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apec 3007

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positive-sum-game theory
the combines payoffs of all players are not the same in every outcome of the game. this differs from constant sum games in which all outcomes involve the same sum of all player's payoffs/ it implies that players may have interests in common, to achieve an outcome that maximized total payoffs
zero-sum-game theory
describes a situation in which a participant's gain or loss is exactly balanced by the losses or gains of the other participant(s). if the total gains of the participants are added up, and the total losses are subtracted, they will sum to zero
labor theories of value
-economic theories of value according to which the values of commodities are related to the labor needed to produce them.
-james mill and his son stewart mill
-pleasure and pain as motivators of human behavior
"wealth of nations"
Adam Smith, demonstrated arguments for mercantilism
mercantilism
an economic theory that holds that the prosperity of a nation is dependent upon its supply of capital and that the global volume of international trade is "unchangeable". it suggests that the ruling government should advance these goals by playing a protectionist role in the economy; by encouraging exports and discouraging imports, notably through the use of tariffs and subsidies
bindings
agreements to reduce tariffs
General Agreement on Tariffs and Trade (GATT)
the outcome of the failure of negotiating governments to create the international trade organization.
Uruguay Round
1986-1994: round based on the general agreement on tariffs and trade (GATT)
The Doha Round
the current trade negotiation round of the WTO. its objective is to lower trade barriers around the world, which allows countries to increase trade globally.
International trade organization (ITO)
the Bretton Woods Conference of 1944 recognized the need for a comparable international institution for trade to complement the international monetary fund and the world bank.
World Bank (IBRD)
provides financial and technical assistance to developing countries for development programs (bridges, roads, schools) with the stated goal of reducing poverty
International monetary fund (IMF)
an international organization that oversees the global financial system by following the macroeconomic policies of its member countries, in particular those with an impact on exchange rates and the balance of payments. formed to stabilize international exchange rates and facilitate development.
Father of globalization
Robert Peel (1815-1846)
why did peel switch in favor of free trade?
1. growth of cities and manufacturing - interest group
2. intellectual integrity of the free trade argument - logic of free trade
Corn laws were abolished by who and when?
Rober Peel in 1846
anit-corn law league
founded in manchester in 1838, richard cobden and john bright were the two principal figures. the goal was to abolish the corn laws. the aim was to establish a fully free-trade economy in order to decrease the price of basic food products such as bread and ag produce, to support the performance of ag and industry and thus to weave stronger commercial bonds - supposedly the guarantors of peace with the other nations
corn law debate
wheat and barley. 1815: napoleonic wars came to an end, france as a power fell, germany and england established a new figure for europe
-england made it a policy of government to limit imports (for keeping a price for grain) tax on imports
what happened in 1815?
corn laws. protected european agriculture.
what happens when tariffs and transport costs equal zero?
world price and import price converge completely
falling divergence
the same thing as increasing convergence
what causes the prices paid for imports and the world price to converge?
the effect in reduction of tariffs or transport costs
food "wage good" (grain avalanche)
food is a majority percent of your expenditures, if price of food goes up it is an equivalent as a cut in your wage

landowners had everything to lose, and capitalists had everything to gain workers were in the middle
grain avalanche
conflict between producers, landowners, and capitalists - they argued that wages could be lowered.
corn laws
import tariffs designed to support domestic british corn prices against competition from less expensive foreign imports between 1815 and 1846. (corn means grain, particularly wheat). viewed examples of mercantilism and their abolition marked a significant step toward free trade. the corn laws enhanced the profits and political power associated with land ownership
capitalization (sugar example)
we don't allow sugar to be imported in to the US, this causes sugar to be more expensive than sugar in other markets, and the land it is made on would be expensive. if we let sugar be imported they would bother go down.
factor price of capital
interest
factor price of land
rent
factor price of labor
wages
Gini coefficient
a measure of statistical dispersion most prominently used as a measure of inequality of income distribution or inequality of wealth distribution.
real wages
wages adjusted for inflation
PPP
Purchasing, power, priority/adjust for real wages
balance of trade
the difference between the monetary value of exports and imports in an economy over a certain period of time. it is the relationship between a nation's imports and exports.
The organization for economic co-operation and development (OECD)
an international organization of 30 countries that accept the principles of representative democracy and free-market economy. most OECD members are high-income economies with a high HDI and are regarded as developed countries.
A setting in which governments can compare policy experiences, seek answers to common problems, identify good practices, and co-ordinate domestic and international policies.
tariff
a tax imposed on good when they are moved across a political boundary. they are usually associated with protectionism, the economic policy of restraining trade between nations. for political reasons, tariffs are usually imposed on imported goods, although they may also be imposed on exported goods
quota
type of projectionist trade restriction that sets a physical limit on the quantity of a good that can be imported into a country in a given period of time. used to benefit the producers of a good in a domestic economy at the expense of all consumers of the good in that economy.
capitalization
a measurement of corporate or economic size equal to the share price times the number of shares outstanding of a public company.
who is opposed to free trade?
-wokers in a threatened industry: a few of whom could lose their job
-owners of such an industry: a few of who could lose their investments
free trade
trade policy that allows traders to act and transact without coercive interference from government. Thus the policy permits trading partners mutual gains from trade, with goods and services produced according to the law of comparative advantage. under a free trade policy, prices are a reflection of true supply and demand and are the sole determinant of resource allocation.
production function
a function that specifies the output of a firm, an industry, or an entire economy for all combinations of inputs.
factors of production
the resources employed to produce goods and services. here the rate of output is modeled as a function of the rate of use of each input employed. they are generally land, labor and capital; the three groups of resources that are used to make all goods and services
infant industry theory
emerging domestic industries should be protected until they become stable and mature. governments should use tariffs, quotas and duty taxes to keep international competitors from ruining the domestic infant industry
David Ricarrdo
"the principle of comparative advantage" in the book principles of political economy and taxation. while there are possible gains from trade with absolute advantage, comparative advantage extends the range of possible mutually beneficial exchanges. in other words it is not necessary to have an absolute advantage to gain from trade, only a comparative advantage
absolute advantage
refers to the ability of a particular person or a country to produce a particular good with fewer resources than another person or country. the ability to produce more of a given product using a given amount of resources.
comparative advantage
the ability of a person or a country to produce a particular good at a lower opportunity cost than another person or country. it is the ability to produce a product most efficiently given the other products that could be produced.
why does trade occur with differences?
some people/states/countries are better in some way at doing some things than other things
what do you need for exchange
differences, people trade with one another because they have different things, desire different things
bilateral trade
trade exclusively between two states, particularly, barter trade based on bilateral deals between governments, and without using hard currency for payment. often aim to keep deficits at minimum by keeping a clearing account where deficit would accumulate.
unilateral trade
any agreement that is imposed on one nation by another, and benefits only one nation. smaller, developing nations are afraid of trade agreements involving developed nations because the imbalance of power could result in a unilateral benefit to the developed nation
multilateral trade
agreements are between many nations at one time. hard to negotiate, very powerful once all parties sign the agreement. nations get treated equally. The Doha round of trade agreements is a multilateral trade agreement between all 149 members of the World Trade Organization.
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