Archive forSeptember, 2012

China Threatens Economic Sanctions over Senkakus Islands

The current dispute between China and Japan over the archipelago located  off the coast of China, worsening as China threatens economic sanctions such as boycotts and trade restrictions to hurt Japan’s economy. Although Japan has hisotrical control over the islands, recent studies that suggest that there could be oil reserves in the Senkakus Islands have called that ownership into question. There are no maritime boundaries on the islands determining sovereignty that are internationally accepted. This new movement by China to push economic sanctions against the weaker economy of Japan represents the use of econmics influencing international relations and politics. This is also one of the first times that China has threatened using it’s superior econmic strength to influence policy, which could set a new tone for the global political stage for the next era.

http://ajw.asahi.com/article/asia/china/AJ201209200084

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Car makers switching to steel

Due to the price of steel and new regulations car manufacturers are testing for lighter and cheaper materials to build cars. Aluminum is lighter and corrodes less then steel while being just as safe and is above all cheaper. Steel may no longer be the main material for building cars anymore.

http://www.ft.com/intl/cms/s/0/c3db9ec0-0a59-11e2-b03d-00144feabdc0.html#axzz27yy8RnN9

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Solar Lighting

http://www.economist.com/node/21560983

This article talks about how small solar-powered lamps can drastically improve the lives of people in developing countries. These lamps serve as a substitute for kerosene lamps and other light sources. Over time, buying kerosene adds up and can become very expensive, and buying a solar powered lamp eliminates those expenses. Ultimately, as solar lamps become more popular, demand for kerosene and other such fuels will decrease.

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Pension Dilemma in Europe’s Debt Crisis

As we all are aware of that population is aging dramatically in Euro, the policy of pension or social welfare for labor force who are 65 years old or older is gradually becoming an important issue. These can be explained in numerous facets. I want to illustrate into two relevant ways, opportunity cost, and incentive. If the governments of the countries in euro zone cut back pension, it will create an incentive that encourages current working old-aged labor force to work longer till they retire, which will somehow sooth the aging population and freshness of labor force dilemmas in Euro. Also, it will increase the opportunity cost of old-aged labor force to retire by cutting back pension or social welfare per se. However, European countries usually have long term tradition of maintaining high standard of social welfare. So the policy will become an interesting trade-off between the generational substitution of labor force in Euro and recovery of struggling debt crisis in Euro.

 

http://www.nytimes.com/2012/10/01/business/global/pension-dilemma-in-europes-debt-crisis.html?pagewanted=1&ref=global

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Olympics: Are there benefits?

This article, entitled “The Olympics: Rewards of the Rings,” was a very interesting read. The article discusses the summer Olympics in London and whether there are any benefits that come from the Olympics especially for the host country. Some that have been listed in the past are the ideas that the revenue brought in will be greater than the cost of hosting the games, that it will inspire people to work out, and a country can benefit economically from being the center of attention for the span of the two weeks. In actuality, none of this factors are really true. In London’s case they paid more than estimated originally for hosting the games and they are already a very well known city. And the idea that people may work out more has not been proven yet and probably won’t be.

This article really reminded me of the benefit- cost principle that states that if the costs out-weigh the benefits then it probably is not worth the investment. This article is very clearly reporting that many of the costs outweigh the benefits, so perhaps the Olympics are indeed a waste of time and money? I can’t help but feel like a pessimist by thinking that it is indeed a waste.

http://www.economist.com/node/21559340

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More money, less children

http://www.economist.com/node/21561112

I tried to check all of the posts to see if Professor Tynan posted about this article already, but did not find it. This article is directly connected to what we talked about during class and the title of this article reads “More or less. Why, as people get richer, do they have fewer children?” The article mentions r-strategists, which correlates with having more offspring but fewer survival rates, and k-strategists, which is having few offspring and investing more resources providing and developing them. This is similar to wealthier people who have decided to invest more time and money on a fewer amount of children, instead of what less wealthy families did in the past- having seven or eight children, but not investing or able to nurture them as well in the thought that the survival rate might not be too promising. The thought of higher education plans for these wealthy families, in the hopes that their children will have high incomes as adults.

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U.S. government finally allows trade between the U.S. and Burma

http://www.bbc.co.uk/news/world-asia-19738308

Until lately, the US had imposed a strict import ban against trade with Burma. Nowadays, since the conditions in the country have improved greatly, the US government wants to give people in Burma the chance to sell goods to the US by removing the import ban. During the last years, Burma has suffered a terrible civil war. The government still has problems with the military, but the political and economic system has definitely gone towards democracy – and, most importantly when considering the changes in an economic context – a market economy. Provided that the economic system ensures a market that balances freedom and equity for everyone, the US is willing to trade with Burma. This can be a great opportunity for Burma, and I think it will be very interesting to see in which goods each country has a comparative advantage and which goods will finally be traded between countries of such great differences.

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Prices Surged for Producers in August

Two economic principles are asserted in this particular news article. First, society faces the short-run trade-off between inflation and unemployment. However, the tension will ease while the economy progresses in a long period. Second, the decrease of supply will result in the rise of the price for a product in the commodity market, which explained the phenomenon that a drought in Midwest led to a boost of food price.

 

http://www.nytimes.com/2012/09/14/business/economy/wholesale-inflation-rose-1-7-in-august.html?ref=economy

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Where Will the World’s Poor Live?

Most of the world’s poor now live in middle income countries, making the development challenge one of addressing domestic income distribution rather than aid from one country to another. The working paper provides an “Update on Global Poverty and the New Bottom Billion”: http://www.cgdev.org/content/publications/detail/1426481/

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This story highlights an example of an Inelastic Good

http://www.economist.com/node/21563304

The price has risen but there is really is no substitute for for olive oil. So this is a great textbook example. It also illustrate supply and demand.

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