Higher Rock Education - Economics Blog

Tuesday, March 05, 2024

Economics in the News – Feb. 26 – March 3, 2024

Economics impacts our lives every day. Below are some of the top storylines from this past week related to economics.

o   Low-cost airlines JetBlue Airways and Spirit Airlines have called off their $3.8 billion merger. A federal judge in Boston blocked the proposed merger in January, citing a reduction in competition that would allow airlines more leeway to raise ticket prices. A merger would have given the combined company a greater market share in an industry dominated by four carriers – American Airlines, Delta Airlines, Southwest Airlines, and United Airlines.

By backing out of the deal, the terms and conditions state that JetBlue must pay Spirit a breakup fee of $69 million and Spirit’s shareholders $400 million. The collapse of the deal could be difficult for Spirit because it remains heavily indebted and has not turned a profit since before the COVID-19 pandemic. [The New York Times]

o   A community in Florence, S.C., is fighting back after developers approved a subsidized project to build 60 apartments within the affluent part of town. As neighbors found out and vowed to block it, the project was re-zoned. That situation has raised awareness on how a study of forces that prevent low-income families from opportunity-rich neighborhoods.

A shortage of affordable housing is an issue across America. Nearly two-thirds of low-income renters face “severe cost burdens” and spend more than half of their income on rent and utilities. The impact on children who grow up in low-income neighborhoods is severe, according to studies. Moving to better neighborhoods, children gain the potential to increase the average lifetime earnings by an average of $200,000. [The New York Times]

o   The majority of internet traffic between Europe and East Asia runs through undersea cables at the bottom of the Red Sea. The cables route into the narrow strait at the southern end of the Red Sea. The cables have always posed a risk for the telecom infrastructure because of the ship traffic, raising the likelihood of an accidental anchor drop striking the cable. But the tensions and attacks by Iran-backed Houthis in Yemen have escalated the risks.

Submarine cables can be simpler and less expensive to build than overland routes, but cable operators report an estimated 150 service calls mostly caused by accidental damage from fishing or anchors at the bottom of the sea. Some companies have considered ways to diversify their connections across Europe, Africa and Asia. But national regulators charge high fees or impose other hurdles to make it more difficult. [The Wall Street Journal]

o   California drivers will soon see more driverless cars on the road. Regulators in The Golden State granted approval for Alphabet’s self-driving car division Waymo to expand its robotaxi service. Expansion could see the robotaxis operate on highways in several Bay Area cities and large areas of Los Angeles. It’s a massive expansion despite concerns about the impact that driverless cars will have on city streets. 

Under the approval, the robotaxis are allowed on roads and freeways at speeds up to 65 miles per hour. Waymo has been offering 24/7 driverless taxis in San Francisco and Phoenix for months and has been testing cars on California freeways with a safety driver behind the wheel. The approval is despite opposition from local officials who tried to halt the expansion, arguing that they should have more power and control over the technology on their streets. [The Washington Post

o   The United States Department of Defense is increasingly relying on artificial intelligence (AI) in warfare. The department’s primary efforts, known as Project Maven, has located rocket launches in Yemen and surface vessels in the Red Sea. Other countries, such as Israel is also relying on AI technology, using it to make targeting recommendations in Gaza. Ukraine is also utilizing AI technology in its efforts to fight back against Russia.

The use of AI in combat is controversial among military leaders. Advocates consider that combat will soon take place at a faster pace than the human brain can follow. But military personnel opposed are reluctant to entrust their lives to the technology. [Bloomberg

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