Uncategorized – Page 2 – Notre Dame Economist

Is there a small college or university near where you live? Declining birth rates threaten to cause it to go belly up in coming years unless more students are found. Do you want to see a vibrant campus become a bunch of empty buildings? That would just attract illegal drug dealing and become a possible hangout for street gangs.

How about giving more financially challenged students a chance to attend college? We like to call our country the land of opportunity, but children who happen to be born into poor families cannot afford the high cost of college without financial assistance.

Let’s make a major effort to make it possible for financially disadvantaged students to attend college. Basically this means contributing money, both directly as individuals, and together as a community, to student scholarship funds that pay for tuition and college expenses such as books and student housing.

Many people are concerned about extreme income and wealth inequality, but they don’t seem to realize that economic inequality is just as extreme between the most well-known and highly-ranked big universities, and the less well-known, but highly-respected, smaller colleges and universities. The large, well-known universities are in great demand and have very large endowments of over a billion dollars, whereas the smaller, well-respected colleges and universities may have less than 10 million dollar endowments, which will have to be tapped, and will be consumed quickly, as enrollments drop off. As with people, the well-to-do are well-to-do indeed, while those with little to start with are struggling to get by.

It’s great to say we live in the land of opportunity, but let’s make it a reality for those who didn’t happen to be born into financially secure families. In thinking about tax write-offs for charitable giving, why not include giving some money for student scholarships, especially at those smaller, less-well-known, but highly-respected colleges and universities?

Lawrence C. Marsh, the author of “Optimal Money Flow: How a Dynamic-Growth Economy Can Work for Everyone,” has agreed to forgo his book royalties so that the full purchase price ($24.95) will go into the student scholarship fund when purchased through Avila University Press at the link: https://www.avila.edu/aupress/optimal-money-flow-by-lawrence-c-marsh

=> Understanding the origin of our very unstable triple bubble economy: the Middle Class Debt Bubble, the Federal Debt Bubble, and the Wealthy-Savings Bubble. <=

Too often our economic textbooks describe economics as a simple transition from one static equilibrium to another without a full understanding and explanation of the accommodative or disruptive forces that drive us toward or away from such an equilibrium state. We need dynamic analysis to better understand the underlying forces that contribute to or disrupt optimal money flow in our economy. This involves population dynamics, technological innovation and the role of globalization with the increasingly interdependent world economy.

In 1839 Thomas Carlyle declared economics to be “the dismal science” because of Thomas Malthus’ argument that the supply of food could never keep up with demand, because population growth would always expand demand to more than absorb any increase in supply. For centuries demographers and economists have warned of the unsustainability of the world’s population growth and all of the economic and environmental problems that would follow.

Full stop. Rather suddenly, the dynamics have reversed abruptly. Population growth has dropped dramatically and many advanced economies have populations in decline. Japan, Germany, Italy, Russia and many other developed countries have been losing population. The United States would have a declining population if it were not for immigration. Even China is destined to see its population peek and then decline partly as a result of China’s one-child policy, which was introduced in 1979 by Chinese leader Deng Xiaoping.

In my economics class at Notre Dame at the start of class on a Monday morning, right after an exciting football weekend, I was trying to get my students’ attention. After several failed attempts to begin our discussion on international income distribution, I suddenly announced: “Today we are going to discuss birth control.” My students immediately blurted out: “Birth control. This is a Catholic university. We can’t be discussing birth control.” I persisted. “What is the most effective birth control method in the world?” I asked. The students were shocked and incredulous. Finally, I said: “It turns out that the most effective birth control method in the world is per capita income. When per capita income rises above $6,000 US dollars, birth rates drop like a rock.”

The problem is not just fewer people, but fewer young people. Other than more medical care, most older people don’t need a lot of things. Typically, they already have accumulated too many possessions from clothing to pots, pans, tools and books. And old people tend to be more conservative and want to hang on to their possessions. It is hard to convince them that they need a whole new wardrobe or a new style of furniture in their old age. At the same time, young people are expressing a desire for experiences (often involving international travel) instead of acquiring lots of possessions. This also reduces the demand for goods and services in our economy.

Now consider the role of changes in technology in driving a transition from a primarily variable cost (labor) economy to a primarily fixed cost (capital) economy. ………………………….

While demand slows with declining population growth and the aging of the population, the supply of investible capital has grown exponentially. Extreme income and wealth inequality has provided a small segment of the population with way more money than they know what to do with. This wealthy-savings bubble has led to a build up of investible funds in financial markets driving up stock and bond prices. Large corporations often use the excessive pool of cash to buy up rival companies or buy back shares of their stock.

At the same time, middle class people are up to their eyeballs in debt. People have credit card debt, mortgage debt, college loan debt, home equity debt and ever more debt from rising health care costs. With so much debt the middle class cannot afford to buy back all the goods and services they are producing. To counter this middle class debt bubble, the federal government has filled in for otherwise inadequate consumer demand by providing unpaid for tax cuts and expenditures. This has produced an ever increasing federal debt bubble.

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Category: Uncategorized

Thousands of Small Colleges to go Bankrupt as Birth Rates Decline

Poor Money Flow Has Produced Our Dangerously Unstable Triple Bubble Economy