Archives: Reg Murphy Pubs

What is economic impact?

Written by Melissa Trussell on . Posted in Melissa Trussell, Reg Murphy.

My friend Dr. Heather Farley and I recently published an article in Journal of Public Child Welfare titled “Economic impact of CarePortal donations in Glynn County, Georgia.” I have written about CarePortal in this space before. It is a tool, hosted by local non-profit Hope 1312 Collective, that allows caseworkers from the Department of Family and Children Services (DFCS) to connect with community members to meet needs of local families at risk of having their children brought into foster care. I knew when I started looking into it that the full impact of the CarePortal system would be much greater than simply the dollar value of the met needs. Indeed, we found that approximately $32,000 in donations had a total impact of over $5.7 million.

But, what does that mean? What is economic impact, and what is involved in an economic impact study? ChatGPT defines economic impact as “the effect that a particular event, policy, project, or activity has on the economy of a specific region or area.”

For most private-sector industries or firms, a standard economic impact study comes down to three primary categories of impact:

  1. Direct effects- value of the firm’s sales and employment.
  2. Indirect effects- value of inputs the firm purchases from its suppliers and employment this generates within those supplier firms.
  3. Induced effects- value of household spending by the employees in the firm and its supply chain.

At the Murphy Center, when we approach an economic impact study, we start with the question what would the world be like if this industry, organization, policy, project, etc., were not here? And, when it comes to the three types of effects listed above, it is not always clear that those calculated impacts would disappear completely if the firm ceased to exist. Usually, the employees would find other jobs, and the money would find other ways to be spent.

But, for many organizations, and especially for non-profit entities, the impact of their work is far greater than their spending and employment impacts. We hear this in the stories they tell of the changes they are effecting for individuals, communities, or the natural world. The challenge for those allocating resources (private donors, grant funders, governments) is to translate those intrinsically invaluable effects into measurable economic impacts.

This is a two step process: 1) Describe the relationships between the program outcomes and changes in public or private spending. 2) Quantify those changes in spending.

For example, in the case of CarePortal, research links the trauma of foster care with many negative post-foster care outcomes. These include, but are not limited to, increased chance of teen pregnancy, mental and physical health conditions, and incarceration, as well as reduced future earnings for the child. Society bears a dollars-and-cents cost for each of these negative outcomes: increased government spending on Medicaid, food stamps, court expenditures, etc.; costs to victims of crime; and decreases in payroll taxes and individual spending from wages. If a donation to CarePortal prevents a child from entering foster care, that donation saves society these costs. Adding together all the costs avoided, a donation that prevents one child from spending one year in foster care in Georgia saves society around $83,000.

Other non-profit activities no-doubt have similar impacts when considered in this way. It is much more complex to calculate the economic impact of these activities than to calculate direct, indirect, and induced effects of business spending. But, these are impacts that are lasting and that we can more confidently claim would not persist without someone doing this or similar work. These are true economic impacts.

———– Dr. Melissa Trussell is a professor in the School of Business and Public Management at College of Coastal Georgia who works with the college’s Reg Murphy Center for Economic and Policy Studies. Contact her at mtrussell@ccga.edu. The views expressed in this article are those of the author and do not necessarily represent those of the College of Coastal Georgia.

This is One Strong U.S. Economy

Written by Don Mathews on . Posted in Don Mathews, Reg Murphy.

The record of the U.S. economy over the past four years is remarkable. It is a record of steady economic growth, productivity growth, labor force growth and exceptionally low unemployment.

What makes that record remarkable is it has been achieved under a stream of adversity: the pandemic, followed by inflation, followed by exceptionally tight monetary policy.   

The U.S. economy moved into 2020 in solid shape. In the fourth quarter of 2019, real GDP increased at an annualized rate of 2.6%. (Since 2000, the average annual rate of real GDP growth is 2%.) In February 2020 the labor force numbered 164,412,000; the unemployment rate, 3.5%.

The pandemic hit in March.

In April, the labor force numbered 156,276,000; the unemployment rate, 14.8%. In the first quarter of 2020, real GDP fell at an annualized rate of 5.3%. In the second quarter, it fell at an annualized rate of 28%.

In May, as the pandemic worsened, the economy began to recover. In the third quarter of 2020, real GDP increased at an annualized rate of 34.8%. In the fourth quarter, it increased at a 4.2% annualized rate.

By year’s end the labor force was up to 160,761,000, the unemployment rate was down to 6.7%.    

In the first quarter of 2021, real GDP increased at a 5.2% annualized rate to $20,990.5 billion, which eclipsed the pre-pandemic high of $20,951.1 billion posted in the fourth quarter of 2019. For all of 2021, U.S. real GDP increased by 5.8%. At year’s end the labor force numbered 162,429,000; the unemployment rate returned to the sub-4% zone at 3.9%.

In November 2022, the labor force rose to 164,441,000, eclipsing the level posted in February 2020. In December 2022, the unemployment rate fell to 3.5%, the rate posted in February 2020.

No national economy recovered from the pandemic as quickly as the U.S. economy did. 

On February 23, 2020, a massive outbreak of coronavirus in Italy set off a global financial panic. On March 16, the panic became a meltdown. To stop the meltdown, the U.S. Federal Reserve System and other central banks pumped a trillion dollars of reserves into banks and other financial institutions. They continued to load banks with reserves until the pandemic was clearly in retreat. 

The Fed prevented a global financial disaster at the onset of the pandemic. But as the economy recovered, banks turned reserves into loans. New loans become new money. Between February 2020 and February 2022, the U.S. money supply increased by 40.5%.

That increase in the money supply caused the 12-month rate of inflation in the U.S. to increase from 1.4% in January 2021 to 8.9% in June 2022.

Only a central bank can cause inflation, and only a central bank can reduce inflation. The surge in inflation prompted the Fed to reverse course and tighten credit conditions. Aggressively.

In a series of steps between March 16, 2022 and July 27, 2023, the Fed increased its key interest rate (its IORB rate) from 0.15% to 5.4%. Market interest rates followed the same path. Mortgage rates moved from the 3-plus % range into the 7-plus% range.

In years past, monetary tightening of this magnitude would all but guarantee a recession. Not in this U.S. economy. Real GDP has increased in six consecutive quarters at rates ranging from 2.1% to 4.9%. The unemployment rate hasn’t budged from the 3.5-3.9% range.

I don’t know what has enabled this U.S. economy to perform as well as it has in the teeth of such adversity. I do know that it’s remarkable, and it’s not getting the attention or appreciation it deserves.

Equally remarkable: Georgia and Glynn. Stay tuned.  

Donald Black: A Theoretical Sociologist

Written by Roscoe Scarborough on . Posted in Reg Murphy, Roscoe Scarborough.

One of my mentors, Donald Black, University Professor Emeritus of the Social Sciences at the University of Virginia, passed away in late January. Here, I’ll discuss Black’s vision for sociology. I believe that he would find my focus on his scientific contributions to be a more prudent tribute than a review of biographical details of his life, though he was very interested in biographies of intellectuals. A conventional obituary of his credentials, appointments, publications, and awards can be found on the American Society of Criminology website.

Black self-identified as a theoretical sociologist. He approached studying human behavior like a physicist studies the universe. Black developed testable theories that hold true across all societies and all time.

Black devised his own approach to explaining human behavior. “Pure sociology” is a type of sociology with no psychology. Pure sociology explains social behavior with its location and direction in social space—its social geometry.

Black is best known for his book The Behavior of Law in which he developed a general sociological theory of law. The book contains a series of theoretical formulations that predict and explain the quantity and style of law in various locations and directions in social space.

For example, Black states “Law varies inversely with other social control.” In a society or group where there are other social controls—family, school, work, religion—there will be less law. In a society where these controls are absent, there will be more law. The book is full of these falsifiable propositions. Collectively, these constitute his general theory of law.

Black’s sociology predicts and explains social life without regard to the individual. Pure sociology makes no presumptions about any essential human nature. His theory does not account for how individuals experience reality. It includes no psychology. Black sought to focus on “the social” and “declare independence from psychology.”

Most social scientists would explain a police officer’s act of making an arrest in terms of an officer’s motivations, background, biases, decision-making, or some other aspect of their psychology. Black transcends an individualistic focus, removes all psychology, and explains arrest as a function of the behavior of law. To use Black’s language, “the social geometry” of the encounter explains whether or not an arrest occurs.

Black was troubled by overt activism in modern sociology. Black contended that ideology doesn’t belong in social science, unless ideology itself was the subject of study. Pure sociology is value-free, including being free of any ideology.

Many sociologists regard value-free sociology as undesirable and make value-judgements in the name of sociology, often to address perceived injustices. For example, a sociologist might research capital punishment in the U.S. and conclude that there are racial disparities in who is sentenced to death. Many sociologists go one step further and advocate for eliminating capital punishment because they deem the practice to be racist and inhumane.

Black would repudiate the intrusion of one’s personal values into sociology. Conversely, he would commend a scientific explanation of the social conditions in which governments employ the death penalty as a form of conflict resolution. For Black, the goal of sociology is to explain human behavior, not to enact social change.

Black influenced how I do sociology. Like Black, I try to develop markedly sociological explanations of behavior; I locate causality in social institutions, not in the psychology of individuals. Additionally, I strive for objectivity and to prevent my own values and biases from intruding into my scholarship or teaching. In my From the Murphy Center columns, I believe that Black would praise my commitment to advancing sociological explanations of phenomena including firearm deaths, declining teen mental health, homelessness, and other subjects. He would challenge me to remove all psychology from my sociology. Finally, I think that he would caution me that taking time to write for the public distracts from advancing theoretical sociology.

Roscoe Scarborough, Ph.D. is chair of the Department of Social Sciences and associate professor of sociology at College of Coastal Georgia. He is an associate scholar at the Reg Murphy Center for Economic and Policy Studies. He can be reached by email at rscarborough@ccga.edu.

Georgia’s New Place in National Politics

Written by Drew Cagle on . Posted in Reg Murphy.

In the evolving landscape of American politics, Georgia has emerged as an unexpected battleground, signaling a shift in its traditional ideology. Long considered a Republican stronghold (before 2020, the state had only gone for Democratic Presidential Candidates twice since 1978), recent elections, especially the 2020 General Election and 2022 Midterms, have shattered that narrative. This transformation seems more than a temporary blip; instead, it is evidence of a more profound shift within Georgia’s society and culture.

The roots of this shift are complex. Over the past 15 years, demographic changes have altered the GA electorate, resulting primarily from an increase in the state’s population diversity combined with an influx of residents from other states. Atlanta’s reputation as “Little Hollywood” has drawn in more liberal individuals from states such as California and New York. Urbanization, mainly in and around Atlanta, has brought a more progressive viewpoint to previously conservative areas of the state. Meanwhile, grassroots civic groups, such as those spearheaded by perennial Gubernatorial candidate Stacey Abrams, have been remarkably successful in engaging with previously underrepresented communities.

Our state’s newfound political relevance was never more apparent than from November 2020 to January 2021. In a historic sweep, GA voted for a Democratic presidential candidate for the first time since Clinton’s first election in 1992, and followed that up by electing two Democrats to the Senate, enough to shift the balance of power towards the liberal party. The key is that these elections in Georgia did not only affect Georgia herself; our decisions had major ramifications for national politics. This fact signals Georgia’s growing role moving forward.

Much attention is now being paid to Georgia politics not only by individuals but also by national political parties and political donors. Political investment in Georgia has grown exponentially. For example, in 2022, approximately $146.3 million was spent on the GA Senate race. In 2020, Jon Ossoff and David Perdue combined for a whopping $513.9 million. $100 million has been spent already this year on the 2024 elections in Georgia, a whole 7 months before Election Day. This investment serves as recognition that both parties know winning Georgia’s electorate over may be the key to political power.

The state’s meteoric rise has not been without its challenges, however. Allegations of voter suppression, concerns over election integrity, and the severity of political polarization remain potent forces in Georgia. The state has become not just an electoral battleground but also a philosophical one. The debate on the future of American democracy rages on within our capital, Atlanta. Even so, within these challenges lie opportunities for Georgians to lead on national policy, from social to economic issues, by leveraging its newfound notoriety and power to influence outcomes across the country.

Georgia’s journey from Republican bastion to critical swing state reflects broader national trends and the ever-changing face of American governance. As we continue to navigate our new reality, your participation and civic engagement are now more important than ever. Our impact on the country will be shaped by the voices, opinions, and votes of people right here at home.

In this new era, we must prioritize staying informed, becoming engaged, and remaining active in the political process. Georgia’s role in the national landscape underscores the power of every vote and the critical nature of civic participation. As Georgians, the opportunity to influence the direction of not only our state, but the country, is in our hands, a call to action that resonates with the very ideals at the heart of our democracy.

Drew S. Cagle, Ph.D. is an Assistant Professor of Political Science in the Department of Social Sciences at College of Coastal Georgia. He is an associate scholar at the Reg Murphy Center for Economic and Policy Studies. He can be reached by email at dcagle@ccga.edu.

One Giant Leap for Georgia

Written by Drew Cagle on . Posted in Reg Murphy.

Last week, after a 52-year hiatus, we returned to the moon. The historic moon landing, a monumental achievement not just for the United States but for humanity as a whole, has reignited a sense of wonder, ambition, and pride across the nation. The landing marks a new chapter in space exploration. For the state of Georgia, this mission holds particular significance, underscoring the state’s role in advancing aerospace technology and inspiring future generations.

On Thursday, February 22nd, an unmanned lander built and operated by Intuitive Machines, an aerospace robotics company, successfully landed on the South Pole of the moon. This marks several firsts: the first U.S. Moon Landing since 1972, the first moon-landing ever on the South Pole, and the first ever moon landing by a private entity. Intuitive Machines joins an exclusive club of lunar travelers: The U.S., U.S.S.R/Russia, China, India, and most recently, Japan.

The American spirit, characterized by its relentless pursuit of the unknown and its commitment to pushing the boundaries of human ability, was on full display as the world watched the live stream from the lander control room in Houston, Texas. This mission, building on the legacy of the Apollo missions, illustrates America’s dedication to taking the lead in space exploration. It represents the culmination of years of hard work, technological innovation, and collaborative effort among the country’s best and brightest.

Georgia, with its robust aerospace sector, plays a pivotal role in this renewed era of lunar exploration. The state’s aerospace industry, one of the most dynamic in the nation, contributes significantly to the design, manufacture, and innovation of technology used in space missions. Companies and research institutions across Georgia, such as Georgia Institute of Technology, Emory University, Lockheed Martin, and Gulfstream, are at the forefront of developing the cutting-edge technology that made this moon landing possible, from propulsion systems, to solar arrays, to cameras and antennas capable of transmitting to and from space. This involvement highlights Georgia’s contribution to national achievements and its place in the growing frontier of modern space-travel.

Moreover, the moon landing’s emphasis on science, technology, engineering, and mathematics (STEM) education resonates deeply with Georgia’s educational initiatives. The state’s universities and schools have long been advocates for STEM, preparing students for careers in high-tech industries. The success of the moon landing serves as a powerful inspiration for Georgia’s students, illustrating the tangible outcomes of their studies and the exciting possibilities their futures could hold. It emphasizes the importance of curiosity, critical thinking, and persistence—essential attributes for the next generation of innovators.

The mission also has significant economic implications for Georgia. Aerospace products are Georgia’s top export and generated $57.5 billion in 2023. The spotlight on space exploration is likely to drive further investment in aerospace, offering new opportunities for growth and innovation. GA is at the forefront of this new Space Race at the perfect time to be there.

As we reflect on last week’s moon landing, it’s clear that the mission is more than a technological triumph; it’s a testament to the American spirit—a spirit that thrives in Georgia. It’s a reminder that exploration and innovation are not just about reaching new worlds but about inspiring, uniting, and lifting humanity. Space is often called “the last frontier,” but for Georgia, and America, the sky is only the beginning. This moon landing is not just a step forward in space exploration; it’s a leap for mankind, propelling us into a future full of promise and potential.

Drew S. Cagle, Ph.D. is an Assistant Professor of Political Science in the Department of Social Sciences at College of Coastal Georgia. He is an associate scholar at the Reg Murphy Center for Economic and Policy Studies. He can be reached by email at dcagle@ccga.edu.

“Perfect” Sustainability is the Enemy of Progress

Written by Heather Farley on . Posted in Heather Farley, Reg Murphy.

Perfect solutions sound enticing, don’t they? How nice would it be to be able to fix something in the best possible way and say, “that is perfect.” As gratifying as it sounds, it is almost always impossible. Even so, the quest to find perfect solutions is a real issue when it comes to sustainability.

A few months ago, after I gave a presentation on definitions of sustainability, a student raised their hand and asked, “can sustainability actually be achieved?” I thought about that question for a minute before responding, “no, but that’s not the point.” The student’s question stuck with me, and I began hearing the same angst over accomplishing an end goal of sustainability from people in environmental careers as well. In discussing the merits of different renewable energy sources, I heard these individuals bemoaning the fact that none of them were a “perfectly sustainable” option – wind is too intermittent, solar requires too much land, our energy storage solutions aren’t advanced enough yet, too many precious metals are required. All these critiques may be true, but they had me thinking the same thing, “that’s not the point.”

Fixating on finding perfect solutions is the same as doing nothing at all. Sustainability doesn’t need to be an end goal, but instead an ever-stretching horizon that we can make progress toward. To think about sustainable solutions linearly implies that we can’t make progress that improves social, environmental, and economic conditions unless that progress has no costs to it. I think that’s flawed.

If you’ve ever studied the environment, you have likely heard of Barry Commoner’s Four Laws of Ecology: everything is connected to everything else; everything must go somewhere; nature knows best; and there is no such thing as a free lunch. If our aim is to reduce environmental harm, we don’t discard a solution simply because it has a cost. Everything has some cost, even regenerative solutions. Instead, we consider that cost and continue to try to reduce it.

For example, reusable shopping bags help the environment, and many retailers incentivize their use.  This has become an accepted social norm in the US over time. But, the more ideal solution would be for nobody to use any bags at all, plastic, paper, or otherwise. That is a norm that we have not yet accepted here. Does this mean we reject efforts to reduce paper and plastic consumption and only settle for the best solution? No. We encourage movement toward greater sustainability and continue down the road of finding even better solutions.

It’s a simplistic example, but it is an argument I keep hearing in the context of electric vehicles and batteries, renewable energy, and climate change reduction initiatives. In truth, the speed of innovation and improvement in more sustainable directions has been remarkable over the last decade or so. The cost of renewables and batteries has plunged, we have reduced our use of petroleum, and agricultural innovations have made huge strides that both improve production and soil quality. Are they perfect solutions? No, but that’s not the point.

Should we keep questioning our impacts and improving as much as our technological, economic, and societal limits will allow? Yes, but with caution. Let’s not block solutions with any cost, it just delays progress. If we shift our thinking to focus on what we are trying to move away from rather than a singular end goal, however, I think we can identify where we need to do better and keep stretching that sustainability horizon.

Dr. Heather Farley is Chair of the Department of Business and Public Administration and Associate Professor of Public Management at the College of Coastal Georgia. She is an associate of the College’s Reg Murphy Center for Economic and Policy Studies and an environmental policy scholar. The opinions found in this article do not represent those of the College of Coastal Georgia.

Voting in Primary Elections

Written by Drew Cagle on . Posted in Reg Murphy.

As Georgia prepares for its upcoming presidential primary on March 12, the importance of participating in this electoral process cannot be overstated. While general elections typically capture the public’s attention, primary elections are equally, if not more, important in shaping the political landscape. In primary elections, voters have the opportunity to choose which candidates will represent their party in the general election. This initial step in the electoral process plays a pivotal role in determining the choices available to voters later on and, by extension, the future direction of local, state, and national governance.

In Georgia, as in many states, the presidential primary serves as a measure of public opinion and a testing ground for candidates’ policies and campaign strategies. The outcomes in Georgia often have significant implications, given the state’s diverse demographic and political makeup. It is a mini-version of the general election, giving glimpses of the broader national political climate, offering insights into issues that resonate with voters across different regions and backgrounds. Participation in these primaries is not just an exercise of your civic rights; it is a powerful means for voters to influence the political narrative.

The importance of voting in primaries is underscored by the fact that the candidates selected during this process will go on to represent their parties in the general election. The choices made in the primaries effectively shape the political agenda of each party, and maybe the nation, for years to come. When voter turnout in primaries is low, a small, and possibly unrepresentative, segment of the population ends up deciding who the available candidates in the general election will be. This can lead to the nomination of candidates who may not accurately reflect the preferences of the broader party electorate. Because of this, participation in primary elections is crucial.

Additionally, primary elections often feature races for other important offices, such as senators, representatives, governors, and local officials. These positions significantly impact governance at various levels, influencing everything from education to taxes to healthcare. The decisions made by these officeholders can have a direct and tangible impact on the daily lives of citizens.

Georgia’s upcoming presidential primary is not just an opportunity to choose a presidential candidate; it is a chance to shape the future of the state and nation. It is a forum for voters to make their voices heard, their stances clear, and their aspirations plain. High voter turnout in primaries sends a strong message about the public’s engagement and interest in the political process, encouraging greater accountability and responsiveness from political leaders.

So, as Georgia gears up for its presidential primary, it is imperative for voters to recognize the power and significance of their participation. Voting in the primary is a step towards ensuring that the democracy functions as intended, with leaders who are representative of and responsive to the electorate. It is a responsibility that goes hand in hand with the privileges of democracy. Every vote counts, and in the context of a primary election, particularly in a state decided by less than 1% in the last election, it can be the deciding factor in shaping the political future. Therefore, I encourage all eligible Georgians to participate in the March 12th election. Make your voices heard, and keep democracy going.Top of Form

Drew S. Cagle, Ph.D. is an Assistant Professor of Political Science in the Department of Social Sciences at College of Coastal Georgia. He is an associate scholar at the Reg Murphy Center for Economic and Policy Studies. He can be reached by email at dcagle@ccga.edu.

Cupid Economics: How and why we match with whom we match

Written by Melissa Trussell on . Posted in Melissa Trussell, Reg Murphy.

Happy Valentine’s Day!

Now, let me ruin the romance for you by describing how economists view love and marriage.

Economists study and write about the “marriage market,” wherein, much like in a market for goods or services, individuals search for what they want and snag it when they find it. While prices in a marriage market are not always as explicit as those in a market for heart-shaped candies, they still do exist. In some cultures, they are, indeed, explicit, and take the form of dowries or bride-prices. In modern, western culture, the marriage price is negotiated as the terms of the relationship—who will perform what household duties, how shared bank accounts will be handled, etc.

Also like in the market for candies, preferences are important. More popular or more unique candies bring higher prices. A husband or wife who is desired by multiple potential partners is able to negotiate a better deal for themselves in marriage. They may not have to wash as many dishes as a less desirable partner.

Not surprisingly, what makes a potential partner desirable is different for each individual. Like in the market for jobs/labor, the marriage market is as much about search and matching as it is about negotiating a price and sealing a deal.

So, why do we match with the people we match with? And why do some folks choose not to participate in the matching at all? And is our matching really ideal? (If you resisted the urge to just answer “love” to these questions, you may be a budding economist.)

First, what brings us to the marriage market in the first place? Not knowing I was already writing this article, my Granny provided a great example last week. I was telling her about my really rough start to this semester: In the last five weeks, I had an infected cat bite on my hand, a head-to-toe allergic rash reaction to the antibiotic I was taking for that infection, a bout with Covid, and nasty a stomach bug. Somehow, my children have managed to stay healthy, and I am staying afloat at work, but it has been hard, to say the least. My Granny’s solution: “You need a husband.”

Granny is thinking like an economist. Marriage comes with economic incentives—a second income, a second set of hands to perform household work and childcare, and (Granny’s thought) insurance that covers your side of the work when you are sick. We come to the marriage market because life is easier with help. The data bear this out. Particularly among women, marriage rates decline as incomes and education increase, i.e., as they need less of a safety net.

But, once we are in the marriage market, with whom do we match? Contrary to the adage opposites attract, economists find that we tend to match with individuals who have similar incomes, education, political leanings, etc., to ourselves. But, our ultimate matches depend not just on our preferences but also on the pool of candidates to which we are exposed.

And, according to St. Louis Fed economist Paulina Restrepo-Echavarria, our matches are not ideal. Our matches promote the persistence of inequality in economic and educational attainment. She compares the marriage matches that would be made by an all-knowing and benevolent social planner to those we make in real life. The social planner’s guidance would lead us to matches that are both better for society and better for us as individuals than the matches we make on our own. Her conclusion is that we would do better if we simply devoted more effort to the search, widening our pool of candidates, and improving our chances of making an ideal match.

So, here’s to all the searching and match-making taking place this Valentine’s Day.

And, if you are happily matched, please don’t take this as my call for you to begin now to expand your pool. Ignore everything I’ve written; you are no doubt the exception to Restrepo-Echavarria’s findings. Maybe this just gives you something new and interesting to talk about at dinner tonight with your love.

———–

Dr. Melissa Trussell is a professor in the School of Business and Public Management at College of Coastal Georgia who works with the college’s Reg Murphy Center for Economic and Policy Studies. Contact her at mtrussell@ccga.edu. The views expressed in this article are those of the author and do not necessarily represent those of the College of Coastal Georgia.

Taylor Swift’s Lessons for Entrepreneurs

Written by Skip Mounts on . Posted in Reg Murphy, Skip Mounts.

Confession time: I am thinking about hiding my toaster. It is old, likely wastes electricity and probably harms the ozone yet it still makes a beautiful English muffin. The current administration wants to regulate home appliances as part of their ‘green’ agenda. While toasters are not on the list now, what about tomorrow? It will take Josh Gates of Expedition Unknown to find it after I’m done.

Another confession: I have watched too much professional football. I have loyalties to the Green Bay Packers and the Buffalo Bills. When I was nine years old, I got Coach Lombardi’s autograph at an opening of a Red Owl grocery store in Appleton, Wisconsin and the Bill’s long-time head coach, Marv Levy, was an undergraduate economics major. Being a fan is simple for me.

With the Super Bowl now in the rear view, I admit finding a curiosity with the Kansas City Chiefs. I wish the media would have just left Taylor Swift and KC tight end Travis Kelce alone. Its only football for gosh sake. Just leave them alone. Remember what happened to the relationship between Marilyn Monroe and Joe DiMaggio? (If you are thinking ‘who’, ask someone in their golden years.)

Coastal students seeking the Bachelor of Business Administration (BBA) must choose an area for extended study – a concentration. Currently, entrepreneurship is the fastest growing among the nine concentrations from which students can choose. Not only is there coursework, but entrepreneurship students are also exposed to the programs and guidance of our Lucas Center (also available to all students at the College).

I think Taylor Swift offers our future entrepreneurs a few lessons on being successful. First, the facts. In 2023 Ms. Swift’s Era Tour netted $1.04 billion. It is estimated that the tour also generated $5.8 billion in community benefits outside of the concert in jobs, hotels, local tax revenues, etc. She also paid bonuses to her employees, of which truck drivers got $100,000. This is what happens in the magic of entrepreneurship. Not only do entrepreneurs benefit themselves and their customers, but they also create external benefits to many others. This is to say, there are multiplier effects beyond the initial act of entrepreneurial creativity. Future Taylor Swift concerts will only amplify these benefits.

Contrast this to the federal government and the Inflation Reduction Act of 2022. First, it has very little to do with inflation. Most of the Act, around $390 billion of the $500 billion price tag, are subsidies and other incentives aimed at advancing the green agenda of battery plants, semi-conductors, processing chips, EVs, nationwide charging stations, windmill farms in the ocean, and on and on. Here, subsidy is just a word that means private businesses would not produce this stuff without the government paying them to make it. Producers of oceanic windmill farms want larger subsidies and greater liability protection from legal actions brought on the behalf of dead whales and birds. Ford has discovered that people really don’t want electric pickup trucks. Cities that bought electric buses cannot get spare parts as the producer declared bankruptcy and EVs don’t work well in cold weather plugged into charging stations that don’t work. The federal government is the only entity that can encourage the production of things that people don’t want. A subsidy funded by other people’s tax dollars usually does the trick. (My colleagues will point out things called public goods, but this is for another day.)

So, on to Taylor Swift’s lessons for our budding entrepreneurs. They are simple, obvious, and extraordinarily important. In an interview, she attributed her success to being smart (“If you fail to plan, you plan to fail/Strategy sets the scene for the tale” lyrics from her Midnights album), thinking (she buys carbon offsets for her jet so she can be net zero), hard work, and giving people what they want. Imagine that. Dedication, thinking, hard work and paying attention to consumers are Taylor Swift’s lessons. Our students need to see that it is not what they want that matters. It is what others want. Success is built around thinking of others. Taylor Swift’s impact on the world would have not been possible had she produced a concert that no one wanted to attend.

These lessons work everywhere, from a global concert tour to wherever you call home. Imagine the impact our Coastal entrepreneurs can have! Final confession: I am not just a fan of Vince Lombardi and Marv Levy. I’m totally into being a Swiftie and the entrepreneurial gifts of Taylor Swift!

Dr. Skip Mounts is Dean of the School of Business and Public Administration at the College of Coastal Georgia, a Professor of Economics, and an associate of the Reg Murphy Center for Economic and Policy Studies and the Art and Lindee Lucas Center for Entrepreneurship.

How Averting Disaster Caused Inflation

Written by Don Mathews on . Posted in Don Mathews, Reg Murphy.

In two previous columns, I have argued that the leading explanations of the post-pandemic inflation are wrong.

Supply chain disruptions do not cause inflation. Supply chain disruptions cause the prices of a narrow set of goods and services to increase. Inflation is when the prices of a broad range of goods and services increase, then increase some more, then increase some more, then increase some more, and so on.

Rising wages do not cause inflation. Wages increase as worker productivity increases: the more productive workers are, the more employers are willing and able to pay them. Rising productivity pays for rising wages.

Inflation has a single cause: excessive money supply growth. The post-pandemic inflation is no exception.

From 2000 thru 2019, the U.S. money supply increased at an average annual rate of 6.2%. In 2020, it increased by 25.7%, and in 2021, by another 11.4%. From February 2020 to February 2022, the U.S. money supply increased by 40.4%. That’s what caused the 12-month rate of inflation to rise from 1.4% in January 2021 to 8.9% in June 2022.

So, what caused the surge in money supply growth in 2020 and 2021?

The actions the Federal Reserve took to prevent a global financial catastrophe at the onset of the coronavirus pandemic, coupled with the actions it took to keep banks abundantly stocked with reserves through the pandemic, caused the surge in money supply growth in 2020 and 2021.

On February 23, 2020, the Italian government imposed a lock down on eleven towns in the hope of containing a massive outbreak of coronavirus. In financial markets, the news prompted panic and an immediate “rush to safety.” Investors rushed to sell higher yielding assets and rushed to buy “safe haven” assets, primarily U.S. Treasury bonds and bonds issued by the governments of Japan, Germany and the U.K.

In the last week of February 2020, the value of U.S. blue chip stocks fell by 12%, while the yield on ten-year U.S. Treasury notes fell to a record low 1.13%.

As the outbreak spread and intensified, panic in financial markets did, too. On March 9, blue chips dropped by 7.8% before New York Stock Exchange officials halted trading. The yield on the ten-year Treasury note hit 0.54%.

Then came the meltdown. As markets opened on March 16, financial institutions and investors began unloading assets, including safe haven assets, for cash. Sell orders inundated the U.S. Treasury bond market. Stock prices plunged, bond yields spiked, and short-term credit channels froze. Liquidity in the global financial system was rapidly evaporating. 

The Federal Reserve had been adding liquidity to financial institutions since February 23. On March 16, it opened the floodgates. It purchased hundreds of billions of dollars in Treasuries that the institutions were frantic to sell. It announced it would continue to purchase assets in large amounts until credit markets functioned smoothly again. It also set up funding facilities to provide short-term credit until frozen short-term credit channels thawed. 

The meltdown ceased. By July, credit markets functioned smoothly. With no end to the pandemic in sight, the Fed opted to reduce its asset purchases rather than end them, to further fortify banks.

In preventing a global financial catastrophe and in keeping banks abundantly stocked with reserves through the pandemic, the Fed increased its holdings of Treasury securities and other assets from $4,170 billion in February 2020 to $7,128 billion in June 2020, and to $8,934 billion in February 2022. Banks turn reserves into loans, and loans increase the money supply – in this case by 40.4% from February 2020 thru February 2022. And that, as we’ve discussed, caused the post-pandemic inflation.