Transcript Lesson 5_MBA 540x

MBA 540: Societal Economic Analysis
Week 5 Agenda
 Course Research Paper------Questions?
 Review Course Learning Outcomes
 “You Can’t Build on Broken”------Key Takeaways?
 Consider this Systems Focused Framework for Analysis … (not in our textbook)
 Key Economic Policy Issues to consider today-----roles, desired outcomes,
impacts—winners and losers, frameworks for analysis (aka. Research Paper
applications)?
 Unemployment Benefits and Minimum Wage
 International Trade: Does is Jeopardize American Jobs?
 Are (Free) Trade Agreements Good for Us?
 International Economic Growth and Development
Rick Coplen; Cell: 703-786-7181; [email protected]
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Course Learning Outcomes
• Develop an economic view of the state of the world through the
application of rigorous analysis that connects real-world issues with
core economic theories.
• Assess and interpret the challenges of the global economic
environment by exploring and evaluating a wide-range of issues that
encompass the private-sector, government and societal environments.
• Appraise the economic impact of issues and synthesize a course of
action by analyzing arguments by thinking economically, while
recognizing and avoiding logical traps.
• Envision what possible changes are likely to occur in the global
economic environment over the next decade and apply economic
concepts to develop rational market actions.
• Synthesize an understanding of the interplay between economics and the
process of creating public policy.
• Apply economic methods; build practical approaches that promote
both the short and long-term economic well-being of the organization
and society.
Asset-Based Community Development
TEDxHouston 2011
Angela
Blanchard
http://www.youtube.com/watch?v=TaX5DUGC1CU
Key Takeaways??
“You can’t build on broken.”
Model for Sustainable Economy presented in the
Guiding Principles
Causes of weak economic development and instability in
the context of capacity building systems ...
Control Illicit Economy &
Economic-Based
Threats to Peace
Economic
Macroeconomic
Stabilization
Money,
Banking, Finance
Governance
• Fiscal Policy
• Tax Collection
• Budgeting
• Monetary Policy
• Trade Policy
• Regulatory
(Human Capacity)
Policy
• Illiteracy / Uneducated
• Unskilled workers
Rule of
Infrastructure / • Health/Welfare issues
Law
Public Services • Insurgents undermine
• Land Tenure and
• Sewage
capacity building
Property Rights
• Water
• Illicit Economies
• Energy
• Corruption
• Transportation Market Economy
• Telecom
• Unemployment
•
•
Info Creation •
•
&
Hidden banking actions
Dependent on aid / DFI
Inflation/Deflation
Lack of access
People
Sharing System to credit
Employment
Generation
•
•
•
•
Agriculture weak
Inflation / Deflation
Imports > Exports
Supply Chains
Market Economy
Sustainability
Supporting economic development is ...
... all about building local capacity, not projects or handouts.
Civil Society
People
(Human Capacity)
Business
•
•
•
•
...................
Illiteracy
/ Uneducated
Unskilled workers
Health/Welfare issues
Insurgents undermine
capacity building
Education & Training
Government
Raise Minimum Wages?
Obama's State of the Union in Two Minutes
http://www.youtube.com/watch?v=nQaVPe97fCo
State of the Union 2014: President Supports Minimum Wage Increase
http://www.youtube.com/watch?v=sy2qVgh84Bg
Sen. Rand Paul and Wolf Blitzer Discuss President's State of the Union
Address - January 28, 2014 (start at 1:35)
http://www.youtube.com/watch?v=O-4vBMrhi-Y
OMG Raise The Minimum Wage (Parody)
http://www.youtube.com/watch?v=Sk9BmMvsKz4
• Goals, Actors, Interests, Negotiation (Position, Leverage, Tactics)
• Labor Supply and Demand Analysis
• Winners and Losers?
Minimum Wage
Relative to the Poverty Line
McGraw-Hill/Irwin
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Nominal and Real Minimum Wage
(1999 dollars)
McGraw-Hill/Irwin
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The Labor Market without a Minimum
Wage
W
A
W*
C
B
0
L*
McGraw-Hill/Irwin
• Value to the firms:
• 0ACL*
Supply
• Firms pay workers:
• OW*CL*
• The opportunity cost to workers:
• OBCL*
• Surplus to firms:
• W*AC
Demand • Surplus to workers:
Labor • BW*C
©2012 The McGraw-Hill Companies, All Rights Reserved
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Kicking it Up a Notch: Demonstrating the Case
Against the Minimum Wage
•
W
Supply
A
E
Wmin
W*
•
•
C
•
F
B
Demand
0 Lmin L* LS
McGraw-Hill/Irwin
Labor
•
•
Value to the firms:
• 0AELmin
Firms pay workers:
• 0WminELmin
The opportunity cost to workers:
• 0BFLmin
Surplus to firms:
• WminAE
Surplus to workers:
• BWminEF
Unemployed workers
• Who had jobs
• L*-Lmin
• Who are now looking
• LS-L*
©2012 The McGraw-Hill Companies, All Rights Reserved
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Demonstrating the Inelasticity Argument
W
Supply
E
Wmin
W*
F
C
B
Low level of DWL
Demand
0
Lmin L*
Labor
Small number of displaced workers
McGraw-Hill/Irwin
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Extend Unemployment Benefits?
There are 10,000 Virginians who have been struggling to find work for too long – and
because of Congressional inaction, they are beginning 2014 without any
emergency unemployment assistance.
For many, this makes a tragic situation potentially debilitating. These benefits help
folks keep the heat on and put a little bit of food on the table.
Earlier this week, the Senate passed the first hurdle in the fight to extend this critical
lifeline for those striving to find work. But there is a lot more work to be done to
ensure Congress passes this legislation – and I’m asking for your help.
Will you join my colleagues and me and demand that Congress extend emergency
unemployment benefits?
This shouldn’t be a partisan issue. With the help of both Republicans and Democrats,
Congress has always extended these emergency assistance programs when long
term unemployment has remained as high as it is today.
This isn’t just the right thing to do. It’s also good economics. Funds spent on this
program are reinvested in the economy quickly – spurring job creation and
economic growth.
Please help apply the necessary public pressure to get this done.
Add your name and demand Congress pass emergency unemployment benefits.
Thanks for your help,
• International Trade: Does is Jeopardize
American Jobs?
• Are (Free) Trade Agreements Good for Us?
Using Production Possibilities
Frontiers
Brazil
United States
Apples
Apples
Production
Possibilities Frontier
Production Possibilities Frontier
Coffee
McGraw-Hill/Irwin
Coffee
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Consumption Possibilities
Frontier with Trade
Apples
Consumption Possibilities Frontier
Coffee
McGraw-Hill/Irwin
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Cost of Limiting Trade
Domestic Market
P
World Market
S
P
A
S
Pdomestic
Pworld
C
F
E
B
Q’s Qd Q’d
McGraw-Hill/Irwin
Pworld
D
D
Q/t
Q/t
©2012 The McGraw-Hill Companies, All Rights Reserved
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Tariffs vs. Quotas
P
S’
A
Plimit
F
P*
C
}
Tariff
B
E
S
Limiting trade with a quota
Limiting trade with a tariff
A tariff raises tax revenue and
a quota does not.
D
Qlimit Q*
McGraw-Hill/Irwin
Q/t
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Alphabet Soup: NAFTA
• North American Free Trade Agreement
• Creates a (relatively) free trade zone in
North America.
• Includes Canada, Mexico and the United
States.
• Passage
• Envisioned by President Reagan in the 1980’s.
• Negotiated by President Bush (G.H.W.) in the
late 1980s and early 1990s.
• Enacted by President Clinton.
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The Impact of NAFTA
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NAFTA
and Trade Growth Rates
PreNAFTA
1990 to
1994
US exports to Mexico
Full Effect
1999 to
2007
1995 to
1998
10.2%
12.9%
2.7%
US imports from Mexico
8.2%
9.8%
5.0%
US exports to Canada
4.3%
4.1%
2.1%
US imports from Canada
4.9%
3.5%
3.2%
US Total Exports
3.5%
2.9%
3.6%
US Total Imports
3.3%
4.1%
4.9%
McGraw-Hill/Irwin
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The Politics of Free Trade
• There are winners and losers from
freer trade.
• The winners have tended to be people
who are educated and highly skilled.
• The losers have tended to be people in
manufacturing who have little education.
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Comparing Developed Countries and
Developing Countries
• Rich Countries
• Are getting richer (faster GDP growth)
• Have more evenly divided incomes (lower
GINI coefficients)
• GDP is produced by services, then industry
(agriculture insignificant)
• Lower Inflation
• Poor Countries
•
•
•
•
Have lower GDP growth rates
Have highly uneven incomes
Agriculture is an important part of GDP
Have higher levels of inflation
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Fostering (and Inhibiting)
Development
• Solow growth model predicted
convergence of income.
• Evidence shows this is not
occurring.
• Political and institutional problems
inhibiting growth.
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The Challenges Facing
Developing Countries
•
•
•
•
•
•
•
Low Rates of Basic Literacy
Lack of Infrastructure
Political Instability
Corruption
Lack of Independent Central Banking
Inability to Repatriate Profits
A Need to Focus on the Basics
McGraw-Hill/Irwin
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What are the “appropriate” roles for all these actors?
What McGraw-Hill/Irwin
are the desired outcomes
forCompanies,
all these
actors?
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Reserved
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