’s, and now Yellen’s, board. But, with developments such as the massive decrease in energy prices in the last year, an incongruence between FOMC promises and global market realities are sharpening. In KEEP READING >>

Glass-Steagall Act and the 2016 Presidential Race: The Great Misperception

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An obscure Depression-era financial law has taken central stage in the debates of the 2016 presidential race. The 1999 repeal of the Glass-Steagall Act, which had imposed a regulatory separation between commercial banking and investment banking, is blamed by many for the financial crisis of 2008-09. Invocation of this law has become synonymous with “breaking up big banks” or ending “too big to fail”: an argument preached by populist candidates on the left and the right. Such demands on the basis of the repeal of Glass-Steagall are ungrounded in history, and serve largely as a romantic morality tale touted by candidates for popular appeal. Republicans and Democrats have embraced similar populist rhetorics against Big Banks underpinned by a misguided understanding of Glass-Steagall. “Crony capitalism,” “a corrupt system,” and “excessive risk-taking” are evoked by the left and right as implicit symptoms of its repeal. Glass-Steagall has become symbolic of a populist narrative of the KEEP READING >>

The Death of the Hedge Fund Industry

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In a world where top graduates are increasingly pursuing opportunities in technology over financial positions on Wall Street, hedge funds are still the kings of a thinning hill. A survey of 116 institutional investors conducted last spring by NN Investment Partners found that 52% of respondents favored investment in hedge funds, “well ahead of the second most popular option, private equity.” Data from Preqin indicate that the assets in the 10 largest institutional investors in hedge funds increased by almost 10% over the last year. Yet, even as hedge funds “continue to grow despite numerous challenges,” issues of regulation, liquidity, investor concern, and general market performance may be premonitory of challenges still to come. Before we examine the future of the hedge fund industry, it is important to understand the functional roles that hedge funds provide to society. Unlike mutual funds, hedge funds are able to invest in almost any asset, opening the door to alternative KEEP READING >>

An Analysis of Ted Cruz’s Balanced Budget Amendment

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The Columbia Economics Review is proud to present the following article by John Staunton, a student at Bronx High School of Science and the winner of our Fall 2015 High School Student Essay Contest. Among a number of impressive entries, John's analysis of Senator Ted Cruz's economic proposals was selected after extensive deliberation by our executive board. As 2016 has begun, so has the Republican nomination process taken off. Of the many candidates running for office, Senator Ted Cruz has a considerable chance of winning the Republican nomination. One position he is “an emphatic advocate” for is the Balanced Budget Amendment. On face, the economic benefits seemingly include an efficiently run government; however, another look reveals that a Balanced Budget Amendment would disable the government from continuing public investments and destroy a stable point of investment for banks, both of which have catastrophic effects on the economy. Understanding the effects of the KEEP READING >>

The Paradox of Pay-As-You-Earn College Loans

What should be done about expensive colleges? In the midst of the 2016 election, Senator Marco Rubio has quietly endorsed an interesting alternative to the debt-free college funding proposals of Democratic candidates Hillary Clinton and Bernie Sanders: income-based repayment loans. Also known as a pay-as-you-earn scheme, this program allows recent college graduates to pay for their college loans with a fixed share of their income rather than a fixed amount of money. Although they seem simple at first glance, IBR loans are actually a complex economic interaction completely dependent on expectations, trust and optimism. Year after year, the rising price of a college education continues to put a high burden on the finances of American families and young people. Measured in current dollars, the average price of tuition in a public college has risen from $500 dollars in 1971 to $9139 dollars in 2015. This increase has occurred simultaneously with a shift in the American economy away from KEEP READING >>