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.
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"
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.
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.
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
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!
Any help on this matter would be great! I was wondering what are the advantages and disadvantages of debt cancellation in highly indebted countries?
-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
-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.
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.
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.
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!