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