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Econ 102 (My Notes) > Week 1 And 2 Notes > Flashcards

Week 1 And 2 Notes Flashcards

1
Q

Who laid the conventional conceptualisation of free trade and when?

A

Conventional conceptualisation of free trade framework laid out by David Ricardo in 1817

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2
Q

What were Ricardo’s 3 basic ideas?

A

Ricardo’s 3 basic ideas

  1. Trade is driven by “competitive advantage”
  2. Nations are the correct units of analysis
  3. Globalization is driven forward by lower trade costs
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3
Q

What is the core logic of global economics?

A
  • As trade costs fall, nations increasingly specialize in producing goods where their relative efficiency is inherently highest (they are relatively good at it) while importing goods where it is inherently lowest (they are relatively bad at it)
  • Trade volumes rise
  • All nations gain
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4
Q

What is the principal of comparative advantage used to explain?

A
  • why nations trade
  • Why they trade what they do (pattern of trade)
  • Why nations gain from trade
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5
Q

What happens when nations’ relative prices differ?

A

Whenever nations’ relative prices differ (for whatever reason) it allows trade to create a two way buy low sell high deal

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6
Q

What are the two main gains of trade?

A

• Gain 1: Higher consumption: Consumers in each nation get something from abroad for less than they would pay at home
◦ Lower prices
◦ Wider variety of goods
• Gain 2 : More productive economy: Additional gains as national shift scarce productive resources into producing mor of their competitive advantage goods

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7
Q

What are the 4 main gain amplifiers?

A
  1. Greater scale economies and agglomeration economies
    A. Higher volume production tends to lower per unit production costs
    B. Agglomeration of activity boosts productivity like automobiles in Detroit, software in Silicon Valley
  2. Upgrading
    A. Trade opening may induce skill upgrading, improved management techniques, better governance, higher quality, etc
  3. Trade and growth:
    A. Investment:
    a. Trade creates new investment opportunities and thus may stimulate investment led growth
    1. China
    2. Vietnam
    B. Innovation
    a. Trade opening may induce innovation which drives productivity and growth
  4. Trade and peace
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8
Q

What are the two main pains of trade?

A

◦ Pain 1: Relative price changes (short term or without product shifts)
◦ Pain 2: Restructuring (long term or with product shifts)

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9
Q

Explain the pain of price change pain

A
  • within a sector: producers versus customers
  • Higher prices for exports mean domestic consumers lose but domestic producers win

• Within an economy: Rewards to factors of production, E.G labour vs capital:
◦ Factors of production used intensively in expert sectors tend to see higher rewards (wage, profits, etc)
◦ Factors of production used intensively in import competing sectors tend to see lower rewards

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10
Q

What are the pain amplifiers?

A

Pain amplifiers:
• These “static” losses may be amplifies by other effects:
◦ Trade may lock developing nations into producing goods where technological progress is slow or sectors where scale economies are absent
‣ Mining, agricultural products
◦ Natural resource curse: Exporting natural resources may foster corruption and poor governance
‣ But Canada and Norway, two resource intensive exporters have low corruption and good governance

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11
Q

What are the hard realities of globalization?

A

• No pain, no gain; politics of compensation always arises
◦ Trade increases the size of the pie (net economic gain is positive) so “in principle” winners could compensate losers
◦ But this compensation does not always take place
• If dynamic gains are large enough, all may gain, but some are likely to gain more than others
◦ This is true for sectors, for individuals (consumer, producer) and for factors of production…

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12
Q

The classic liberal perspective is…?

A

Efficiency is the markets role

Justice/equity is the governments role

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13
Q

When is there no need for international trade?

A

• when production and consumption take place in the same place (Organizing principle)
◦ There is local trade but no international trade (bundled)

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14
Q

When does international trade take place?

A

• when production takes place in different places (unbundling)

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15
Q

What are 4 phases of trade?

A
  1. Humanising the globe (climate) (185 of 200 millennia)
    A. Consumption moves to production
    B. Trade is an exotic phenomenon
  2. Localizing world economy (agricultural revolution) (12000BCE-1820)
    A. 1st bundling- production moved to consumers
    B. Trade is regular but not significantly large
  3. Rise of trade (1820-1990) (steam revolution)
    A. First unbundling- production and consumption unbundling
    B. Modern globalization starts
  4. Rise of North South offshoring (ITC revolution) (1990-now)
    A. 2nd unbundling
    B. Production stages unbundling internationally
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16
Q

What happened in phase 1?

A

• Hunter gathered their way around the world- consumption goes to production

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17
Q

When did warm spike occur?

A
  • 130k BC

* Another 83 millennia BCE allowed out of Africa migration

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18
Q

When did Two migrations out of Africa occur?

A

125k BCE was a failed “out of Africa”

85K bce another (from DNA evidence, all humans outside of Africa are related to this pioneering group)

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19
Q

Was trade rare in phase 1? Give an example

A
  • yes, ex; obsidian from turkey found its way down to the Fertile Crescent around 8000 BCE
  • Farming clusters lined in chain like fashion forming lost distance routed of exchange circulating (using things like the Nile)
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20
Q

What happened in phase 2?

A

• agriculture allowed production to be brought to consumption= civilization

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21
Q

What happened to the climate 20000 years ago

A

• Temperature rose and stabilizes 10000 years ago

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22
Q

When and where did domestication of plants and animals begin?

A
  • 10000 years ago
  • Probably developed in various locations
  • In Fertile Crescent, today irac and Syria
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23
Q

Fertile Crescent- what was it

A
  • earliest domestication of pig, cattle, sheep and goats
  • First and oldest farmers of wheat and barley
  • Very fertile plan of land
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24
Q

What was the results of this humanitarian change? (Phase 2- production being brought to consumption)

A
  • permenant villages means production comes to consumption (first time in human history)
  • River valleys allow continuous settlement (annual flooding solves problems of soil exhaustion and makes it possible to stay in one place)
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25
Q

Where was the ideal fertile plane

A

30 degrees north

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26
Q

What is another result of phase 2- permenant villages?

A
  • agricultural innovation- which leads to food surpluses and population and civil growth
  • Agricultural revolution makes a high difference when amplified by metal tools (bronze but especially iron)
27
Q

What did iron and bronze create?

A

• a rise in population due to increase ease of effort because of tools (increased productivity and made life easier )

28
Q

What happened due to increase population in phase 2?

A

• Different civilizations emerge due to increase population

29
Q

Where did start of civilizations occur

A

• Mesoamerica, Andean region, Nile valley, Mesopotamia, Indus River region, Huang Ho river region

30
Q

What are the three phases of stage 2 and when did they occur?

A
  • rise of Asia (1200BCE up to 200 BCE)
  • Eurasian integration (200 to 1350 CE)
  • Ride of Europe (1350 CE to 1850 CE)
31
Q

When did cities and civilizations begin to occur

A
  • 3500 BCE

* Earliest in river valleys due to flooding

32
Q

What were the earliest developed civilizations?

A
  • Sumerian 3500 BCE
  • Egyptian 3000 BCE
  • Indus Valley 2600 BCE
  • Chinese 2100 BCE
  • Others 1200 BCE
33
Q

who dominate the colonial economy for 2 millennia (500 BCE to 1500 CE)?

A
  • Asia and Egypt

* 4 clusters spread and western 3 becomes adjacent

34
Q

Who dominated the world economy up to 1820?

A
  • Asia- Mesopotamia, Egypt, china and India

* Per capital income close to subsistence levels almost everywhere

35
Q

What type of growth in Asia

A

• more people not higher income per capital

36
Q

What should the relationship between GDP and population

A

Share of world population= share of world GDP

37
Q

Who has more than half of world GDP and population 1 year CE?

A
  • India and china

* All of Europe and todays western offshoots (US, Canada, Australia etc) are less than 20%

38
Q

What is GDP?

A
  • Gross domestic product
  • Measure of the market value of all the final goods and services produced in a given region or country over a given period or time
39
Q

What is growth rate?

A

• Relative rate if change of GDP between to periods (GDP t-t1/GDP t-1)

40
Q

Long distance trade, what was traded and by whom

A

• only in elite goods and essential materials: tin bronze= copper plus tin) Tyrian purple (red dye from shells) wood etc

41
Q

Where was the trade hubs during the Bronze Age of Trade

A
  • Mesopotamia’s: Indus Valley by sea; Nile river valley by land
  • china is located from 3 other consumption/ product clusters
42
Q

What was traded during Bronze Age of trade?

A

• copper and tin ingots, glass beads, ebony wood, ivory, tortoise shells, ostrich egg shells, ceramic jars filled with resin, and some weapons and tools as well as Egyptian jewelry

43
Q

What is the Silk Road?

A

• connected basic production/consumption clusters for 17 centuries
◦ East, west and south of Tibetan plateau (Middle East, India and china, secondary southeast for Asian spices)
Silk Road, trade still small

44
Q

Why has the world only two words for tea (influence of trade)

A
  1. Tea if by sea
  2. Cha if by lang
    • both words are from china
45
Q

What types of political organizations when civilizations started?

A

Kingdom, dynasty and empires

46
Q

Name the notable first big political kingdoms

A
  • Roman Empire (150 BCE-500CE)
  • Han dynasty (200 BCE- 200 CE)
  • Islamic golden age (630- 1250)
  • Mongolian empire (1200-1370)
  • Other chine dynasties (260-1280) over varying periods
47
Q

What was the Mongol empire?

A

• largest contiguous land empire
• Under them whole Silk Road under single authority (1200-1350
◦ Marco Polo travels to china 1280’s

48
Q

When and how did the Black Death get to Europe?

A

• Silk Road in 1347
◦ Wiped out between a 1/4 and a 1/2 Europeans in 3 years
• Islamic world imapact at least as severe
• Impact on china and India by contrast seems to have been les marked

49
Q

What happened as a result of mass population loss due to Black Death?

A

• transformed European societies in deep ways, most triggering progress
• Had the opposite effect on the Islamic world
◦ One hypothesis is that Europe was a rural society that became more urban and centralized while Islamic world was already urban and centralized before (Plague hits city harder)
◦ Golden age of islam further damaged by mongol invasion (1260)

50
Q

What happened to European economy after Black Death?

A
  • England gained salary after Black Death
  • 150 years from 167- growth doubled .2% per year
  • Beginning of modern growth well before industrial revolution
51
Q

what happened to the Silk Road in 15th century

A

It shut down

52
Q

What happened after the closing of the Silk Road?

A
  • Fragmentation of Islamic world
  • Fall of Constantinople
  • China decided to isolate itself
53
Q

Voyages of Admiral Zhang He (1405-33)

A
  • China was far better at sea transport than Europe in the 1400’s
  • China could have chosen to run Silk Road type of thing by sea
  • After a half dozen voyages, Ming dynasty decided to abandon effort and to isolate itself
54
Q

What is proto globalization?

A
  • preparatory stage for the dramatic shifts that were to start with phase 3
  • Slowly moving from age of religion to the age of reason (1450-1776)
55
Q

What are the keys elements of proto globalization

A
  • Renaissance, reformation and enlightenment
  • Age of discovery
  • Colombian exchange and the America’s as Europe extension
56
Q

What is the renaissance and when?

A

• 1300-1600s
• Greek manuscripts and mastery of Greek spread to Europe via byzantine empire
• Revival of middle eastern knowledge and rise of humanism
◦ Michelangelo, Shakespeare, Galileo, Columbus, Luther, da Vinci, Columbo, machiavelli, copernicus
• Commercial revolution: Europe develops banking finance and markets
• Much based on ideas, instituons and technologies borrowed from the advanced civilizations in middle and far easts

57
Q

Reformation, what happened?

A
  • Luther questions Catholic Church and gets away with it (1518)
  • Salvation based on individual faith not organized religion
  • Bible translated into local languages encourages individual readings and thinkings
  • Printing press speeds dissemination
58
Q

What is enlightenment (1600’s-1700’s)

A

• reason logic and scientific revolution (western thinking)
• Modern economic though foundations concerning the functioning of markets and international trade were laid during this period
• Key texts include
◦ Adam smiths wealth of nations (1776)
◦ David’s Ricardo on the principes of political economy and taxation (1817)

59
Q

When did the age of discovery happen and what is it?

A

• begins reversal of 10 millennia of Asian dominance
• Portuguese started from 1419
◦ Discovery of the south Atlantic gyre, which made it easier to get south by going far to the west
◦ They sighted American although they didn’t bother to follow up on this at the time
• Cape of good hope was rounded in 1488
◦ Four years later, Columbus landed in Central America in pursuit of a western passage to Asia
◦ Ten years later, Portuguese ships reached India around Africa and returned to tell the tale
• Just two years later, in 1500, Brazil was claimed for the Portuguese crown
• By the end of the 1500’s
◦ Portugal trading posts yay connected Lisbon to Nagasaki via the the west and South African cost, the Middle East, India and Southeast Asia
◦ Spain had colonies throughout Central America and the west coast of South America- most notably in Peru and Bolivia

60
Q

What happened in the Colombian exchange?

A
  • Imported food and crops from America’s: Potatoes and maize
  • Raised European population density
  • European diseases depopulated the new world (Small pox, diphtheria, bubonic, measles, influenza, thypus, scarlet fever)
  • Almost erased the ancient civilization in mesoamerica and Andes
61
Q

Outcomes of Columbian exchange?

A
  • European population rises, American population falls

* America’s rapidly repopulated with European immigrants

62
Q

What is the A7 countries

A

China, India/Pakistan, Iraq, Iran, turkey, Italy/Greece and Egypt

63
Q

What are the G7 countries

A

USA, Japan, Germany, Italy, UK, France, Canada

Econ 102 (My Notes) (2 decks)

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