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trevthetrev
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#461
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#461
Interesting article RJA! However I think I will have to agree with City Bound that some assumptions and conclusions are seem a bit inconclusive and speculative.

Also, I can see your point City Bound, but am still not convinced. I mean just as the article pointed out, one man should not be rewarded for the effort of thousands. In reality we may have market imperfections that will allow for such bonuses, but is it the most efficient way? I would argue that the system is stuck in a trap, and only through big, and possibly forced, reform can the corporate system change into a more effictive enterpise. Even if a CEO's decision is the difference between life and death for a company, his wage is already reflecting his skill. I am also sure that there are a whole bunch of unproven or mediocre CEOs out there, who could do almost the same job but would accept lower compensation. So why isn't the CEO marketplace more competative? I would suspect barriers to entry that are, if not created, at least enforced by senoir management.

My view on it all is that the high levels of the corporate are entrenched in a kind of collusive system to keep wages and bonuses high. I know, it sounds very cynical, but if powerful people can scratch each others backs without the common plebs being able to detect nor do anything about it, wouldn't it make sense to inflate each others wages? It all makes economicall sense, but just as there may be an optimal equilibrium and one sub-optimal (but still an) equilibrium in markets, I think the case of corporate leadership is stuck in a sub-optimal equilibrium for society.

Phew. My fingers hurt.
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tanusha-tomsk
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#462
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#462
Welcome nimoh and cr3at0r to the society! party:
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RJA
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#463
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#463
What are the advantages of monopoly? And explain creative destruction?

I am struggling to get my head around this. Everything that pops into my head can have the response "so would a competitive market"
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Overmars
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#464
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#464
gain further economies of scale - lower ATC curve and could filter through to lower prices. Joseph Schumpeter's argument that super-normal profits can be used to invest back into the production cycle - to improve efficiency etc.

legal monopolies - could talk about patents; without any sort of protection, rival firms could just copy their products - patents ensure that the firm that invests in developing new products e.g. Dyson's bagless vacuum cleaner, can benefit greatly - increasing the incentive for firms to invest in technology.

Just a couple of arguments there - you can also talk about natural monopolies (e.g. Railway travel), effects and demands of globalisation - in order to compete with the likes of India and China, the UK needs larger and established firms etc.

I've heard of 'creative destruction' - I can't be bothered to google it though lol. I'm sure somebody can clarify what it means - I'd be interested to know aswell.
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RJA
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#465
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Thanks. The textbook definition of creative destruction is firms from outside leapfrogging the monopolist's technology, therefore destroying the monopolist's market.

I was just wondering whether - in technology markets especially - a monopoly would encourage technological advances (because of creative destruction) moreso than competitive markets.
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trevthetrev
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#466
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(Original post by RJA)
Thanks. The textbook definition of creative destruction is firms from outside leapfrogging the monopolist's technology, therefore destroying the monopolist's market.

I was just wondering whether - in technology markets especially - a monopoly would encourage technological advances (because of creative destruction) moreso than competitive markets.
Think that a normal pro-monopoly argument is that it provides the abnormal profits needed for high R&D spending. But then again, if the firm isn't really in threat of competition it is in no need to innovate, the argument is not really valid. I would actually think that duopolies or oligopolies are better in terms of R&D.
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RJA
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#467
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#467
That is exactly my opinion
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Overmars
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#468
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#468
What's R&D?
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shadowfax
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#469
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#469
R & D is research and development

I think a monopoly can be very innovative, if it thinks that creative destruction is a very real possibility. Probably depends on how contestable the market is - if it's easy for firms to enter the market, the monopoly would want to be as innovative as possible to keep new entrants away. In terms of technology markets, I'd say some markets aren't very contestable (eg operating systems...I don't see Microsoft losing its monopoly anytime soon because of network externalities. Microsoft didn't really bother about the internet until Netscape came along...only then did it come up with Internet Explorer. But Microsoft does 'innovate' from time to time, eg it came up with Vista - I don't know much about it, but I imagine it's quite an improvement from XP (I hope so anyway ). And the entry of Firefox into the browser market forced Microsoft to redesign IE - so I'd say a monopoly operating in a contestable market will tend to be more innovative than one in a non-contestable market, like electricity generation.
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Cyclotron
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#470
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#470
firefox could provide an interesting example of an attempt at creative destruction as the technology was advanced compared to internet explorer but did not completely take over due to the strength of microsoft's monopoly. microsoft managed to retain its hold on the browser market

yes/no?
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trevthetrev
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#471
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#471
(Original post by Cyclotron)
firefox could provide an interesting example of an attempt at creative destruction as the technology was advanced compared to internet explorer but did not completely take over due to the strength of microsoft's monopoly. microsoft managed to retain its hold on the browser market

yes/no?
Well, I think an important part of why microsoft kept the browser monopoly is because it was sneaky enough to joint provide and promote it with Windows. This means that they could use their monopoly in the OS domain to retain the browser domain, despite maybe having a worse product.
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hassam
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#472
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#472
tanusha-tomsk i thank you for the information you gave me for the brick and mortar but i had to wrote a whole report on the topic but got a B. Still thanks for getting me started and now i'm back and if you ever need help just haler for my name. Thnks!
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Vivacious_Sky
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#473
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#473
Hi guys,

Any help on this matter would be great! I was wondering what are the advantages and disadvantages of debt cancellation in highly indebted countries?
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CorpusNinja
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#474
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#474
Advantages
-helping them out of the circle of poverty - each new govt ends up inheriting debt (debt overhang) and borrowing more IMF/World Bank money to pay interest
-free indebted govts from IMF/WB pressure to restructure economies according to their free market ideals - opening economy and cutting public spending! often disastrous.
-prevent countries financing unpayable debt - interest payments being greater than country's GDP

Disadvantages
-cancelling debt can come with strings tied - not least giving contracts to western firms for projects
-western banks suffer for what is often corruption in indebted countries
-future loans WILL be more expensive (higher interest rates) so compromising future generations ability to borrow

There's a start. I'm sure you can think of some more.
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Vivacious_Sky
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#475
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#475
Thanks a lot... that did help out a lot
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shaunskjw
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#476
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#476
I need some help, I have these two questions on trade and comparitive advantage, the second question I can do but would like some guidance.

1. China has recently joined the WTO and in consequence lowered its trade barriers.

Explain How the principle of comparitive advantage suggests that the UK economy is likely to benefit.

2. Discuss how increased trade in China is likely to affect the UK's economic performance.


The reason why I am asking for help is becuase my teacher is pretty crap and I just don't quite get the first question, the second question is easy enough but a bit of guidance to ensure that I have it correct would be appriciated.
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trevthetrev
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#477
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#477
Hey Shaun,

WTO was formed as an institution to promote trade and reduce barriers (It was spawned from GATT). This means that China, one of the worlds leading growth engine, will lower its trade barriers. To avoid getting too technical, China will trade more, and trade at a higher level of "fairness" with its trading partners. That means that, technically, a decrease in barriers to trade will create more trade and more (correclty) specialised trade, as with removal of market impurities such as tarriffs and quotas will ensure that efficiency plays a bigger role in exports. Comparative advantage thus says that specialisation and more trade will benefit all parties, UK should technically gain if it trades with China. Which it does.

For your second question just think about when barriers go down, what is likely to happen with Chinas export and UK's export markets. Will UK export more or less, ceterius paribus? Who does China trade with except UK, and who does UK trade with except China? Will that trade be affected?

Hope that got you going.
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tanusha-tomsk
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#478
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#478
Welcome to:

Boycey
19-02-2007 14:38 Hi can i join please. Im about to study PPE (planning to major in economics) at Warwick and want to get more involved in the subject.

konstantinos_uk
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Scarlett_Jewel (too many societies, can't add you but you're still a part of this society )
21-02-2007 01:19 Because erm, I DO economics, and I'm erm, INTERESTED in economics... do you really want further justification?

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Bennyboy65
2 Weeks Ago 23:23 I would like help with my Economics course!! I enjoy it also!!

Unknown User (too many societies, can't add you but you're still a part of this society )
1 Week Ago 15:14 Maths and Econ at LSE


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Bennyboy65
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#479
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#479
Hi everyone,
First post in this soc for me!!!

ANyway i was wondering if anyone can help me understand comparative and absolute advantage? I just can't quite understand it!
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Who?
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#480
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#480
(Original post by Bennyboy65)
Hi everyone,
First post in this soc for me!!!

ANyway i was wondering if anyone can help me understand comparative and absolute advantage? I just can't quite understand it!
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