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Information about 2180overhead02

Published on April 13, 2008

Author: Savina

Source: authorstream.com

Slide1:  How a market system works? Theory, practice and conflicts Market economy was started from the “industrial revolution” in around 1750. (1) Industrial revolution: (a) Technology progress; (b) Changes of social structure (c) Changes of economic structure (2) Returns: “you take out what you take in”? 「按勞報酬」? - Personal freedom - Equal opportunity Slide2:  Returns 「按勞報酬」 - Efficiency and fairness Factors Markets: Workers is paid by the contribution (marginal product) that he/she makes to the revenue (marginal returns) of the enterprise. Wage = MCL = P x MPPL = MRPL (marginal revenue product of labor) Interest = P x MPPK = MRPK Rental = P x MPPland = MRPland Slide3:  Adam Smith conceptions: Laisser-faire Invisible hand – self adjustment for imbalance Own interests - public goods serve more effective Trade is Non-zero-sum – growth and efficiency allocation Specialization – technological innovation Division of labor – productivity enhancement Slide4:  Market efficiency : Pareto optimality The Edgeworth Box: Pareto Efficiency Slide5:  Efficient ≠equal income distribution “Income inequality is necessary for Pareto optimality so that people will work as hard as they can?” True or false? Slide6:  Partial equilibrium Competitive supply and demand S D Pe Qe Efficiency and fairness: self-corrections and equal opportunity Slide7:  Individual goods market adjustment (By short-run, medium-run and long-run adjustment) Slide8:  In long-run: adjustment should be relied on AS In short-run: adjustment should be relied on AD Recession: Under liquidity trap situation, AS expansion does not help the economy Overheated: Under vertical AS, AD expansion does not help. Slide9:  Role of Entrepreneur: innovations and profit motives “Efficient function of markets” “Institution change separate ownership and management weaken entrepreneurial activity reduce market efficiency?” “Arbitrage” and “speculation” – stabilize or destabilize? Capital market : Combination of expected returns and potential risks “bankers, loan officers, fund manager, investors must make best informed decision, otherwise will be lost.” “Soft-budget constraint within centralized socialist planning drawbacks the market efficiency” Other elements of market economy Slide10:  Characteristics of the market system Under a market system: Disequilibria are self-correcting D = S (if Government control, or other interfers  D ≠ S  wastes) (5) A market system opposes the concentration of power  Separate political and economic power (2) Markets minimize the need for information flows Perfect competition: Profit max. P = MC (No need of centralization information, avoids the problems of a whole system orientating itself on data) (3) A market system provides stimulus to innovation Product differential  Profit  innovation (Motivations to growth and progress) (4) Under a market system relative prices reflect relative costs (i.e. Px/Py = MCx/MCy, or MRS =MRT).  Competitive system  Efficiency  Max. Social Welfare Slide11:  Discussions: Why are arbitrage and speculation important for the orderly operation of markets? Why is it important for relative prices to reflect relative costs of production in general? How does a competitive market system oppose the concentration of power? Why are market systems economical in the need for centralizing data? Slide12:  Sources of Market Failure Limits to the efficiency of laissez-faire market capitalism Market power: monopoly or oligopoly Externalities (negative externalities) Collective consumption goods or Public goods Imperfect or lack of information Merit goods and orphan goods Capital market myopia Role of Union Slide13:  Comparing pricing solution of Monopoly and perfect competition Deadweight loss In consumption Slide14:  (2) Negative Externalities: social cost Slide15:  Four general suggestions to compensate the negative externalities: (2) Technological restrictions or quantitative control (3) Clear definition & enforcement of property right (Coase Theorem implies serious limits: “Property rights may be impossible to define and negotiation costs may be too high”) (4) Marketable emissions permits (1) A.C. Pigou Suggestion — Taxation Tax = MCS - MCP Slide16:  (3) Collective consumption goods or Public goods: “non-excludability”, “non-depletability”, “simultaneously” also always have “free-rider” problem and inefficiency. Private good Public good Basic needs for public goods Infinitive opportunity costs to give up public goods PPF Because of the nature of public goods is difficult for private markets to organize and to provide in optimal quantities. The collective nature of public goods breaks the link between paying for it and consuming it. Discussion: Give examples of collective consumption goods are publicly provided in Hong Kong that could be efficiently provided privately instead. And why are they not so provided? Slide17:  (4) Imperfect information: For efficiency of an equilibrium outcome, perfect information is the most unrealistic assumption. There is no perfect information anywhere about anything. For examples: Used-car market Insurance market (Name another examples?) Asymmetry of information between the buyers and sellers Such asymmetry leads to sub-optimizing behavior due to “moral hazard”. Slide18:  Some others problems regarding laissez-faire (5) Merit goods and orphan goods Examples of merit goods: Charitable activities Voluntary activities Bans on drugs, prostitution, gambling, pornography, etc Examples of Orphan goods: Lack of sufficient market to get produced Such as HIV medicine for rare but deadly illness People feel on moral grounds that they should be provided. Thus providing such orphan goods may well be a legitimate function of government, but it does not involve correcting inefficiency. Slide20:  (6) Capital market myopia Low Tech, 撈o野! High Tech, high o野! Slide21:  Role of labor union D Q Wage S private WMarket Slide22:  Days lost to labor disputes per thousand workers Slide23:  Government Failures: (1) Availability of information: “Market system: operates in a decentralized way, with no participant need to see “the whole picture” Planning System: Government action requires all relevant information  inefficiency (2) The capture of regulators Public policy to regulate monopolies becomes a staple of government activity. Regulators often identify more with those of the industry that they, in theory, control than with the public at large. (Regulated industry generally enjoys guaranteed profit margins. Given this guarantee, monopoly firms tend to grow cautious about innovation and often pay too little attention to cost control) Examples of local monopoly utilities: bus, electricity, gas, etc Slide24:  (3) Collective action Small groups with intense preferences, through their collective action, will lobby hard for some types of expenditure, even if total costs well exceed benefits, because the costs will spread among large numbers. (4) Rent-seeking behavior For protection on particular areas, employed lobbyists to convince government to restrict competition. (5) Pork barreling “Empty Cheque”: benefit the local or own electorate usually take the form of public expenditure on infrastructure or government facilities that benefit the locality but cost of which is spread over the tax-paying population. Example: Central chicken slaughter house issue in HK Slide25:  (6) Agent inertia Bureaucrats show little interest in cutting their own jobs and in some cases maintain a chokehold on the information about their own activities. Slide27:  Government and redistribution: - Direct transfer payments: Old age pensions, unemployment compensation and cash welfare benefits, etc. - Indirect transfer payments: - Provision of subsidized housing, free education, Free medicine, etc. Income redistribution can enhance social cohesion, and thus “social productivity”. Slide28:  The “justness” of income redistribution: (Conflicts of competition): (1) Natural talent and ability 經濟上的收入差異是源於各人的天賦才能或是天生機能的特異(biological different)。 因此任何人出生時的稟賦差異並不是資本主義會的錯。但市埸經濟的競爭存在, 可以運用天賦才能去創造收入。 (2) Acquired skills and assets (include inherited wealth) 因此要創造市埸競爭的起步要達到公平,這將是一個十分複雜及困難的問題。 只要在經濟社會裏能夠按各人的表現而得到應有的獎勵回報,就能平衡不公平的差異。所以競爭市埸的公平在於如何能保持那種按表現而獲得獎勵回報的機制的存在。 (3) Effort “多勞多得”(Extra income from extra effort)是作為公平競爭的一種最基本及是公平的 誘因,也是在工作辛勞中以換取休閒的一種補償。犧牲休閒自然要有其他的回報才算得上是公平的交換。但公平的觀點有時亦會產生以下這幾個難題: - 是否社會須制定限制人們工作與休閒的取向? - 社會是否真的要對那些懶惰的人不供給糧食? 社會是否真的要對那些在生產上貢獻少的人吃得比平常人少?(這包括老年人、小孩、需支援的人等), 因此在一比較廣泛的觀點上看,努力的誘因必須建立在生產回報,而且能夠在市埸上有購買力的價值上。 Slide29:  (4) Accumulated savings – Inter-temporal choices (5) Related supply and demand considerations The more one foregoes in one time period, the greater will be the capital to be consumed in a later one. Discussion: Do we (society) need to take care those senior citizens without savings? No market, no value, no price, no development? 經濟社會的生產收入是完全視乎社會的需要偏好,品味和技術。由於一種產品的需求的增加,亦會帶來社會連串相關的生產與需求增加。 因此市埸經濟的另一最大優點就是透過這種市埸相關的需求與供給透過創造、創新自然能帶給人們有更大的進步。而進步亦帶動知識及科技資金的累積。 Slide30:  Justifications for redistribution policy Utilitarianism (功利主義) Altruism(利他主義) Social contract(社會契約) Increase of social productivity(增進社會生產力) Social control(社會監督) Shared growth(分享成長) Democratic progress(民主前進) Demand stabilization(需求穩定) Slide31:  Discussions: Evaluate the arguments for and against the use of government power to curb monopolies. How does lack of information impede the operation of a market system? How can a government act to correct this? Define public goods. Are pure public goods an important category? Give some examples. Is information a pure public good? Why may government action be required to correct externality problems like pollution? Which types of systems, planned or market, would you expect to lead to most pollution? Give some reasons why redistribution via both cash and in-kind payments is the fastest growing government activity. Slide32:  附表-: 資本主義的市場經濟學說沿流: 1. 重商主義(Mercantilism) :大約在1600-1700,國家監管的重商經濟。 2. 古典經濟學說(Classical theory) 亞當史勿斯(Adam Smith)之自由放任經濟主義(Laissez-faire) 薩伊定律(Say’s Law):「供給能創造需求(Supple create its own demand)」 馬爾薩斯(Malthus)的《人口論》之悲觀看法 大衛利加圖(David Ricardo)之「比較優勢」理論 約翰梅爾(J. Mill)之「社會公正(social Justice)」理論所提的福利資本主義 3. 政府積極干預(positive interfere)資本主義的倡議: 經濟大蕭條後之凱恩斯(Keynes)理論之《一般性均衡理論(General theory)》 熊彼得(J. Schumpeter)之《資本主義、社會主義、和民主(Capitalism, Socialism and Democracy》及《創意之破壞(Creative destruction)》對自由放任的大力批評。 4. 戰後的新經濟理論:重新鼓吹自由經濟,減少政府的干預: 海耶克(Friedrich Hayek)之《資訊經濟學(Economics of information)》 佛利民(Milton Friedman)之《選擇的自由(Free to choice)》和貨幣理論學說。 新凱恩斯學派(New- or Post-Keynesian) 新制度經濟學派(Institutional Economics) 供應學派經濟理論(Supply-side economics) Slide33:  全球性資本主義(Global capitalism)的趨勢: Trade 貿易國際化 Investment, production, employment 投資、生產、和就業國際化 Finance 金融國際化 Information 資訊國際化 資本主義的國際經濟組織和結合(international organization and cooperation) 世界貿易組織(WTO)(前身是“關稅貿易協定組織(GATT)”) 國際貨幣基金會( International Monetary Fund, IMF) 世界銀行(the World Bank)和區域發展銀行 經濟合作開發組織(Organization of Economic Co-operation & Development, OECD) 全球主義與區域主義(Globalism vs. Regionalism) 歐盟(European Common Market, EC) 北美自由貿易區(North-American Free Trade Area, NAFTA) 東盟自由貿易區(Free Trade of ASEAN) 亞太經濟合作組織(Asia-Pacific Economic Council, APEC) 其他區域聯盟others Slide34:  Industrial revolution產 業 革 命 = Citizen revolution市 民 革 命 私有財產制(property rights) 自由追求利潤(self-interest for profit) 自由企業活動(free business activities) capitalism資 本 主 義 之 成 立 價格經濟(price economy) 以價格作為經濟自動調節 (self-correction) 以供需市場繞著景氣循環 (economic cycle 商品經濟 (merchandise economy) 自 由 競 爭(Free & competition) 發 展 (Development) 生產力迅速擴大(productivity increases) 數品眾多(outputs diversified) 品質優良(better quality) 價格便宜(cheaper prices) 人人自我發揮創造潛力(innovative & potential) 生產者無計劃性的盲目擴充(aimlessness enlarged) 獨占資本主義(monopoly) 經濟恐慌(economic recession & panic) 社會失業問題(unemployment) 勞資對立問題(confrontation) 貧富懸殊擴大(income disparity) 修 正 與 改 良 (Revision & improvement) 附表二:資本主義 市場經濟社會發展的特徵

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