Higher Rock Education - Economics Blog

Tuesday, January 10, 2023

Economics in the News – Jan. 2-8, 2023

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

o   Ridership on several of America’s largest mass-transit systems has not recovered from the COVID-19 pandemic. Many commuters are only using public transit a couple of days per week, because of businesses allowing employees to work from home at least part of the time. Trains in major cities such as New York or San Francisco are operating at even lower capacities on Monday and Friday. In addition to fewer workers going back to the office, a rise in crime has deterred others from riding public transit. 

Historically, public transit is funded by a combination of rider fare and public money. The Federal Transit Administration said that fares, on average, make up about one-third of the operating income for the transit systems. Decreased ridership and deteriorating funds provided by Congress in the COVID-19 relief bills have left experts scrambling. The New York Metropolitan Transportation Authority has announced cuts to their Monday and Friday schedules and increased rider fare prices this year. Federal funds for San Francisco’s Bay Area Rapid Transit are expected to run out in 2025, which would create a budget gap of $200 million. Authorities say that without a new funding stream, BART would need to implement service reductions. [The Wall Street Journal]

o   Officials from the United States Food and Drug Administration approved an Alzheimer’s drug that has been shown to slow the early stages of the disease modestly. The drug was approved for patients with mild or early cases of dementia. 

Leqembi – the drug produced by Japan’s Eisai and United States partner Biogen – attacks the disease’s underlying biology. It is the first drug to convincingly show to slow the decline in memory, reasoning, and communication that an estimated six million Americans suffer from. While the drug is not a cure, it can delay cognitive decline by several months. Eisai said that the drug will cost $26,500 for a typical year’s worth of treatment. [Associated Press]

o   A tight home market and rising interest rates have forced many prospective first-time homebuyers to remain on the sidelines. Owning a home is and remains a critical part of achieving the American dream and provides a key avenue to building wealth, but many people are unable to afford a home in the current climate. What options are available for prospective homebuyers unable to compete with the high asking prices and all-cash offers? 

Homeownership has been a vital part of the American dream, especially since more people moved to the suburbs following World War II. The wealth difference between homeowners and renters is considerable. Homeowners often have higher incomes and have a greater ability to invest or build their savings. Several options exist for renters, including downsizing and moving to another region. Another option, depending on the excess funds available, is to build wealth by investing in stocks and bonds. [NPR]

o   Since the start of 2022, Tesla’s market value has fallen from $1.2 trillion at the start of the year to $340 billion at the end of the year. That’s a more than 70 percent decline in value, placing company CEO Elon Musk on the wrong side of history after he became the first person ever to lose more than $200 billion in their personal net worth. Tesla remains the world’s most valuable automaker based off market value, surpassing the likes of Ford, Toyota, and General Motors combined. 

One obvious explanation for Tesla’s downturn is the stock's highly speculative and volatile nature. Investors turned on them as interest rates rose and the stock market entered a bear market. Musk has also given reason for nervous investors to sell with his own actions and headlines, selling nearly $40 billion of Tesla shares since late 2021. With economists forecasting a recession in 2023, high inflation and rising interest rates have made financing a car more expensive, forcing many customers to delay their purchase or buy a more affordable option. Competition has also played a role, as automakers are expected to roll out more electric vehicle options in the coming months and years. [Bloomberg]

o   Nearly a decade ago, Netflix popularized the streaming space, allowing audiences to binge-watch their favorite shows and movies from the comfort of their couch while avoiding the burdensome commercials. In its latest release of “Kaleidoscope,” which recently debuted, viewers are provided episodes in a random order rather than a traditional chronological set-after-set. 

Streaming has changed how writers and producers write their script, focusing more on a season rather than one episode at a time. The idea has added to creator’s arsenal in creating their long-form stories and has provided new concepts for how viewers consume various shows. A generation of viewers has grown accustomed to having the ability to watch their favorite shows, movies, and games from wherever they are, without a cable box and viewing schedule. But more streaming platforms are reverberating back to the ways of traditional TV due to the realization of the costs that the business is not limitless. [The New York Times]

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