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To Kill a Licensed Driver September 30, 2009

Posted by Avu in Data Response, Section 2, The Economist Outside of Class.
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toyota-logoAccording to a New York Times Article, Toyota recently has to recall 3.8 million vehicles, including very popular models, due to a problem in manufacturing which renders the acceleration stick useless, causing accidents. The accidents are related to the floormats placed in these cars combined with the design of the acceleration pedal. This would affect supply and demand hugely. Firstly, people would tend to mistrust Toyota as a company, leading to fewer sales. This is an example of consumer’s tastes and preferences being affected, causing demand to decrease. Furthermore, the cost of recalling and remaking the dysfunctional parts of cars would lead to an increase in production costs, causing supply to shift to the left. This would drive up the actual cost of the cars.With higher costs, quantity supplied would increase and quantity demanded would decrease, leading to a surplus.

Toyota will face a surplus

Toyota will face a surplus

My Two Cents. I’m Right. September 30, 2009

Posted by Avu in Section 2, The Economist Outside of Class.
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Economists ask the simple question that seems to plague us as a society so grievously. Why? Why does the economy fail? Why are there starving people? Why did Bush bomb the towers? Simply enough, all the world’s problems can be blamed on the European Union and the United States. For supposedly forward thinking market-focused economies, these powers are perhaps the greatest barriers to a free market. Trade is quite well supported in these countries, as it should be.

The World needs to remove subsidies

The calamity comes from the trade barriers. Tariffs absolutely destroy up and coming economies, quotas do the same, but none are so catastrophic as subsidies. One could focus on a single aspect of the market, say food, to notice the destructive properties. The EU and USA selfishly provide subsidies to farmers. This leads to several factors. Firstly, subsidies encourage laziness, which is morally questionable. Secondly, more relevantly, subsidies allow for farmers to sell their crop at lower prices. Not simply slightly lower, but rather humongous so. So much so, in fact, that these powers effectively eclipse all others through their market dominance. This leads to local farmers in poorer, agriculture driven economies, to not be able to wholesale their crop, leading to eventual deterioration. Now if one could indulge me in a fantasy I should share one. Imagine these trade barriers being obliterated. Due to purchasing power and living conditions, African and Asian farmers would suddenly have market dominance due to their inherently lower prices for crop, shifting the money to these areas. With the extra provision of micro-credits to these areas, the agriculture district in developing countries would boom. Simultaneously, farmers in the USA and EU would face the brink of unemployment. Is this bad? Hardly. One could witness, hypothetically, the emergence of creative destruction, in which, devastated by the destruction of farming opportunities, farmers would search for other venues, potentially leading to better efficiency. Market sharing could also be achieved through certain amounts of ingenuity, as one can witness from New Zealand. By shifting the market dominance however, world hunger would be solved, as the allocation of resources would ideally move to where they are most needed. This is good. From our learning we have learned that specialization helps efficiency and therefore success. To establish worldwide specialization would only be logical. It would force competition, discourage competition, and increase global GDP by several trillion dollars within a matter of years. This needs to start with the removal of trade barriers. This is my two cents. I’m right. I usually am.

The world needs to move the market to Africa

If we remove subsidies, hunger will be fixed and the world will be richer.

The Implications of Japan’s Power Shift September 15, 2009

Posted by Avu in Section 2, The Economist Outside of Class.
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On September 16, 2009, Yukio Hatoyama will formally ascend to power as Japan’s new prime minister. By doing so, he, and his liberal Democratic Party of Japan (DPJ), will effectively smash the nearly spotlessly uninterrupted rule of the aptly named conservative Liberal Democratic Party (LDP). The LDP has enjoyed a political monopoly for half a century, only deterred by a short, bickering makeshift left-wing tenure for eleven months in 1993.
Political analysts and economists have been watching these unfolding events, guessing what could only be imagined in the infinite beyond. Right-wing hounds would accuse the new PM of anti-laissez faire socialism, while far-leftists appear to be skeptical about his seemingly money-oriented political style. While the parties appear to differ ideally, it seems unlikely that any substantial change will occur. The possibilities are unlimited, however.

PM Hatoyama

Prime Minister Hatoyama

Hatoyama is quite vocal about his views on the recession and the United States, citing “globalism” and “US-led free market fundamentalism” as the premier perpetrators behind the current economic crisis. He has further expressed his opinion against US military bases in Japan, though wishes to keep friendly relations with the US. In the case that US-Japanese relations deteriorate, one could only imagine the vast economic repercussions.
Others have found a likeness between Japan and France, in becoming a co-leader in a powerful regional bloc, with China and Germany, respectively. However, cohesion between the Asian powers would be trying, while it was relatively smoother in Europe. This is related to post-occupation anathema and quarreling over resources rather than compromise, as well as a huge gap in GDP. It is however foreseen that Japan could, like France did, experience economic growth through this policy.
Growth is, unfortunately, at the heart of the struggle. Japan needs to boost domestic consumption to make up for falling exports, as export partners are suffering from reduced demand. Japan can possible only increase domestic consumption by integrating into the Asian region, rather than focusing globally. This would mean investing heavily in China and Southeast Asia, rather than the US, and working with these regions on such areas as technology and energy. This would only occur with trust, which Japan is trying to achieve by stopping Yasakuni shrine visits and making financial deals.
By focusing more on Asia and separating from being almost a United States protectorate, Japan could reestablish its foothold as one of the main economic powers internationally, and become almost a middleman between the US and China, rather than a secretary of either power. To draw upon the precedents set by political analyst Atsuo Ito, Japan is wet concrete lacking a mold; Asian ties could provide this heavily needed structure.

Sources: The New York Times, Harvard International Review, Newsweek

Japan must draw closer to Asian powers to strengthen its economy, rather than relying on the USA

Japan must draw closer to Asian powers to strengthen its economy, rather than relying on the USA

Broad Social Goals September 15, 2009

Posted by Avu in Section 2.
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In our Broad Social Goals activity, we looked at the factors that make a “good” economy, and broke it down to six factors.

  • Efficiency
  • Equity
  • Freedom
  • Growth
  • Security
  • Stability

To an extent, we can argue that certain factors are unnecessary. For example, I believe that equity is highly overrated. Equality is not exactly needed for an economy to be good. Inequality promotes competition, as the economy is unpredictable when it is unequal, and people cannot be insured that their equality would be granted for lifetime. This leads to people needing to work harder to maintain in a competitive system, leading to innovations and advancements. This is of course juxtaposed with a completely equal communist economy where there is no incentive to work, and therefore no innovation or advancement. The priority in any economy is freedom, as it leads to competition and advancement.

We also looked at two articles featuring command and market economies and assigned each of these factors to them, realizing that in reality, all six are unattainable. To an extent, these concepts are contrasted, and cannot work together. For example, economic security invites government intervention, limiting freedom. This is bad.

We learned that the world isn’t perfect and neither is the economy. This is bad too.

1:1 – Thoughts on Distraction September 8, 2009

Posted by Avu in Section 1.
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I initially thought that distraction could be an obstacle to learning, but I felt that it was up to personal student discipline to deal with this. I still believe that each student has a responsibility to do what they must do to insure the best education. Arguably, as long as the student keeps up to date with his studies and completes whatever assignments must be turned in, they should be able to do whatever else is necessary to learn. This is basic responsibility, and we have been taught this since beginning school, and laptops hardly affect this issue at all. This responsibility should be similarly applied to physical care and electronic care, leaving no loopholes for students to blame the laptop for their woes. This I hold to be an unequivocal fact.

HDI and Economic Growth – Russia September 7, 2009

Posted by Avu in Russia.
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Economic growth is a condition in which an economy is producing more than it used to, graphically speaking, the PPC is moving to the right. This also results in an increase in GDP.

Economic development is a situation in which a number of beneficial developments are bestowed upon the economy, often signaled by a transition of the PPC from capital and consumer goods to merit goods such as schools and hospitals. Development is defined as a high life expectancy, high education, and high GDP per capita.

The Human Development Index (HDI) is an indicator of economic development based on dividends of three factors

-Life expectancy at birth

-Primary, secondary, and tertiary enrollment ratios

-GDP per capita

While HDI is a good indicator, perhaps the best indicator of development available to us, it is by no means perfect. It lacks certain important factors including, but not limited to, women’s rights, effects on the environment and overall political freedom. To a certain extent, there is room to grow, but we must leave it to an Oxford professor to find that room. For the time being, I will say that Russia has an HDI of 0.806, keeping it in the middle 50%, and a relatively high GDP per capita of 15,922 dollars (PPP).

This is Russia, It's cooler than you
This is Russia, It’s cooler than you.

Production Possibility Curves September 1, 2009

Posted by Avu in Section 1.
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From our exercises related to production possibility curves, we learned the choices that an economy has when choosing to allocate resources between two possible production sectors. For example, a government may have to choose between producing consumer and capital goods, using the same resources. We learned that there is no best choice on the curve, but points outside the PPC are impossible, while points on the inside are an inefficient use of resources. As you move along the curve, you must trade-off production units of one type of product for another. As you move along the curve you also suffer an increasing opportunity cost.