Recently in International Economics Category

We can take the first thirty minutes or so to review before most of you take the Macroeconomics and International Economics Exam.

Here's a link to the review page. (You can bring a single sheet of notes again if that is helpful to you.)

Here's the format:

• 25 multiple choice (25 points)
  
• 3 problems - components of GDP, currency conversions, effects of Federal Reserve actions on the money supply (10 points total)
• 3 "short essay" - You choose 3 from the list of options and can write outside of class. Due on Wednesday, May 8th. (5 points each)

These will be due on Wednesday, May 8th.

A. Martians have landed on the earth, and they want to better understand the American economy. You are allowed to teach them about the two (and only two) economic measures or indicators that you believe reveal the most about the economy. Which two would you choose to explain? Why?

B. Assume that the United States needs a new "chief economist". You have been tapped for the job. At your Senate confirmation hearing, you are asked if your macroeconomic "view" relies more heavily on the "demand" approach or the "supply" side. What would you tell them? Why?

C. Taxes are, however unfortunately, a fact of life in America. Assume that you are on the committee appointed to look at "tax reform". What would you recommend as the best system of taxation in America? (You don't need to talk about specific numbers, but be sure that your choices reflect the values you would want to emphasize in our society.)

D. Here's a "softball" for you. What do you believe should be the role of government in managing and/or regulating the economy?

E. The Federal Reserve Board has been responsible for conducting our nation's money supply for decades. Critics charge that it is often ineffective, sometimes making things worse. Based on what you know, should changes be made in the way the Fed operates? Why or why not?

F. You and one of your Economics classmates have recently been elected the leaders of two of the world countries. Using specific examples (names, products, and countries), demonstrate your understanding of the terms "absolute advantage" and "comparative advantage".

G. Assume that you are teaching a class of second graders some basic economic principles. You need to explain why the nations of the world benefit from trade. Keeping in mind that the authors of The Armchair Economist will sue plagiarists, develop an analogy or story that gets this point across. (By the way, The Armchair Economist was the source of the "Iowa Car Crop" story...)

H. You are the new headline writer for the StarTribune. Tomorrow's issue is a special edition devoted to globalization. You are in charge of writing five "headlines" for the pro-globalization forces and their best arguments and five "headlines" for the anti-globalization forces and their best arguments. What would those headlines be?

I. The rest of the world has gotten tired of arguing about globalization. They have left you to cast the deciding vote. Is globalization helpful or harmful? Why?

J. You have been named the President of the World Bank. You unexpectedly have an additional $15 billion in funds to loan out for the purposes of development assistance. In broad terms, tell us what you would do with that money. Where/how would you spend it?

HOMEWORK for tomorrow - Friday, May 3rd

I'd like all of the Naked Economics blogs to be posted by the end of the weekend. There is now an Extra Credit Blog Entry posted that will has choices from the "Epilogue."

You should now have access to a copy of Thomas Friedman's, The World Is Flat. Please have chapter 1, "While I Was Sleeping," read for class on Monday. That's pages 3 through 50. You'll again be required to make blog entries related to the readings on occasion.

We're still scheduled for the Macroeconomics and International Economics quiz on Thursday. Here's a link to the review page. I'll make sure I set aside at least a little time at the end to get some folks caught up. We can also take some review questions right at the top.

The format will be: (You can bring a single sheet of notes again if that is helpful to you.)

• 25 multiple choice (25 points)
  
• 3 problems - components of GDP, currency exchange rates, effects of Federal Reserve actions on the money supply (10 points total)
• 3 "short essay" - You choose from a list of options and can write outside of class. Due on Wednesday, May 8th. (5 points each)

>>>>>>>>>>>

Development Economics: This will be more discussion oriented than "lecture" based. You know a lot about inequality and the problems of poverty and related issues. For us, I'd like the bigger questions to be these:

• What CAN be done to foster economic development?
• What SHOULD be done to foster economic development?

There are a few terms and concepts that will be useful in this discussion:

World Bank: The World Bank is owned by 184 countries. In 2002, almost $20 billion in loans were provided to clients in more than 100 countries. The World Bank's focus is on development assistance.

Work your way through this overview of the World Bank's functions at "10 Things You Never Knew about the World Bank."(Click on a region of the world to start the 10 items...)

Here are the "Quick Reference Tables" from the World Bank. You can find a lot of information here.

International Monetary Fund: According to its own web page, the IMF "works for global prosperity by promoting the balanced expansion of world trade and stability of exchange rates..." Its functions complement those of the World Bank.

Structural Adjustment Programs (SAP): The IMF and World Bank at times require nations to "adjust" their economies in order to assure debt repayment. Many critics believe this only deepens the poverty of the people. Nations may be required to encourage foreign trade, shift to a cash crop focus, or otherwise be directed to act in a particular way. These are also referred to as "economic austerity" plans.

>>>>>>>>>>

9th Annual MPA Globalization Forum: Let's hear what you all have to say...

3 United States representatives: 1 from "big" business, 1 environmental activist, 1 worker whose job has been "outsourced"

3 Europeans: 1 owner of a multinational corporation, 1 worker "displaced" by foreign competition, 1 immigrant from North Africa working outside Paris

2 Africans: urban teen living on less than $1 a day, leader of poor nation that exports coffee

6 Asians: 1 "sweatshop" laborer, Chinese peasant, 1 Chinese governmental official, 1 Indian service-industry worker, 1 recent migrant to Shanghai from Chinese countryside, 1 elderly Japanese citizen

2 Latin Americans: 1 manager of a foreign-owned factory, 1 illegal immigrant to United States

3 Middle Easterners: 1 leader of oil-rich nation, 1 Islamic fundamentalist, 1 young woman

Obviously, you had to "create" much of your own detail. Think about how your life has changed over the past decade. What are the advantages/ drawbacks of globalization in your world? What will the future hold?

• You are expected to deliver an introductory statement of not less than sixty seconds. In this statement, you will tell other participants of your "situation," and you will offer your preliminary comments on events associated with globalization.
  
  
• You will post on the Globalization Forum Blog Entry. Here, you are limited to 150 words maximum. You should use the blog entry to advocate for any causes, aspects of globalization, etc. that would be of the most benefit to your character. This is your chance to rant against your enemies, blow your own horn, or do a combination of these. You, of course, are bound by the need to not be obscene and totally inappropriate, but think of this as your billboard, letter to the editor, protest sign, bragging sheet, or whatever it is. Be creative, be outspoken, but also be appropriate...
  
  
• Do whatever research in class that might help you create your "perspective" and better understand the issue of globalization.

Here are some resources that you might consult:

• The Lexus and the Olive Tree There are some excerpts and reviews here that you might find interesting.
  
• Globalization: Threat or Opportunity? This is an IMF report addresses many of the central issues in globalization.
• The International Forum on Globalization This is the site of a group critical of many of the effects of globalization.
• The World is Flat: A Brief History of the Twenty-First Century This is a talk by Thomas Friedman about his most recent book.
• Globalization and Its Discontents - Joseph Stiglitz (He won a Nobel Prize for Economics...)
• In Defense of Globalization - Professor Jagdish Bhagwati

HOMEWORK for next session - Wednesday, May 1st

We will have our Macroeconomics and International Economics quiz Thursday. There's a review page for you to use.

Blog Entry #7 should be taken care of by the end of the week. There is now an Extra Credit Blog Entry posted that has choices from the "Epilogue" and "Life in 2050."

Have your copy of The World Is Flat ready to go for THIS Friday's class, please.

We're still scheduled for the Macroeconomics and International Economics quiz on Thursday. Here's a link to the review page. I'll make sure I set aside at least a little time at the end to get some folks caught up. We can also take some review questions right at the top.

The format will be: (You can bring a single sheet of notes again if that is helpful to you.)

• 25 multiple choice (25 points)
  
• 3 problems - components of GDP, currency exchange rates, effects of Federal Reserve actions on the money supply (10 points total)
• 3 "short essay" - You choose from a list of options and can write outside of class. Due on Wednesday, May 8th. (5 points each)

What has been happening in the "real world" these past few years??? We aren't going to have time to take an in-depth look at the economic events of the past couple years, but I wanted to at least alert you to a trio of sites that do a very nice job of trying to make sense of where we've been these past couple of years.

• Timeline:  Global Economy in Crisis - Council on Foreign Relations
• Frontline:  Inside the Meltdown
• The Economy:  Crisis and Response - Federal Reserve

Economics and Development: We'll start our shift to 21st Century topics this week looking at poverty and development economics before we turn out attention to globalization.

Globalization: Many people argue that this force of integration will come to characterize this era as much as the Cold War had dominated the previous era. 

What is globalization? Many definitions exist, but let's start with this one.

"Simply put, globalization is the increasing integration of the world through the forces of global trade, business, and finance."

We'll tackle some "prompts" on globalization here today. You'll each get a single statement. Your job is to pair up with the other person that has the same statement. Each of you needs to articulate one side of the argument over that statement. We'll give you an example and then a few minutes to prepare.

MPA Globalization Forum: Next time, we will come together for the Ninth Annual Mounds Park Academy Globalization Forum. Each of you will represent a different interest.

We will need:

3 United States representatives: 1 from "big" business, 1 environmental activist, 1 worker whose job has been "outsourced"

3 Europeans: 1 owner of a multinational corporation, 1 worker "displaced" by foreign competition, 1 immigrant from North Africa working outside Paris

2 Africans: urban teen living on less than $1 a day, leader of poor nation that exports coffee

6 Asians: 1 "sweatshop" laborer, Chinese peasant, 1 Chinese governmental official, 1 Indian service-industry worker, 1 recent migrant to Shanghai from Chinese countryside, 1 elderly Japanese citizen

2 Latin Americans: 1 manager of a foreign-owned factory, 1 illegal immigrant to United States

3 Middle Easterners: 1 leader of oil-rich nation, 1 Islamic fundamentalist, 1 young woman

Obviously, you will need to "create" much of your own detail. Think about how your life has changed over the past decade. What are the advantages/ drawbacks of globalization in your world? What will the future hold?

• You will be expected to deliver an introductory statement of not less than sixty seconds. In this statement, you will tell other participants of your "situation," and you will offer your preliminary comments on events associated with globalization.
  
  
• You will post on the Globalization Forum Blog Entry. Here, you are limited to 150 words maximum. You should use the blog entry to advocate for any causes, aspects of globalization, etc. that would be of the most benefit to your character. This is your chance to rant against your enemies, blow your own horn, or do a combination of these. You, of course, are bound by the need to not be obscene and totally inappropriate, but think of this as your billboard, letter to the editor, protest sign, bragging sheet, or whatever it is. Be creative, be outspoken, but also be appropriate...
  
  
• Do whatever research in class that might help you create your "perspective" and better understand the issue of globalization.

Here are some resources that you might consult:

• The Lexus and the Olive Tree There are some excerpts and reviews here that you might find interesting.
  
• Globalization: Threat or Opportunity? This is an IMF report addresses many of the central issues in globalization.
• The International Forum on Globalization This is the site of a group critical of many of the effects of globalization.
• The World is Flat: A Brief History of the Twenty-First Century This is a talk by Thomas Friedman about his most recent book.
• Globalization and Its Discontents - Joseph Stiglitz (He won a Nobel Prize for Economics...)
• In Defense of Globalization - Professor Jagdish Bhagwati

HOMEWORK for next session - Tuesday, April 30th

We will have our Macroeconomics and International Economics quiz Thursday. There's a review page for you to use.

We'll hold the 7th Annual MPA Globalization Forum tomorrow. Try to post on the MPA Globalization Forum by then.

Blog Entry #7 should be taken care of by the end of the week. There is now an Extra Credit Blog Entry posted that will has choices from the "Epilogue" and "Life in 2050."

Have your copy of The World Is Flat ready to go for THIS Friday's class, please.

As you'll notice, I am not here today. Please make good use of this time and work through the lesson. We'll catch up on anything confusing on Monday.

Here's the review guide for Macroeconomics and International Economics. We'll plan on taking a quiz on that material next Thursday.

Last time it was trade. (I've copied a couple things below that we didn't get to.) This time it's money and exchange rates.

>>>>>

TRADE CONTINUED FROM YESTERDAY: Let's work through an example of a simple economy. Download this Comparative Advantage handout, and work through the scenario with a partner. 

Trade explained 

I have a short (2 page) reading that I want us to do. It may be the single most effectively worded defense of trade that I have ever read. Let me hand it out... This is from The Armchair Economist. Let's read it and talk about it.

Limits on trade

Next, let's think about the limits that are put on international trade. These barriers can take a number of forms.

• tariffs - taxes on imports (either for generating revenue or sheltering firms from competition)
• quotas - restrictions on the quantity of a good that may be imported or exported
• non-tariff barriers - regulations on labeling, packaging, and testing; customs restrictions
• embargo - This, of course, is a cutting off of trade with another country.
  

There are a couple more definitions we need to make sense of this information when we look specifically at a particular country, such as the United States.

Balance of trade: Balance of trade data describe the exports of goods and services produced in the U.S. and sold abroad and the imports of goods and services produced abroad and sold to individuals, businesses, and governments in the U.S. To obtain the balance, imports are subtracted from exports and the result is described as a surplus if exports are greater than imports and a deficit if imports are greater than exports.

More commonly, you will hear of the trade deficit. This is exports minus imports.

• bilateral trade negotiations: These are trade negotiations between two countries only
• most-favored-nation clauses: These extend the benefits of lower trade barriers granted to one country to all nations what have most-favored-nation status. This term has been phased out in favor of the terms normal trade relations or permanent normal trade relations.

The Status of US Trade: Charts and graphs...

Here's current information from the US Government on our trade balance and situation. Here's more specific information on our trading partners.

World Trade Organization:

This is the largest international organization focused on issues of trade. Here are a couple resources for you to check out from their website.

• Understanding the WTO
• 10 Benefits of the WTO Trading System
• 10 Misunderstandings about the WTO

>>>>>

EXCHANGE RATES: More specifically, we'll look at international currencies and the role they play in the world's economy. Here are some definitions that you will need to understand:

Exchange Rates: The value of currencies worldwide is provided by exchange rates, which tell you what each currency is worth in relation to other currencies. In simple terms, a currency is worth what people will pay for it. Exchange rates are constantly adjusted to reflect markets.

• Fixed exchange rates: After the 1930s, most countries abandoned the gold standard. Instead, each country's government "fixed" the value of their currency, deciding what it would be worth. (For example, the British decided to exchange their pound into US dollars at a rate of $2.40 per pound.)
  
  
• Floating exchange rates: After 1973, international agreements on fixed rates expired, and currencies began to have their value decided in the market. A currency's value will "float" up or down. (An estimated $3+ trillion dollars in currencies are traded every day in the world's foreign exchange markets.)
  

Purchasing Power refers to what money can actually buy in each country- calculating its purchasing "power". Purchasing Power Parity (PPP) would be when a currency can buy the same basket of whatever in any country.

Playing with "Purchasing Power Parity (PPP): I think you'll like this stuff...

To do the following, you need a copy of "cross currency" rates. You can get one from the Benchmark Currency Rates page at Bloomberg.com. (Yes, that's the same Bloomberg as in the Mayor of New York City.)

Economists refer to purchasing power parity to describe why, over time, the dollar price of a good in one country should equal its dollar price in all other countries. The notion that a particular type of cordless telephone should sell for the same dollar price in the United States as it does in, say, Japan and Great Britain, makes sense if you think about supply and demand in world markets. Suppose that the telephone sells for $29.99 in the United States, 2500 yen in Japan, and 20 pounds in Great Britain.

Let's figure out in which country the dollar price of the cordless phone is lowest?

1. What is the exchange rate between the Japanese yen and the United States dollar?

2. What is the exchange rate between the British pound and the United States dollar?

3. Calculate the dollar price of the cordless phone in Great Britain.

4. Calculate the dollar price of the cordless phone in Japan.

5. In which country is the dollar price of the cordless phone the lowest?

6. In which country is the dollar price of the cordless phone the highest?

So, what does "purchasing power parity" suggest that an entrepreneur could do to earn profits?

Of course, purchasing power parity theory suggests that price adjustment will continue until the dollar price of cordless phones is the same in each country. This price equalization is an example of purchasing power parity. Note that it works best for close substitutes that can be traded among countries over long periods of time.

Foreign Exchange map: This is initially confusing, but it should make sense if you play with it for a minute. Give it a little time to load itself. Try several comparisons between countries and over time periods.

Be sure I also show you the Big Mac Index.

>>>>>>>>>

HOMEWORK for next session - Monday, April 29th

Please have your copy of The World Is Flat ready to go by the end of next week.

Blog Entry #6 (Chapters 10 and 11) was posted and it will be due before class time on Monday.

Try and get through Chapter 12 before class Monday, and we'll ask you to have Chapter 13 read for Tuesday. (I will post the final required blog for Naked Economics, but I'll have you read the Epilogue as well. There will be a bonus blog entry there you can do for extra credit if you want.)

I'm looking at doing the Macroeconomics/International Economics Exam on Thursday, May 3rd. There is a review page posted on the blog that you may find useful. You can again bring in a sheet of notes.

FYI -  NEXT Wednesday, May 1st, you'll be able to head to College Counseling after checking in with me to celebrate College Choice Day. They'll have some refreshments and supplies for you to make a pennant with to hang next to your picture. (I'll treat it as sort of a catch-up day and be available to help anyone with that.)

Nice job with the simulation yesterday. We'll be able to see next week what the "real" Fed decides.

We'll wrap up our whirlwind tour of economics with a quick venture into international economics over the next couple of days. Today, we'll look at trade.

An introductory discussion on trade
Very often, discussions of trade center on "winners" and "losers". Let's consider the case of NAFTA, the North American Free Trade Agreement. NAFTA went into effect on January 1, 1994. Its goal was to limit trade barriers among Canada, the United States, and Mexico. (We'll forget about Canada, since we have long had very free trade with them.)

Who do you believe have been/ are/ will be the "winners" and "losers" under NAFTA?

Brainstorm two lists, and have them ready to share. (I'm thinking of "classes" of people here - things like "American unions" or "Mexican entrepreneurs" or "consumers" or things like that...)

Introducing two key concepts in trade
We need to learn a bit of vocabulary that goes along with international trade. There are two fundamental terms that often cause confusion.

• absolute advantage: When two countries can each produce a different good (or service) more efficiently than the other country, each of the countries has an absolute advantage in the good or service they produce more efficiently.
  
  
• comparative advantage: When Country A can produce two different products more efficiently, but has a greater advantage in one product than the other, they have a comparative advantage in the product with the greater relative efficiency. Country B has a comparative advantage in the product in which the disadvantage is less large.

That seems like a mouthful, but let's try to make sense of it. Clearly, it is in both counties' best interest to trade in a situation of absolute advantage. What if we are talking comparative advantage?

Let's work through an example of a simple economy. Download this Comparative Advantage handout, and work through the scenario with a partner. 

Trade explained 

I have a short (2 page) reading that I want us to do. It may be the single most effectively worded defense of trade that I have ever read. Let me hand it out... This is from The Armchair Economist. Let's read it and talk about it.

Limits on trade

Next, let's think about the limits that are put on international trade. These barriers can take a number of forms.

• tariffs - taxes on imports (either for generating revenue or sheltering firms from competition)
• quotas - restrictions on the quantity of a good that may be imported or exported
• non-tariff barriers - regulations on labeling, packaging, and testing; customs restrictions
• embargo - This, of course, is a cutting off of trade with another country.
  

A couple questions to consider:

• What are the arguments in favor of restricting trade?
• What are the arguments against restricting trade?
• In your opinion, when are restrictions on trade justified?

There are a couple more definitions we need to make sense of this information when we look specifically at a particular country, such as the United States.

Balance of trade: Balance of trade data describe the exports of goods and services produced in the U.S. and sold abroad and the imports of goods and services produced abroad and sold to individuals, businesses, and governments in the U.S. To obtain the balance, imports are subtracted from exports and the result is described as a surplus if exports are greater than imports and a deficit if imports are greater than exports.

More commonly, you will hear of the trade deficit. This is exports minus imports.

• bilateral trade negotiations: These are trade negotiations between two countries only
• most-favored-nation clauses: These extend the benefits of lower trade barriers granted to one country to all nations what have most-favored-nation status. This term has been phased out in favor of the terms normal trade relations or permanent normal trade relations.

The Status of US Trade: Charts and graphs...

Here's current information from the US Government on our trade balance and situation. Here's more specific information on our trading partners.

World Trade Organization:

This is the largest international organization focused on issues of trade. Here are a couple resources for you to check out from their website.

• Understanding the WTO
• 10 Benefits of the WTO Trading System
• 10 Misunderstandings about the WTO

HOMEWORK for next session - Friday, April 26th

Blog Entry #6 (Chapters 10 and 11) is posted and it will be due before class time on Monday.

Try and get through Chapter 12 before class Friday, and we'll ask you to have Chapter 13 read for Monday. (That will be the final required blog for Naked Economics, but I'll have you read the Epilogue and there's a bonus blog entry there you can do for extra credit if you want.)

I'm looking at doing the Macroeconomics/International Economics Exam on Thursday, May 2nd. There will be a review list available on the blog by tomorrow.

Well, no big surprises here. You'll take the Macroeconomics and International Economics Exam today. There are 25 multiple choice questions and 20 points worth of "problems."

These will be due on Wednesday, January 9th, 2009.

A. Martians have landed on the earth, and they want to better understand the American economy. You are allowed to teach them about the two (and only two) economic measures or indicators that you believe reveal the most about the economy. Which two would you choose to explain? Why?

B. Assume that the United States needs a new "chief economist". You have been tapped for the job. At your Senate confirmation hearing, you are asked if your macroeconomic "view" relies more heavily on the "demand" approach or the "supply" side. What would you tell them? Why?

C. Taxes are, however unfortunately, a fact of life in America. Assume that you are on the committee appointed to look at "tax reform". What would you recommend as the best system of taxation in America? (You don't need to talk about specific numbers, but be sure that your choices reflect the values you would want to emphasize in our society.)

D. Here's a "softball" for you. What do you believe should be the role of government in managing and/or regulating the economy?

E. The Federal Reserve Board has been responsible for conducting our nation's money supply for decades. Critics charge that it is often ineffective, sometimes making things worse. Based on what you know, should changes be made in the way the Fed operates? Why or why not?

F. You and one of your Economics classmates have recently been elected the leaders of two of the world countries. Using specific examples (names, products, and countries), demonstrate your understanding of the terms "absolute advantage" and "comparative advantage".

G. Assume that you are teaching a class of second graders some basic economic principles. You need to explain why the nations of the world benefit from trade. Keeping in mind that the authors of The Armchair Economist will sue plagiarists, develop an analogy or story that gets this point across. (By the way, The Armchair Economist was the source of the "Iowa Car Crop" story...)

H. You are the new headline writer for the StarTribune. Tomorrow's issue is a special edition devoted to globalization. You are in charge of writing five "headlines" for the pro-globalization forces and their best arguments and five "headlines" for the anti-globalization forces and their best arguments. What would those headlines be?

I. The rest of the world has gotten tired of arguing about globalization. They have left you to cast the deciding vote. Is gloablization helpful or harmful? Why?

J. You have been named the President of the World Bank. You unexpectedly have an additional $10 billion in funds to loan out for the purposes of development assistance. In broad terms, tell us what you would do with that money. Where/how would you spend it?

HOMEWORK for tomorrow - Friday, December 19th

Read Naked Economics Chapter 12, "Development Economics," before class time on Friday.

Take advantage of the generous terms of the "MPA Economics Bailout" and get caught up on any of your missing blog entries.

Your Blog Entry #11 should be posted before class time on Friday. (We'll call the MPA Forum entry Blog #10 so there's no missing entry.) I'll post #12 before the end of the week, and that will be your final required entry.

We'll continue with the 5th Annual MPA Globalization Forum. I asked you to read Chapter 11 in Naked Economics for today. That blog entry is posted, and we can certainly discuss that chapter both today as ideas come up in the forum and tomorrow in class.

Economics 5 x 10s: We'll spend up to 5 minutes on each of the ten topics/statements below. I'll ask for comments "in character" first, but you are also welcome to speak "as yourself" as we get further into the topic.

• The United States benefits disproportionally from globalization.
• Globalization is a tool by which the West spread its values and ideas around the world.
• Globalization threatens national sovereignty.
• The world can continue to develop economically while remaining environmentally sustainable.
• On balance, globalization is a negative for the majority of the world's population.
• There's nothing wrong with large inequalities in wealth around the world as long as conditions are improving for all.
• On balance, globalization has been a benefit to the interests of workers.
• Those who oppose free trade are inadvertently working to keep poor people poor.
• Globalization has made large-scale terrorism more likely.
• The process of globalization has decreased the risks to human health.

HOMEWORK for tomorrow - Wednesday, December 17th

Here's a study guide (also a blog page) that you might find useful in preparation for Thursday's Macroeconomics and International Economics Exam.

Read Naked Economics Chapter 12, "Development Economics," before class time on Friday.

Take advantage of the generous terms of the "MPA Economics Bailout" and get caught up on any of your missing blog entries.

Your Blog Entry #11 should be posted before class time on Friday. (We'll call the MPA Forum entry Blog #10 so there's no missing entry.) I'll post #12 before the end of the week, and that will be your final required entry.

Welcome one and all to the "5th Annual MPA Globalization Forum." We gather to try and make sense of this force that is reshaping our world...

Today, we'll commence with the "opening statements" from those in attendance. In your ninety seconds of fame (read that as a minimum of one minute and a maximum of three...), you'll have a chance to share your story and your views. There may be a question or two from the floor, and then we'll move on.

So there's no rush to the "podium," I offer this quite random speaking order... (Really, it WAS random. I used the Microsoft Excel random number generator and everything.)

• Asia - "Sweatshop" laborer
• Asia - Indian service-industry worker
• North America - Consumer (middle class)
• North America - Worker whose job was "outsourced"
• Africa - Person existing on $1 a day
• Latin America - Illegal immigrant to the United States
• Asia - Rural youth recently emigrated to Shanghai
• Latin America - Manager of foreign-owned factory
• Africa - Leader of nation dependent on coffee exports
• Middle East - Islamic fundamentalist
• North America - Environmental activist
• Asia - Peasant
• North America - Governmental official 
• Europe - Owner of multi-national corporation
• Asia - Chinese government official
• Middle East - Leader of oil-rich state
• North America - "Big Business" executive
• Europe - Worker "displaced" by immigrant labor

We'll see what time it is when we make it through these speeches. I've got a few questions I may ask you yet today... We'll spend up to 5 minutes on each of the ten topics/statements below. I'll ask for comments "in character" first, but you are also welcome to speak "as yourself" as we get further into the topic.

• The United States benefits disproportionally from globalization.
• Globalization is a tool by which the West spread its values and ideas around the world.
• Globalization threatens national sovereignty.
• The world can continue to develop economically while remaining environmentally sustainable.
• On balance, globalization is a negative for the majority of the world's population.
• There's nothing wrong with large inequalities in wealth around the world as long as conditions are improving for all.
• On balance, globalization has been a benefit to the interests of workers.
• Those who oppose free trade are inadvertently working to keep poor people poor.
• Globalization has made large-scale terrorism more likely.
• The process of globalization has decreased the risks to human health.

HOMEWORK for tomorrow - Tuesday, December 16th

Read Naked Economics Chapter 11, "Trade and Economic Development," before class time on Tuesday.

Here's a study guide (also a blog page) that you might find useful in preparation for Wednesday's Macroeconomics and International Economics Exam.

We'll be short some people today (Peer Leaders), but we'll go a little further in our look at globalization. I'll make sure you get some time to either work on your globalization "character" or begin your review for Wednesday's Macroeconomics and International Economics exam.

I realize that I forgot to make sure everyone was okay with the exchange rates exercise with the cell phone. In addition, I made some copies of the last "Burgernomics" exercise I have, since I did a pretty week job of explaining it...

Globalization: Our look at globalization begins today. Many people argue that this force of integration will come to characterize this era as much as the Cold War had dominated the previous era. Author Thomas Friedman argues that the "Web" has replaced the "Wall" as the symbol of the era.

What is globalization? Simply put, this is the increasing integration of the world through the forces of global trade, business, and finance.

Thomas Friedman's book, The Lexus and the Olive Tree: Understanding Globalization, has become the most widely-cited book on the topic. (Yes, his recent work, The World is Flat is also being widely cited... You 21st Century folks will soon learn what I'm talking about.) He has a number of very useful metaphors and explanations. You'll be asked to read one of the chapters for Monday.

A couple of Friedman's ideas:

• The Title: The "Lexus" represents the forces of modernity and technology. It is the "drive for sustenance, improvement, prosperity, and modernization." The "Olive Tree" represents "everything that roots us, anchors us, identifies us, and locates us in the world... a family, community, tribe, nation, religion, or home."

There are three balances in the global system:

• Balance between nation-states: The United States has clearly emerged as the sole superpower.
• Balance between nations-states and global markets: Friedman calls the global market of investors the "Electronic Herd". They trade in the global financial centers he calls "Supermarkets".
• Balance between individuals and nation-states: The emergence of people that he calls "Super-empowered Individuals" is a new factor to consider. Some are very angry, others are wonderful.

The "Walls" come down... Friedman argues that the Cold War era gave way to the era of globalization as a result of three fundamental changes.

• Democratization of Technology: caused by advances in miniturization, computerization, digitization, etc. (Computer power has doubled roughly every eighteen months over the past thirty years.)
• Democratization of Finance: caused by computerization, investment technologies, access to financial markets, etc.
• Democratization of Information: spread through things like the Internet, satellite dishes, and television

Mounds Park Academy Globalization Forum: Monday, we will come together for the Fifth Annual Mounds Park Academy Globalization Forum. Each of you will represent the interest you selected on Thursday in class.

Requirements:

Obviously, you will need to "create" much of your own detail. Think about how your life has changed over the past decade. What are the advantages/ drawbacks of globalization in your world? What will the future hold?

• You will be expected to provide an introductory statement of not less than ninety seconds. In this statement, you will tell other participants of your "situation," and you will offer your preliminary comments on events associated with globalization.

• You will post on the Globalization Forum Blog Entry. Here, you are limited to 150 words maximum. You should use the blog entry to advocate for any causes, aspects of globalization, etc. that would be of the most benefit to your character. This is your chance to rant against your enemies, blow your own horn, or do a combination of these. You, of course, are bound by the need to not be obscene and totally inappropriate, but think of this as your billboard, letter to the editor, protest sign, bragging sheet, or whatever it is. Be creative, be outspoken, but also be appropriate...

• Do whatever research in class that might help you create your "perspective" and better understand the issue of globalization.

Here are some resources that you might consult:

• The Lexus and the Olive Tree There are some excerpts and reviews here that you might find interesting.
• Globalization: Threat or Opportunity? This is an IMF report addresses many of the central issues in globalization.
• The International Forum on Globalization This is the site of a group critical of many of the effects of globalization.
• The World is Flat: A Brief History of the Twenty-First Century This is a talk by Thomas Friedman about his most recent book.
• Globalization and Its Discontents - Joseph Stiglitz (He won a Nobel Prize for Economics...)
• In Defense of Globalization - Professor Jagdish Bhagwati

HOMEWORK for next session - Monday, December 15th

Post your MPA Globalization Forum blog entry before class on Monday.

Read Naked Economics Chapter 11, "Trade and Economic Development," before class time on Tuesday.

Here's a study guide (also a blog page) that you might find useful in preparation for Wednesday's Macroeconomics and International Economics Exam.

We'll start off today chatting about "How Statistics Lie" and your reactions to it.

Next, we'll head back to issues of poverty and economic development:

Questions to try to answer together:

• What are the causes of poverty?
• What are the causes of global inequalities in growth and wealth?
• Do wealthier nations have a moral obligation to help those poorest nations?
• Do individuals have any responsibility to work to benefit those less fortunate?

Here are some of the resources you might find useful: 

• Global Issues website maintained by Anup Shah
• Poverty Facts and Stats. 
• Poverty around the World 

The other resource that we'll make use of today/tomorrow is Jeffrey Sachs' book, The End of Poverty: Economic Possibilities for Our Time. (Bono wrote the forward, so it must be good...) We'll use a couple charts and brief sections from this work.

• Overview of poverty around the world
• An individual family - income growth and income reduction
• Why are some countries poor?

Professor Jeffrey Sachs also chaired the UN Millennium Project that issued its report in 2005.

Here are the resources that we consulted yesterday:

• Millenium Development Goals 
• Millennium Development Goals Indicators. The Gapminder chart under the Data menu section is really neat...
• Millennium Development Goals Indicators Dashboard. (The key is in the upper left.)

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Development Economics: This will be more discussion oriented than "lecture" based. You know a lot about inequality and the problems of poverty and related issues. For us, I'd like the bigger questions to be these:

• What CAN be done to foster economic development?
• What SHOULD be done to foster economic development?

There are a few terms and concepts that will be useful in this discussion:

World Bank: The World Bank is owned by 184 countries. In 2002, almost $20 billion in loans were provided to clients in more than 100 countries. The World Bank's focus is on development assistance.

Work your way through this overview of the World Bank's functions at "10 Things You Never Knew about the World Bank."

Here are the "Quick Reference Tables" from the World Bank. You can find a lot of information here.

International Monetary Fund: According to its own web page, the IMF "works for global prosperity by promoting the balanced expansion of world trade and stability of exchange rates..." Its functions complement those of the World Bank.

Structural Adjustment Programs (SAP): The IMF and World Bank at times require nations to "adjust" their economies in order to assure debt repayment. Many critics believe this only deepens the poverty of the people. Nations may be required to encourage foreign trade, shift to a cash crop focus, or otherwise be directed to act in a particular way. These are also referred to as "economic austerity" plans.

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We'll set up the MPA Globalization Forum today, but it will not take place until next Monday.

Globalization: Our look at globalization begins today. Many people argue that this force of integration will come to characterize this era as much as the Cold War had dominated the previous era. 

What is globalization? Simply put, this is the increasing integration of the world through the forces of global trade, business, and finance.

MPA Globalization Forum: Monday, we will come together for the Fifth Annual Mounds Park Academy Globalization Forum. Each of you will represent a different interest.

* You are allowed (within limits) to select your role for this forum. I do need certain perspectives represented, but you can take creative liberties within those limits.

We will need:

5 American representatives: 1 from government, 1 from "big" business, 1 consumer, 1 environmental activist, 1 worker whose job has been "outsourced"

2 Europeans: 1 owner of a multinational corporation, 1 worker "displaced" by foreign competition

2 Africans: 1 person existing on less than $1 a day, leader of poor nation that exports coffee

5 Asians: 1 "sweatshop" laborer, 1 peasant, 1 Chinese governmental official, 1 Indian service-industry worker, 1 recent migrant to Shanghai from Chinese countryside

2 Latin Americans: 1 manager of a foreign-owned factory, 1 illegal immigrant to United States

2 Middle Easterners: 1 leader of oil-rich nation, 1 Islamic fundamentalist

Obviously, you will need to "create" much of your own detail. Think about how your life has changed over the past decade. What are the advantages/ drawbacks of globalization in your world? What will the future hold?

* You will be expected to provide an introductory statement of not less than ninety seconds. In this statement, you will tell other participants of your "situation," and you will offer your preliminary comments on events associated with globalization.

* You will post on the Globalization Forum Blog Entry. Here, you are limited to 150 words maximum. You should use the blog entry to advocate for any causes, aspects of globalization, etc. that would be of the most benefit to your character. This is your chance to rant against your enemies, blow your own horn, or do a combination of these. You, of course, are bound by the need to not be obscence and totally inappropriate, but think of this as your billboard, letter to the editor, protest sign, bragging sheet, or whatever it is. Be creative, be outspoken, but also be appropriate...

* Do whatever research in class that might help you create your "perspective" and better understand the issue of globalization.

Here are some resources that you might consult:

The Lexus and the Olive Tree There are some excerpts and reviews here that you might find interesting.

Globalization: Threat or Opportunity? This is an IMF report addresses many of the central issues in globalization.

The International Forum on Globalization This is the site of a group critical of many of the effects of globalization.

The World is Flat: A Brief History of the Twenty-First Century This is a talk by Thomas Friedman about his most recent book.

Globalization and Its Discontents - Joseph Stiglitz (He won a Nobel Prize for Economics...)

In Defense of Globalization - Professor Jagdish Bhagwati

HOMEWORK for tomorrow - Friday, December 12th

Your Blog Entry #9 is due Monday.

We'll hold the MPA Globalization Forum on Monday as well. You'll be asked to have your blog entry done before the start of class time, and you can simply put them on this entry.

Please read Chapter #11, "Trade and Globalization," for Tuesday's class.

Let's settle on Wednesday for the Macroeconomics and International Economics Exam. That should take some pressure off of your college deadlines, etc.

We'll talk a bit about Chapter 9 in Naked Economics if there is anything you are interested in sharing...

Please have "How Statistics Lie" read for Thursday's class. We'll have Blog Entry #9 due by Monday. It's posted.

Last time it was trade. This time it's money. More specifically, we'll look at international currencies and the role they play in the world's economy. Here are some definitions that you will need to understand:

Exchange Rates: The value of currencies worldwide is provided by exchange rates, which tell you what each currency is worth in relation to other currencies. In simple terms, a currency is worth what people will pay for it. Exchange rates are constantly adjusted to reflect markets.

• Fixed exchange rates: After the 1930s, most countries abandoned the gold standard. Instead, each country's government "fixed" the value of their currency, deciding what it would be worth. (For example, the British decided to exchange their pound into US dollars at a rate of $2.40 per pound.)
• Floating exchange rates: After 1973, international agreements on fixed rates expired, and currencies began to have their value decided in the market. A currency's value will "float" up or down. (An estimated $1.5 trillion dollars in currencies are traded every day in the world's foreign exchange markets.)

Purchasing Power refers to what money can actually buy in each country- calculating its purchasing "power". Purchasing Power Parity (PPP) would be when a currency can buy the same basket of whatever in any country.

Playing with "Purchasing Power Parity (PPP): I think you'll like this stuff...

To do the following, you need a copy of "cross currency" rates. You can get one from the Benchmark Currency Rates page at Bloomberg.com. (Yes, that's the same Bloomberg as in the Mayor of New York City.)

Economists refer to purchasing power parity to describe why, over time, the dollar price of a good in one country should equal its dollar price in all other countries. The notion that a particular type of cordless telephone should sell for the same dollar price in the United States as it does in, say, Japan and Great Britain, makes sense if you think about supply and demand in world markets. Suppose that the telephone sells for $29.99 in the United States, 2500 yen in Japan, and 25 pounds in Great Britain.

Let's figure out in which country the dollar price of the cordless phone is lowest?

1. What is the exchange rate between the Japanese yen and the United States dollar?

2. What is the exchange rate between the British pound and the United States dollar?

3. Calculate the dollar price of the cordless phone in Great Britain.

4. Calculate the dollar price of the cordless phone in Japan.

5. In which country is the dollar price of the cordless phone the lowest?

6. In which country is the dollar price of the cordless phone the highest?

So, what does "purchasing power parity" suggest that an entrepreneur could do to earn profits?

Of course, purchasing power parity theory suggests that price adjustment will continue until the dollar price of cordless phones is the same in each country. This price equalization is an example of purchasing power parity. Note that it works best for close substitutes that can be traded among countries over long periods of time.

Foreign Exchange map: This is a service from The Economist. Once you get to the page, you have to "Launch the Map". Give it a minute or so to load itself. After that, follow the directions from the first page. Try several comparisons between countries and over time periods.

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Since the other activity I used to do is no longer available for free on the Internet, we'll move on to poverty for a bit. (I have no idea why the rest of this is indented...)

HOMEWORK for tomorrow - Thursday, December 11th

Please have "How Statistics Lie" read for Thursday's class. We'll have Blog Entry #9 due by Monday. It's posted.

I'm now thinking that we will have our Macroeconomics and International Economics quiz on Tuesday, December 16th. We'll be sure and get a review sheet posted yet this week. 

We'll go back to trade today. Let's chat about the comparative advantage worksheet and the rest of the "Iowa Car Crop" article.

A couple questions with which to get going:

What are the arguments in favor of restricting trade?
What are the arguments against restricting trade?
In your opinion, when are restrictions on trade justified?

There are a couple more definitions we need to make sense of this information we will consider today.

Balance of trade: Balance of trade data describe the exports of goods and services produced in the U.S. and sold abroad and the imports of goods and services produced abroad and sold to individuals, businesses, and governments in the U.S. To obtain the balance, imports are subtracted from exports and the result is described as a surplus if exports are greater than imports and a deficit if imports are greater than exports.

More commonly, you will hear of the trade deficit. This is exports minus imports.

bilateral trade negotiations: These are trade negotiations between two coutries only

most-favored-nation clauses: These extend the benefits of lower trade barriers granted to one country to all nations what have most-favored-nation status. This term is being phased out in favor of the terms, normal trade relations or permanent normal trade relations.

The Status of US Trade: Charts and graphs...

You can download this Powerpoint of September 2003 trade report graphs and charts. (I realize that's a little old, but I haven't found a newer set, and they make the points I want to highlight...)

Here's more current information from the US Government on our trade balance and situation.

Specific issues in US trade policy: We'll access resources from the "Public Citizen" web page. They call themselves a national, non-profit public interest organization. Ralph Nader helped found this organization 30 years ago, so there is a definite liberal perspective here.

We'll have you pick one of these issues. I want you to figure out the basics and report back to us. In addition, please consider what you think the "conservative" response might be...

World Trade Organization (WTO)
North American Free Trade Agreement (NAFTA)
Free Trade Area of the Americas (FTAA)
Central American Free Trade Agreement (CAFTA)
Offshoring

HOMEWORK for tomorrow - Wednesday, December 10th

Please read Naked Economics Chapter #9, "Keeping Score," for Wednesday's class. 

Please read the "How Statistics Lie" chapter from The Armchair Economist for Thursday's class.

I'm thinking that we will have our Macroeconomics and International Economics quiz on Monday, December 15th. We'll be sure and get a review sheet posted yet this week.  

You were asked to read Chapter 8, "The Power of Organized Interests" by today's class. The blog entry for that is posted and should be done by Tuesday.

An introductory discussion on trade
Very often, discussions of trade center on "winners" and "losers". Let's consider the case of NAFTA, the North American Free Trade Agreement. NAFTA went into effect on January 1, 1994. Its goal was to limit trade barriers among Canada, the United States, and Mexico. (We'll forget about Canada, since we have long had very free trade with them.)

Who do you believe have been/ are/ will be the "winners" and "losers" under NAFTA?

Brainstorm two lists, and have them ready to share. (I'm thinking of "classes" of people here - things like "American unions" or "Mexican entrepreneurs" or "consumers" or things like that...)

Introducing two key concepts in trade
We need to learn a bit of vocabulary that goes along with international trade. There are two fundamental terms that often cause confusion.

• absolute advantage: When two countries can each produce a different good (or service) more efficiently than the other country, each of the countries has an absolute advantage in the good or service they produce more efficiently.
• comparative advantage: When Country A can produce two different products more efficiently, but has a greater advantage in one product than the other, they have a comparative advantage in the product with the greater relative efficiency. Country B has a comparative advantage in the product in which the disadvantage is less large.

That seems like a mouthful, but let's try to make sense of it. Clearly, it is in both counties' best interest to trade in a situation of absolute advantage. What if we are talking comparative advantage?

Let's work through an example of a simple economy. Download this Comparative Advantage handout, and work through the scenario with a partner. 

Trade explained 

I have a short (2 page) reading that I want us to do. It may be the single most effectively worded defense of trade that I have ever read. Let me hand it out... This is from The Armchair Economist. Let's read it and talk about it.

Limits on trade

Next, let's think about the limits that are put on international trade. These barriers can take a number of forms.

• tariffs - taxes on imports (either for generating revenue or sheltering firms from competition)
• quotas - restrictions on the quantity of a good that may be imported or exported
• non-tariff barriers - regulations on labeling, packaging, and testing; customs restrictions
• embargo - This, of course, is a cutting off of trade with another country.

A couple questions with which to close:

What are the arguments in favor of restricting trade?
What are the arguments against restricting trade?
In your opinion, when are restrictions on trade justified?

HOMEWORK for tomorrow - Tuesday, December 9th

Your Naked Economics Blog Entry #8 should be posted by tomorrow.

Please read Naked Economics Chapter #9, "Keeping Score," for Wednesday's class. 

I'm thinking that we will have our Macroeconomics and International Economics quiz on Monday, December 15th. We'll be sure and get a review sheet posted yet this week.