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Archive for September, 2011

Economic Freedom of the World 2011 Annual Report

September 30, 2011 Leave a comment

Check it out.

Students, select your country from the dropdown menu to see how it ranks in terms of economic freedom.

The chain-linked summary ratings of Uganda, Zambia, Nicaragua, Albania, and Peru have increased by three or more points since 1990. The summary ratings of eight other countries—Bulgaria, Poland, El Salvador, Romania, Ghana, Nigeria, Hungary, and Guinea-Bissau—increased by between two and three points during this same period.

Since I have students from Ghana, Uganda and Zambia this term, for their sakes I’m happy to see this paragraph in the executive summary!

Take Home Problem 1 Answers

September 29, 2011 Leave a comment

1. Krakosia! The land is more productive there, no matter what you grow!
2. Krakosia, because each acre can grow more rice than an acre in Lugash.
3. Krakosia, again. Same reason.
4. 4,000 tons (2,000 times 2)
5. 3,000 tons (3,000 times 1)
6. 6,000 tons (2,000 times 3)
7. 3,000 tons (3,000 times 1)
8. (c) and (d). (d) is possible but not efficient!
9. (d)
10. (c) in other words, all inputs are not efficiently used
11. –answer given in class–
12. 3,000 tons of rice and 2,000 tons of wheat
13. 2,000 tons of rice and 1,000 tons of wheat
14. 3,500 tons of rice and 2,000 tons of wheat
15. 2,500 tons
16. 2,500 tons of rice and 1,000 tons of wheat
17. Better off. They can consume 500 more tons of rice than without trade.
18. Better off. They can also consume 500 more tons of rice than without trade.
19. They have a comparative advantage in the production of wheat, even though they do not have an absolute advantage!

Categories: Uncategorized Tags:

Inflation and Unemployment

September 24, 2011 Leave a comment

Some students had questions about the Phillips curve and the idea of the tradeoff between unemployment and inflation. Since we’re focused on Microeconomics in this class, I’m both 1) unprepared to answer in detail and 2) reluctant to take class time from the material we need to cover.

But if you are really interested in this topic, here’s a paper from Dr. Greg Mankiw on The Inexorable and Mysterious Tradeoff Between Inflation and Unemployment.

Categories: Uncategorized

Is Population Growth Good for an Economy, or Bad?

September 22, 2011 1 comment

Most people associate high population growth with poverty and environmental destruction. After all, aren’t the largest countries the poorest?

Not so fast. The PPF is a simple model that helps us see how a population increase could expand production as well. To shift the PPF to the right, you need more technology, or more capital, or more labor…

But even without the PPF, what do we see? The world’s population has grown faster in the past 200 years than ever before.

And yet, so has GDP per capita:

Bonus question: who said 人多力量大?

Categories: Microeconomics

Does Trade Really Make Everyone Better Off?

September 20, 2011 2 comments

Few concepts in economics are more widely accepted than that of the benefits of trade. The argument is more or less settled: rich countries benefit, but so do poor ones; exporters benefit, but importers do, too. It’s a somewhat counter-intuitive idea. Many of my freshman students have trouble accepting it. They’ve been almost exclusively exposed to the idea that trade benefits the rich and exploits (or at least disadvantages) the poor.

After a few more classes, most of my students will get it. The argument for trade is logical and fairly easy to teach, even if not intuitive.

The question that unsettles this tidy argument for many of my students is corruption. Why is it that some countries seem to achieve no benefit after decades of trading away resources (often, oil), for example?

I like the pairing of “markets are a good way to organize economic activity” (#6) and “government can sometimes improve outcomes” (#7). These two principles complement each other well.

It seems to me “trade makes everyone better off” (#3) needs a matching principle, something like “governments often diminish or even completely destroy the potential benefits of trade.”

Until we get to Chapter 3, I encourage students interested in this topic to keep reading.

Categories: International Trade

Nollywood and IPR

September 16, 2011 Leave a comment

Daniel Ajegbo writes about the challenges of making money by making movies in Nigeria, where lack of IPR enforcement has kept kept the film industry much smaller than it otherwise would be.

NollwyoodLove is an interesting approach to finding a solution, but it’s more of an end-around. Imagine what could happen if intellectual property rights were routinely enforced in Nigeria? How would that change the economics of film making?

The Quotable Don Boudreaux

September 16, 2011 Leave a comment

Beware especially of any economist who poses as a genius.

Spot on.

Categories: Microeconomics