Class #24 "Continue of Comparative and Absolute Advantage" (10/28/2011)

What determines if a job will get shipped overseas?
Comparative and Absolute Advantage


In China
$8/4 units per hour = $2 per unit

In the USA
$30/20 units per hour = $1.50 per unit



Wages/ Marginal produce of labor (MPL-how more stuff you can get if you work one more hour). This shows your absolute advantage in production. But you need to calculate comparative advatange using wages and production from other sectors.

Do trade surpluses create jobs?
Example: Agriculture sector- Trend says no. Running a trade deficit does not create jobs and nor does it destroy them.

Why don't trade deficits destroy jobs?
-You pay for imports with your exports. When you specialize, you get richer (you use fewer resources to make more goods. With more income, you consume more and this create jobs. On net, that's why you should see employment increase.
When you get a free car as a gift from Korea, American living standards would increase the someway as if American manufacturers could produce cheaper cars.

US Current Account Balance: What Americans sell compared to what Americans buy
US Capital Account Balance: Look at American Assets (Treasuries, bonds)

Rizzo

-Daniel Gaona

Class #23 "The Effect of Trade on Jobs" (10/26/2011)

The Effects of Trade on Jobs
Trade doesn't cost jobs, it changes the types of jobs in the economy.

• Sources of job loss from trade:
• Outsourcing
• Technology (Replacing human labor with machines)
• The workers who lose their jobs from trade were the first to initially benefit from trade.
• No evidence suggests long term gains from adjustment training laid off workers.

If you want to argue that trade costs jobs, technology is the biggest job killer in history.
Trade Statistics (are meaningless, but make for great theater): If we buy more from China than we sell to China, we are running a trade deficit. In reality, we have a service surplus and a goods deficit with China.
Trade deficits don't effect the number of jobs, but the types of jobs distributed in an economy.

The popular belief that America does not make anything anymore is wrong, manufacturing output (Despite the fact that a less percentage of the job forces works in manufacturing) has been steadily increase since the 1940's.

-Rizzo

Daniel Gaona/Max

Class #22 "Comparative and Absolute Advantage" (10/24/2011)

This class talked about absolute advantages vs comparitive advantages.

Absolute Advantage is stragith up ability to produce something. Without regard to cost, efficiency and more.
Comparative Advantage is how much more efficient yhou are at producing somethign in comparison to someone else producing something.
Example
Rochester and Cornell and wine/camera production.

A key point here is that no one can have comparative advantage in everything. Becuase in order to produce something you must be trading off the ability to produce something else.

Each person has a comparative advantage in something, and this means they can specialize in that something, and use trade to get the things they do not produce. This concept allows everyone to get richer.

Thus being social allows for an increase in wealth, Thus self-sustainability is the road to poverty. The more closed off we are as humans the less trade can flow and this the poorer we are.

Example.
The USA is one huge free trade zone, and that is what allowed the country to become so rich, becuase trade is so easy between states. That is why the income per capital in USA's poorest states (New Mexico) is higher than those of France and Italy.

NOTE: All of the graphs and other explanations could be fine in by notebook no in the blog.

-Rizzo

Daniel Gaona/Cy

Reading Analysis #8 "A set of Paul Krugman Articles" (10/30/2011)

A)
              In all three pieces Paul Krugman defends free trade against various accusations. In Ricardo's Difficult Idea he defends the basic concept that through comparative advantage and spezialitzation, trade makes everyone richer. In Praise of Cheap Labor, shows why very low wages and less then enviable working conditions should not be considered evil or be stopped. He explains that these jobs are much better than anything available before and are the best way for these countries and people to escape poverty. In the last he argues that most people do not really care about working conditions at all, they care about imports that cause competing American companies to go out of business. The second article was the most interesting for me because it explained the very counter-inuitve concept that cheap foreign labor is actually good for those countries  Most people would argue that it is bad that these people work at such low wages, and that something should be done to stop it. However, as Krugman explains, this is actually the best deal going for both these people and their countries. No other route will help as many people as quickly as the employment of cheap labout to manufacture exports. This is a counter intuitive to people, but it is the truth because before ethey were employes in these jobs they had no jobs at all. As more people are emloyes competitions for labour will increase and the wages will rise.

B)

1. Ricardo's model shows how trade benefits everyone, and increase wealth. Which everyone agrees is good, However, does this mean the governments should do nothing to help those people with jobs lost to foreign competition?
2. Krugman's article, In Praise of Cheap Labour states that aid actually only creates chronic dependency. Does it follow that governments in order to help poor regions should invest in their economies, rather that give aid money?
3. Could we as American consumers put enough on clothing manufactueres (throught boycotts their clothing) to force increase in wages and working conditions? And if we could, would it be right to do in order to help those people?

C)
These article demonstrate why free trade is always the right answer. That despite all of the arguments made against it, nothing compares with the ability of free trade to lift people from poverty. On top of this the people who argue against free trade unknowingly advocate more harm to people in developing countires, then those business people who they label as greedy capitalist.

EWOT #8 "Opportunity Cost in Real Life Scenario (10/30/2011)

A week ago. Me and a few friends bought a XBox 360 and controllers, and 5 games for 150 dollars. This is a quite an incredible deal considering that a new Xbox with one controller and NO games is $200 USD. How can economics explain why this guy would ever sell all of this for a such a low cost. 
Opportunity Cost


The seller had pruchuse a new, more advance, gamming system for wathever reason and had no use for the XBOX anyomore. So he figured he would sell it and make money. When we came to him and offered 150 usd he had two options. 

1. Keep the Xbox, which gives no benefit to him since he does not use it
2. He could sell the Xbox and make 150 usd.

So the opportunity cost of selling the Xbox was almost zero (the one cost was the chance for a better deal in the future, however he told us he was short on cash, and so needed money now). Whereas the opportunity cost of not selling was 150 usd.