Economic Systems, Comparative Advantage

The Alternative trade theories
Most of the theories touched above are what we call traditional trade theories i.e.:
1-      Mercantilism
2-      Theory of absolute advantage
3-      Theory of comparative advantage
4-      Theory of factor proportions and Leontief’s paradox
5-      Theory of product life cycle
The alternative theories or newer theories include:
1-      Theory of economies of scale
2-      Specialization
3-      First mover
4-      Porter’s Diamond Theory
Of recent the book or movie “ The world if Flat” Friedman introduces the FLATNERS that he believes have changed the land scape of the globalization:
1-    The fall of the Berlin wall

2-    Netscape went public and shifted us from a PC-based platform to an Internet-based platform.

3-    Work Flow Software
“Work flow platforms are enabling us to do for the service industry what Henry Ford did for manufacturing,” said Jerry Rao, the entrepreneur doing accounting work for American from India. “We are taking apart each task, [standartizing it,] and sending it around to whomever can do it best, and because we are doing it in a virtual environment, people need not be physically adjacent to each other, and then we are reassembling all the pieces back together at headquarters [or some other remote site]. This is not a trivial revolution. This is a major one. It allows for a boss to be somewhere and his employees to be someplace else.” These work flow software platforms, Jerry added, “enable you to create virtual global offices – not limited by either the boundaries of your office or your country – and to access talent sitting in different parts of the world and have them complete tasks that you need completed in real time. And so 24/7/365 we are all working. And all this has happened in the twinkling of an eye – the span of the last two or three years” (p.91).
For example, Wild Brain is an animation studio in San Francisco that produces films and cartoons for Disney with a team which is spread all around the world: the design and direction is done in San Francisco; the writers work from their homes in Florida, London, new York, Chicago, L.A., and San Francisco; the animation of characters is done in Bangalore; and the recording sessions are held in New York and L.A.
Salesforce.com offers online 590 business tools as email marketing tools, sales analysis tools, and finance tools. Justin Lu, a Shanghai-based businessman is able to sells his organic vitamins and run a $1 million-dollar-revenue generating business from his home with help from salesforce.com business tools.
4-Uploading

5-      Outsourcing
The Year 2000 problem, also known as the Y2K problem and the millennium bug, was outsourced oversees because it was cheaper to hire programmers in India. India benefited not only from the dot-com boom (when the cables were laid to India), but also from he dot-com failure (when the cables connect India with the rest of the world).Many jobs eventually will be outsourced oversees, but I would like to mention here jobs that Friedman calls “untouchables” — those people whose job won’t be outsourced or merged. These “untouchable” jobs are:
1. Special or specialized — like Michael Jordan, Madonna, Elton John, J.K. Rowling, brain surgeons, the top cancer researchers etc.
2. Localized and anchored — jobs done at a specific location, involving face-to-face personalized contact or interaction with a customer, client, patient, colleague, or audience — a barber, waitress, plumber, nurse, dentist, masseurs, repairmen, electrician, gardener, etc. I would add here a teacher.
3. Adaptable — constantly acquiring new skills that “can make you (at least temporarily) special, specialized, or anchored, and therefore (at least temporarily) untouchable and more likely to reap rising wages” (p.285).
6-Offshoring:
Running with Gazelles, Eating with Lions
On December 11, 2001, China formally joined the World Trade Organization, which meant Beijing agreed to follow the same global rules governing exports, imports, and foreign investments that most countries were following.” (p.137) ASIMCO Technologies – an American auto parts manufacturer in China put the following African proverb, translated in Mandarin, on the factory floor:
Every morning in Africa, a gazelle wakes up.
It knows it must run faster than the fastest lion or it will be killed.
Every morning a lion wakes up.
It knows it must outrun the slowest gazelle or it will starve to death.
It doesn’t matter if you are a lion or a gazelle.
When the sun comes up, you better start running.
Ever since China joined the World Trade Organization, both they and the rest of the world have had to run faster and faster.
Facts to think about: the average wage of a high-skilled machinist in America is $3,000-4,000 a month, while the average wage for a factory worker in China is about $150 a month (p.147). America remains the world’s biggest manufacturer, producing 75% of what it consumes, though that’s down from 90% in the mid-90s (p.150).
7-Supply-Chaining: Eating Sushi in Arkansas
Friedman describes the Wal-Mart’s supply chain in Bentonvilee, Arkansas — 1.2-million-square-foot distribution center.
When a consumer picks up one of the products in a Wal-Mart store, the cashier scans it and the generated signal goes to the supplier of that product and pops up on the supplier’s computer screen and prompts him to make another of that item and ship it via the Wal-Mark supply chain. Wal-Mart movies 2.3 billion general merchandise cartons a year to its stores.
For example, during hurricane, Florida Wal-Mart stores stock more beer, pop tarts, and kid’s games that don’t require electricity. Of course, Wal-Mart’s ruthless obsession to lower prices has its down sides. For example, Wal-Mart locks overnight workers into its stores, uses illegal immigrants as ganitors, battles the largest civil-rights class-action lawsuit, etc.
8-Insourcing:
What the Guys in Funny Brown Shorts Are Really Doing
FedEx and UPS not just delivering packages anymore. They are synchronizing global supply chains large and small (p.167). If you own a Toshiba laptop under warranty, and it breaks and you call Toshiba to have it repaired, it goes to a UPS workshop dedicated to computer repairs at their Louisville hub. UPS also dispatches the drivers and schedules supply pickup and delivery for Papa John’s Pizza.
9-In-Forming:

Google, Yahoo!, and MSN Web Search
Google is now processing roughly one billion searches per day, up from 150 million just three years ago. According to Alan Cohen, “If I can operate Google, I can find anything. Google is like God, God is wireless, God is everywhere, and god sees everything. Any questions in the world, ask Google” (p.185).
10-The Steroids:
 Digital, Mobile, Personal, and Virtual
The first steroid: Computing power. in 1971, the Intel 4004 microprocessor contained 2,3000 transistors. Intel’s Tianium processor has 1.7 billion transistors in 2006.
The second steroid: Breakthroughs in instant messaging, peer-to-peer networks and file sharing.
The third steroid: Breakthroughs in making phone calls over the Internet (VOIP) — Skype.
The fourth steroid: Videoconferencing — people can collaborate, “communicate their thoughts, facial expressions, feelings, ire, enthusiasm, and raised eyebrows.”
The fifth steroid: Advances in computer graphics. “Video games are particularly important in this regard, because in addition to their very realistic visual images and great sound, they are highly interactive and increasingly collaborative.” (p.194).
The sixth steroid: Wireless technologies and devices. In Japan, you can get uninterrupted wireless internet service on your computer or cell phone while traveling on the bullet train at 150 mph. According to Tamon Mitsuishi, senior VP at DoCoMo, the Japanese cellular giant, ” the mobile phone will become the essential controller of a person’s life. For example, in the medical field it will be your authentication system and you can examine your medical records, and to make payments you will have to hold a mobile phone. You will not be able to lead a life without a mobile phone, and it will control things at home too. We believe that we need to expand the range of machines that can be controlled by mobile phone.”
These steroids made it possible for all forms of collaboration – outsourcing, offshoring, open-sourcing, supply-chaining, and in-forming – to come together. Friedman writes: “As a result of these steroids, engines can now talk to computers, people can talk to people, computers can talk to computers, and people can talk to computers father, faster, more cheaply, and more easily that ever before. And as that has happened, more people from more places have started asking one another the same two question:
Economic measurements
Most economies are measured using GDP. However a more accurate measure should be per capita income. This is only because many items in GDP never get to be the direct income for citizens. Important aspects include: inflation, unemployment rate, interest rates and economic growth.
 
 
 
 

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