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Tuesday, February 17, 2009

A Planned World Economy


The human race is getting to be too much for itself and too much for the world." - William Saroyan as quoted in Mankind at the Turning Point (1974)
The Club of Rome is a premiere think tank composed of approximately 100 members including leading scientists, philosophers, political advisors and many other characters who lurk in the shadows of power. This series of articles described the major conclusions of the 1974 book Mankind at the Turning Point: The Second Report to The Club of Rome [1].
Part 1 described their desire for the development of a totalitarian world system presented under the euphemism of an "organic society". Part 2 described the need to create a new value system to ensure the acceptance of the upcoming world government. This new value system will be based on a "world consciousness." Mankind at the Turning Point used an absurd, exponentially based computer model of the world system in an attempt to hide their predetermined conclusions behind the vale of science. One of the main scenarios developed by the model was an analysis of the price of oil. This was an obvious choice due to the importance of oil to the world economy and the Middle East oil crisis which began the previous year (1973). The conclusion of this analysis was that an optimal price exists for oil. A price too high, would encourage development of alternatives and result in long-term losses to the exporting nations. A price too low, would encourage over use and resource depletion which would result in long-term losses of the importing nations who would not have sufficient time to develop alternatives. Therefore, there existed an "optimal" price for oil and that the only way to obtain this price was through cooperation. Naturally, an optimal price would exist for all commodities and the only way to obtain these prices was a planned world economy. After all, a planned economy was working so well in the Soviet Union, why not extend it to the rest of the world? From Mankind at the Turning Point:
"The conclusion applies not just to oil, but to all of the finite resources - food, fertilizer, copper and so forth. The "most beneficial" price range and the proper rate of increase differ for each commodity, but the optimal level exists for all and should be determined and then on a global basis maintained by all participants in the world system - if recurrence of the world economic crises due to resource-constraints is to be prevented." [emphasis mine] - 100 "Indeed, nothing short of a complete integration of all strata, from individual values to ecology and mineral resources - and on a global scale - will suffice for the solution of the world food crises..." [emphasis mine] - 87
Redistribution of Industry Not satisfied with the control of resource prices the report also stresses the need for a planned redistribution of industry throughout the world, especially to South Asia.
"Scenario five - the only way to avert unprecedented disaster in South Asia - requires the emergence of a new global economic order. Industrial diversification will have to be worldwide and carefully planned with special regard for regional specificity. The most effective use of labour and capital, and the availability of resources, will have to be assessed on a global, long-term basis. Such a system cannot be left to the mercy of narrow national interests, but must rely on long-range world economic arrangements... But the strain on the global food production capacity would be lessened if the eating habits in the affluent part of the world would change, becoming less wasteful."










Global Resource Allocation System A planned economy would entail a powerful central government with the authority to allocate resources to areas it decrees most deserving.
"Now is the time to draw up a master plan for organic sustainable growth and world development based on global allocation of all finite resources and a new global economic system. Ten or twenty years form today it will probably be too late..." [emphasis mine] - 69 "The solution of these crises can be developed only in a global context with full and explicit recognition of the emerging world system and on a long-term basis. This would necessitate, among other changes, a new world economic order and a global resources allocation system." [emphasis mine] - 143
The horrors of this proposed system should be obvious to anyone, but for those without any imagination I will provide a quote from The Impact of Science on Society [2] by Bertrand Russell who was also a proponent of world government. The quote below highlights one of the benefits - in Russell's view - of such a world allocation system.
"To deal with this problem [increasing population and decreasing food supplies] it will be necessary to find ways of preventing an increase in world population. If this is to be done otherwise than by wars, pestilence, and famines, it will demand a powerful international authority. This authority should deal out the world's food to the various nations in proportion to their population at the time of the establishment of the authority. If any nation subsequently increased its population it should not on that account receive any more food. The motive for not increasing population would therefore be very compelling. What method of preventing an increase might be preferred should be left to each state to decide." -

Sources and acknowledgments

Acknowledgements
This survey has benefited from the help and advice of many economists, not all of them mentioned in the text. Particular thanks are due to Doug Elmendorf, Thomas Helbling, Subir Lall, Adam Posen, Eswar Prasad, Ken Rogoff and Arvind Subramanian.

Sources
Global Financial Stability Report”, IMF, October 2008.
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World Economic Outlook”, IMF, October 2008.
System Banking Crises: A New Database” by Luc Laeven and Fabian Valencia. IMF Working Paper No 08/224. September 2008.
The New Power Brokers: Gaining Club in Turbulent Markets”, McKinsey Global Institute, July 2008.
Bubblemania”, Barclays Capital, Summer 2008.
Global Commodities: a longer term vision for stable, secure and sustainable global markets”, HM Treasury, June 2008.
Global Development Finance 2008: The role of international banking”, World Bank, June 2008.
Reaping the Benefits of Financial Globalisation”, IMF, July 2007.
“A Pragmatic Approach to Capital Account Liberalisation”, by Eswar Prasad and Raghuram Rajan. Journal of Economic Perspectives, Vol 22, Number 3, Summer 2008.
Sovereign Wealth and Sovereign Power” by Brad Setser. Council on Foreign Relations, Special Report No 37, September 2008.
What happens during recessions, crunches and busts?” by Stijn Claessens, Ayhan Kose and Marco Terrones, IMF, August 2008.
Big bad banks?: The impact of US Branch Deregulation on Income Distribution” by Thorsten Beck, Ross Levin and Alexey Levkov, World Bank, August 2007.
Multilateralism beyond Doha” by Aaditya Mattoo and Arvind Subramanian. Peterson Institute for International Economics, Working Paper 08-8, October 2008.
Banking Globalisation, Monetary Transmission, and the Lending Channel” by Nicola Cetorelli and Linda Goldberg, NBER Working Paper 14101, June 2008.
Can Financial Innovation help to explain the Reduced Volatility of Economic Activity?” by Karen Dynan, Douglas Elmendorf and Daniel Sichel. Federal Reserve, November 2005.
“This Time is Different: Eight Centuries of Financial Folly" by Carmen Reinhart and Kenneth Rogoff. Princeton University Press, forthcoming (2009).
Finance, Financial Sector Policies and Long-Run Growth” by Asli Demirgüç-Kunt and Ross Levine. March 2008.
Finance and Growth: Theory and Evidence” by Ross Levine, September 2004.
OECD-FAO Agricultural Outlook 2008-2017, OECD.
Food Price Inflation: Explanation and Policy Implications” by Karen Johnson, Council on Foreign Relations. July 2008.
Financial Globalisation: A Reappraisal” by Ayhan Kose, Eswar Prasad, Kenneth Rogoff and Shang-Jin Wei. IMF Working Paper 06/189. August 2006.
How does Financial Globalisation Affect Risk Sharing? Patterns and Channels” by Ayhan Kose, Eswar Prasad and Marco Terrones, IMF Working Paper 07/238, October 2007.
Some new Perspectives on India’s Approach to Captial Account Liberalisation” by Eswar Prasad. Brookings-NCAER India Policy Forum 2008. July 2008.
Does Openness to International Financial Flows Contribute to Productivity Growth?” by Ayhan Kose, Eswar Prasad and Marco Terrones, August 2008.
Embracing Financial Globalisation”, HM Treasury, May 2008.
Financial Stability, the Trilemma, and International Reserves” Maurice Obstfeld, Jay C. Shambaugh and Alan M. Taylor. July 2008

International finance

International finance is the branch of economics that studies the dynamics of exchange rates, foreign investment, and how these affect international trade. It also studies international projects, international investments and capital flows, and trade deficits. It includes the study of futures, options and currency swaps. Together with international trade theory, international finance is also a branch of international economics.
Some of the theories which are important in international finance include the
Mundell-Fleming model, the optimum currency area (OCA) theory, as well as the purchasing power parity (PPP) theory. Moreover, whereas international trade theory makes use of mostly microeconomic methods and theories, international finance theory makes use of predominantly intermediate and advanced macroeconomic methods and concepts.

Economy – overview

[edit] 2005–2006

Current account balance 2006[1]
Global output (gross world product) (GWP) rose by 4.4% in 2005, led by China (9.3%), India (7.6%), and Russia (5.9%). The other 14 successor nations of the USSR and the other old Warsaw Pact nations again experienced widely divergent growth rates; the three Baltic nations continued as strong performers, in the 7% range of growth.
Growth results posted by the major industrial countries varied from no gain for Italy to a strong gain by the United States (3.5%).
The developing nations also varied in their growth results, with many countries facing population increases that erode gains in output.
Externally, the nation-state, as a bedrock economic-political institution, is steadily losing control over international flows of people, goods, funds, and technology. Central governments are losing decision making powers and enhancing their international collective power thanks to strong economic bodies of which they democratically chose to become part, notably the EU. The introduction of the euro as the common currency of much of Western Europe in January 1999, while paving the way for an integrated economic powerhouse, poses economic risks because of varying levels of income and cultural and political differences among the participating nations.
Internally, the central government often finds its control over resources slipping as separatist regional movements - typically based on ethnicity - gain momentum, e.g., in many of the successor states of the former Soviet Union, in the former Yugoslavia, in India, in Iraq, in Indonesia, and in Canada.

[edit] 2008
In 2008 after vigorous growth which produced a dramatic increase in the price of commodities such as oil and basic foodstuffs, the international economy began to slow in many countries providing relief from high commodities prices and increasing inflation. It was the opinion of some observers that the world economy had become somewhat overheated and was retracting to a more sustainable pace.[2]

[edit] Statistical indicators

[edit] Economy
GDP (GWP) (gross world product): (purchasing power parity exchange rates) - $59.38 trillion (2005 est.), $51.48 trillion (2004), $49 trillion (2002)
GDP (GWP) (gross world product) (IMF 179 countries [3]): (market exchange rates) - $43.92 trillion (2005 est.), $40.12 trillion (2004), $32.37 trillion (2002)
GDP - real growth rate: 4.3% (2005 est.), 3.8% (2003), 2.7% (2001)
GDP - per capita: purchasing power parity - $9,300 (2005 est.), $8,200 (92) (2003), $7,900 (2002)
GDP - composition by sector: agriculture: 4% industry: 32% services: 64% (2004 est.)
Inflation rate (consumer prices): developed countries 1% to 4% typically; developing countries 5% to 60% typically; national inflation rates vary widely in individual cases, from declining prices in Japan to hyperinflation in several Third World countries (2003)
Derivatives outstanding notional amount: $273 trillion (end of June 2004), $84 trillion (end-June 1998) ([4])
Global debt issuance: $5.187 trillion (2004), $4.938 trillion (2003), $3.938 trillion (2002) (Thomson Financial League Tables)
Global equity issuance: $505 billion (2004), $388 billion (2003), $319 billion (2002) (Thomson Financial League Tables)

[edit] Employment
Unemployment rate: 30% combined unemployment and underemployment in many non-industrialized countries; developed countries typically 4%-12% unemployment[citation needed]

[edit] Industries
Industrial production growth rate: 3% (2002 est.)

[edit] Energy
Yearly electricity - production: 15,850,000 GWh (2003 est.), 14,850,000 GWh (2001 est.)
Yearly electricity - consumption: 14,280,000 GWh (2003 est.), 13,930,000 GWh (2001 est.)
Oil - production: 79.65 million bbl/day (2003 est.), 75.46 million barrel/day (12,000,000 m³/d) (2001)
Oil - consumption: 80.1 million bbl/day (2003 est.), 76.21 million barrel/day (12,120,000 m³/d) (2001)
Oil - proved reserves: 1.025 trillion barrel (163 km³) (2001 est.)
Natural gas - production: 2,569 km³ (2001 est.)
Natural gas - consumption: 2,556 km³ (2001 est.)
Natural gas - proved reserves: 161,200 km³ (1 January 2002)

[edit] Cross-border
Yearly exports: $6.6 trillion (f.o.b., 2002 est.)
Exports - commodities: the whole range of industrial and agricultural goods and services
Exports - partners: US 17.4%, Germany 7.6%, UK 5.4%, France 5.1%, Japan 4.8%, China 4% (2002)
Yearly imports: $6.6 trillion (f.o.b., 2002 est.)
Imports - commodities: the whole range of industrial and agricultural goods and services
Imports - partners: US 11.2%, Germany 9.2%, China 7%, Japan 6.8%, France 4.7%, UK 4% (2002)
Debt - external: $2 trillion for less developed countries (2002 est.)

[edit] Gift economy
Yearly economic aid - recipient: Official Development Assistance (ODA) $50 billion...

[edit] Communications
Telephones - main lines in use: 843,923,500 (2007)4,263,367,600 (2008)
Telephones - mobile cellular: 3,300,000,000 (Nov. 2007)[3]
Internet Service Providers (ISPs): 10,350 (2000 est.)
Internet users: 1,311,050,595 (January 18, 2008 [5] est.), 1,091,730,861 (December 30, 2006 [6] est.), 604,111,719 (2002 est.)

[edit] Transport
Main article: Transport
Airports
Total: 49,973 (2004)
Roadway
Total: 32,345,165 km
Paved: 19,403,061 km
Unpaved: 12,942,104 km (2002)
Railways
Total: 1,122,650 km includes about 190,000 to 195,000 km of electrified routes of which 147,760 km are in Europe, 24,509 km in the Far East, 11,050 km in Africa, 4,223 km in South America, and 4,160 km in North America.
Broad gauge: 251,153 km
Standard gauge: 710,754 km
narrow gauge: 239,430 km
Ports and harbors:: List of seaports

[edit] Military
Military expenditures - dollar figure: aggregate real expenditure on arms worldwide in 1999 remained at approximately the 1998 level, about $750 billion, about 1/2 of which was the United States (1999)
Military expenditures - percent of GDP: roughly 2% of gross world product (1999).

[edit] References
^ Current account balance, U.S. dollars, Billions from IMF World Economic Outlook Database, April 2008
^ "U.S. and Global Economies Slipping in Unison" article by Peter S. Goodman in The New York Times August 23, 2008
^ global cellphone penetration reaches 50 percent

[edit] See also
List of most wealthy historical figures - The scope of the list is world-wide in history since the beginning of civilization.
Globality
Globalization
The Global Economy
Economy of Africa
Economy of Asia
Economy of Europe
Economy of North America
Economy of Oceania
Economy of South America
Energy policy
List of billionaires
List of countries by GDP sector composition
North American Industry Classification System
Steel production by country
List of world's largest economies (nominal) - based on current currency market exchange rates for 2007
List of world's largest economies (PPP) - based on purchasing power parity for 2007
Historical list of world's largest economies (nominal) - for the years between 1998 and 2003
Historical list of world's largest economies (PPP) - for the years between 1 and 1998
World
Trade route
Economics
Ecological economics
2007–2008 world food price crisis
Oil price increases since 2003

[edit] External links
Maps of the global economy
IMF - World Economic Outlook
UN DESA - World Economy publications
CIA - The World Factbook -- World
Career Education for a Global Economy
BBC World economy news
World Economies
Financial Times
Global Economy Portal
Retrieved from "http://en.wikipedia.org/wiki/World_economy"

World economy

The world economy can be evaluated in various ways, depending on the model used, and this valuation can then be represented in various ways (for example, in 2006 US dollars). It is inseparable from the geography and ecology of Earth, and is therefore somewhat of a misnomer, since, while definitions and representations of the "world economy" vary widely, they must at a minimum exclude any consideration of resources or value based outside of the Earth. For example, while attempts could be made to calculate the value of currently unexploited mining opportunities in unclaimed territory in Antarctica, the same opportunities on Mars would not be considered a part of the world economy – even if currently exploited in some way – and could be considered of latent value only in the same way as uncreated intellectual property, such as a previously unconceived invention.
Beyond the minimum standard of concerning value in production, use, and exchange on the planet Earth, definitions, representations, models, and valuations of the world economy vary widely.
It is common to limit questions of the world economy exclusively to
human economic activity, and the world economy is typically judged in monetary terms, even in cases in which there is no efficient market to help valuate certain goods or services, or in cases in which a lack of independent research or government cooperation makes establishing figures difficult. Typical examples are illegal drugs and other black market goods, which by any standard are a part of the world economy, but for which there is by definition no legal market of any kind.
However, even in cases in which there is a clear and efficient market to establish a monetary value, economists do not typically use the current or official exchange rate to translate the monetary units of this market into a single unit for the world economy, since exchange rates typically do not closely reflect world-wide value, for example in cases where the volume or price of transactions is closely regulated by the government. Rather, market valuations in a local currency are typically translated to a single monetary unit using the idea of
purchasing power. This is the method used below, which is used for estimating worldwide economic activity in terms of real US dollars. However, the world economy can be evaluated and expressed in many more ways. It is unclear, for example, how many of the world's 6.6 billion people have most of their economic activity reflected in these valuations.

The Cure To Our Economic Problems

would hate to be the winning Presidential candidate. Both candidates are delusional in thinking their economic policies will drag us out of a recession or even improve the economy. The reality is that the solutions offered by both are the equivalent of shuffling the deck chairs on the Titanic. They are meaningless.
You can cut taxes for 95pct of Americans and raise taxes for the rest. You can cut taxes for businesses and retain the Bush Tax Cuts. You can increase or decrease the capital gains tax 5 or 10pct either way. Under both programs the deficit for the country will increase, we will borrow and print more money. 5 or 10pct variance either way, given the big hole our economy is in wont matter.
The cure for what ails is us the Entrepreneurial Spirit of this country. We are a nation of people who encourage , support and invest in those of any and all age, race and gender who will use their ingenuity and come up with a new idea.
Its always the new idea that re energizes this country. Industry, manufacturing, transportation, technology, digital communications, etc, each changed how we lived and ignited our economy and standard of living. Tax policy has never done that. The American People have.
Entrepreneurs who create something out of nothing don’t care what tax rates are. Bill Gates didn’t monitor the marginal tax rate when he dropped out of Harvard and started MicroSoft (btw, it was a ton higher than it is today). Michael Dell didn’t wonder what the capital gains tax was when he started PC’s Limited, and then grew it into Dell Computer. I doubt that any great business or invention started with a discussion or even a consideration of what the current or projected income or capital gains tax was or would be.
The impact of tax rates on productivity and development is something economists masterbate about, enterpreneurs don’t waste their time thinking about it. We have business to do.
Entrepreneurs live to be entrepreneurs. I have never had a discussion with anyone about starting a business that included tax rates. Ever. If anyone that wanted an investment from me made a point of discussing tax rates as an impact on their business, I wouldnt invest in them. Ever.
Entrepreneurs live for the juice of making their dreams come true. Of having a vision and fighting to see it come true. The joy of mission accomplished and the scoreboard of the financial rewards.
We are in an economic mess right now. It doesn’t matter who caused it. It’s here. It doesn’t matter what our Presidential candidates and their economic advisors come up with. Its meaningless.
The cure to our economic problems is the Entrepreneurial Spirit of All Americans. Instead of bitching at each other, could one Presidential candidate please show even the least bit of leadership and character and stand up for and encourage the entrepreneurs in this country ?
i dont care who is friends with whom, who preached when you went to church, whether you know the actual role of the Vice President, whether you voted with President Bush. I dont care about any of the mudslinging going back and forth. All it does is waste the time of every potential voter. All of that is meaningless.
What we need is our candidates to stop yelling at each other and starting looking at the American people and encouraging the best of who we are. That is who I want to get behind. That is what I would like to see for our country. That is what will energize and motivate people to create companies and invent products that will turn the economy.
The best time for little guys to start a business is when the big guys are worrying about surviving in theirs. You dont need to raise money. You need to be smart and be focused. I had no idea until this current financial crisis that when I started MicroSolutions, my first company, it was in the middle of a very bad recession. I had no idea whatsoever. I didnt know what the tax rates were, and I didnt care. I had an idea, a floor to sleep on and a lot of motivation.
Now is the time for Entrepreneurs to step up and do our part for our country. Its up to us to start businesses and create jobs. That is the cure to this country’s economic problems.

Economy of scale



Economy of scale

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The increase in output from Q to Q2 causes a decrease in the average cost of each unit from c to C1.
Economies of scale, in
microeconomics, are the cost advantages that a business obtains due to expansion. They are factors that cause a producer’s average cost per unit to fall as output rises.[1] Diseconomies of scale are the opposite. Economies of scale may be utilized by any size firm expanding its scale of operation. The common ones are purchasing (bulk buying of materials through long-term contracts), managerial (increasing the specialization of managers), financial (obtaining lower-interest charges when borrowing from banks and having access to a greater range of financial instruments), and marketing (spreading the cost of advertising over a greater range of output in media markets). Each of these factors reduces the long run average costs (LRAC) of production by shifting the short-run average total cost (SRATC) curve down and to the right.






Contents[
hide]
1 Overview
2 Examples
3 References
4 See also
5 External links
//

[edit] Overview
This should not be confused with increasing
returns to scale which is represented by the SRATC where simply increasing output within current capacity reduces the short run cost per unit.
This is, of course, an extremely simplistic example and, in real life, there are countering forces of
diseconomies of scale. As these forces balance, an optimum production volume can be found (referred to as constant returns to scale).
This principle can be equally applied to an organization resulting in firms within a particular industry tending to be
similar sizes. Economists have studied this effect as the theory of the firm.
A
natural monopoly is often defined as a firm which enjoys economies of scale for all reasonable firm sizes; because it is always more efficient for one firm to expand than for new firms to be established, the natural monopoly has no competition. Because it has no competition, it is likely the monopoly has significant market power. Hence, some industries that have been claimed to be characterized by natural monopoly have been regulated or publicly-owned.
In the short run at least one factor of production is fixed. Therefore the SRAC curve will fall and then rise as diminishing returns sets in. In the long run however all factors of production vary and therefore the LRAC curve will fall and then rise according to economies and diseconomies of scale.
There are two typical ways to achieve economies of scale:
High fixed cost and constant marginal cost
Low or no fixed cost and declining marginal cost
Economies of scale refers to the decreased per unit cost as output increases. More clearly, the initial investment of capital is diffused (spread) over an increasing number of units of output, and therefore, the
marginal cost of producing a good or service is less than the average total cost per unit (note that this is only in an industry that is experiencing economies of scale)
An example will clarify. AFC is
average fixed cost
If a company is currently in a situation with economies of scale, for instance, electricity, then as their initial investment of $1000 is spread over 100 customers, their AFC is .
If that same utility now has 200 customers, their AFC becomes ... their fixed cost is now spread over 200 units of output. In economies of scale this results in a lower average total cost.
The advantage is that "buying bulk is cheaper on a per-unit basis." Hence, there is economy (in the sense of "efficiency") to be gained on a larger scale.
Economies of scale tend to occur in industries with high
capital costs in which those costs can be distributed across a large number of units of production (both in absolute terms, and, especially, relative to the size of the market). A common example is a factory. An investment in machinery is made, and one worker, or unit of production, begins to work on the machine and produces a certain number of goods. If another worker is added to the machine he or she is able to produce an additional amount of goods without adding significantly to the factory's cost of operation. The amount of goods produced grows significantly faster than the plant's cost of operation. Hence, the cost of producing an additional good is less than the good before it, and an economy of scale emerges. Economies of scale are also derived partially from learning by doing.
The exploitation of economies of scale helps explain why companies grow large in some industries. It is also a justification for
free trade policies, since some economies of scale may require a larger market than is possible within a particular country — for example, it would not be efficient for Liechtenstein to have its own car maker, if they would only sell to their local market. A lone car maker may be profitable, however, if they export cars to global markets in addition to selling to the local market. Economies of scale also play a role in a "natural monopoly."
Typically, because there are
fixed costs of production, economies of scale are initially increasing, and as volume of production increases, eventually diminishing, which produces the standard U-shaped cost curve of economic theory. In some economic theory (e.g., "perfect competition") there is an assumption of constant returns to scale.
In Porter's analysis, Elements of Industry Structure, 'Economies of Scale' is an element of 'Entry Barriers' concept. This is one of the fact which should be taken under care while entering an industry. In Porter's view, cost leadership strategy is realized through 'economies of scale' production thinking.