1. MIM 513 Pacific Rim Economies Class One – Introduction to Globalization

2. Introductions and Syllabus review Country & Team Selections & Current Events sign-up Metrics & Current Events - Economic indicators – ISM Data Overview / Historical Thought What is International Economics about? Ricardo comparative models Globalization Overview – Articles Review Agenda

3. Economic Historical Thought Adam Smith – Invisible Hand (Against Mercantilism) John Maynard Keynes – pro-gov stimulus (IS-LM) (“It is better to be roughly right than precisely wrong”) David Ricardo – labor theory of value & trade Karl Marx – Surplus value / Exploitation labor Thomas Malthus – (Principals of population / Moore’s law) Milton Friedman – (“No Free Lunch” / monetary theory)

4. What is International Economics about? $3Trillion of foreign exchange transactions / day $12T goods & $3T services are sold across borders Four elements of International Economics: –Outsourcing –Immigration –Currency exchange –Sovereign wealth funds

5. What is International Economics about? Sovereign Nation States allow for: –Factor Mobility – Land, Labor, & Capital were viewed as national –Capital is the largest factor of production that moves Differing fiscal policies and regulations –Banking and financial systems Differing currency EU versus UK

6. Globalization Globalization – Interdependent and integrated world economy All firms export and import – 97% of firms in US <500 employees Globalization of Markets – global norms equate to trade 2006 over 2,500 trade treaties have been signed vs. 181 in 1980. Globalization of Production – low-cost factors of production

7. Example – Boeing 787

8. Dialectic Marketplace

9. Globalization Globalization can be cultural, political, & economic. –Cultural: A new Universalism (laws versus Jihad) –Political: policies regarding factors of production (oil) –Economic: Markets and Production Globalization of Markets – global norms equate to trade Globalization of Production – low-cost factors of production – Ricardo

10. Globalization -W-Bank – states that by 2020 60% of econ activity by developing nations, today 35% -Foreign Direct investment is easier with technology -Multinationals are not the only participants; Haier for ex. -Backlash against market economy in some nations (Russia) -China is even different by province (Shenzhen vs. Hong Kong vs. Shanghai) -Outsourcing & Jobs -Consumer savings vs. job displacement -Division of income widens -Environment degradation in developing nations

11. Globalization - Political systems -Socialism vs. Capitalistic -“Follow the party” vs. free market -Intellectual Property issues -Foreign Corrupt Practices Act -Purchase Power Parity –

12. Overview of terms MPC / MPS GDP (location) / GNP (ownership) Income & IS-LM M1 (consumption) / M2 (M1 + savings, CDs) M3 (M2+ CD>$100K, 401K) = ~90% of $$$ Surplus Labor / Value Supply / Demand Consumer & Producer surplus

13. Overview Cont. Supply / Demand Consumer & Producer surplus Price Discrimination -> £8 charge leading to internet Sales Elasticity of Supply & Demand Formulas

14. Elasticity of Demand – what is it? Demand creation and consumption modeling

15. Ricardo’s comparative advantage – Beginning of Trade - Defined : A country will export goods with a low opportunity cost and import goods with a high opportunity cost - Key is relative or comparative, one country cannot produce everything -Comparative vs. Absolute advantage -Gains from Trade – models -Production Possibility Frontier (PPF) -Economies of scale – Efficiency (slope of PPF) -Aggregate shifts in PPF -Efficiencies in resources -Hechscher-Ohlin model – some countries have more resources -China- labor vs. US Agriculture -Flaw – assumes tech is equal

16. Inequality – GINI

17. HBC Inequality & Globalization What do we know? - Human development index (Gini) – life expectancy, education, & Std of living based on PPP -China – 43.4 but U.S. – 40.8? -Apartheid economy developing? -An issue in both developing and developed nations -GDP growth; PPP effect normalizes a little

18. Questions: -MDG / WB poverty levels muddying the water? $1 or $2 / day? -What is the cause of inequality? -Is trade to blame? Type of exports / imports? -Is it technology? -Is it governance? -What should be done as a global citizen and as a business leader?

19. Two Articles - Discussion Krugman, P (2009). How did economists get it so wrong? Cleveland, P. (2011). A vital link: Foreign markets and Oregon jobs.

20. Krugman’s point - Discussion -Monetarists versus Keynesian policy – Saltwater vs. freshwater economists -Financial markets do go offtrack, depressions are bad and can be avoided -Externalities do create abnormal behavior without consequence (pollution, real estate bubble based on sub-prime behavior) -Low inflation & high growth was over too long a period

21. Krugman – Multiplier deficits

22. Cleveland Article – MFG Jobs