Download doc GEOG 216 Bread and wine

September 12th
Factors of Production And Measures of Wealth
Land, Labor and Capital all vary within societies
Land: -Quantity and characteristics of “land” e.g. soils, minerals, forests, fisheries,
animals, water resources, geographic location climate
- “natural resources”, physical attributes used for economic purposes.
Labor: -relative abundance or scarcityabundant labor  lower wages (and vice versa)
-productivity (relative value of output per unit of labor); tends to increase with
machinery and specialization of labor
-cost of labor (abundant vs. scarce)
-health of workers (often called “public good”)
-skill levels (unskilled, semi0skilled, scientific and technical knowledge,
indigenous knowledge)
-Entrepreneurship:
-propensity to innovate and create
- Special management and decision making skills; “developed skill”
Capital:
Finance capital: access to the money through national asavings, external loans
(UN) or aid, and or throught foreign direct investment.
Physical capital: (private)
-e.g infrastructures, equipment, building, fertilizer
Physical capital (public):
e.g facilities or health education transport and communication
Government policies:
e.g interest rates and money supply and social investment
-cash dollars, boats etc. (donkeys)
Opportunity costs: the true cost of doing anything is the cost of foregone activities
-i.e. giving up the opportunity to do something else you would like to do
-choices must be taken whenever resources are finite e.g time, money,
energy, or raw materials (fields can be turned into many different things)
Gross Domestic Product (GDP/GNP):
-total market value of the output of goods and services for final use produced by
an economy by both residents and non-residents.
 GDP is GNP that is adjusted; GNP includes foreign investments and leakage of profits
-GDP does not include within-country distribution of income (y) and delivery of
public goods (how many schools, health facilities there are etc)
-depreciation of physical capital and depletion or degradation of natural resources
are not included
Purchasing Power Parity (PPP):
-a currency will have the same purchasing power in home country as in another
country
-linked to exchange rate but not the same
-a rate of exchange that accounts for proce differences across countries
-measures how much of a common market basket of goods and services each
currency can purchase locally (food, computersequivalent things across borders; not
things like haircuts)
-allows international comparisons of output and incomes
-e.g. PPP $US1 rate: has the same purchasing power in international economy that
USD has in USA
Human Development Index (HDI):
-a composite index that measures a country’s average achievements in basic
human development
-longevity (life expectancy at birth)
-knowledge (adult literacy rate, combines enrollment in schools ration)
-standard of living (adjusted per capita in PPP$)
-value ranges from 0 to 1 (for rankings)
-high (more than .8); medium (.5-.799); low (less than .5)
-disparities between/within region and social groups can be substantial
-no automatic correlation between income per capita and HDI
-no environmental measure
September 16th -- #6
Europe’s Economy: -Dusseldorf and Frankfurt (Germna manufacturing)
-UK: machester, M4 Corridor in London (UK’s Silicon Valley)
-France: Nice (high tech center)
-Italy: North-Milan; “third Italy”—Venice (textiles etc.)
-Spain: Barcelona and Balboa
Russia:
-Moscow “central industrial region”
-Volga-steel mills, chemicals during WW2
-Urals-mining, natural resources, minerals
-Kabal: natural resources
-Vladivostok: access to East Asia and the Pacific economy
Japan:
Kanto plain: Tokyo, Yokohama
Kansan:
Kitakyushu: ship building
Tokoyama: paper etc.
China:
Northern District: heavy manufactyuring
Northern: Beijing and surrounding cities
Chang District: Shanghai—chemcials, cars etc.
Guang Dong: tremendous growth of the south in the past year between fifteen and
20 percent
“Four Tigers”
South Korea: heavy industries; high tech
Taiwan: manufacturing; developing services in the second activities category
Hong Kong: “break of bulk point” (transportation hub); financial industries
Singapore: transshipment; quaternary information industries
Recent Patterns and Trends: A Global Perspective
Global patterns of: manufacturing production an international trade
-developing countries count for 23% of world economy now
Global patterns of Manufacturing Output:
-Europe, NA, East Asia=roughly 25% of manufacturing production
-US, Japan, Germany dominate (more recently China is becoming domination as
well)
-substantial geographic shifts through time:
_Growing importance of NIE’s
-Growth in East and southeast Asia outpaces all other regions
Need to know: patterns and shifts (when and where) and the general trends
Merchendise trade 2004 Imports vs. Exports:
US: exports are less than imports (deficit)
Russia: imports are less than exports
-trade flows are a bit more even than when simply “manufacturing”
-US, Japan, Germanymake up onlt 25% of Imports and exports
Net Merchandise Trade balances; US huge deficit, whereas Russian, Germany, and Japan
have a surplus
merchandise trade 4x more than general output
1980’s-internet bubble busting (?)
Exports as a % of GDP
-1870: 4.6% (average)
-1998: 17.2%
Geographical patterns:
-three primary trading regions: Europe (EU), North America (NAFTA), East and
Southeast Asia (ASEAN)
-most world trade is either within or between these three trade blocs
Trends overtime: Trade growth faster than output growth
-growing interconnectedness
-NIEs experiences the strongest trade growth
September 18th -- # 7
Canada in the World Economy
Outline: time-space compression
-a brief history of Canada’s links to the world economy
-Canada US (a special relationship in merchandise trade and foreign trade
investment)
-Canada China: “feeding the dragon?”
Time-space Compression (TSC):
-involves a set of “processes that revolutionize the qualities of space and time
such that the ways in which we represent the world are altered”
-i.e. TSC reflects accelerated moevemnts of goods, information, and financial
resources
time-space shrinking technologies (i.e. transportations and communications)
that overcome the frictions of space and time
!!! CAUTION!!! Technologies are not the main cause of globalization (i.e. not
only or not the primary source of change). International agreements, migration and things
like that have an effect on the world economy as well.
Timeline to illustrate:
1500-1800: 16km/hr: bulk very big, transport very slow
1850-1930: steam 9a bit faster
1950s: propeller aircraft
1960s: jet passenger aircraft
2000s: container ships (quadruple the size of what it was in the eighties)
Uneven time-space compression?
investments in transportation and communication infrastructures largest where
demand and financial returns the greatest!
A Brief history Of Canada and Links to The World Economy:
-Pre-19th century: Canada (part of periphery) exports staples (or natural
resources) to European core countries
-Mid 19th century: as US begins to industrialize, exports of resources flow south
of the border
-1867: Confederation: national building policies (transnational railroad); tariff
-protectionencourage east-west trade flows
-WW1: pacific coast limber industry develops
-WW2: consolidation of parts of Ontario and Quebec as key manufacturing
district
-1965: Canada-US Auto pact: elimination of stride tariffs on cars, trucks, and
automotive parts
-canada-US linkages “unique” in terms of volume of bilateral trade and
patterns of corporate ownershipmanaged trade, yet still mostly regulated by the
government
1970s: development of oil industry in Alberta (new staple?) and rise of Japan’s
industrial society
-1988: Canada-US FTA becomes NAFTA (inclusion of Mexico) in 1994 lead
to greater regional economic integration; some exclusions exist, soft lumber; meat
packing, cultural magazines (like Times) differ.
-exports+imports/GDP=merchandise trade
-86% of CAD exports go to US
-FDI-foreign direct investment
-Canada has a trade deficit in services
-US: “importer of last resort”: largest market where you can sell anything
Canada-China Trading:
-2007 China sells more goods to US than Canada (1st time in history)
-China primarily imports machinery and transport from NA
September 21, 2009—#8
Why Countries trade?
RE READ CHAPTER 6!
-difference in factor endowments:
-natural resources/raw materials distributed unevenly across the globe; people
needing certain things will trade them
-climate and terrain
-labor force (quantity, skill)
-technology
More reasons to trade?
-intra-industry trade
-trade and geography (agglomeration economies)—where economies located
Advantages and the gain from trade:
-differences in factor endowments: countries are advantageous in particular types
of production and disadvantaged in others
-advantage: absolute vs. comparative
Can countries gain from trade?
-Mutual gains from trade occur when precuts are redistributed in such a way that
countries end up with a combination of goods that is better adapted to their preferences
(better after borders opened)
Bread and Wine Example!!!
Model Assumptions:
-global economy: only 2 countries (North and South)
-each country produces only bread and wine
-only one factor of production (labor)
-labor homogenous (same skill, quantity etc.)
-amount of labor is fixed (100 workers)
-technology is constant i.e. unaffected by trade
-a country has an absolute advantage over another in the production of a good if they
produce their good using smaller quantities and resources (?) than can the other country.
 North had a lot absolute advantage in bread, whereas south had absolute
advantage in wine.
Comparative Advantage:
“(1-1)”opportunity cost
North, compared to South is most advantageous in production of bread
South, compared to North, is least disadvantage in the production of goods.
Even if a country has an absolute advantage relative to another country in the production
of every good, it is said to have comparative advantage in making the goof in the
production of which it is most efficient compared with the other country (Ricardo)
 countries specialize in production of goods in which they are relatively more
efficient: trade can lead to mutual gains
-engaging in trade must be beneficial (exchange rates) (HUH?!)