Here is a cool graphic that I picked up from the Government Economics Network (GEN). It has been produced by Statistics NZ and shows New Zealand’s changing country-composition for dairy exports over the last 20 years. The size of circles is proportionate to dairy exports to that country as a percentage of total dairy exports; the white circle in 1992 and the black circle in 2012. It emphasizes the massive drop in relative importance of the UK, and increase of China. You can find other graphics from Statistics NZ by clicking the link below:
From RT – China is poised to overtake the US as the world’s largest economy way ahead of schedule. The IMF predicts that by the end of the year China’s GDP, adjusted to the countries relatively low cost of living, will be $17.6 trillion, topping the US essentially that means, even though a typical person in China earns less than their American counterpart, they can afford more with their money.
A recent article in the New Yorker by James Surowiecki addressed the issue of Coarse Theorem – Ronald Coarse argued that bargaining between parties could produce a mutually beneficial and efficient solution to problems like pollution. An example of this was the a deal between Liberia and Norway.
Norway will give $150m in aid in return for Liberia stopping the destruction of its forests. See cartoon from the New Yorker.
Stick and Carrot
The stick approach of trying to force Liberia to stop cutting down its trees might give way to a more effective carrot approach by paying Liberia to do so. This makes both sides better off. Liberia still gets the aid and Norway gets to preserve biodiversity and take a small step against climate change.
5 or 6 more Chinas
The reality is that the planet can’t stand another 5 or 6 Chinas but developing countries still need to grow and, like their developed country counterparts, it will involve greenhouse gas emissions. If we are to curb global emissions developing countries will have to leapfrog to new technologies as the burning of traditional fossil fuels will just exacerbate the problem. However developing countries have neither the resources nor the incentive to reduce dependence on fossil fuels on their own as their main focus is economic growth. Whilst developed countries have a lot to lose from developing-world emissions it is in their interest to pay the latter to curb emissions e.g. Norway paying Liberia not to chop down its trees. Although this looks a simple enough policy politicians will not be so enthused by it as money that is paid overseas to cut climate change is not very popular with the electorate and therefore the government.
From Journeyman Pictures
In the world’s most populated country there are dozens of empty cities and more are being built every year. Is China’s ‘build-mentality’ good urban forward planning or an economic bubble that’s about to burst?
Tianduchenga, a near deserted replica of Paris complete with its own Eiffel Tower, was meant to attract new residents and businesses. But the new businesses are struggling to survive. “There aren’t many people here; our business is volume-based”, says the owner of a takeaway lunch shop. Meanwhile, in the Lanzhou New Area a range of 700 mountains has been leveled and demolition of houses and forced relocation is underway to make space for a new 130,000 hectare metropolis. According to Li Tie, who heads the country’s top economic planning agency, the federal government “must stop any fanatical actions by local authorities who blindly and hastily implement unreasonable urbanisation measures”. But urbanisation expert Tom Miller rejects the claim that China is on the brink of a property crisis. “Imagine China as bubble wrap. Some of those bubbles within it might burst. But in places like Shanghai there is massive demand for housing.”
With the dairy industry accounting for approximately 25% of NZ’s export market, a reduction of dairy prices by 46% from last year will definitely slow growth over the next year. Lower prices will also mean a deterioration in the terms of trade and a bigger current account deficit.
The BNZ have identified 3 factors that have influenced the global dairy market:
1. Ongoing very strong growth in global milk supply – lagged response to previous high prices, favourable weather, and low grain prices. Low grain prices mean that feed for farmers is cheaper and relative to milk prices makes it worthwhile to produce even more milk;
2. Disruption caused by the Russian trade ban on dairy products from the EU, US among others;
3. Question marks around Chinese demand amid reports of high inventory levels.
The graph below suggests that there will be $5.5bn less revenue coming into the economy – 2.3% GDP.
From The Economics of Seinfeld website. Useful look at externalities and cost-benefit analysis.
A Kenny Rogers Roaster restaurant opens across the street from Kramer. He can’t stand the red glare from Kenny’s neon sign, and moves into Jerry’s apartment. But he becomes hooked on Kenny’s chicken, and eventually accepts the red glare in exchange for access to the chicken. When Kenny’s shuts down, the lights go out, and Kramer’s overall welfare falls—the benefits of the chicken outweighed the cost of the glare.
I went through this graph with my A2 class today. Note that the firm’s short-run supply curve starts at P4. Useful for multiple-choice questions.