1. MBA 540: Societal Economic Analysis Week 5 Agenda  Course Research Paper------Questions?  Review Course Learning Outcomes  “You Can’t Build on Broken”------Key Takeaways?  Consider this Systems Focused Framework for Analysis … (not in our textbook)  Key Economic Policy Issues to consider today-----roles, desired outcomes, impacts—winners and losers, frameworks for analysis (aka. Research Paper applications)?  Unemployment Benefits and Minimum Wage  International Trade: Does is Jeopardize American Jobs?  Are (Free) Trade Agreements Good for Us?  International Economic Growth and Development 1 Rick Coplen; Cell: 703-786-7181; rcoplen504@comcast.netrcoplen504@comcast.net

2. Course Learning Outcomes Develop an economic view of the state of the world through the application of rigorous analysis that connects real-world issues with core economic theories. Assess and interpret the challenges of the global economic environment by exploring and evaluating a wide-range of issues that encompass the private-sector, government and societal environments. Appraise the economic impact of issues and synthesize a course of action by analyzing arguments by thinking economically, while recognizing and avoiding logical traps. Envision what possible changes are likely to occur in the global economic environment over the next decade and apply economic concepts to develop rational market actions. Synthesize an understanding of the interplay between economics and the process of creating public policy. Apply economic methods; build practical approaches that promote both the short and long-term economic well-being of the organization and society.

3. Asset-Based Community Development TEDxHouston 2011Angela Blanchard http://www.youtube.com/watch?v=TaX5DUGC1CU Key Takeaways?? “You can’t build on broken.”

5. Model for Sustainable Economy presented in the Guiding Principles

6. Info Creation & Sharing System Market Economy Unemployment Agriculture weak Inflation / Deflation Imports > Exports Supply Chains Money, Banking, Finance Hidden banking actions Dependent on aid / DFI Inflation/Deflation Lack of access to credit Rule of Law Land Tenure and Property Rights Illicit Economies Corruption Economic Governance Fiscal Policy Tax Collection Budgeting Monetary Policy Trade Policy Regulatory Policy Causes of weak economic development and instability in the context of capacity building systems... Infrastructure / Public Services Sewage Water Energy Transportation Telecom (Human Capacity) Illiteracy / Uneducated Unskilled workers Health/Welfare issues Insurgents undermine capacity building People Macroeconomic Stabilization Employment Generation Market Economy Sustainability Control Illicit Economy & Economic-Based Threats to Peace

7. ... all about building local capacity, not projects or handouts. Supporting economic development is...

8. Civil Society Business Government................... Education & Training Illiteracy / Uneducated Unskilled workers Health/Welfare issues Insurgents undermine capacity building People (Human Capacity)

9. Raise Minimum Wages? Obama's State of the Union in Two Minutes http://www.youtube.com/watch?v=nQaVPe97fCo State of the Union 2014: President Supports Minimum Wage Increase http://www.youtube.com/watch?v=sy2qVgh84Bg http://www.youtube.com/watch?v=sy2qVgh84Bg Sen. Rand Paul and Wolf Blitzer Discuss President's State of the Union Address - January 28, 2014 (start at 1:35) http://www.youtube.com/watch?v=O-4vBMrhi-Y OMG Raise The Minimum Wage (Parody) http://www.youtube.com/watch?v=Sk9BmMvsKz4 Goals, Actors, Interests, Negotiation (Position, Leverage, Tactics) Labor Supply and Demand Analysis Winners and Losers?

10. 1- 10 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin 31 - 10 Minimum Wage Relative to the Poverty Line

11. 1- 11 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin 31 - 11 Nominal and Real Minimum Wage (1999 dollars)

12. 1- 12 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin 31 - 12 The Labor Market without a Minimum Wage Labor W Demand Supply A W* B C 0 L* Value to the firms: 0ACL* Firms pay workers: OW*CL* The opportunity cost to workers: OBCL* Surplus to firms: W*AC Surplus to workers: BW*C

13. 1- 13 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin 31 - 13 Kicking it Up a Notch: Demonstrating the Case Against the Minimum Wage Labor Value to the firms: 0AEL min Firms pay workers: 0W min EL min The opportunity cost to workers: 0BFL min Surplus to firms: W min AE Surplus to workers: BW min EF Unemployed workers Who had jobs L*-L min Who are now looking L S -L* W Demand Supply A W* B C 0 L* W min L min LSLS E F

14. 1- 14 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin 31 - 14 Demonstrating the Inelasticity Argument Labor W Demand Supply W* B C 0 L* W min L min E F Small number of displaced workers Low level of DWL

15. Extend Unemployment Benefits? There are 10,000 Virginians who have been struggling to find work for too long – and because of Congressional inaction, they are beginning 2014 without any emergency unemployment assistance. For many, this makes a tragic situation potentially debilitating. These benefits help folks keep the heat on and put a little bit of food on the table. Earlier this week, the Senate passed the first hurdle in the fight to extend this critical lifeline for those striving to find work. But there is a lot more work to be done to ensure Congress passes this legislation – and I’m asking for your help. Will you join my colleagues and me and demand that Congress extend emergency unemployment benefits? This shouldn’t be a partisan issue. With the help of both Republicans and Democrats, Congress has always extended these emergency assistance programs when long term unemployment has remained as high as it is today. This isn’t just the right thing to do. It’s also good economics. Funds spent on this program are reinvested in the economy quickly – spurring job creation and economic growth. Please help apply the necessary public pressure to get this done. Add your name and demand Congress pass emergency unemployment benefits. Thanks for your help, Mark Warner

16. International Trade: Does is Jeopardize American Jobs? Are (Free) Trade Agreements Good for Us?

17. 1- 17 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin 17 - 17 Using Production Possibilities Frontiers Apples Coffee Apples Coffee BrazilUnited States Production Possibilities Frontier Production Possibilities Frontier

18. 1- 18 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin 17 - 18 Consumption Possibilities Frontier with Trade Apples Coffee Consumption Possibilities Frontier

19. 1- 19 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin 17 - 19 Cost of Limiting Trade Q/t S D P Domestic Market P world S D P World Market P world P domestic QdQd A B C Q’ s Q’ d EF

20. 1- 20 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin 17 - 20 Tariffs vs. Quotas P limit C A B E P Q/t D S P* Q* Q limit Limiting trade with a quota S’ } Tariff F Limiting trade with a tariff A tariff raises tax revenue and a quota does not.

21. 1- 21 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin 19 - 21 Alphabet Soup: NAFTA North American Free Trade Agreement Creates a (relatively) free trade zone in North America. Includes Canada, Mexico and the United States. Passage Envisioned by President Reagan in the 1980’s. Negotiated by President Bush (G.H.W.) in the late 1980s and early 1990s. Enacted by President Clinton.

22. 1- 22 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin 19 - 22 The Impact of NAFTA

23. 1- 23 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin 19 - 23 NAFTA and Trade Growth Rates Pre- NAFTA 1990 to 1994 1995 to 1998 Full Effect 1999 to 2007 US exports to Mexico10.2%12.9%2.7% US imports from Mexico8.2%9.8%5.0% US exports to Canada4.3%4.1%2.1% US imports from Canada4.9%3.5%3.2% US Total Exports3.5%2.9%3.6% US Total Imports3.3%4.1%4.9%

24. 1- 24 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin 19 - 24 The Politics of Free Trade There are winners and losers from freer trade. The winners have tended to be people who are educated and highly skilled. The losers have tended to be people in manufacturing who have little education.

25. 1- 25 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin 20 - 25 Comparing Developed Countries and Developing Countries Rich Countries Are getting richer (faster GDP growth) Have more evenly divided incomes (lower GINI coefficients) GDP is produced by services, then industry (agriculture insignificant) Lower Inflation Poor Countries Have lower GDP growth rates Have highly uneven incomes Agriculture is an important part of GDP Have higher levels of inflation

26. 1- 26 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin 20 - 26 Fostering (and Inhibiting) Development Solow growth model predicted convergence of income. Evidence shows this is not occurring. Political and institutional problems inhibiting growth.

27. 1- 27 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin 20 - 27 The Challenges Facing Developing Countries Low Rates of Basic Literacy Lack of Infrastructure Political Instability Corruption Lack of Independent Central Banking Inability to Repatriate Profits A Need to Focus on the Basics

28. ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin 1 - 28 What are the “appropriate” roles for all these actors? What are the desired outcomes for all these actors?