Priyanka's Econ Blog

Section 2 Examination Reflection March 30, 2010

Filed under: Uncategorized — priyanka821 @ 11:54 pm

I think I can improve my score on the data response question. I went too in depth about certain topics, but did not cover a wide range. This is why I did not do as well as I had expected. I think I had prepared well enough for this test, it was just a matter of writing the examination paper. I also thought that we had 80 minutes for this exam, and I had only started the evaluation when I found out that we had 60 minutes. I was really stressed and I panic wrote everything. I need to work on improving my time management during the test and check the time constantly during the test. Furthermore, for the definitions and diagrams, I feel like I did well. I  forgot to explain the curves for the Normal Profits in Perfect Competition so I lost a point there. Next time I will have remember to explain the curves to get full marks.


Japan’s Destruction March 29, 2010

Filed under: Section 3 — priyanka821 @ 12:21 pm

Japan was once considered to have one of the world’s most powerful economies, yet in the recent decades it has collapsed. Why can’t Japan rise again???

1. Exports fell- Japan used rely on export-led growth. However, productivity growth fell in the 1980s and the Japanese companies lost to South Korea and Vietnam as the people offered lower wages. Furthermore, in 1992, China and India’s economy’s started to develop.

2. DeflationThe government did not take action against deflation quickly enough. The drop in prices made life easier for those who worked, but decreased the incentives to spend.

3. Debt- The cumulative central and local government debt is about 180% of the GDP. The government spending of 2010 will be financed by new borrowing. By 2030, a third of the population will be over 65 which will reduce tax revenues but increase health care costs.

4. Women- The role of women seems to only extend to childcare. If more women entered the work force it would compensate for the pregnant women leaving it .

5. Budgeting- The new government cannot cut the deficit in the budget, as corrupted scandals are promised before the July elections for the upper house. The budget is only focused on the election. Atshushi Makahima, chief economist of Mizuho Research Institute says, “[the budget] does nothing for the corporate sector”. It does not help cut taxes, deregulate the service sector or aim to raise capital.

Japan in the middle of this turmoil, has not lost its optimism. It will climb its way out of this mess eventually.

For more information visit:

Building on a Japanese Crisis


Capitalism Vs. Corruption March 8, 2010

Filed under: Section 3 — priyanka821 @ 12:28 pm

Is capitalism so deeply flawed that any attempts to ensure the public good are doomed to failure?

Harshest critic of capitalism say that it is a unfair system based on solely greed and self interest. This means that  the public welfare or public good, cannot be ensured without government intervention. This takes a direct jab at Adam Smith’s Theory of the Invisible Hand, which reckons that by allowing the market forces (ie. supply and demand), the market will function and be efficient. There are two sides to capitalism that must be discussed in relation to the public good, which includes not only individuals but also envirnoments.

Capitalism in our world today, can be defined as an economic system that is characterized by private ownership of capital goods. These goods are attained through investments which are determined by private decisions, prices, production and the distribution of goods. These elements are determined through free market, with no or very little regulation as opposed to the state controlling the production.

Public good can be defined as the welfare of the people living in a state or nation. The government is obligated to protect its people, and to certain extent must be regulate the free market. For instance, the government sets up a minimum wage or a price ceiling to ensure that its people’s standard of living is increased. So up to what extent should the government intervene in the market?

John McMurty believes that the government should be regulating the marekt. McMurty  argues that the global market is not both ‘productive and efficient’. The current global economy has produced the most waste ever in history. In his book Economics by Paul Saumelson describes economic efficiency as “an absent of waste”. The flaw here is that the waste only include wastes that cost the private enterprises money, in other words, there is no account of the negative externalities.This means that the pollution, and carcinogens poisoning the envirnoment are ignored by the government. Furthermore, McMurty argues that the free-market discriminates against healthy products unless they promise profits. For example:

he British Medical Journal reported in July 2003 that a daily low-cost pill made up of six known drugs resulted in an 80-per-cent reduction of heart attacks in everyone over 55 – ‘a greater impact on the prevention of disease in the Western world than any known intervention’. Pharmaceutical corporations had little interest because the drugs involved were inexpensive and out of patent. Governments fail to produce the pills themselves because they would be pilloried by corporate PR campaigns for ‘undermining the free market’ – just as public healthcare is still demonized in the US as ‘socialist’.”

Instead of tackling the problem of increasing carbon dioxide emissions, we have just resolved to trading permits and allowing major polluting corporations to pollute even more. The free-market is only interested in the company’s own profit, thus try to ignore the negative externalities that affect the public welfare.

On the other hand, the we have free-market environmentalists who argue that the current environmental regulations follow a “government knows best mentality”. Government intervention is called for whenever the environmental quality is degrading. However, there is no end to the private activities which effect the environment in a negative way.The new solution,  “free market environmentalism” is a new set of policy which  reconcile human needs and environmental concerns. Grounded in property rights, voluntary exchange, common law liability protections, and the rule of law, free market environmentalism integrates environmental resources into the market system.

In defense of capitalism, Richard Branson, the owner of Virgin Records argues that there is no better approach than capitalism to increase human wealth and happiness. He claims that entrepreneurs are seen as the villains of the market system. However, he claims that the entrepreneurs are the ones who took the risks and innovate new products due to the pressures of the free-market and the competition they are faced with.

“As I see it, entrepreneurship is something we are born with  –  because it’s about turning what excites us in life into capital so that we can enjoy it even more. And those are the principles that have informed my entire business career.”- Richard Branson

Personally, I think that capitalism is a good way to create healthy competition and new innovative ideas can emerge. My family comes from a capitalist back ground and we deal in pearls. Through the taxes we pay, I think that we are contributing to public welfare. Though I we do not operate in a system which is free from government market intervention, the market structure in not communist or socialist which I think is quite unsuccessful as we have seen in the past with the Soviet Union. Under a socialist market system, there is no incentive to work and no room for innovation or increase in efficiency. Thus I would say that capitalism is not so bad, if not even better than other market structures, and does promote the welfare of the general public.

For more information and insight visit:

Richard Branson defends capitalism

John McMurty opposes capitalism

Free Market Environmentalism


Apple In China March 5, 2010

Filed under: Section 3 — priyanka821 @ 1:44 am

Recently Apple has discovered  abuse of workers by its contractors in China. Though due to tight Chinese censorship and Apple’s privacy, the location remains unknown, the giant claims its supplies hired underage employees, dumped toxic waste illegally and made the stall work unreasonable hours. Furthermore the workers were payed under the minimum wage, and violated  Apple’s own standards by discriminating against pregnant women.

To be fair, Apple was under no obligation to commission the report or make its findings public. What is more, the report claims, “During most of our audits, suppliers stated that Apple was the only company that had ever audited their facility for supplier responsibility.”

Due to concern about contractor’s conduct, some companies have made their supply chains public, this includes Nike. However, Apple is extremely secretive and remains unwilling to do so.

Increase in Supply of Products as a Result of Worker Abuse

The reason why the contractors would abuse their workers is to increase the supply, yet keep their fixed costs low. The supply is increased as each worker is producing more units per time. Thus the quantity produced in total moves from Q1 to Q2. Only the most efficient companies have contracts with Apple, thus they are under pressure to produce more quantity. However, this is unethical because the workers are humans and deserve to be treated right; they must be paid at least minimum wage and have