Berkeley Economic Review presents Issue 4 IN THIS ISSUE The Unrealizable Libertarian Dream • The Attention Economy • The Next Global Depression • More STAFF TABLE OF CONTENTS EDiTORS-iN-CHiEF STAFF WRiTERS 4 From the Editors’ Desk 18 Political Polling Yechan Shin Ally Mintzer Vinay Maruri Ani Banerjee Caitlin Hartley 5 The Unrealizable Libertarian 21 Analysis of Taiwanese EDiTORS Davis Kedrosky Dream Economic History and Parmita Das* Grace Jang Policies Abhishek Roy Howard Yan Amanda Yao Jeffrey Suzuki 8 Paying Attention: The Andreas Maass Konnor von Emster Attention Economy 24 Is the Next Global Depression Andrew Babson Nicolas Dussaux Imminent? Chazel Hakim Olivia Gingold Courtney Fung Pak Hei (Thomas) So 10 An Ill Economy: The Edgar Hildebrandt Rojo Savr Kumar Economic Toll of the 27 Spring 2020 Essay Contest Lucia Dardis Vanessa Thompson Coronavirus Jennifer Jackson Yash Rajwanshi Pedro De Marcos 28 Berkeley Economics Review’s Pinja Johanna Vuorinen LAYOUT EDiTORS 15 A New Breath for U.S. Spring 2020 Journal Preview Raina Zhao Antitrust Regulations Sabrina Lerskiatiphanich Anne Fogarty* Sean O’Connell Chelsea Gomez-Moreno Hannah Heinrichs PEER REViEW Kara Jia Natalia Ramirez Hayden Davila* Charlie McMurry David Lyu Mission Statement: In Berkeley Economic Review, we envision a platform for the recognition of quality Eugenia Zhang undergraduate research and writing. Our organization exists to provide a forum for students to voice Shiyun Hu their views on current economic issues and ultimately to foster a community of aspiring economists. Xilin Yin Disclaimer: The views published in this magazine are those of the individual authors or speakers and Vatsal Bajaj do not necessarily reflect the position or policy of Berkeley Economic Review staff, the UC Berkeley Venkat Palanati Economics Department and faculty, or the University of California, Berkeley in general. *Department heads Zhenhao Lu 2 3 Berkeley Economic Review econreview.berkeley.edu THE UNREALiZABLE FROM THE EDITORS’ DESK LiBERTARiAN DREAM Dear BER Reader: BY NiCOLAS DUSSAUX node was deficient or was sending wrong information? The field of economics, in its goal to quantify and understand the mechanics which control our daily lives, too often dehumanizes the very subjects it strives to care for. In 2019 Facebook announced the creation of a new The Libra developers came up with a solution called the Too often, the individuality of people is lost in the great generalization of economic cryptocurrency, called Libra. Even though Libra is usually Libra Byzantine Fault Tolerant consensus (LibraBFT theory. Berkeley Economic Review’s Equilibrium, serving as the voice of young referred to as “Facebook’s money,” the project is in fact consensus). The Byzantine Fault Tolerant consensus is economists at UC Berkeley, strives to make economics accessible, relatable, and carried by the Libra Association, a non-profit headquartered a common process in the blockchain that consists of educational to all of our readers. It is our hope that by reading our publication, you in Geneva and San Francisco. The goal of the Libra defining a common behavior for all nodes in reaction to understand that the field of economics can be more than just statistics and numbers; Association is simple: to create a currency with two billion a deficiency or hostile manipulation. In the case of the economics is just another way to visualize the story of us. users that would not have to deal with frontiers, regulations LibraBFT consensus, the system would allow up to one or speculations. Their aim is to foster financial inclusion third of deficient nodes to validate a transaction, which As such, our articles cover a wide range of topics, from health concerns, political by challenging the dominance of Wall Street brokers and would make it both secured and efficient. However, only tensions, and regulatory battles, to the ever-evolving world of technology. Every article central banks in the financial system. Nevertheless, Libra the Libra partners would be allowed to add blocks to the presented conveys a unique and important issue of our time, and has been chosen to has been received with a lot of defiance from the public. ledger, which would speed up the transactions and make demonstrate the wide reach of the economic field. The articles were relatable and This article will examine some of the reasons why the Libra it a more eco-friendly alternative to Bitcoin. The Libra important to us, and we hope that you, as the reader, will agree. project would not be able to meet its own expectations and Association plans to move to a decentralized system once why the goals of the Libra Association are problematic the scalability problems are settled, but it does not seem As our nation and the world go through an unprecedented and difficult time together, from a practical standpoint. attainable anytime soon. it is our desire that this magazine can present you a moment of distraction from the chaos. The 68 staff members of Berkeley Economic Review’s eight departments and Like every other cryptocurrency, Libra uses blockchain The biggest difference between the cryptocurrencies that executive team have worked hard to produce a diverse and interesting publication for technology. This technology consists are currently being exchanged and the Libra project is your reading pleasure. of registering transactions on volatility. Bitcoin, Ethereum and XRP are the most traded the network in blocks that cryptocurrencies and their value regularly surges and With gratitude and pride, we present to you the 4th issue of Berkeley Economic are successively added to a slumps. Since the Libra Association wants Libra to be a Review’s magazine, Equilibrium. chain, which accounts for all stable currency that would not lose its function as a wealth transactions on the network. reserve or means of exchange, currency stability is their Several transactions are stored number one goal. However, pegging Libra Yechan Shin & Vinay Maruri in each block. This technology to the dollar, operating through a Editors-in-Chief relies on a distributed ledger, mechanism Berkeley Economic Review which means that instead of being k n o w n overseen by a central authority, a s transactions are validated by a network of computers, called nodes. These nodes verify that the a information contained in the block —the container of the transaction—is true, then add the transaction to the database. Each block is assigned a single number, called a hash, which allows for inviolability. For instance, if a hacker wanted to hack the blockchain by modifying the information in a block, he could not do it without creating a new block, with a new hash, which would make the hack very visible and easy to stop. Due to this, the system is very transparent and almost inviolable. But how would the system react if a 4 5 Berkeley Economic Review econreview.berkeley.edu currency board, would be very expensive and very do anything that would decrease their trustworthiness difficult since a currency board consists of repurchasing in the eyes of regulatory officials. These episodes were the currency being pegged to the dollar with dollars in seen by the public as clear setbacks for Facebook and the order to maintain its value. It has failed several times in Libra Association. Nevertheless, the Libra Association still the past when used in countries with limited resources, has about thirty members. It must not be forgotten that such as Argentina in the early 2000s. Therefore, instead of the economic and technologic might of Facebook allows guaranteeing no fluctuations, the Libra Association created them to use their two billion users as leverage in a very the Libra Reserve. The reserve will acquire as many stable efficient manner. Moreover, the partners of the association distanced itself assets as customers purchase Libra. Simply put, this would allow for a very rapid scalability of the Libra from its subsidiary, means that purchasing one Libra by allowing the customers to pay Calibra, and wrote in with one dollar will allow the in their applications directly in the status of the company very Libra Reserve to purchase Libras. This would allow it to clearly that it would be impossible for one dollar worth of overcome the problem Facebook to use the financial information stable assets, such as most cryptocurrencies collected by Calibra on its customers in any manner. safe government face: they are not easily Nevertheless, we still know very little about who leads the securities, used and accepted. Libra Association and as such it is currently impossible mortgage backed for the public to assess the Association’s trustworthiness. accounts securities, and If the Libra In addition, despite claiming it would not do it, the Libra than in other financial Association is Association is going to perform monetary policy, a very Venezuelan banks products with successful in technical duty that even highly skilled government officials where the value of the a competitive creating Libra, barely master. This would tie very closely the monetary deposit shrinks daily. Therefore, credit rating. it would policy of the Fed and the one performed by the Libra this is probably the most ambitious For now, create huge Association. attempt in history by a private entity to compete the Libra challenges with the state on one of its regalian duties. Association for regulatory The biggest threat posed by Libra is to economic and plans to use entities. The monetary sovereignty. Although in the distant future It is widely believed that privately-issued money is a dollars, euros, first partner competition between the euro or dollar and Libra could libertarian idea. Libertarians argue that the coercive japanese yen, of the Libra power of the state must be used only if it is absolutely british pounds Association necessary. Therefore, it must reduce as much as possible and Singapore is Calibra, its intervention in the economic system even by letting dollars, which a Facebook “THE BiGGEST THREAT money be controlled by private agents.