November 30 2004
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November 30, 2004 國際事務菁英班. Seminar on Global Finance and Investment 國際經貿情勢分析 Some Path-breaking thoughts on Modern Economy. 高雄市政府公教人力發展局 93341 國際事務菁英班 講座:衛忠欣 (Jong-Shin Wei) 語言: English ( 中文出現係特殊情況 ) 對象:在座諸位 市府菁英 背景: No prior knowledge in economics, finance, or

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November 30, 2004 國際事務菁英班

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November 30 2004

November 30, 2004國際事務菁英班

Seminar on Global Finance and Investment

國際經貿情勢分析

Some Path-breaking thoughts

on Modern Economy


November 30 2004

高雄市政府公教人力發展局

93341國際事務菁英班

講座:衛忠欣 (Jong-Shin Wei)

語言:English (中文出現係特殊情況)

對象:在座諸位市府菁英

背景:No prior knowledge in economics, finance, or

business required. No calculus needed.

要求:No need to preview materials. A good sleep on Monday night will

suffice.


Information about the speaker

Information about the speaker

  • Jong-Shin Wei衛忠欣 Associate Professor

  • Chairperson, Dept. of International Business

  • Wenzao Ursuline College of Languages

  • Ph.D. (in Economics), Purdue University 1988

  • B.S. (in Marine Mgmt), National Chiao Tung Univ. 1980

  • http://www.wtuc.edu.tw/ib師資介紹 click on name

  • (07) 342-6031 ext.6201 0912-604-341

  • [email protected]


Information about the speaker continued

Information about the speaker (continued)

  • Full-time teaching experience:

    Purdue Univ., Florida International Univ.,

    Feng Chia Univ., SHU-TE Univ.

  • Part-time teaching experience:

    Tunghai Univ., SHU-TE Univ.

  • Co-Editor, International J. of Business and Economics (ISSN 1607-0704) IJBE_web1.htm


Lecture plan for nine hours

Lecture Plan (for nine hours)

  • Motivation (see … no Chinese!)

    interesting examples (English auctions, sealed-bid auctions, simplest game-playing)

  • Placement test? Mmmm … not really! Just for fun!

    Question for you: Do I think like an economist?

  • Simplest illustration of comparative advantage and gains from trade

  • Strategic thinking, decision-making under uncertainty, role of information in modern society

  • How economics helps with public/political issues?


Lecture plan for nine hours continued

Lecture Plan (for nine hours) (continued)

  • Some steaming debates and controversial issues in macroeconomics (if schedule permits)

  • Useful decision criteria in a world of uncertainty

    (if schedule permits)

  • More examples on game theory?

    (if schedule permits)


Outline for tuesday nov 30 2004

Outline for Tuesday, Nov.30, 2004

  • Motivation

    interesting examples (English auctions, sealed-bid auctions, simplest game-playing)

  • Placement test– What most economists might agree upon (hand out sheets)

    Question for you: Do I think like an economist?

  • Simplest illustration of comparative advantage and gains from trade


Motivation

Motivation

interesting examples (English auctions, sealed-bid

auctions, simplest game-playing)

  • English auction

    open-cry, ascending bids, motion pictures

  • Sealed-bid auction

    sealed-bid, simultaneously played (as a static game)

    標會、工程招標

  • Are they equivalent?


Motivation continued

Motivation (continued)

  • Vickrey auction (second-price sealed-bid auction)

    1961, the cost to the winner is the second highest bid. b1 = 500, b2 = 400, b3 = 300. #1 wins!

  • Reservation price of bidders

  • Truthful revelation of preferences

  • Dollar auction

    Object to be sold: NTD1,000 (bill)

    Rule: Open-cry; ascending bids; second highest bidder

    also pays (but gets nothing!)


Motivation continued1

Motivation (continued)

  • Two ice-cream vendors on a beach; potential customers evenly spread; at most one unit consumed; same price due to identical quality; minimizing purchasing effort.

    Will they be next to each other or be far apart?

  • Three ice-cream vendors ?

  • Anything to do with the saying, “As time goes by, all political parties are alike”?


Motivation continued2

Motivation (continued)

  • Simplest two-person symmetric static game

    Aumann (1987)

    Two kids met an angel who asked them to make a

    wish simultaneously and independently.

    Options:

    Being selfish: give me $1 (or 一英磅?一百萬? )

    Being altruistic: give me nothing but my friend $3

    Assumption: ordinal utility maximization


Motivation continued3

Motivation (continued)

Assumption: no reputation problem (one-shot game)

Useful tool: payoff matrix (row player = kid 1)

selfish altruistic

selfish1, 1 1+3, 0

altruistic0, 1+3 0+3, 0+3


Motivation continued4

Motivation (continued)

selfish altruistic

selfish1, 1 1+3, 0

altruistic0, 1+3 0+3, 0+3

And your prediction? What would you choose?

What should they choose?

How would John Nash predict?


Motivation continued5

Motivation (continued)

selfish altruistic

selfish1, 1 4, 0

altruistic0, 4 3, 3

implicate not confess

implicate20, 20 0, 40 (yrs)

not confess40, 0 1, 1

  • Tucker’s prisoners’ dilemma game


Is there consensus among us

Is There Consensus among Us?測驗聽眾的經濟常識與專業英文閱讀

Simply answer True or False. No need to justify your answer.

  • 1. A ceiling on rents (設定房屋租金之上限) increases both the quantity and quality of housing available. Ans: .

  • 2. A minimum wage increases unemployment among young and unskilled workers. Ans: .

  • 3. Effluent taxes and marketable pollution permits (對污染者課稅與開放污染許可證交易) represent a better approach to pollution control than imposition of pollution ceilings (設定污染量之上限). Ans: .

  • 4. Cash payments (現金救濟) decrease the welfare of recipients to a greater degree than do transfers-in-kind of equal cash value (與現金等值之實物救濟). Ans: .

  • 5. Tariffs and import quotas (關稅與進口配額) usually increase general economic welfare. Ans: .


Is there consensus among us continued

Is There Consensus among Us? (continued)

  • 6. The government should restructure the welfare system along the lines of a “negative income tax.” Ans: .

  • 7. Fiscal policy (e.g., tax cut and/or government expenditure increase) has a significant stimulative impact on a less than fully employed economy. Ans: .

  • 8. If the federal budget (聯邦政府之預算) is to be balanced, it should be done over the calendar year rather than the business cycle (景氣循環). Ans: .

  • 9. A large federal budget deficit (聯邦政府之預算赤字) has an adverse effect on the economy. Ans: .

  • 10. Flexible and floating exchange rates offer an ineffective international monetary arrangement. Ans: .


Outline for tuesday nov 30 2004 revisit

Outline for Tuesday, Nov.30, 2004 (revisit)

  • Motivation

    interesting examples (English auctions, sealed-bid auctions, simplest game-playing)

  • Placement test – What most economists might agree upon (hand out sheets)

    Question for you: Do I think like an economist?

  • Simplest illustration of comparative advantage and gains from trade


Comparative advantage gains from trade

comparative advantage & gains from trade

  • Two economic agents

  • Frank as a farmer; Robert as a rancher

  • Productivity (fixed rate assumed) measured by time

  • No externality; no technical progress nor learning-by-doing

    Frank: (need) 60 min to produce 1 ounce (of) meat

    Frank: 15 min to produce 1 ounce potatoes

    Robert: 20 min to produce 1 ounce meat

    Robert: 10 min to produce 1 ounce potatoes

    Common sense at a glance: Who has the edge?


Comparative advantage gains from trade continued

comparative advantage & gains from trade (continued)

  • Question: What should Frank do? Nothing?

  • conversion

    Frank: 60 min to produce 1 ounce (of) meat

    Frank: 15 min to produce 1 ounce potatoes

    Robert: 20 min to produce 1 ounce meat

    Robert: 10 min to produce 1 ounce potatoes

    Frank: 4 hours for 4 oz meat

    Frank: 4 hours for 16 oz potatoes notice 1:4

    Robert: 4 hours for 12 oz meat

    Robert: 4 hours for 24 oz potatoes notice 1:2

    Moral (啟示)?


Comparative advantage gains from trade continued1

comparative advantage & gains from trade (continued)

comparative advantage:

Frank on potato; Robert on meat

Derive production possibilities frontier (PPF)

Assume each is endowed with 8 hours

Frank: 60 min to produce 1 ounce (of) meat

Frank: 15 min to produce 1 ounce potatoes

(1)(x) + (1/4)(y) = 8 here 1hr per oz of meat

x + (1/4)(y) = 8 as Frank’s PPF


Comparative advantage gains from trade continued2

comparative advantage & gains from trade (continued)

x + (1/4)(y) = 8 as Frank’s PPF slope -4

(1/3)x + (1/6)(y) = 8 as Robert’s PPF slope -2

At autarky: Frank (0, 32) Robert (24, 0)

3 ounces of potatoes in exchange of 1 ounce of meat?

After trade:

Frank (0 + 2, 32 - 6) Robert (24 - 2, 0 + 6)

Relative price of meat = 3 = Qy/Qx term of trade

(end)


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