Weekly Blog Post - Week 10

Kiwi firms positive outlook

This article talks about the benefits that the Global Financal Crisis had on business.  It argues that the GFC "...put Kiwi businesses through the mill. Most have come out the other side leaner, tighter and more focused."  According to the article, New Zealand businesses are more agile and can more easily adapt to changing market conditions than can business in Europe, the U.S., and Australia.  This is interesting because we have mainly focused on negative effects of the GFC thus far in class, and the article shows how it may have been beneficial in the long run to some.

Reflection

a)  I believe that learning how interdependent the world's economies are is directly applicable to understanding how the world works.  For example, it is important to know that even though a financial crisis in one part of the world may not immediately hurt the economy of a country on the other side of the globe, eventually there will be some affects.  These affects can range from a decrease in foreign demand for domestic goods to a decrease in supply of money for investing.

b)  I am interested in learning more about the appreciation and depreciation of currency.  I would like to cover the effects of both more in depth.

c)  I would tell the student to enjoy the class.  With the right attitude, the readings can be very intriguing and researching one's (potential) study abroad destination can get very exciting.  I am much more motivated now to studying abroad, particularly in New Zealand, now that I have done some research on the country.

Week 9 blog post

Smokers save Govt cash, says report

This article details how smokers can be beneficial to the government deficit.  With high tobacco taxes, cigarette smokers contribute a significant amount of money to the government in taxes.  In addition, the shorter life expectancy of a smokers reduce the cost of aged care provided by the government. This relates to our class as this has a direct effect on government spending.

The article also talks about the supply and demand of cigarettes.  As the government raises the price of cigarettes by 10 cents (through taxation), consumption falls by 5 percent.  This shows the effect that price has on quantity demanded of cigarettes, or, the price elasticity.  The article relates to the class in that it talks about the relationship between supply and demand.

Beware of Greeks Bearing Bonds

a)  To me, the most interesting part of the reading was the part about Greeks paying, or rather not paying, taxes.

"The Greek people never learned to pay their taxes. And they never did because no one is punished. No one has ever been punished. It’s a cavalier offense."

Most surprising to me was that even doctors who make millions of dollars per year report incomes under 12,000 - low enough not to pay any taxes.  This is drastically different from the culture of the U.S. where tax fraud is not only very strictly monitored but also not socially acceptable.

b)  Greece's economy threatens the rest of Europe because their economies are so intertwined.  When Greece joined the European Union the convinced the other countries that they would be a safe, stable economy.  This led foreign countries and investors to invest in Greece's economy.  Not only will those investments be lost, but as Greece uses the Euro, the value of the Euro will depreciate.

c)  Raising taxes and decreasing government spending will significantly decrease GDP.  After increased taxes, consumption in Greece will presumably decline.  In the GDP equation (GDP = C + G +I +Ne) both consumption and government spending will decrease. 

Weekly Blog post - Week 8

NZ rated highly for investment safety

This article reports that New Zealand has been ranked, according to Dun and Bradstreet's global risk (GRI) indicator, fourth in its region and in the top 20 in the world for investment safety.  This is the result of New Zealand having relatively low economic uncertainty.  While this does show promise for New Zealand, some are still concerned that the uncertainty in Western Europe could lead to some deterioration in New Zealand.

Economic uncertainty is one factor that firms consider when deciding whether or not to expand their business into a country.  New Zealand's high world rankings in this category add to the attractiveness of the country as a place to start a new business or expand a business into.  This directly relates to our consulting firm project where we had to evaluate our study abroad country based on its economic conditions.

How Walmart Is Changing China

a)  I found the passage on the pressure on Walmart to become for environmentally friendly particularly interesting.  To me, this is a great example of the "Environmental Kuznets Curve."  As Walmart grew into a multi-national corporation, they became more and more concerned with the amount of waste they produce.  While this may have been the result of public pressures (the company had earned the label of "environmental despoiler"), it still shows that as income increases past a certain point, pollution decreases.

b) From the article, we see that multi-national (such as Walmart) can have a significant impact on the economics and culture of a country (such as China).  As Walmart started to move in to China, new environmental standards began to develop.  Not only did Walmart have to comply with these standards, but so did its competitors and suppliers.

c)  Multinational firms play a huge role in integrating various cultures.  Not only do multinational firms bring in goods from other cultures, but often times bring in workers from other countries as well.  As a developed country, New Zealand hosts many multinational firms.  These firms make up a significant portion of New Zealand's GDP.

Week 7 blog

Kiwi dollar dips after weak retail stats

This article is about the decrease in the exchange rate of the Kiwi dollar.  The article attributes this most recent dip to a drop in core retail sales in New Zealand.  This article also mentions how both the New Zealand and Australian dollar are greatly affected by the economic status of Europe. 

This relates to class, for one, because it has to do with exchange rates from country to country.  We just completed a worksheet where we had to convert U.S. dollars to the currency in our country, and after this dip in the Kiwi dollar, the value would have changed.  It also relates to the broader concept of our class that is a global economy.  What happens in Europe not only affects European countries, but all countries around the world.

EGT Consulting Summary

In new Zealand, GDP per capita is just under $30,000 and has been increasing since 1997.  In addition, he "light passenger" fleet makes up over 90% of the vehicle market in New Zealand.  Since 2000, this market segment has increased in number by 22%.  This shows that the market for sedans is the optimal market for the firm to expand into.

New Zealand is also a great country to expand a business.  It has an extensive transportation system set up, with includes 14 major ports, railways spanning the length of the country, and a road network that makes almost every part of the country easily accessible.  In addition, the business climate in New Zealand is, in relation to other countries, an easy place to start a new business and a great place to run a business.

Reinventing the Bazaar

A) I found the part about relationships amongst consumers and producers very interesting.  In particular, I found it was very interesting when the author said, "buyer and seller remain adversaries."  It surprised me that, even after a relationship is established between a particular buyer and seller, and numerous transactions have taken place between the two, they continue to bargain over the price. 

B)  By transactions costs, the author means any costs that arise in the process of transactions that are directly involved in the transaction.  One example is the time it takes for a consumer to "shop around" to find the best price. 

C)  High prices often occur as a result of imperfect information.  This hurts the consumer because transaction costs discourage them for shopping around for prices and they must settle to some degree to one producers price.  The allows producers to act as little monopolists.  However, producers can also be hurt to a degree.  Imperfect information prevents producers from lowering their prices to attract more customers, as there would be little effect on the number of customers they bring in.

Weekly Post (week 6)

Get The Answers: Entrepreneurs are important source of new jobs

This article examines why small business thrive in New Zealand and what types of small business should look to expand.  However the article also mentions New Zealand's lack of international businesses:
    "A recent report by Statistics NZ, from their 2011 Business Operations Survey, indicates that only 18 per cent of businesses surveyed generated some form of overseas income last year and that 77 per cent of businesses had never generated overseas income."
The lack of international business limits the size of corporations in New Zealand.  This directly relates to the consulting project in class because without large firms, there is no demand for limousines.  If New Zealand is able to increase international business and in doing so increase firm size, a viable limousine market may develop.

A Fez of the Heart

1)  pg. 11 "Life used to be fun," Halil told me. "Now it's just business."

This short passage was particularly interesting to me because it shows how the economics of a country can overpower the culture.  While Halil once enjoyed the rich Turkish traditions, many of them have been abandoned because Turkey can bring in more money from tourism by adopting a new lifestyle.

2)  One example of the relationship between economics and culture is how signs in Turkish villages changed from "Bikini in village No" to "No problem in Turkey." This shows how Turkey changed its culture to increase tourism.

Another example of this relationship is how the Turkish population would, at first, provide hospitality to tourists for very little or no charge.  However, as tourism grew, Turkish residents started to charge tourists and this quickly grew into a business.

3)  Much of New Zealand's tourism revolves around its landscape.  Sightseeing, bungee jumping, and hiking are some of the major tourist attractions of New Zealand.  For all of you Lord of the Rings fans out there, the film trilogy (being shot mostly in New Zealand) is often credited for a 40% increase in toursim in New Zealand between 2000 and 2006.

Riovli Ch. 5-8

a)  The history of the location of the textile industry illustrates that the economy truly is global.  It shows how one good can travel halfway across the world and back to be fully produced.  It also shows how firms have the ability to move production from country to country to find the cheapest labor possible.

b)  Industrialization has both positives and negatives consequences.  Industrialization has led to, for some (Chinese female laborers) very poor working conditions, long hours, and low wages.  However, industrialization also leads to an increase in productivity.  Firms can produce goods for a lower cost and thus lower the price of goods in the market.

c)  the section I found most interesting was the one where Rivoli highlights how important China is to the U.S. textile economy.  I was surprised that in the 1800'2, China purchased half of the US total chlothing exports.

The World is Spiky

a)  Florida rejects Friedman's notion that the world is flat, and instead insists that the world is "spiky".  He believes that the world's population is becoming more urbanized, as the populations of big cities continue to grow relative the rural populations.  The reason, Florida believes, that others see the world as becoming flatter is because the world's peaks have become more dispersed. 

b)  The central place theory states that National and Regional Metropolises are the areas where stock markets and corporate headquarters are located.  These regions are the "spiky" ones which Florida is referring to.  The cluster of business and technology creates economies of scale and knowledge spillover which provides a huge advantage to businesses located within them.

c)  Christchurch, New Zealand would either be considered a regional city or a small regional metropolis.  While population is just under 400,000, Christchurch has a number of universities and a fairly large airport with several international destinations.  The closest national metropolis to Christchurch would be Wellington.  Lincoln is a town near Christchurch.

THE WORLD THE BOX MADE

a) I found the section on why innovations sometimes take years to take effect most interesting.  The success/effects of an innovation are often not based on the new technology itself, but on its reception.  Levinson uses the example of the light bulb to show this phenomenon.  Though Edison invented the light bulb in 1879, it took more than 20 years for society to adopt to the invention.

b)  The container not only made trade cheaper for already active trading countries, but also forced countries that secluded themselves from trade to enter the global market.  Due to significantly decreased shipping costs, foreign producers were able to sell goods at prices fractionally higher than in their own countries.  This meant that domestic firms did not have major production cost advantages over foreign firms and could not rely on high shipping costs to essentially wipe out foreign competition. They had to compete.  The container also made it possible to ship perishable goods half way around the world.  In addition, the container allowed firms to move production to wherever they could find the cheapest labor. 

c)  To measure the impact on National Income one must look at consumption, investment, government spending and net exports.  The container will shift the supply curve right, decreasing price and increasing quantity.  Depending on the elasticity of demand, this could either increase or decrease total consumption.  Investment will likely increase as firms will be spending more on the new innovation.  Governement spending has no clear change in the short run.  The impact on net exports can be either positive or negative, depending on whether the increase in exports or the increase in imports is greater.  Overall, it seems as though national income will rise as investment will rise, government spending will stay the same, and the impact consumption and net exports is unclear.   Unemployment in the short run will rise because firms need less labor to produce their goods.  In the long run, potential National Income will rise because of the increase in resources.  Unemployment, assuming mobility in the labor market, will presumably recover back to where it was before the invention.

Rivoli Ch. 1-4

a)  The market for cotton in the U.S. differed from pure market theory for two main reasons.  First, cotton growers used slave labor.  This drastically decreased the cost of production for U.S. growers and gave them an advantage over competitors which they would not have in a ideal market.  Second, the U.S. government provided subsidies to U.S. cotton farmers.  This also made the production of cotton in the U.S. cheaper than in foreign countries which again strays from pure market theory.

b)  In chapter 3, Rivoli highlights the difference between cotton farming in Texas and Alabama in the Old South.  A change in practice Mobile (Alabama) would take years, however in Lubbock (Texas) would take just months.  Specifically, the use of tractors was picked up immediately by Texan farmers however was gradually implemented by those from Alabama.  According to Rivoli "this led to drastically different labor patterns in the two regions, differences that would have lasting implications."

c)  I was surprised with how big of a difference culture can make on innovation, even from region to region in the U.S.  Specifically, I was surprised at how long it took farmers from Alabama to adopt the use of the tractor when Texans adopted it so quickly.

Lower tax take hits govt finances

http://www.nzherald.co.nz/economy/news/article.cfm?c_id=34&objectid=10796624

a)  This article talks about how the revenue received from taxes in New Zealand was less that expected.  The New Zealand Government over-estimated this amount and thus its expenditures were too high leading to an increase in their operating deficit.  The gross debt of New Zealand is $75.78 million, equating to 37% of the GDP.

b)  The article relates to the statistics we found earlier in the year as it discusses the relationship between Government debt and GDP.

c)  National debt is a very complex issue with no easy solution.  Obviously the Government needs to increase its revenue and decrease overall spending.  The government could increase taxes to try to solve this problem.  However, increasing taxes will decrease the income of individual household which will shift the demand curve for almost all goods to the left, meaning that there will be a decrease in quantity for every market.  This means that producers need to produce less and need less labor.  This could lead to higher unemployment which will mean that there are more citizens who need government assistance, thus increasing government expenditures.  A viscous cycle indeed.

The Social Responsibility of Business is to Increase its Profits

a)  Friedman's major theme from this article is, as its title suggests, that the responsibility of a business is to increase profit.  He rejects the notion that businesses should have a "social conscience" beyond that of "staying within the rules of the game."  Friedman sees any action by a firm that attempts to exercise "social responsibility" while at the same time reducing profits as fraud.  It is fine for an individual acting on their own behalf look out for public self-interest, but when they are acting on behalf of a business their one priority should be increasing profit.

b)  Individualism seems to be very important to Friedman, especially when it comes to business.  Friedman believes that a business must first look out for its own good.  If one is not trying to increase profit, they are committing fraud.  He believes that businesses have no social responsibility and that it is not a businesses function act in society's interest.

c)  I do see a conflict between business and social responsibility.  I agree with Friedman in that businesses need to strive for efficiency.  The more efficient a business is, the more profits it will generate and thus the more the employees will be paid.  It is then the responsibility of the individual to act according to their own sense of social responsibility.  Businesses should not decide what to do with their employees/owners resources because that is not their purpose -- hat is the responsibility of the government.

Schweder Talk

a)  Schweder discussed three prophesies about the shape of the new world order.  The first is that "the West is best", which states that all nations will westernize themselves in an attempt to compete globally.  The second is that nations will remain culturally unique and although there will be trade, nations will remain essentially isolated.  The third prophesy, and the one Schweder believes is most likely, is the emergence of a global empire very similar in structure to the Ottoman Empire.  The government body will collect taxes and protect individual cultures but do little more than that.

b)  One indicator that could help predict the direction of global trade is language, specifically when looking at the "Westernization" prophecy.  I believe that whether or not the English language continues to spread is an indication of the spread of western culture.

c)  Culture plays a very important role in shaping economic outcomes.  Economic ideology often comes from a societies' traditions.  Culture determines whether a society is focused on equality or whether it is focused on self-interest.  Some cultures place an emphasis on innovation and wealth and others look down upon lavish lifestyles.

New Zealand Statistics (continued)

Resources 
      a) New Zealand's natural resources include natural gas, iron ore, sand, coal, timber, hydropower, gold, and limestone.
      b) New Zealand's labor force consists of 2.353 million laborers,  7% of which work in agriculture, 19% in industry, and 74% in services.
      c) Not available

International Trade
     a) New Zealand's exports total about $40.92 billion per year.  Their main exports are dairy products, meat, wood and wood products, fish, machinery and they trade mainly with Australia, China, U.S., and Japan.
     b) New Zealand's imports total about $35.07 billion per year and include machinery and equipment, vehicles and aircraft, petroleum, electronics, textiles, and plastics.  They import mainly from Australia, China, U.S., Japan, and Germany.
    c) New Zealand's exchange rate per U.S. dollar is 1.266 (as of 2011).

National Income accounts
    a)  Household income: not available.
    b) Investment in New Zealand accounts for 19.4% of the GDP.
    c) New Zealand's revenues are $61.94 million and its expenditures are $75.21 million

New Zealand Statistics

GDP: $123.3 billion (2011 est.)
GDP per capita: $27,900 (2011 est.)
Life Expectancy: 80.71 years
Poverty Rate: not available
Literacy Rate: 99%
Unemployment Rate: 6.5%
Inflation rate: 4.5%

Why Did Human History Unfold Differently On Different Continents For The Last 13,000 Years?

a)  Diamond explores the reason behind Eurasian global dominance.  He attempts to show that "differences among continental environments, and not...biological differences among peoples themselves" is why Eurasians were able to decimate, subjugate, and exterminate Native Americans, Africans, and Aboriginal Australians.  He accepts that Eurasians had numerous advantages such as ships, political organization, writing, disease, guns, steel swords, and horses.  The most important question for diamond is how these advantages were developed.  Diamond highlights the fact that Eurasia's geography enabled plant and animal species to easily move from one area to another without having to adapt to new climate.  In addition, Diamond points out that Eurasia started out with more domesticatable plant and animal species than the other continents.  The ability to develop stable, centralized communities in Eurasia also enabled them to develop and maintain new technology better than in other continents.

b) According to Diamond, the most important determinants to a society's success are "the availability of wild plant and animal species suitable for domestication, the ease with which those species could spread without encountering unsuitable climates, agriculture and herding, population densities, food surpluses, and the development of epidemic infectious diseases, writing, technology, and political organization."

c)  These ideas can be applied to today's global economy.   The dominant countries is today's world share many of these determinants.  In particular, thriving nations in the modern world seem to have strong political structure, advanced technology, high literacy rates and a more abundant supply of food than struggling nations.