Beer, Fries and Globalization: Hartford cities by the rivers have prospered b/c they host trade fries

and beer in Antwerp also available in DC although they are more expensive globalization? availability of foreign products in local settings economic and cultural integration will take a long time comparative advantageProfessor Wilson is an amazing biologist(probably could be a great economist) but comparative advantage means that Wilson does biology while Hartford does econ US blocks Chinese goods through anti-dumping lawsprevents cheap Chinese products from flooding US marketsit only helps US producers workers in developing countries are much less productive than workers in developed countries. They compete through lower wages After all, we hire until wage= marginal productivity marginal productivity= marginal physical productivity times price of output we can borrow money to pay for imports, but in the end, exports must pay for imports If we focus on being self-sufficient, export industries die Lerner thm: tax on imports=tax on exports Luddite rebellion in BritainLuddism destroy textile machinery Globalization is bad for the planet: trade of goods/services, migration of people, exchange of technological knowledge, foreign direct investment, cross border financial assets Most trade occurs between rich countriesmore money spent importing wine from Australia than from shoes in Indonesia free trade leads to polluting companies moving to countries w/o strict environmental regulationsmost trade occurs between rich countries

cost of environmental regulation< cost of labor firms offshore for cheap labor, not lenient environmental regulations dirty industries go to the UStoys, shoes, etc don't pollute as much as high quality chemicals that require high skill/human capital protectionist farming often only benefits a few large farmers transport costs of shipping products around the world may be less than their environmental cost trade makes people richer who makes the environment worse offdoesn't makes sense b/c richer people demand improved environmental standards Globalization is bad for the poor: Nike Sweatshop shoes factories run by multinationals pay better than local factories fair trade/free trade is essentially a boost to rich nation's industries tariffs are high to protect special interest groups What Stock to Buy? Hey, Mom Don't Ask Me: Mankiw Markets Process information quickly: if I knew something about a company that would make its stock a good buy, the market price would have already incorporated the info Stock prices are too volatile and don't represent any rational reasoning if stock prices change to reflect market rationality/ increasing risk, why does risk change so drastically in such a short period of time? Risk of holding stocks is rewardedstocks pay 6% more than treasury bondsstocks are risky but not to that extent Diversify your stocks! Invest globally s.t. if the US economy falls, maybe somewhere else in the world won't fall as hard Rethinking the Social Responsibility of Business: Mackey (Whole Foods) Rebuttal/Friedman responds/ T.J. Rodgers's two cents

Putting Customers Ahead of Investors (Mackey) Investors believe that corporations should maximize profits; customers, employees, suppliers and the community believe otherwise As an analogy, Mackey says his wife's happiness is a desideratum; he doesn't make his wife happy so he can be happysuccessful businesses put customer happiness as a goal Whole Foods tries to make customers, employees, investors, communities, vendors, and the environment happy Corporation's assets legally belong to investors so to invest money back into the community and environment is stealing from investors right? too narrow a definition 5% day helps the community while also attracting new customers to Whole Foods entrepreneurs, not investors, have the right to define the purpose of a companyif altruism is part of the company's purpose, it is justified Shareholders are aware of Whole Food's policyinvestors aware of donation, so how can it be called stealing? A company can have multiple responsibilities, a responsibility to investors and the community human nature isn't all about self interestjoy of humans everywhere Making Philanthropy Out of Obscenity: Milton Friedman Friedman compacts Mackey's argument into 1. putting customers first is another way of putting investors first 2. corporate philanthropy is good business and works in the long term for investors then argues that "corporate philanthropy is a good thing" is false. This is only true b/c the tax code makes a corporate gift a larger donation than a private donation. Why is it better for the business to donate as opposed to the individual?

Put Profits First: T.J. Rodgers If Whole Foods runs into trouble, the investors will fire Mackey. Rodgers argues that Whole Food's 6 plan is just another way of Friedman's "firms that conform to business ethics" why is donating 5% of profits to the homeless better than returning that 5% to investors so that they can fund college later on? "Only 10-20% of corporations have been accused of serious wrongdoing"most corporations run ethical standards cost of a semiconductor reduced from $3 to $3millionths of a dollar Profit is the Means, Not End: John Mackey Putting customers before profit is acceptableyou don't please customers just to maximize profit Some firms are created only to maximize profit (T.J. Rodgers's) Some are created to also to be philanthropic Whole Foods aims to make people health, it uses profits to maintain its mission Mackey believes capitalism is branded poorly, it is seen as greedy b/c people choose to completely detach it from humanistic ideas Rodgers is proud of reducing cost of semiconductor from $3 to $3millionths of a dollarthat doesn't say anything about profit The Social Responsibility of Business is to Increase its Profits: Milton Friedman Business is solely concerned with maximizing profit NOT social conscience/responsibility/employment/ending discrimination/avoiding pollution Businesses cannot have responsibilities; people have responsibilitiescorporations are not people corporate executives are employees to business owners responsible for maximizing profit (or whatever goal the owner have (hospitals heal the sick, schools educate)) while conforming to laws and ethical customs

corporate executives can devote their own incomes to things they value (charity, family, etcwhich are social responsibilities) When they do so, they act as the principle and not the agent (they spend their own money, and not someone else's) If corporate executives are to be socially responsible by not rising prices during times of inflation or reducing pollution beyond mandated levels, he is spending someone else's money) (if prices risehe's spending the consumer's money; if wages lower, than other employees' money) By acting on the benefit of social responsibility, the executive is imposing taxes He chooses who/what is taxed, where the money goes If the executive starts acting on the social behalf, he isn't acting on the owner's behalf How does the executive know how to spend the money? Who is he to know that inflation is more important than charity? Trade union leaders don't submit to social responsibility. They demand higher wages and realize that if they don't do their jobs, random strikes may occur. Why should stockholders tell corporations to act in the social good? It's all a ploy. Really, some stockholders just want others to act in a certain way and "social good" is their way of getting funds.

Executives say they are acting on social behalf in order to keep the people (we're in an age of hating corporations and greedy profit) happy. They know how to keep their individual firms profitable, but not how to maintain business in the long run. (social responsibility is not good for business) Profit should not be considered greedy. The goal should be free compeition without "deception or fraud" Becker-Posner College Tuition tuition at 4 year and 2 year universities has skyrocketed w/n the last 30 years colleges collude occasionally (NCAA athletes cannot be paid), but the increase is probably not collusive increases in the cost of producing college education colleges compete against public and private sectors for high human capital employees costs of elite colleges has risen the most colleges have incentives to increase workload to increase the skill costs to attend college> benefits of attending college Average gain in earnings from college education> rise in tuition so average rate of return on college has been increasing although tuition has been increasing student loans are a small proportion of debt for younger individuals mortgages= 74% of debt The "Greening" of Institutional Christianity- John Allen Benedict XVI and Bartholomew I are both extreme environmentalists Benedict-"pollution and attacks on the environment are sins", "christians must act as priests to reverse the spiral of ecological

destruction" voluntary self-limitation in consumption of food and natural resources ecological crisis are even more dangerous than terrorism hoarding/technology is depleting the earth's resources gap between environmentalists and conventional christianity 1.1 billion catholicschristianity embraces environmentalism
A Defense of the One Percent assume perfect economic equality d.t. supply and demand for different kinds of labor being the same, gvmt only used for public goods,protecting property rights, everyone earns value of marginal product everything great until entrepreneur assume J.K Rowling comes in and becomes a monopolist, how should society deal with her? parallels post 1970 average income is growing, but the top 1% income is growing much moreshould society redistribute? Does inequality cause inefficiency? the current situation is pareto efficient Kaldor Hicks efficiency: If the top 1% is earning another $1 by cutting the middle class out of $2 then inequality is inefficient. How would they do this? By rent seeking/ getting gvmt to favor certain monopolies (peanut), regulations, etc Golden and Katz (2008) argue: Skill based technological change increases demand for skilled labor widening the earning gap between skilled and unskilled labor From 1950-1960 wages didn't rise for skilled labor b/c the supply of skilled labor rose more quickly than the demand From 1970s on, the education advance slows so increasing demand increases wages and causes rising inequality Problem isn't simply inequality and the solution isn't more progressive taxes/redistribution financial markets are extremely important in that they decide how capital is allotted, however, rent seeking is pervasive in that personal rewards exceed social value of good We don't want the next Steve Jobs to go to Wall Street b/c the rewards are higher there than doing something socially productive Unequal opportunity is inefficient if poor children cannot get enough human capital to contribute to the economic pie Gvmt can redistribute income through taxes, but it is a leaky bucket so during redistribution resources are lost (Okun). But loss of resources + redistribution may be more efficient than severe inequality Mirrlees model: W/O gvmt, individuals consume WL (where W is productivity) and L is work effort. More productive people have higher total consumption, higher utility, lower marginal utility (d.t. law of diminishing marginal utility). GVMT wants to move resources from those with high productivity and low marginal utility to those with low productivity and high marginal utility. Since gvmt can't see L(work effort), they can only redistribute income WL. If gvmt redistributes too much, high productivity individuals will slack off.

Okun and Miirless both depend on the elasticity of supply of labor. If labor is completely inelastic, the bucket doesn't leak. If it is completely elastic, redistributing will cause high productive individuals to completely slack off/ bucket is useless. Problems with Miirless and Okun models

3. 4. 5.

assume that gvmt is a benevolent social utility maximizer Miirless assumes a completely elastic demand of labor curve Miirless assumes tastes are completely identical (some people would rather teach econ than work on Wall St.) Why can't gvmt be a benevolent social utility maximizer? Utility depends on the individualcan't determine who gets greater marginal utility from spending $1 Why should inequality be limited to within a nation? Why isn' the US taxed so that the funds go to sub-Saharan Africa? Since wages are correlated to height, sex, age, race, shouldn't we tax based on these standards? If gvmt could observe productivity, it would make more productive individuals work harder and less productive ones work less increasing utility for less productive individuals The occupy movement likes to pretend the progressive tax code is regressive using Warren Buffet. To what extent do the incomes of the top 1% reflect their contribution to society vs rent seeking? Justify high taxes on the rich not by reducing their high marginal utility but by saying the rich became rich through the gvmt and have a responsibility to help out. Average value of gvmt very high, but marginal value low. Veil of Ignorance: if you were risk averse, you would buy insurance against being born into an awful life (e.g. gvmt redistribution) Mankiw "Just Desserts" theory: you get the compensation of your contribution