For a sport that’s only been around for 10 years or less, competitive gaming is already turning into a lucrative field.

A Business Insider report released in March of this year shows that $800 million will be made on eSports in 2020. That doesn’t include media broadcasting rights, which, if included, are estimated at $1.5 billion.

This year eSports raked in about $700 million and Goldman Sachs has it growing at 22% per year.

For comparison, the National Football League made about $13 billion in the 2015-2016 season. That’s roughly 13 times more than what eSports is making now, but it’s hard to compare eSports to the NFL because it isn’t as much of an established brand.

This year, eSports has about 400 million viewers. Last year, the NFL had about 18 million views per game during the regular season, which adds up to 4.3 billion viewers.

But the NFL has seen a drop in viewers over the past couple of years, while eSports has seen a steady increase. The purpose of comparing these two sports helps add context to the numbers. Even though eSports is growing it won’t take over NFL viewership anytime soon.

You may ask yourself, how do people playing video games competitively generate millions in revenue? One, the popularity is immense. The finals for the popular game League of Legends sold out the Staples Center. Two, companies can sponsor players and teams which helps generate revenue. And finally, selling media licensing to broadcast games is very profitable, and will likely even be more profitable once media companies realize the sport’s popularity.

The majority of the people who consume eSports are young and view almost all content digitally. Getting advertisements to that demographic is no problem, but getting them to respond to it is another story.

A lot of companies are already looking at entering the space. Twitch, a platform primarily used for people to stream themselves playing video games but also used for eSports, was purchased by Amazon in 2014. ESPN has an eSports vertical on their site. YouTube has their own gaming section.

There are unique ways that eSports can be monetized so it will be interesting to see how this medium will grow in the future.

http://j469.ascjclass.org/2017/09/20/3249/

It’s no surprise that hundreds of millions of people are frustrated with Equifax after one of the largest security breaches. And, let’s be honest, many Americans must have saw it coming considering the numerous hacks we have had recently. Hackers found a “vulnerability” in Equifax’s site leading them to retrieve a sufficient amount of Americans most crucial information – social security numbers, credit card data, identity (The Economist, 2017). Because Equifax is amongst one of the largest CRAs, the breach ended up affecting all three of the big players – Equifax, Experian and Trans Union. What goes up, must come down.

The Economist is calling it an “Equifailure” and we could not agree more. Talk about an incredible fall in share prices, taking about a 15% dip after TransUnion, Equifax, and Experian stocks were on a stable, upwards spiral that showed growth in price from January 2017 to May 2017 (The Economist, 2017). Not only are we looking at a huge loss in the market, but a huge risk for millions of Americans. This poses the danger of identity theft and the potential for the government to have to cover the losses. And to make matters even worse, Equifax employees sold shares of the company when they heard about the breach and didn’t even notify the public until weeks later. We don’t like the sound of that.

The big question is why are they still allowed to store people’s data? Wouldn’t you think that after numerous hacks they would be able to re-locate people’s most important data, or at least protect it? As one of the biggest credit holding agencies, Equifax should not be easily hacked. The issue, however, is that it is extremely “central to the American financial system.” That means that nothing can be done to fix the issue and Equifax will just keep going on as if nothing happened in the future and keep storing data even if we don’t know about it. To make matters worse, it is regulated by the Federal Trade Commission and Consumer Financial Protection Bureau, and they aren’t even choosing to halt business (The New York Times, 2017). The real question is why not? Do they not think it is a monetary concern by any means? The employees of Equifax knew what they were doing when they each sold their stake and ended up 2 million dollars richer, while the losses of millions of Americans, frozen credit accounts, and stolen identities leaves them with nothing but fear and financial burden.

Let’s examine a CRA further to understand why our data will continue to live on and potentially, get hacked again. First of all, it is regulated by some of the biggest economic players –– each federal agency regulator is detailed in the photo below (this photo keeps uploading as low-res but the regulators are the OCC, the FRS, the FDIC, and OTS)

There is a lot of power attached to a CRA. If that power wants a CRA to continue, it will, especially if it is helping the economy. Beyond these federal agencies, CNN explains that the market can’t fix this either. “Markets can’t fix this because buyers choose between sellers, and sellers compete for buyers. In case you didn’t notice, you’re not Equifax’s customer. You’re its product.” (CNN, 2017). This hack was the result of millions of Americans valuable information, in which Equifax is in the business of ‘selling’ that valuable information. Our information is out there, and it’s only a matter of time (if not already) until it is completely exposed and stolen. The only solution is government involvement, but to the government this is not a big enough issue, or an issue that they need to take care of because it happens in data security a lot. Beyond that, so many people are choosing to complain to Equifax when the real entity that needs to step in is the government. Currently, though, there is not the proper data to support the government’s involvement in this hack and Equifax, and other CRAs will continue to “collect and sell our data [because] don’t need to keep it secure in order to maintain their market share. They don’t have to answer to us, their products” (CNN, 2017). Let’s continue to be weary of the information we share especially when it comes to CRAs. We never know what can happen.

https://www.economist.com/news/finance-and-economics/21728956-financial-industry-worries-about-who-next-big-data-breach-suffered

http://www.cnn.com/2017/09/11/opinions/dont-complain-to-equifax-demand-government-act-opinion-schneier/index.html

The Case of the Fed

The U.S. Federal Reserve is set to announce a multi-year plan tomorrow to shrink its balance sheet of $4.5-trillion of assets, which are amassed from series of Quantitative Easing following the 2008 financial crisis. The process will start gradually, depending on housing arrangement and refinance, according to The Economist.

In the latest issue of The Economist, an article titled “Dangerously Vacant” suggests that Trump should reappoint Janet Yellen to be the Chair of the Board of Governors of the Federal Reserve System. Yellen’s term as Chair will end in February, which means that four of the 12 seats of the FOMC, the Fed’s committee that sets interest rates, will be vacant. The article argued for the reappointment of Yellen because it would provide efficiency for future directions and make the vacant posts easier to fill. The Fed’s future tasks will be tricky, according to the article. The Fed will focus on reversing the effects of quantitative easing and to solve the puzzle of why low unemployment has not juiced up inflation.

In the classic Keynesian structure of macroeconomics, monetary policy is the wheel that pushes the economy forward in times of recession. In a Global economy, Keynesian policies seem problematic. The Fed’s policy will send a signal to Central Banks worldwide, leading to simultaneous shrinking.

What exactly does this new cycle mean to the Global Economy? To understand this, we must start by looking into the effects of QE. One hypothesis is that QE can bring down long term interest rates, and thus increasing investment. But skeptics argue that it’s a game of managing trader’s expectations for short-term rates and the extension of which produces money, i.e, money producing money. If this scenario is true, then there will be no guarantee of a bright economical future due to the fact that what moves money around is not products but blind optimism. Claudio Borio, an economist in Bank of International Settlements, said on Financial Times that bonds and equity prices are beyond their fundamental values, and thus they could struggle to repay when rates rise. Moreover, amid this huge bubble of pure guesswork and hyperbole of values, companies are less likely to increase investment because of a small margin of error. Thus, Central Banks will have to decide to get rid of QEs, and the time for the Fed is now.

Exactly what is “faith in the economy” triggers my curiosity. It seems that the economy right now is “the blind led by the blind”—no one knows what’s going on so why not just follow the trend. The cause is that all previous economic models have failed to articulate an efficient model for a global economy, perhaps it’s because no central banks want their respective countries to give way to other country. We don’t even know what does a global economy mean, because there are too many secret deals between different forces and there seem to be no higher authority to regulate people’s greed when one can simply refuse to acknowledge one’s greed and irrationality. The mentality is that in the modern Capitalist society, for one to be successful, one must possess a certain kind of “animal spirit” that can transcend our mortality and justify our dimmed past. This explains why sales of Ayn Rand’s Atlas Shrugged increased dramatically during 2009, once climbing to the top of Amazon’s fiction bestsellers in April, 2009. Alan Greenspan admired the book and even defended the book as “celebration of life and happiness”; popular TV shows such as Mad Men also has significant resemblances to Randian ideals. However, despite its seemingly irresistible attractiveness among all social classes, Randian ideals is never successful when applied to monetary policies. Maybe it’s useful in a modern individualist society for one to build an indifferent and strong attitude to “create”, but I would argue against it. If one recalls the classical Greek way of thinking, it would be easy to dissolve the doubt. Aristotle put it nicely in Politics, “as man is the best animals when perfected, so he is the worst when separated from law and justice. For injustice is most dangerous when it is armed; and man, armed by nature with good sense and virtue, may use them for entirely opposite ends. Therefore, when he is without virtue, man is the most unscrupulous and savage of the animals.”

More on the issue: http://fingfx.thomsonreuters.com/gfx/rngs/USA-FED/010050VD1YM/index.html, www.theguardian.com/commentisfree/2013/oct/11/who-responsible-us-shutdown-2008-meltdown-slavoj-zizek, https://www.youtube.com/playlist?list=PL08C0992430469B34, https://youtu.be/9FrHGAd_yto?list=PL023BCE5134243987&t=759

Learning economics is a difficult undertaking for students like myself. Unlike biology or mathematics, economics is not tangible or easy to visualize. Even its definition–the study of scarcity–leaves me puzzled about the nature of economics as a field of study.

However, Uber, a global ridehailing service, is an economics student’s saving grace. Uber’s market is an ideal for what we want the economy to look like. It has characteristics of a competitive market: low barriers for entry, many buyers and sellers, and somewhat homogenous services. Most importantly, the prices riders pay are a direct response to supply and demand. Uber is an excellent example with which to apply numerous economic terms and theories.

Take, for example, consumer surplus. According to Britannica, consumer surplus is “the difference between the price a consumer pays for an item, and the price he would be willing to pay rather than do without it.” It’s a number that has been impossible to estimate in the real world (unless you are a fan of the Infinite Universe theory) until now. Steven Levitt, an economist at the University of Chicago, was able to estimate a consumer surplus measurement using Uber’s data, which collects information about completed trips and those that were considered (user opened the app) but never taken.

On Freakonomics’ podcast from September 7, 2016, Levitt explains that even though Uber has an algorithm to come up with the ideal prices of surged rides, the company instead only multiplies the cost by tenths (1.1, 1.2, 1.3) for customer convenience. This series of minute discontinuities allows for the estimation of the price-sensitivity of Uber riders.

Now, what is price sensitivity? In Greg Ip’s The Undercover Economist, he explains the concept: “when I raise the price, how much do my sales fall? And when I cut the price, how much do my sales rise?” So, it’s the extent to which the price of something affects if a person will buy it.

Levitt examined Uber’s database of many similar consumers facing incrementally different prices to examine the price sensitivity of the riders (at what price will they leave the app instead of booking a ride). Levitt also used this data to estimate Uber’s consumer surplus. He extrapolated that in 2015 the consumer surplus in the United States was $7 billion, which means that riders were willing to spend $11 billion on rides, but in reality only paid $4 billion.

The “Regression Discontinuity Analysis” that Levitt used to estimate consumer surplus can also be used to illustrate a real-life example of the demand curve. Britannica explains that the Demand Curve is a graph illustrating the relationship between price and quantity. The curve slopes downward from left to right because price and quantity are inversely related. It’s an artificial construct that economists use to examine real-world situations. But once again, Uber can be of assistance. Uber’s price surging data, all of the small jumps in price faced by similar consumers, can be added together to discover an instantaneous demand curve. When there is no surge, the price of rides is average and so is the amount of drivers. As an oversimplification it can be noted that demand is at equilibrium. When surges occur, prices go up and and the amount of drivers available declines, so demand is high.

Uber has been in the news a hundred times over for all of its scandals and controversies. But Uber deserves more positive press–it led me to pass my econ quiz!

The devastation of Hurricane Harvey on Houston, the 4th largest city in the United States, has been predicted to negatively impact national activity and employment, according to Chad Moutray, chief economist for the National Association of Manufacturers.

The damaging effects of Hurricane Harvey left physical scars on Texas, and to an extent, a few bruises to the national economy. While some can argue that huge widespread events actually spur economic re-structuring, the Federal Reserve reported that industrial production decreased by nearly 1% In August from July. To put this number to scale—this decline was akin to that during the 2008 recession. This decrease in production was attributed to less oil drilling and petroleum refining.

Due to a decreased supply of oil, gas prices rose, and as a result, consumers have less money in their pockets to spend on other things. This accounts for the “C” component in the GDP equation.

At a rudimentary level, economists expect overall output to decrease in short run because of storm-related job losses, but note that it will ultimately increase in future quarters when jobs and structure start to come back. In the long run, however, the Harvey won’t drastically affect the big economic indicators: GDP, unemployment, and inflation.

The Wall Street Journal forecasted that Hurricane Harvey will “reduce the pace of job gains by about 27,000 jobs a month” in Q3. By Q1 of 2018, forecasters predict a boost of 13,000 jobs. Economists also predict GDP will fall by 0.3% in the third quarter.

To add salt to the wound, most homeowners and business-owners did not have flooding insurance, which additionally decreases their ability to spend and invest. It’s almost analogous to the effects of a stock market crash, says Constance Hunter, chief economist at KPMG.

Although the commerce department could not completely isolate the effects of Harvey on brick and mortar retailers, the weeks following the storm saw a mix of sales drops and increases. Necessity goods sales increased, including home furnishing supplies and grocery stores, while sales of non-necessity goods decreased. For instance, gas-station sales rose 2.5% in a month, due to higher oil prices. Internet sales fell a percent, the largest decline since Q2 2014. Another uptick to the equation is a 0.2% increase in auto sales, due to the loss of automobiles (a necessary good) from the storm.

Overall, a small dip in productivity will be seen for a quarter, due to rising oil prices, lost assets, and decreased consumer spending. Though only a short-term scale, consumer spending, which accounts for two-thirds of GDP, will still have a profound effect on the surrounding economic and regional locus.

Sources:

https://www.wsj.com/articles/u-s-retail-sales-fell-in-august-1505478885

https://www.wsj.com/articles/u-s-industrial-production-fell-in-august-as-hurricane-harvey-hit-gulf-coast-1505481802

https://www.wsj.com/articles/how-hurricane-harvey-will-ripple-through-the-u-s-economy-1504792802

It is obvious that the tragic event of Hurricane Harvey has left thousands of families devastated, as it has destroyed billions of dollars’ worth of homes and properties. What is not so obvious, however, is the effect it will have on the U.S. economy. Although it is extremely difficult to accurately predict the impact a hurricane such as Harvey will have on the economy, economists are breaking down the impact by economic indicators.

According to the Commerce Department’s Bureau of Economic Analysis, Texas accounted for 8% of the total U.S. economic output with a GDP of $1.5 trillion in 2016. The cost of the hurricane is estimated to be somewhere between $70 to $100 billion.

Inflation is an important indicator of Harvey’s impact, exemplifies through the increase of gas prices in Houston. According to the AAA, the average gas price has increased from $2.35 to $2.66 a gallon. This number is expected to continue to increase more before settling down. The increase in inflation will have its own impact on consumer spending, forcing people to spend less money on secondary items.

Hurricane Harvey is expected to have an impact on initial jobless claims, or people filing for unemployment for the first time. Historically, we have seen an increase in claims about 2 weeks after a massive hurricane, such as Katrina in 2005 and Sandy in 2012. This could account for all the people who lost their jobs because of companies shutting down or working part time due to weather conditions.

However, at a more macro level, Harvey’s impact on the economy may not be as bad as it sounds. According to Goldman Sachs, the rebuilding of homes and properties in the future could possibly offset the damage done to the overall economy. Although in the short run it may seem harmful, in the long run, properties are going to require rebuilding. This will motivate construction companies and their workers to migrate to Houston for job opportunities.

It has only been a few weeks since the hurricane struck Houston, therefore only allowing room for predictions about the future of its economy. It will be interesting to see how the impact of this hurricane will compare to other historical hurricanes in the past. Will Harvey be the costliest? Will it have a larger negative impact on the economy, or will rebuilding efforts balance it out? We have yet to find out.

References:

http://www.foxbusiness.com/features/2017/09/07/how-hurricane-harvey-will-ripple-through-u-s-economy.html

http://www.businessinsider.com/hurricane-harvey-economic-impact-2017-8/#the-cost-of-harvey-1