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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
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

slide2
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
  • 93001@mail.wtuc.edu.tw
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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