What’s Wrong with School Lunches?

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A handful of tater-tots coupled with pizza the size of your palm (with two whole pepperoni slices!) on top of a disposable styrofoam tray was considered a really good day at the cafeteria. On other days, students were in for more of a surprise: a mystery meat accompanied by chocolate or strawberry milk would be received differently by everyone. Very few are satisfied with the lunches but it is too late to revamp the American public school lunch system. This is not simply an issue to bad food, but really a problem of money. The health of this generation is at stake, but corporations are not interested in the health of kids, but only profits.

Courtesy to DoSomething

Regardless of the menu, school lunches in American public schools often elicit an image of a soggy, plastic-y, hot (or sometimes cold) mess. Part of this is due to the vague definition of vegetables from the United States Department of Agriculture (USDA). Our nation’s nutrition standards that guide public school lunches describe potatoes as a vegetable, and, by association, french fries are classified as vegetables. The tomato paste in the pizza, pickle relish, and ketchup all qualify as vegetables in the confines of American lunchrooms and pass as “healthy” food.

Why are the health guidelines for school lunches so confusing? And what does that have to do with the bad food? In 1947, Congress passed the National School Lunch Act, which aimed to ensure all kids in America that could not afford lunches at school would still be fed, even if the government had to subsidize their meals. Even with the suspicious standards for food, the intentions of the government were good—they wanted to keep kids from going hungry at school. But today, the American public school lunch system tells a revealing story of Federal budgeting and how policy actually plays out from the Congressional floor to elementary school lunchrooms and beyond.

 

Budget Food

1935 was the first year Congress set aside money in the school lunch program. The government initially used the surplus food from farmers like dairy, wheat, and pork to make these meals. As more children started eating government-funded lunches, the budget steadily increased because the lunch programs needed even larger quantities of food, no longer utilizing surplus food, but created a demand. But in the 1980s, the Reagan administration faced the difficult problem of cutting the Congressional budget. From the overall $615 billion of the 1981 fiscal year, the school lunch program became the victim of the budget cut. President Reagan reallocated $1 billion from the lunch subsidies, reducing the U.S. government spending to a reported $3.6 billion overall for school lunches. This 24 percent decrease in lunch funding led to creative ideas from the Reagan Administration to pinch pennies. Controversially, ketchup was presented as a vegetable during this time, and these bold classifications of vegetables have continued. Even today, within Congress and the administration, there is a constant struggle to keep the budget as small as possible because the spending on child nutrition programs grows at exponential rates. According to the Congressional Budget Office, the spending more than doubled since the 90s and is projected to rise continuously in the future. Despite the increase in budget, nutritional programs often grow at similar or faster rates, resulting in a shortage of money.

The money to provide these services and food gets tighter every year, so do the health standards. The demand for low- and no-fat foods has surged since the 90s. Today, the meals schools serve have a calories limit ranging from 650 to 850, depending on the age range of the children. Not only that, the minimum servings of fruits and vegetables doubled, “dark green and orange vegetables” now replace the previous potatoes and tomato paste as vegetables, offering a wider variety of real vegetables. Meals are now served with less sodium, less saturated fats, and a reduced amount of added sugars. No more sugary drinks or unhealthy snacks… the list goes on.

The stricter health guidelines are largely due to two things. The first is the Free and Reduced Lunch program, which derived from the initiative to feed every child in our schools. The National School Lunch Act guarantees lunch for everyone. These lunches play an important role for many children; President Obama once noted that, for many children, school lunches are “their most nutritious meal—sometimes their only meal—of the day.” Last year, a whopping 4.9 billion lunches were served. If we break this number down to a daily basis, American public schools served 30 million lunches in one day: 20 million of which are free, 2 million were at a reduced rate, and 8 million were paid in their full price. If over two-thirds of lunches served receive their food at a reduced or free price, it’s a good indicator that many children are indeed dependent on these school provided lunches.

The other reason the USDA began to enforce tighter health guidelines was due to the obesity epidemic the media extensively covered in the early 2000s. From the University of Michigan, Dr. Kim A. Eagle’s research study identified school lunches as another risk for childhood obesity. One of most jarring statistics stated that “those who regularly had the school lunch were 29 percent more likely to be obese than those who brought lunch from home.” Eagle attributes this to the fact that school lunches rely on high-energy, low-nutrient-value food, which was usually centered around corn and potatoes, because of their lower costs. The First Lady Michelle Obama created the Healthy Hunger-Free Kids Act, an initiative to combat obesity, promoting not only exercise, but also pushed for stricter health guidelines for students.

The constant shaving of the Federal budget alongside strict health standards had left America with very few options. Processed foods were on a rise in response to this situation. The opportunity to turn Federal dollars into a lucrative business propelled companies such as Tyson and PepsiCo to capitalize on this opportunity. These companies began lobbying efforts to ensure their products were used in lunchrooms.

 

Graphic from School Nutrition Association


In these conversations where the decision making for school lunches take place, there are two other major players: the SNA or School Nutrition Association and the National School Boards Association who represent the interests of students and as advocates of schools, and organizations such as the Food Research and Action Center and the Center on Budget and Policy Priorities who examine the nutritional value of food.

Though SNA is supposed to advocate on behalf of schools, the School Nutrition Association’s website shows that lobbying groups such as Tyson and Pepsico are listed as partners. While the processed foods are not a good thing, it’s all the schools can realistically afford. Such high health standards with a significantly low budget from the government is a tall order to fulfill.

When asked about the amount of processed foods in school lunches, the SNA stated, “While many school are working to increase the amount of freshly prepared and scratch-made menus items, those with limited equipment and labor resources rely on healthy pre-prepared foods to ensure students receive balanced meals each day.” Even if there is enough money to assemble all the ingredients for healthy, unprocessed meals, there is not enough to employ kitchens to cook and serve children.

A myriad of factors are all complex layers to the problem of American public school lunches: the shrinking Congressional budget, the high reliance on free and reduced lunch, the intricate health standards, and lobbying groups of processed foods. The system has ballooned so much and fallen too deep to fix.

 

 

SOURCES:

https://www.cnbc.com/video/2018/11/14/heres-who-gets-rich-from-school-lunch.html

https://www.cnbc.com/2018/11/14/how-big-brands-like-tyson-and-pepsico-profit-from-school-lunches.html

https://www.ers.usda.gov/topics/food-nutrition-assistance/child-nutrition-programs/national-school-lunch-program.aspx

https://www.cbo.gov/publication/50737https://firstfocus.org/wp-content/uploads/2017/06/Nutrition-Budget-Fact-Sheet-FY18-PDF1.pdf

https://www.weforum.org/agenda/2015/08/how-to-scale-up-healthy-eating-in-schools/

https://fraser.stlouisfed.org/files/docs/publications/usbudget/bus_1981.pdf

https://schoolnutrition.org/AboutSchoolMeals/SchoolMealTrendsStats/#1

https://www.fns.usda.gov/nslp/history_5

https://www.scientificamerican.com/article/new-nutrition-standards-for-school-lunches/

Amazon and Delivery Services in America

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For some reason, America’s current postal delivery system has never been updated; we’ve been operating on a centuries-old system. But as technology continues to improve, the demand for convenience has risen too. Magically finding your purchases on your doorstep within days of ordering is not special but now an expectation. People are pushing the boundaries of convenience— grocery deliveries and subscription box services are a testament of that.

The services that make this new preference for convenience possible are many times the postal delivery services. For many postal services such as USPS, package deliveries are quickly becoming a key part of their business, if not the focal point. Yet, surprisingly, the U.S. Postal Service lost almost $4 billion in 2018 even as package deliveries rose because it is not enough to offset the sharp decline in first-class letters caused by the internet and email. In addition to the decline in letters, the rising wages for workers and rising gas prices means higher overall transportation costs to produce delivery services. As the delivery service industry becomes pressed for profits (or rather any revenue), companies such as FedEx, USPS, and others rely heavily on packages to sustain their businesses and Amazon is a major customer. According to a Postal Service worker, around 75 percent to 80 percent of the daily packages they deliver have the blue tape with the scattered Amazon logo—most are Amazon packages.

In particular, the United States Postal Service is especially dependent on Amazon. It is an independent agency of the U.S. in which the federal government is responsible for to ensure insular areas also receive service; according to their website, they are the only delivery service that reaches every address in the nation which is over 155 million residences and businesses. However, they do not receive any federal tax dollars, so the partnership with Amazon is a logical choice. For Amazon, delivery is one of the most important pillars of their business considering that one of the main selling points of the yearly Amazon Prime membership is free two-day shipping. In a mutually beneficial contract, Amazon and USPS agreed on strict guidelines such as adding a delivery day on Sunday for only Amazon’s packages and ensuring the priority delivery—even if the workers may be overworked.

Amazon’s priority on shipping is reflected in their fiscal statements as well, but takes up a significant part of their expenses. In 2015, Amazon spent $11.5 billion on shipping, 46 percent of its total operating expenses that year. With the holiday season coming up, Amazon is reportedly hiring thousands of delivery drivers because they are expecting to send 8.5 million to 9 million packages per day during the peak parts of the holidays, according to the president of the delivery tracking and management technology company ShipMatrix, Satish Jindel. This means the tech-giant is looking to hire seasonal workers in addition to the services the existing American delivery companies such as the U.S. Post Office, FedEx, and other partners and is only one example of how they spend their money on shipping.

 

With such a budget, allocating a little under half of the operating budget on shipping, Amazon has been looking at alternative options for their shipping. Earlier this year in February, Amazon announced that they would begin testing a new method of delivery service to replace United Parcel Service and other services and is supposedly called Ship with Amazon or Shipping with Amazon. Amazon said in a statement, “We’re always innovating and experimenting on behalf of customers and the businesses that sell and grow on Amazon to create faster, lower-cost delivery choices.” Sooner or later, these preparations will shake the industry of parcel delivery.

 

References:

 

https://www.bloomberg.com/opinion/articles/2018-04-04/congress-not-amazon-messed-up-the-u-s-postal-service

http://about.usps.com/who/profile/

https://medium.com/s/powertrip/confessions-of-a-u-s-postal-worker-we-deliver-amazon-packages-until-we-drop-dead-a6e96f125126

https://www.bloomberg.com/opinion/articles/2018-02-09/amazon-s-delivery-dream-is-a-nightmare-for-fedex-and-ups

https://www.nytimes.com/reuters/2018/11/05/business/05reuters-amazon-com-delivery.html

 

Spotify Buys Back their Company

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Just two days ago, one of the largest music streaming providers, Spotify, announced that it would buy back up to $1 billion dollars worth of stock. This technology company is most well known for their smooth streaming services and custom designed playlists, and new weekly tailored music picks for the user and with these features, Spotify has accumulated at total of 191 million active users per month. In addition to the users that listen for free (with advertisements), a total of 87 million users have a premium subscription. But even with active usership, Spotify was unsatisfied with the state of their company.

 

Image result for spotify

The buyback of Spotify’s own stock is essentially rooted in their internal belief that the company is valued higher than the current stock prices— the stock is undervalued in their eyes. To explain the logic behind the belief, it is important to examine that with the rise of competitors such as Amazon Prime streaming service and Apple Music, the competition in the music streaming sphere has intensified recently. In addition to this competition, Spotify as a company has been keeping up but sales have recently been declining. The revenue rose 31% but according to the third-quarter reports of 2018, the operating loss was at $6.8 million. When these figures balance out, this can understandably be seen as grounds for concern for the company, investors, and stakeholders.

 

Just six months ago in April, Spotify decided to go public and become a publicly traded company. Since their IPO or initial public offering, investors have only been skeptical about whether it is a good investment and the revenue was relatively modest. Since the IPO, the company lost nearly $10 billion in market value. In short, the business is struggling to grow with less shareholding power, and thus, executive power to make the risky business decisions needed to challenge the growth rate.

 

In buying back their stock, Spotify’s intends to invest in itself through allocating their capital—the total outstanding shares of the company shrink. Spotify is sending a clear economic message into this world: even if no one believes in us, we believe in ourselves. This repurchase program is projected to begin in the fourth quarter of this year and generally end by late April of 2021. This is a long time—in fact, this means Spotify will be actively buying back stock by the time I graduate college—but by the end of this period, Spotify is confident in their ability to grow as a company.

Joe Costigan, the director of equity research Bryn Mawr Trust explains, “corporations are confronted by this and there are two things that they know: If they buy assets outside of their industry, they’re probably not going to get the returns they need to justify their purchase. If they buy their own assets back via share repurchases, it’s more of a known quantity,”

 

Typically, buybacks of stock are often a response to the state of the market such as when the GDP is stalling and there is not enough spending on the government or consumer level. Yet in the case of Spotify, the low-growth situation leads decision makers to avoid creating additional capacity. 

 

In terms of the relevance of Spotify with the larger state of our economy, the buyback of shares sometimes occurs in a bull market. In the midst of ample competition, it is strategic to work towards improving a company and increasing value. A more streamlined decision making process leads to better allocation of Spotify’s capital, which theoretically should increase productivity levels and create the possibility of absolute advantage within the music streaming sphere.

 

 

Spotify plans to buy back up to $1 billion in stock

https://www.businesswire.com/news/home/20181105005454/en/Spotify-Announces-Stock-Repurchase-Program-1.0-Billion

https://www.ntu.org/foundation/detail/what-do-stock-buybacks-mean-for-the-economy

https://www.marketwatch.com/story/why-stock-buybacks-are-losing-their-fizz-2014-06-15

 

Venezuela Attempts to Stay Afloat

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Millions are hungry, ill, and suffering from lack of food and basic necessities such as a police force to patrol the increasing crime in Caracas. In the capital, local residents are constantly rushing to supermarkets and gas stations, waiting in line for hours. Many are even resorting to eating rotten meat. The International Monetary Fund recently declared the lack of stability in the bolivar, predicting Venezuela’s projected inflation rate to be over 1 million percent by the end of 2018. Every day, the foundational pillars of Venezuela’s economy are rapidly changing: the prices of bread, the exchange rate between the US Dollar and the bolivar, and the trust of the Venezuelan people.

How did a prosperous country spiral out of control in less than two decades? It wasn’t always like this. Blessed with the largest oil reserves in the world, Venezuela has had a stable economy based on mostly oil revenue since the 1990s. In fact, they had such immense wealth, with the purchasing power parity (PPP) for  GDP per capita was placed just over $16,000 in the 1990s. The economic disaster can be traced back to 1998 when Hugo Chavez was elected President of Venezuela. As he came from a similar background of poverty from the small village of Los Rastrojos in Venezuela, Chavez appealed to the lower-income individuals of Venezuela. After securing these votes, President Chavez was hit with a stroke of luck: a decade-long rise in global oil prices followed his election.

With Chavez in power, Venezuela’s dependence on oil grew— oil accounts for 96% of Venezuela’s exports and over 40% of the government revenue and the rise in global oil prices felt like a jackpot. The flourishing government finances drove Chavez to make a series of economic decisions that tend to be appealing to politicians—good in the short run but disastrous in the long run. Chavez’s socialist regime began to increase spending but as oil revenues declined, they also increased their borrowing. According to the Financial Times, the figure was around $25 billion during 2004 and just last year, the best estimate is around $178 billion. To continue to appeal to the poor, Chavez then spent this new wealth on food subsidies, health care for the poor, and improved education. Although these social programs certainly raised the quality of life for lower-income families, they were unsustainably funded, relying heavily on one major industry—oil. In fact, Chavez did not actively attempt to lay off the dependence Venezuela placed on oil exports. Instead, he zeroed in on welfare programs to the point that his unrestrained spending led to a deficit.

After Chavez died in 2013 and Nicolás Maduro succeeded Chavez as President of Venezuela, the oil prices plummeted in 2014. The U.S. Energy Information Administration states that in June of 2014, crude oil cost $112 per barrel (bbl) and by December, it went down to $59 per barrel. The Venezuelan economy took the hit hard as the GDP shrunk by 30 percent during a four-year span between 2013 and 2017. As Venezuela’s government revenue decreased dramatically, the government slowly realized the gravity of their problem of heavy dependence on one resource. In the past, Venezuela’s wealth and focus on oil exports led them to import more of their food and consumer goods. In 2013, food accounted for 18.41 percent of all of its imports.

President Chavez’s previous overspending on welfare created large fiscal deficits and the economy kept shrinking due to cheap global oil prices. President Maduro decided to simply print more money to sustain the welfare programs and import more food and consumer goods, but that is an extremely short term solution to their problem. Venezuela was trapped: the more bolivars (VEF) it printed to fund imports, the more the currency depreciated. The increase in imports for everyday goods, in combination to years of added regulations from the Venezuelan government (such as price control) and inefficient operations of nationalized businesses, caused domestic production of food and goods to shrink. With greater reliance on the government for the distribution of goods and services, only a few US dollars to spend on imports, and a decrease in welfare funding, there was a sudden scarcity of products within Venezuela. As the bolivar (VEF) became worthless, no one wanted to buy Venezuela’s debt or lend them money.  President Maduro tried again to mitigate the bolivar’s decreasing value through various policy attempts that proved to be equally as disastrous; he raised the minimum wage by more than 3,000% and later hacked off 5 zeroes on the bolivar currency. But Venezuela fell short of achieving long term economic stability and these actions only elicited a deeper inflation crisis. Finally, the short term effects of Chavez’s policy to exchange welfare programs for popularity had worn off and the negative long term consequences began to emerge under Maduro.

Under Maduro, the normally subsidized medicine and food were not available to the poor because the government ran out of money and supplies. During this time, around 84 percent of the population identified as poor. To make matters worse, in the midst of this crisis, political corruption permeated the economy. Nicolás Maduro tweaked the political system to ensure that he could take advantage of the nation’s resources by using a complex currency system. While the bolivar became worthless and the demand for a more stable currency such as the US dollar arose, Maduro set the official government exchange rate at 10 bolivars per $1. However, only allies and elite friends of President Maduro could access this special rate, who then imported food and goods and sold them on the black market for a massive profit, to ultimately ensure that Maduro could maintain his power through near total control of goods and the cooperations of his allies. Most Venezuelans had no choice but to turn to the black market to access US dollars with exchange rates in the tens of thousands of bolivars.

Running out of options, Maduro turned to issuing local currency debt to raise money for Venezuela. However, the Trump administration responded by restricting Venezuela from selling their government debt in the US, making it more difficult to access foreign currencies and get out of their inflation. But most ambitious of all, Maduro is currently betting on a new type of currency to solve the economic crisis: the Venezuelan petro. It is an attempt at a virtual currency or cryptocurrency backed by commodities such as oil, gas, gold, and diamonds and intended to supplement the Venezuelan bolivar fuerte (VEF) while aiding in the mission of overcoming US sanctions. On the first pre-sale day, the petro raised $735 million and current prices are $62 for a barrel of oil. The Venezuelan government argues that this revenue could help pay part of the country’s obligations and is hopeful to one day use the petro as a daily currency.

Financial experts from the Washington Post find this ambitious plan incredibly risky. Though they are linked to oil reserves, the initiative can only be a superficial solution as long as the central bank continues to print money to cover government spending, which is what caused the inflation in the first place. More importantly, there is a lack of credibility. Implementing the petro is not the best policy because it circles back to the idea of trust—if no one believes in the cryptocurrency, no one is likely to use it. According to the Washington Post, “few Venezuelans appear to have faith in the fix (the petro), with many expressing broad fears that it may only make the situation worse.”

Often, economics are a self fulfilling prophecy and an economy’s state is rooted in social perceptions and belief. In fact, there is speculation of whether the petro is backed at all, as there is no evidence of active oil drilling or indication which reserves are used to back the currency. At the same time, because social perception influences economic actions, Venezuela is looking to legitimize the petro through active participation in using the petro as currency. An example is Venezuela’s expressed desire to pay for importsfrom Brazil with the petro. Another way Venezuela is implicitly forcing their citizens to partake in the petro initiative is in processing fees of one of the most important government issued items: the passport. The financial crisis has Venezuelans dwelling in social unrest. In fact, an estimated 2.3 million people have been fleeing the country since Nicolás Maduro’s ascendance to presidency in 2014 and is said to be the biggest migration of people in Latin America’s recent history. With large flocks of people emigrating, Ecuador and others are tightening immigration laws and requiring passports (reported to take up to two years to approve) to restrict access. Venezuela’s mandate that passport fees are to be paid in petro may be an economic policy move, but it is also a political decision from President Maduro. The past policy attempts to fix Venezuela’s economy from both Chavez and Maduro have been vast but short-sighted, yet one thing continues to ring true: in the root of Venezuela’s economic crisis lays political turmoil.

 

 

SOURCES:

https://www.economist.com/the-americas/2018/08/25/a-rude-reception-awaits-many-venezuelans-fleeing-their-country

https://www.reuters.com/article/us-venezuela-economy/venezuelas-annual-inflation-hits-488865-percent-in-september-congress-idUSKCN1MI1Y6

http://go.galegroup.com.libproxy1.usc.edu/ps/i.do?id=GALE%7CA524864014&v=2.1&u=usocal_main&it=r&p=AONE&sw=w

https://www.washingtonpost.com/world/the_americas/maduro-has-a-plan-to-fix-venezuelas-inflation—-which-may-make-things-worse/2018/08/19/7a6ee048-a3bf-11e8-ad6f-080770dcddc2_story.html?noredirect=on&utm_term=.87c509cca661

https://search-proquest-com.libproxy2.usc.edu/docview/398286313?accountid=14749&rfr_id=info%3Axri%2Fsid%3Aprimo

https://www.forbes.com/sites/garthfriesen/2018/08/07/the-path-to-hyperinflation-what-happened-to-venezuela/#4c9a7a3215e4

https://cointelegraph.com/news/venezuela-mandates-passport-fees-must-be-paid-in-controversial-cryptocurrency-petro

https://www.scmp.com/tech/blockchain/article/2167274/want-passport-venezuela-tells-citizens-pay-travel-document-state

https://www.aljazeera.com/news/2018/02/venezuela-petro-cryptocurrency-180219065112440.html

https://www.theguardian.com/world/2018/aug/20/venezuela-bolivars-hyperinflation-banknotes

https://www.imf.org/external/datamapper/PPPPC@WEO/OEMDC/ADVEC/WEOWORLD/VEN?year=2017

https://tradingeconomics.com/venezuela/consumer-price-index-cpi

https://www.cato.org/research/troubled-currencies?tab=venezuela

https://www.economist.com/finance-and-economics/2017/04/06/how-chavez-and-maduro-have-impoverished-venezuela

https://ftalphaville.ft.com/2017/10/03/2194217/how-did-venezuela-get-to-this-point/https://www.eia.gov/todayinenergy/detail.php?id=19451https://www.nytimes.com/interactive/2017/07/16/world/americas/venezuela-shortages.html

 

The Plastic Straw Effect

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The city of Seattle reports that while people who need straws for medical use are allowed, businesses in Seattle must adhere to the new law, or else face a $250 fine. As Seattle becomes the first major city in America to ban plastic straws and utensils, there has been a momentous movement catching up with the American public. Companies such as Bon Appetit who bought 16.8 million straws in a year, but have also joined in on banning plastic straws. Since then, Starbucks announced that they intended to go “strawless.” McDonalds, Dunkin’ Donuts, Alaska Airlines, and American Airlines are just a few of the long list of companies that jumped on the bandwagon. From there, California became the first state to regulate the distribution of straws in bars and restaurants as a “straws-upon-request” policy.  

Image Courtesy of Starbucks Newsroom. 

In the past, the widespread use of plastic, one-time use straws was actually to ensure public health was regulated. Straws were implemented for its use as good hygiene and public health and combat the “common cup,” a cup many people drank from and people dying from uncleanliness. In fact, cities began issuing ordinances that wrapped drinking straws were essential in public eating places. The straw was a symbol of good hygiene and a good thing.

 

So how did this movement suddenly pick up momentum?

 

Many believe the catalyst to the awareness of plastic straws is this viral video of a Texas A&M PhD student extracting a plastic straw from a sea turtle. In a painfully long 8 minute long video, what was believed to be a parasite is pulled from the nostril. With blood dripping down and sorrowful moans from the sea turtle, the researchers angrily exclaim “don’t tell me it’s a freaking straw.” This impactful video started a change in attitude, ultimately pointing towards a change in consumer perception of straws. It started a trend that everyone is now following.

 

As the demand of straws starts to dwindle for environmental concern, it becomes clearer to economists and behavioral psychologists on how to track the rationale on how consumers are making decisions and what motivates them.  For example, customers have personally started campaigns of signatures to call companies to change their plastic straw policies: McDonalds had over 50,000 signatures, Disney had over 35,000 signatures, and Subway had 100,000 signatures.

 

To parallel the sudden change in consumer demand for plastic straws, CNN Money reports that instead, the demand for paper straws (Aardvark, maker of premium disposable tableware) sales increased by 5000% from last year. The company is struggling to keep up, sometimes delaying shipments of straws for up to 12 weeks to some customers.

 

This plastic straw phenomena exhibits economic consumer behavior. In the sense of economics, a consumer is simply someone who makes demands in the market. A producer is try to tailor its production to ensure it sells, and thus creates supply to respond to the consumer’s wants (or demand). Because consumption is based on satisfying the human wants, when the consumer wants something different— in this case, a different material straw for personal and environmental ethical reasons— then the consumption and demand reflects what the “human want” is. Additionally, Claire Sprouse, a consultant for the beverage industry in conservation education, states that “If you think about the greater picture of carbon footprint, straws are a kind of a small component, not like the most engaging way for us to be engaging with the environmental issues as a community. But I think it does have a benefit.” Consumers are active participants in this strawless movement due to personal perception and want, suggesting that their behavior is not always the most logical.

Indexes and Indicators

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If you’re reading this, you’re most likely in college or at least very familiar with higher education. If so, you may be aware of the yearly increase colleges make to their final Cost of Attendance (COA). Yes, part of that may be because of the increased expenses and simply an administrative decision, but there is another underlying reason the cost goes up in small (though sometimes not-so-small) increments. Take the tuition of University of Southern California, for example.

 

The Widney House, then known as Hodge Hall at the University of Southern California circa 1880. 

The original cost of tuition when USC was first founded in 1880 was a whopping $15.00 per term. Today, that is about the cost of a single dining hall meal at USC (if not cheaper). But if we examine even the past few years, the tuition at the University of Southern California has increased 3.5% or more every year. The economy experiences inflation and the American dollar’s value starts to depreciate. In other words, you have to start paying more money for the same products, like your panini sandwiches.  

Graphic made by Baylee Nagda from the Daily Trojan Newspaper

 

The inflation, or the “weaker dollar,” versus deflation, or the “stronger dollar” refers to how much value the same dollar bill holds. Though it is important to note that this is not true in every case—sometimes, the rising prices may simply signal a bustling economy and the dollar will increase along with the stimulated economy. 

But why is this important? The strength of the dollar in any nation’s economy can be a strong economic indicator. One way of measuring inflation is through the Consumer Price Index, or CPI for short. It takes a general list of essential things most Americans or the citizens of a certain nation buys and tracks its cost. Seeing where the trend lies in the Consumer Price Index can let us know as Americans, consumers, investors, and global citizens how the foreseeable economic future will be shaped to some degree. This knowledge can influence what we choose to do or not do with our money, influencing decisions.

 

In more specific breakdowns, these statistics are differentiated by Urban consumers and non-Urban consumers. The Bureau of Labor Statistics from the US Department of Labor reveals a monthly Consumer Price Index summary— this past month in July of 2018, the Bureau reported that the CPI has increased 0.2 percent.

 

Graphic by George Petras from USA Today. 

 

However, Dan Caplinger of the USA Today speculates that the inflation rate isn’t always accurately reflected in our everyday lives. He explains that the statistics for the Consumer Price Index that is taken are averages of the general population. This includes different categories of the workforce such as employed, unemployed and the growing group of the baby boomer generation that is starting to retire. Thus, different age brackets and income brackets. Age inevitably has a stronghold of influence on our personal spending, but also the allocation of money even within our “necessities.” An example would be that health care is most likely to cost more the older you get. Yet, some may argue that in the bigger picture of economic activity, a specific demographic will only change consumer behavior so much. Ultimately, consumers will spend when the economy is favorable and spending becomes attractive. 

 

Understanding that the primary goal of CPI statistics are for tracking the economy rather than personal accuracy is important to note. This means that the CPI statistics are not going to be accurate in every neighborhood of the United States, but are referenced as the average cost of an item during a certain time period. Considering all of these factors, we can extrapolate from this data to give us guiding clues about how the economy is going to behave.