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Among many economists, there is a growing worry that Americans are not saving enough for the future, but Patrick Zboray ’07 (Stratford, Conn.) is wondering if the problem is really as dire as it seems.
Zboray, a Trustee Scholar and math and economics & business double major, questioned whether the national savings rate is being measured correctly. For his honors thesis, he is researching whether people really are saving less once the value of their assets, such as their home and stock portfolio, are taken into account.
He developed the idea for his thesis based on widely-held concerns that the national savings rate is too low, especially in relation to potential problems, such as surging Social Security and Medicare payments to the Baby Boomer population and possible government debt issues.
“People are wondering if Americans are saving enough to deal with potential tax hikes in the future. It is a pretty concerning and interesting question,” he says.
The current savings rate measures the amount of money taken out of household income and invested for capital formation. This calculation does not include capital gains and losses, only the money a person initially invests. However, the last fifteen years have seen a surge in the equity and real estate markets, indicating that people have been making money on these investments even if they aren’t increasing their savings accounts.
“They are still technically saving, and the savings rate should reflect this,” Zboray says.
“America’s standard of living depends on how much we save today,” said Ed Gamber, professor of economics and business and Zboray’s thesis adviser. “According to standard measures of the saving rate published by the U.S. government, personal saving is near zero (or maybe even negative). If we don’t save today we won’t build the capital (plant, equipment, roads, schools, factories) that we need to ensure that future generations prosper. But the current method of calculating the saving rate does not take into account that people may be saving less because the value or their homes and stock portfolios may be increasing.”
Gamber says that Zboray’s thesis “goes to the heart of one of the most important topics in macroeconomics – what determines personal consumption and saving – and it addresses an important policy issue: can or should the government do anything to encourage more saving?”
Zboray feels that Lafayette has been supportive of his research.
“All the economics thesis students are required to meet every Thursday and we are given a new task to accomplish each week. It helps you to budget your time. Lafayette really keeps on top of you to get your thesis done as efficiently as possible,” Zboray says.
Gamber believes that Lafayette is a good environment for student research because professors are willing to spend one-on-one time with students.
“In writing an honors thesis, one-on-one time is essential because a good thesis evolves and changes shape and focus through discussion between student and professor,” he says.
Following his graduation from Lafayette, Zboray plans to pursue a career as a certified public accountant.
“The skills that Patrick will acquire while writing this thesis are likely to serve him well in any occupation. Writing a thesis requires a careful reading of technical literature in economics and it also requires clear thinking, and clear and concise writing,” Gamber says. “In addition, an important element of Pat’s thesis is that he will be working with a very large data set and he will be conducting fairly sophisticated statistical analysis. These skills are valuable as well.”
In addition to his academic studies, Zboray rows on the crew team and is also involved with the investment club and the Newman Association. He is a member of Pi Mu Epsilon, the mathematics honor society and Omicron Delta Epsilon, the economics honor society.
Selected from among Lafayette’s top applicants, Trustee Scholars, like Zboray have distinguished themselves through exceptional academic achievement in high school. Lafayette provides them with an annual minimum scholarship of $7,500 ($8,000 effective with the Class of 2009) or a grant in the full amount of their demonstrated need if the need is more than $7,500.
Honors theses are among several major programs that have made Lafayette a national leader in undergraduate research. The College sends one of the largest contingents to the National Conference on Undergraduate Research each year; 40 students were accepted to present their research at this year’s conference.