December 17, 2010

Price Shopping with Phone

Seems the way we are shopping is starting to change. No longer are shoppers only using brick and mortar stores for their shopping needs. Consumers are now able to access prices on mobile devices such as smartphones, this allows them the ability to comparison shop. Stores are no longer able to just bring in a consumer with the hopes of finding the customer leaving with more than they planned on taking home in the first place. The economic down fall is this is making the market once mildly competitive now highly competitive. Consumers are able to go to a store start up an app such as The Find and comparison shop with other retailers that have the same product almost instantly. What does this spell for the small stores well there is no longer going to be as many small Ma and Pa stores unless they can separate themselves from the others. There are things such as warranties and personally service which can still draw a loyal customer but will it be enough. When those who used the apps available were surveyed, most stated they were used for big ticket items. Will this mean that there will be less employees at the Best Buy when you visit to buy a Blu-ray who knows but it is something to consider. The market is becoming very hard to enter knowing that the prices that are low are from big suppliers such as Amazon who can allow for competitive pricing. Will we be able to see a lowering of the use of apps to shop with; no as technology advances so does how we manage our finances. Penny saved is a penny earned and this will allow those who do comparison shop to feel less guilty, though in the long run they might be aiding in the loss of some employees lively-hood their job.

December 16, 2010

Chinese Iphone Made in America

The economy in China likes to lay claim to many things that are just not there's one such thing is the economic benefits of laying claim to exports. China claims exports that are produced and exported in the final stage of production as part of their GDP. Is the claiming of items only produced and exported as part of their GDP, an honest look at the real GDP of China? No the actual GDP of China should reflect the percentage of the final price of the export added to it. Things will not change though the unseen adjustment to the GDP of China's other contributors to their GDP are left in the dust. For example the Iphone is conceived in the United States 6%, and account for the aforementioned labor and components of the device. Other countries such as Japan, Germany, South Korea and other account for 34% ,17% ,13% and 27% of the production while China accounts for only 3.6% all numbers are rounded and for use of approximation as minute changes are possible in margin of error. With China only accounting for 3.6% of the product how are they able to add it to there GDP, answer, by the current standard of who exports the products is how. If we were to only allow the use of those items who are solely produced to be accounted for this would not be evenly distributed. It should be taken into account the percentage of the product produced in the process and where to be accounted in the country of said work to be included in the correct country for use in GDP determination. China does lay claim though to many products which help its GDP look better than the actual real GDP should be realized. Changing the way it is seen though is a political battle as we are in debt to China seems the United States does not seem it is necessary to act upon these discrepances in real GDP. The debt we owe to China seems to have an adverse affect on our economic outlook but things could always be worse right?

When Will China Overtake the U.S.?

Even though the China's GDP is sitting at 2/5 the size of America's, some economists hypothesize that China will have the largest economy by 2012. It used to be thought by Goldman Sachs, that if China was to overtake us, it would happen no sooner than 2041. Some recent studies done by Goldman Sachs have shown that they could overtake us by 2041. This economic downturn we have experienced in the U.S. has weakened our economy a great deal. This, combined with China's rapidly growing population, and industrailization, has granted them the ability to quickly make up lost ground that we previously held. In fact, China's economy has grown by an annual average of 10.5%, While America has a mere 1.7% average annual growth. This paints a relatively dim picture of our economy in America, and views China as nearly divine, but this fact alone does not provide enough data to make accurate assumptions. It seems obvious, based on past experiences, that the growth rate in China will slow, but with such a large rate of growth, they can afford to slow down a little.
These statistics show that the U.S. has lost much of its economic power, but it does not show why. Inflation rates in China are rising at a rate that is nearly half of their growth rate, which means that the Chinese yuan is not worth nearly as much as the U.S. dollar. The previous statistcs also do not provide the information about the populations of the two countries. The GDP per head in America is four times as large as China's, because China's population is so much larger than ours; the prosperity experienced in America will be far greater than that of China's, because the wealth per person in the United States is fmuch larger than China's.

December 15, 2010

Japan Outsourcing to China

Many companies within the mainland China are now starting to see further utilization of their workers by Japan. Originally Japanese companies would hire Chinese workers at a rate not very competitive with what would be paid to workers of the same skill set native to Japan. In the past five year the number of Chinese workers in the business class has doubled. This spells deeper relationships between the two nations which are now beginning to help one another on a scale set to a brisk pace. There are even companies within Japan that are now owned by Chinese investors this would have been troubling previously but now is of little concern. The idea of intermixing the two countries in a way that they are now able to help one another prosper is fresh considering the history of the two nations relations amongst one another. The idea of considering the firm as a whole instead of just individuals is one leading reason they are outsourcing as well as starting to use mainland China as operative fronts for new business ventures. The profitability of the two nations will soar compared to previous decades especially knowing that China is one of the fastest growing countries and will be on the steady course for many years. What is not seen though is the idea that though it will be of benefit for both the effects on Japan considered to be the second leading economy in the world by many is that they are actually helping China more then themselves. The ideas are on the right path though with China becoming more involved with the Japanese economy it seems that the symbiosis relationship is not one that Japan needs to become successful. Outsourcing is good though the dependency of other nations to the point that they are now involved with game changing information could become disastrous. Time being a factor may Japan realize that not always is it better to use cheap labor.

December 1, 2010

Ireland's Minimum Wage

You may or may not have heard that Ireland is in serious financial trouble. With sky high debt and a rising unemployment rate some fear that Ireland is headed for bankruptcy. Recently, both the EU and the Irish government have been taking steps to right these problems. One of these steps is to decrease the minimum wage of Ireland by 1 Euro. In the article “Cowen Defends Minimum Wage” Taoiseach (Prime Minister) Brian Cowen is defending the plan to reduce the minimum wage and Labour leader Eamon Gilmore disagreement with the plan.
Eamon Gilmore argues that this reduction of the minimum wage will result in more borrowing from banks. Brian Cowen says that “the whole idea is to keep as many people in work at a time when the trading environment is very difficult.” So who is right? As we all know a minimum wage results in employers having to pay more than the market equilibrium price for labor. This results in employers must reduce the amount of labor they employ so there becomes a surplus of labor. Ireland has above a 17% unemployment rate. What Eamon Gilmore is concerned about is that this reduction in wages will cause a economic strain on the poor and people earning the minimum wage which will result in these people borrowing more money. This is not the case, the reduction of the minimum wage means that it moves the price of labor closer to the equilibrium. It will reduce the surplus of labor. This means that it will not only help reduce the unemployment rate which reduces the amount of people drawing unemployment benefits from the government, saving the Irish government money which it desperately needs. But it also means that companies can offer more hours to employees. So across the board anyone who is affected by this decrease of minimum wage is better off. They can either find a job or work more and earn more money. So this increase in pay means that they will borrow less money to pay their bills and maybe even begin to pay back the loans they currently have.

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Are Intellectual Property Laws Harmful?

Are Intellectual Property Laws Harmful?

Intellectual property laws have long been the backbone of innovation. Intellectual properties are the so-called ‘creations of the mind;’ that is, inventions, artistic works, trademarks, copyrights etc. In essence, then, intellectual property rights laws serve to grant the owner or creator of the invention/idea/patent etc. exclusive rights for using and benefiting from such intangible goods. But are these laws right? Let us take a look from an economics standpoint.

On one hand, it can be argued that intellectual property laws are a necessity in promoting innovation and creation in the first place. Without intellectual property laws to protect his patents, copyrights and trademarks, a creator could potentially lose his ideas to others who find them appealing. What motivation – save for purely altruistic motive or creative passion - would a designer have to invest his time, his brainpower, and potentially millions if not billions of dollars into something that he may ultimately reap no reward from? Assuming the invention is any good, there would be massive demand for an invention at 0 cost. In this case, though, it would stand to reason that the producer would be unmotivated to produce if he won’t gain any benefit, and ultimately, the good would go unproduced. This extreme case of excess demand thwarts the idea of abolishing intellectual property laws, and the notion surely is that of a socialist mindset that everyone must share equally.

However, not everyone buys this logic. The other side of the argument cries that intellectual property laws dissuade competition, reduce maximum innovation, and lead to monopolies. This is the position the article’s author seems to take. He appeals that, especially in biotechnology and medication industries, that vital information is being purposefully restricted. It is not entering the marketplace at all, so not only can nobody compete, those who could benefit from the goods cannot and people are dying as a result. Furthermore, as information is often hoarded rather than allowed to enter the marketplace, free market competition is not allowed to thrive. In the instances of software rights and other goods being shared (eg. open source software), the industries boon on the free ability of different producers to share ideas and create better products. This not only benefits the consumer, but the producers are selling more, and it stands as a triumph of free market capitalism and is hardly a ‘socialistic mindset.’ Lastly, from intellectual property laws arise monopolies. The government empowering the bearers of intellectual property with unlimited control of their goods – no matter how much or how little of it is used – allows certain businesses to conquer entire industries (eg. Microsoft). Good ideas will flourish whether or not the government is sticking its nose in the business, and everyone would be better off if intellectual property laws were simply abolished.

This issue is certainly a complex one with strong points for both sides. Would abolishing intellectual property rights be a boost to a free market system and be better for everyone as the author and other proponents of this idea suggest? Or is protecting the intellectual property of innovators the only way to encourage production? What do you think?

What the Deep-Sea Drilling Moratorium Really Caused

I found a very interesting article on the New York Times website relating to President Obama’s moratorium on deep-sea oil drilling. The article talks about how Obama will be extending the moratorium another 6 months which cancels exploratory drilling scheduled in Alaska this summer. The White House says they will also be administering harsher regulations to show that they are trying to fix things in response to the BP oil spill. I think this is an overreaction to the problem as oil spills do not happen very often.

The moratorium will cause a decrease in supply as big oil companies will not be able to drill as much as they normally could. Due to the shift to the left of the supply curve, the equilibrium price will go up which will effect consumers all around the world. I believe most people in the world want gas prices as low as possible so why is Obama doing this? The reason Obama introduced the moratorium on deep-sea drilling was so that United States citizens felt like the government was responding to the oil spill adequately. Instead what they are doing is raising prices of gas which is one of the biggest issues that Americans have today.

The moratorium also decreased jobs for Americans as these rigs employed thousands of Americans. So instead of repairing the government’s image like the Obama administration wanted, they put a lot of people on the Gulf Coast out of work and raised gasoline prices.

Even though Obama did lift the moratorium in mid-October the amount of crude oil that the companies could have drilled is permanently reduced. Before the moratorium, oil rigs were already drilling but after they were forced to move to other places around the world to drill. The oil rigs are not going to come back to Alaska, etc. because they already spent millions of dollars to get to other places to drill. I cannot see a decrease in gas prices coming anytime in the near future but we’ll see.