Is Competition Good

Review of Industrial Organization 19: 37–48, 2001.  © 2001 Kluwer Academic Publishers. Printed in the Netherlands. 37 Is Competition Such a Good Thing? Static Ef? ciency versus Dynamic Ef? ciency MARK BLAUG University of Amsterdam, Amsterdam, The Netherlands Abstract. This paper addresses the rationale for antitrust legislation. It is a striking fact that the legitimacy of antitrust law has been taken for granted in the United States ever since the Sherman Act of 1890 and, until the advent of the so-called Chicago School, it was even taken for granted by conservative American economists. Europeans, on the other hand, have always been lukewarm about legal action against trusts and cartels and this attitude is found right across the political spectrum in most European countries. Nevertheless, in both the U. S. A. and Europe, the ultimate justi? cation for antitrust law derives from economic doctrine regarding the bene? cial effects of competition. But what exactly are these bene? cial effects and how secure is the contention of economists that competition is always superior to monopoly? Surprisingly enough, competition, that central concept of economics, is widely misunderstood by many economists, both as a market phenomenon and as an organizing principle of economic reasoning. I. A Little History of Thought I begin by drawing what I believe is a fundamental distinction in the history of economics, as far back as Adam Smith or even William Petty, between two different notions of what is meant by competition, namely, competition as an end-state of rest in the rivalry between buyers and sellers and competition as a process of rivalry that may or may not terminate in an end-state. In the end-state conception of equilibrium, the focus of attention is on the nature of the equilibrium state in which the contest between transacting agents is ? nally resolved; if there is recognition of change at all, it is change in the sense of a new stationary equilibrium of endogenous variables in response to an altered set of exogenous variables; but comparative statics is still an end-state conception of economics. However, in the process conception of competition, what is in the foreground of analysis is not the existence of equilibrium, but rather the stability of that equilibrium state. How do markets adjust when one equilibrium is displaced by another and at what speed will these markets converge to a new equilibrium? But, surely, all theories of competition do both; existence and stability are tied up together and to study one is to study the other? By no means, however; it is easy to show that, for centuries, competition to economists meant an active process of jockeying for advantage, tending towards, but never actually culminating in, an 38 MARK BLAUG equilibrium end-state. Only in 1838, in Cournot’s Mathematical Principles of the Theory of Wealth was the process conception of competition totally displaced by the end-state conception of market-clearing equilibria. At ? rst this did not succeed in wiping the slate entirely clean of an interest in competitive processes but in the decade of the 1930s – those years of high theory as George Shackle called them – the Monopolistic Competition Revolution and the Hicks-Samuelson rehabilitation of Walrasian general equilibrium theory, forti? d by the New Welfare Economies, succeeded in enthroning the end-state conception of competition and enthroning it so decisively that the process view of competition was virtually buried out of sight. Let me elaborate. It is a striking feature of the language of The Wealth of Nations that the term â€Å"competition† invariably appears with a de? nite or inde? nite article preceding it: â€Å"a competition between capitals†; â€Å"the competi tion with private traders†, and so forth. For Smith, competition is not a state or situation, as it is for Cournot and for us, but a behavioural activity; it is a race – the original sense of the verb â€Å"to compete† – between two or more individuals to dispose of excess supply or to obtain goods available in limited quantities. What we nowadays call competition or the market mechanism was for him â€Å"the obvious and simple system of natural liberty†, meaning no more than an absence of restraints or ree entry into industries and occupations. Neither competition nor monopoly was a matter of the number of sellers in a market; monopoly did not mean a single seller but a situation of less than perfect factor mobility and hence inelastic supply; and the opposite of competition, was not monopoly, but co-operation. Producers in The Wealth of Nations treat price as a variable in accordance with the buoyancy of their sales, much like enterprises in modern theories of imperfect competition. This was not a conception invented by Smith because by 1776, competition had long been analyzed by a whole series of eighteenth century authors as a process which brings temporary â€Å"market† prices into line with cost-covering natural prices, those â€Å"natural† prices were indeed â€Å"the central price, to which the prices of all commodities are continually gravitating†, and in saying that Smith invoked Newtonian language to dignify a conception of price-determination that had a long tradition going back to the seventeenth century. To obtain that end-state in which market prices equal natural prices and the rate of pro? is equalized between industries, there had to be a considerable number of rivals, possessing common knowledge of market opportunities; they had to be free to enter and exit different lines of investment; but that was all and even that much was never spelled out explicitly as necessary prerequisites for competition – only once did Smit h ever mention the number of rival ? rms involved in competition. It was Cournot who ? rst had the notion of sellers facing a horizontal demand curve when their numbers become so large that none can in? uence the price of their own product. Competition, which once meant the way in which ? rms take account of how their rivals respond to their actions, now meant little more than the slope of the average revenue curve depriving ? rms in the limit of any power to make the price. Thus was born, decades before the Marginal Revolution of the 1870s what IS COMPETITION SUCH A GOOD THING? 39 one writer has wittily called â€Å"the quantity theory of competition† (quoted in Blaug, 1997, p. 68). Edgeworth’s Mathematical Psychics (1981) followed Cournot in providing all the trappings of the modern de? nition of perfect ompetition in terms of a large number of sellers, a homogeneous product, perfect mobility of resources and perfect knowledge on the part of buyers and sellers of all alternative opportunities. However, Marshall’s treatment of the competition always carefully labelled as â€Å"free competition† was much closer to Smith’s â€Å"simple system of natural liberty† than to that of C ournot and Edgeworth’s perfect competition. Even Walras hesitated to follow Cournot to the letter. Indeed, it was not until the 1920’s that the modern textbook concept of perfect competition was ? ally received into the corpus of mainstream economics, largely due to the impact of Knight’s classic, Risk, Uncertainty and Pro? t (1921). But it is doubtful whether the idea was in fact fully accepted in 1921 and a good case can be made for the thesis that it was Robinson and Chamberlain a decade later who hammered down the theory of perfect competition in the very process of inventing imperfect and monopolistic competition theory (Machovec, 1995). The replacement of the process conception of competition by an end-state conception, which was ? alized in 1933 or thereabouts, drained the idea of competition of all behavioural content, so that even price competition, the very kernel, of the competitive process for Adam Smith, David Ricardo and John Stuart Mill now had to be analysed as â€Å"imperfect† competition, a sort of deviation from the norm. Indeed, every act of competition on the part of a businessman was now taken as evidence of some degree of monopoly power, and hence a departure from the ideal of perfect competition, and yet pure monopoly ruled out competitive behaviour as much as did perfect competition. II. Perfect Competition, the Unattainable Ideal All I have said so far merely reiterates what Schumpeter said in 1942 and Hayek repeated in 1949: â€Å"perfect competition is not only impossible but inferior, and has no title to being set up as a model of ideal ef? ciency†; â€Å"what the theory of perfect competition discusses has little claim to be called ’competition’ at all and its conclusions are of little use as guides to policy† (quoted in Blaug, 1997, p. 69). But this message, delivered over a half-century ago, fell on deaf ears and the endstate theory of perfect competition is more ? mly in the saddle today than it ever was in the 1940s when Hayek and Schumpeter, not to mention John Maurice Clark (1949, 1961), were writing. And why? The answer is simple: it is that most of us were taught that although perfect competition is rarely if ever attained, nearly-perfect competition is said to be observable in some markets (agricultural markets being a favour ite example) and these approximations to the state of perfect competition somehow replicate many 40 MARK BLAUG f the desirable characteristics of perfect competition; in a word, second-best is so nearly ? rst-best that we may indeed employ ? rst-best as a standard. Open any textbook and what do we ? nd? The concept of perfect competition is said to be like the assumption of a perfect vacuum in physics; descriptively inaccurate, to be sure, but nevertheless productive of valid insights about actual economies. Thus, Samuelson and Nordhaus (1992, p. 295) in the 14th edition of their Economics concede that a perfect and absolutely ef? ient competitive mechanism has never existed and never will â€Å"but the oil crisis of the 1970s† is only one of their many examples of how an empirically empty competitive model can nevertheless produce the right answers to a concrete imperfectly competitive situation (for other textbook treatments, see Blaug, 1997, pp. 69–70). This is prec isely what Reder (1982, p. 12), called the notion of â€Å"tight prior equilibrium†, which he thought was characteristic of the Chicago School of Economics: â€Å"one may treat observed prices and quantities as good approximations to their long-run equilibrium values†. Call this the good-approximation assumption. Unfortunately, the idea of a near or far approximation to perfect competition has absolutely no logical meaning. We seem conveniently to have forgotten the famous Lipsey–Lancaster (1996) second-best theorem published in 1956, according to which we are either at a ? rst-best optimum or it matters not whether we are at second-best or tenth-best because we cannot rigorously demonstrate that doing away with a tax or a tariff that put us at tenth-best will bring us closer to ? st-best in a welfare sense of these terms. This theorem has not been conveniently forgotten; it has been deliberately forgotten because it wreaks havoc with the end-state, ? rst-best conception of competition. Must we therefore cease to give advice on competition policy? I think not; but what it does mean is that instead of gnostic pronouncements about the desirability of any move in the direction of ? st-best perfect competition, we must engage instead in qualitat ive judgements about piecemeal improvements, embracing a dynamic process-conception of competition, which is precisely the old classical conception that Schumpeter, Hayek, Clark and modern neo-Austrians have urged us to adopt. To grasp why it was necessary to revive this tradition, we must spend a moment explaining why modern price theory is so strong on the nature of the competitive equilibrium end-state and so weak on the process by which competition drives a market towards a ? al equilibrium. III. The Awful Legacy of General Equilibrium Theory When Walras literally invented general equilibrium (GE) in 1871, he was just as much concerned with the process-conception of competition known as â€Å"the stability problem† as in what we have called the end-state interpretation of equilibrium known as â€Å"the existence problem† – is simultaneous multimarket-equilibrium possible in a capitalist economy? But gradually, in successive editions of his Elements of Pure Economics, the existence problem came ever more to the fore, while the sta- IS COMPETITION SUCH A GOOD THING? 41 bility problem receded in the background (Walker, 1996). Even so, Walras’s view of how markets adjust in disequilibrium was always somewhat naive. It is a story which we all learn in our ? rst course of economics: in response to the appearance of excess demand and supply, prices adjust automatically as independently acting buyers and sellers â€Å"grope† their way to a ? al equilibrium. When this tatonnement story is well told, it sounds utterly convincing and at such times we are apt to forget that many markets, particularly labour markets and â€Å"customer markets†, react faster in terms of quantities than in terms of prices (as Marshall always insisted in opposition to Walras) and sometimes only in terms of quantities (see Blaug, 1997, pp. 71–75). But prices and quantities aside, what about product ifferentiation and competition by maintenance and service agreements, what about Schumpeterian competition in terms of new products and processes, new methods of marketing, new organizational forms and new reward structures for employees? In short, all the forms of rivalry between producers which Chamberlain and Robinson have taught us to call monopolistic or imperfect competition (the irony of calling what cannot exist, perfect competition, and what always exists, imperfect competition, never ceases to amuse me! . Walras struggled manfully to provide a rigorous solution to the existence problem but never got much beyond counting equations and unknowns to ensure that there were enough demand and supply equations to solve for the unknown equilibrium prices and quantities in the economy. As for the stability problem, he solved that after much hesitation by simply eliminating disequilibrium transactions as â€Å"false trading† (another wonderfully ironic piece of rhetoric). Although he never mentioned the concept of a ? tional auctioneer announcing different prices until an equilibrium price is discovered, whereupon trade is allowed to take place – this is one of those historical myths that subsequent generations have invented – it is dif? cult to avoid the conclusion that he simply gave up the effort to provide a convincing account of how real-world competitive markets achieve GE. Such an account has in fact never been provided even to this date. In 1954, Arrow and Debreu ? nally solved the existence problem by modern mathematical techniques – topological properties of convexity, ? ed point theorems, Nash equilibria, etcetera – of which Walras could never have dreamt but, in so doing, they travelled even further than Walras had from anything smacking of descriptive accuracy: there are forward markets in their GE model for all goods and services in the economy, including all locations and conceivable contingen t states in which these goods and services might be consumed, and yet no one holds cash to deal with the likelihood that income and expenditure may fail to synchronize. They were perfectly candid about this failure to describe actual economies. Indeed, they made a virtue of the purely formal properties of their model. 1 1 As Debreu (1959, p. x) expressed it in his Theory of Value: â€Å"The theory of value is treated here with the standards of rigor of the contemporary formalist school of mathematics . . . . Allegiance to rigor dictates the axiomatic form of the analysis where the theory, in the strict sense, is logically entirely disconnected from its interpretation†. And yet this book claimed to be a work in economics! 42 MARK BLAUG They cracked the existence problem, not to mention the uniqueness problem – is there one unique vector of prices at which GE exists? but they never tackled the stability problem. In other words, after a century or more of endless re? nements of the central core of GE theory, an exercise which has engaged some of the best brains in twentieth-century economics, the theory is unable to shed any light on how market equilibrium is actually attained, not just in a real-world decentrali zed market economy but even in the toy economies beloved of GE theorists. We may conclude that GE theory as such is a cul de sac: it has no empirical content and never will have empirical content. Moreover, even regarded as a research program in social mathematics, it must be condemned as an almost total failure. That is not to say that highly aggregated computable GE models, such as IS-LM, are pointless or that a GE formulation of an economic problem, emphasizing the interdependence of all sectors of the economy, may not prove illuminating but simply that Walrasian GE theory – the notion that the existence of multi-market equilibrium may be studied in a way that is analogous to solving a set of simultaneous equations – has proved in the fullness of time to be an utterly sterile innovation. The real paradox is that the existence, uniqueness and stability of GE should ever have been considered an interesting question for economists to answer: a complete satisfactory proof of all three aspects of the problem would no doubt have been a considerable intellectual feat in logic but would not in any way have enhanced our understanding of how actual economic systems work. IV. The Welfare Implications of GE Of course, Walras hoped to show, not just that GE is possible, but that it is good. But here too he never got much beyond the idea that voluntary exchange between two parties improves both of their welfares – otherwise, why would they have traded? What is true of bilaterial exchange will also be true of competitive exchange between a large number of traders if individual producers cannot themselves set prices, so that all consumers face identical prices for identical homogeneous commodities. This is precisely where the notion of perfect competition as an end-state of rest comes into welfare economics grounded in GE theory. Pareto, who was a much better technician than Walras, carried on where Walras left off. He too was convinced that GE is good for everyone but as a follower of Ernest Mach in philosophy, he hated such metaphysical ideas as maximising happiness, utility, welfare, or call it what you will, and he strenuously objected to interpersonal comparisons of utility (ICU) on the grounds that such comparison could not be operationalised. Pondering these issues, he realised that the one circumstance that avoids ICU is a social state which meets with unanimous approval or at least with the absence of con? ict in which one person is only made better off at the expense of another person. In other words, we want a state which is so ef? cient that there is no surplus, no waste, no slack, â€Å"no such thing as a free lunch†. But is not perfect competition just such a state? Of course, it may leave some people rich IS COMPETITION SUCH A GOOD THING? 3 and some people poor but that will be the consequence of the fact that we started with unequal endowments of the individuals in our economy – some people are born clever and some people have rich parents – but, given those endowments that are not themselves explained by GE theory – no theory ever explains everything – the GE model will grind out the rental prices of all the services of land, labor and capital as well as the prices of all goods , produced with those services. Once we have somehow arrived at the end-state of perfectly competitive equilibrium, it will be impossible to make one person better off without making another person worse off except by interfering with the initial endowments of agents. In this way, Pareto thought that he had ? nally found an admittedly narrow de? nition of the bene? cial effects of competition that was totally free of that positivist bugbear, ICU. The idea, only later called â€Å"Pareto optimality†, fell into oblivion as soon as it was announced but was rescued along with Walrasian GE theory in the 1930s by John Hicks and Nicholas Kaldor. They extended the scope of Pareto optimality by arguing that any economic change, whether from a position of competitive equilibrium or not, was welfare improving if the gains to bene? ciaries of that change were large enough to enable them at least in principle, to bribe the losers voluntarily to accept the change. The existences of such potential Pareto improvement (PPI), as they are nowadays called, still involves no ICU because it is grounded on the voluntariness of market exchange. In short, Hicks and Kaldor (with a prodding from Lionel Robbins) stayed true to the Paretian conception of how an economist should study welfare economics. At ? rst glance, the Hick–Kaldor compensation test does seem virtually to pull a rabbit out of a hat but further re? ection soon showed that the achievement was semantic, not substantive. Why is it a potential and not an actual PI? The moment we try to implement PPI by encouraging gainers and losers to negotiate a bribe, they will engage in strategic bargaining and even without fancy game theory, it is easy to see that they may never reach an agreement. If the change has political signi? cance, the state may then intervene to force the parties to agree – in which case we have said goodbye to our taboo on ICU. No matter how we slice it, in the end we cannot avoid (1) a qualitative judgement from on high of the size of the PPI – remember that there is no objective way short of voluntary trade to measure the magnitude of a gain or a loss to the parties concerned – and (2) an interpersonal comparison of that gain and loss to the respective parties. But all that brings us back to Marshall and Pigou whose Economics of Welfare (1921) had none of Pareto’s compunctions about ICU and was perfectly content to declare that a pound sterling taken from a rich man by a progressive income tax hurt him less than the pleasure it gave the poor man when it was handed over to him. We have not quite reached the end of the story. The Arrow–Debreu proof of the existence of GE in 1954 was almost contemporary with Arrow’s proof of what he labelled the First and Second Fundamental Theorems of welfare economics. The ? st theorem demonstrates that every competitive equilibrium in a decentralized economy is Pareto-optimal, which we have already discussed, and the second 44 MARK BLAUG theorem demonstrates that a Pareto-optimum can always be achieved via perfect competition if lump-sum taxes and transfers are feasible, so that whatever were the original endowments of agents, we can still make everyone better off with a perfectly compe titive economy. Immense pains are taken in every textbook of microeconomics to persuade readers of the validity of those two theorems. And they are valid – as mathematical exercises. Lump-sum taxes and transfers are changes which do not affect economic behaviour and even the most ingenious modern welfare economists have never been able to come up with a convincing example of such things. 2 I think that we may safely conclude that the First and Second Fundamental Theorems of welfare economics are just mental exercises without the slightest possibility of ever being practically relevant. They are what Ronald Coase (1988) called â€Å"blackboard economics†, an economics that is easy to write on a blackboard in a classroom but that bears no resemblance to the world outside the classroom. V. Why Is Competition Good? I contend that perfect competition is a grossly misleading concept whose only real value is to generate examination questions for students of economics. 3 It is misleading because it breeds the view that economics is a subject like Euclidean geometry, whose conclusion may be rigorously deduced from fundamental axioms of behaviour plus some hard facts about technology. But of course this does not imply that competition is bad. I, along with most economists, believe that competition is good. But if perfect competition is impossible, and Pareto-optimality almost impossible, what is the basis of this belief in the desirability of competition? It is based on a concept of dynamic ef? ciency, the outcome of competitive processes, and not the static ef? ciency of Walras, Pareto and the First and Second Fundamental Theorems of welfare economics. The schizophrenia of economists on this issue is simply extraordinary. The manin-the-street favours capitalism because it is ultimately responsive to consumers’ demands, technologically dynamic and produces the goods that are wanted at low cost; of course, it also suffers from periodic slumps, more or less chronic unemployment even in booms, and frequently generates a highly-unequal distribution 2 They would have to be randomly assigned to individuals or else to re? ect some personal noneconomic characteristic, such as more consonants than vowels in one’s last name. It used to be thought that a uniform poll tax was a perfect example of a limp-sum tax but as Mrs. Thatcher discovered it had a most profound effect on economic behaviour: almost a million people disappeared from the electoral roll in Britain because the poll tax could not be collected without a home address. 3 I concede reluctantly that it has its uses for purposes of answering comparative statics questions on taxes and subsidies but even these have much less practical signi? cance than is usually assumed (see Vickers, 1995). IS COMPETITION SUCH A GOOD THING? 5 of income. 4 Still, on balance the good outweighs the bad and without becoming Panglossian, he or she votes for capitalism – and so do virtually all economists. But is this what we teach in our textbooks? To ask the question is to already answer it. Can one actually teach the principles of dynamic ef? ciency? Of course, one can and that is what we do in every course in industrial organization (and in every course in man agement schools), where, alas, we have to undo the brainwashing that students have undergone in their courses on microeconomics. In so doing, we employ historical comparisons and case studies, and these can only cultivate the ability to make informed judgements about speci? c attempts at what Popper called â€Å"piecemeal social engineering†, making the world a little better here and there, because we do not know enough to make the whole world best once and for all. VI. Some Conclusions: Coase and Posner Beliefs in the ef? cacy of antitrust law ? ts neatly into the concept of dynamic ef? ciency, or what Clark called â€Å"workable competition†. A question like: should we break up Microsoft or just reprimand and perhaps ? e the company? does not lend itself to a precise answer by the edicts of economists and it is just as well that it does not. Empirical science frequently proceeds on the untidy basis of what is plausible rather than what can be formally demonstrated beyond any doubt. The structureconduct-performance paradigm of yesteryear, associated with names of Edward Mason and Joe Bain, did j ust that but that has since been superseded by game theory and transaction cost on the one hand and the Chicago School of Richard Posner and Robert Bork on the other hand. In between we ? d Ronald Coase and the widely misunderstood Coase Theorem as the very centre piece of the law and economics movement. Since this so-called inappropriately named theorem picks up a number of the themes in welfare economics that we have discussed above, let us close with a brief discussion of it. As stated by its inventor, George Stigler (1966, p. 113), the Coase Theorem is the proposition that â€Å"under perfect competition private and social costs will be equal† and hence â€Å"the composition of output will not be affected by the manner in which the law assigns liability for damage†. This combines two claims in one, the ? rst of which will be familiar to us: (1) an ef? ciency claim that perfect competition is always optimal if voluntary bargaining between the affected parties to their mutual advantage is possible at zero transaction costs, de? ned as the costs of making deals, negotiating contracts, and policing the enforcement of those contracts (Allen, 2000), and (2) an invariance claim that the ? nal allocation of resources is invariant to different initial assignments of property rights provided these are in fact clearly de? ed. A voluminous literature has shown that both propositions are either highly contentious or else a tautology if perfect competition, perfect information and zero 4 In an instructive essay, Richard Nelson (1981 reiterates my charge of schizophrenia and adds to my list of the bene? ts of a private enterprise system of capitalism that of â€Å"administrative parsimony†, an echo of Hayek’s discussion of the merits of competiti ve prices as information signals. 46 MARK BLAUG transaction costs are rigorously de? ned (Medema and Zorbe, 2000). Lo and behold, however, Coase has argued ever more vehemently that transaction costs can be reduced by appropriate judicial decisions but that they can never be reduced to zero even under Cournot-type perfect competition. Of course, if we de? ne perfect information as literally foreseeing every alternative opportunity under all possible contingencies, now and in the future, it follows immediately that we can write and enforce contracts at zero costs (zero in ? nancial outlays, in time and even in cognitive effort), in which case only increasing returns to scale will prevent us achieving perfect competition. Once transaction costs are zero and competition is perfect, it follows immediately that the distribution of property rights cannot matter. In short, the Coase Theorem is just a logical corollary of perfect competition and perfect information but that does little to persuade us that it is much more than a logical theorem. 5 As for the more controversial invariance claim, income and wealth effects in consumption patterns and the strategic behaviour of the injured and injuring parties as they enter into voluntary bargaining (the old objection to Hicks–Kaldor compensation payments) will certainly make the ? al allocation of resources sensitive to the way in which the law of the moment assigns liability for damage. Are we really to believe that my claim against the American Tobacco Company for giving me lung cancer will be decided in 2002 in exactly the same way it would have been decided in 1940? Coase (1964, p. 105) said it all 35 years ago: Contemplation of an optimal system may provide techniques of analysis that would otherwise have been missed and, in certain special cases, it may go far to providing a solution. But in general its in? uence has been pernicious. It has directed economists’ attention away from the main question, which is how alternative arrangements will actually work in practice. It has led economists to derive conclusions for economic policy from a study of an abstract of a market situation. Richard Posner, in his in? uential textbook, Economic Analysis of Law (1998), now in its ? fth edition, subsumes Pareto optimality and the Coase Theorem in an ef? ciency logic of â€Å"wealth maximization†. He claims not only that common law, statute law and judge-made law should serve to maximize wealth, so that for example entitlements in property law should be shifted to the more productive litigants as evidenced by their willingness to pay, but that legal entitlements and hence resources actually tend to gravitate towards their most valuable use if voluntary exchange is permitted. Without saying so, Posner clearly believes that we can 5 Moreover, as Allen (2000, pp. 904–905) argues quite rightly, the famous Modigliani-Miller Theorem of corporate nance – if capital markets are perfect, the value of a ? rm is invariant to its debt-equity ratio – and the Ricardo Equivalence Theorem of government ? nance – if capital markets are perfect, the level of household wealth is invariant to the ratio of taxes to the size of the public debt – are both special cases of the Coase Theorem because all taxes, debt obligations and equity shares are simply delineation s of property rights; in a world of zero transaction costs, both ? rms and governments could decide on debt levels by tossing a coin. IS COMPETITION SUCH A GOOD THING? 47 isolate PPI, divorcing ef? ciency from equity without committing ourselves to ICU, in short, he believes in classic or rather neoclassical Paretian welfare economics. Although he deals at length with distributional issues arising from liability rules and various forms of taxation, he never lays down any general principles about income redistribution, such as, for example, Pigou did: any transfer of income from the rich to the poor that does not diminish national income was deemed desirable by Pigou. What he argues, when criticized, is simply that users of distributive justice will have to be addressed outside the framework of standard economic analysis (Parisi, 2000). But this is exactly what Pareto, Kaldor and Hicks said years ago. Orthodox welfare economics, including the â€Å"ef? ciency of the common law hypothesis† upheld by Posner, has simply stood still ever since the 1930s. This notion of a neat divorce of ef? ciency from equity, of an objective value-free de? nition of ef? iency, has haunted economics from its outset but it is, of course, a will-o’-the-wisp: there is in fact a different ef? ciency outcome for every different distribution of income, and vice versa. Ef? ciency is necessarily a value-laden term and welfare economics is necessarily normative, that is, a matter of good or bad and not true or false. 6 However, there is real merit in treating ef? ciency and equity questions lexicographically, so that we can be as explicit as possible about our di stributional judgements, but that is not because we can ever decisively separate them. My complaint about Posner is that he evades all these fundamental questions in applied welfare economics. Not only does he fail to tell us how to add equity to ef? ciency but he does not even tell us whether ef? ciency means static ef? ciency or dynamic ef? ciency. There is an almost deliberate fuzziness of language in all his writings, which smacks of ideology rather than science. If we are going to employ the economist’s language of ef? ciency, we ought to be told just how to apply it and why ef? ciency should be our standard for judging the consequences of the law. One of Clark’s old rules of â€Å"workable competition†, such that entry into industries should be kept as free as is technically feasible taking due account of sunk costs, if necessary by antitrust legislation, is more relevant for public policy than Posner’s continual appeal to the principle of wealth maximization. The Chicago school does not deny that there is a case for antitrust law but they doubt that it is a strong case because most markets, even in the presence of high concentration ratios, are â€Å"contestable† (Bork, 1978). How do we know? We know because the good-approximation assumption: the economy is never far away from its perfectly competitive equilibrium growth path! Believe it or not, that is all there is to the â€Å"antitrust revolution† of the Chicago School. 6 Some economists believe, extraordinarily enough, that welfare economics is positive and not evaluative at all (see Hennipman, 1992; Blaug, 1992, chap. 8, 1993). 48 References MARK BLAUG Allen, Douglas W. (2000) ‘Transaction Costs’, in Bouckaert and De Geest, eds. , pp. 893–926. Blaug, Mark (1992) The Methodology of Economics, 2nd edn. Cambridge: Cambridge University Press. Blaug, Mark (1993) ‘Pieter Hennipman on Paretian Welfare Economics: A Comment’, De Economist, 141, 127–129. Blaug, Mark (1997) ‘Competition as an End-State and Competition as a Process’, in Not Only an Economist. Recent Essays. Cheltenham: Edward Elgar, pp. 66–86. Bork, Robert H. (1978) The Antitrust Paradox: A Policy at War with Itself. New York: Basic Books. Bouckaert, Boudewijn, and Gerrit De Geest (2000) Encyclopaedia of Law and Economics, 3 Vols. Cheltenham: Edward Elgar. Clark, John Maurice (1961) Competition as a Dynamic Process. Washington, DC: Brookings Institution. Coase, Ronald G. (1964) ‘The Regulated Industries: Discussion’, American Economic Review, 54, 194–197. Coase, Ronald G. (1988) The Firm, the Market and the Law. Chicago: University of Chicago Press. Debreu, Gerard (1959) Theory of Value. An Axiomatic Analysis of Economic Equilibrium. New Haven: Yale University Press. Hennipman, Pieter (1992), ‘Mark Blaug on the Nature of Paretian Welfare Economics’, De Economist, 140, 413–445. Lipsey, Richard C. , and Kelvin Lancaster (1996) ‘The General Theory of Second Best’, Review of Economic Studies, 24, 1956, pp. 11–32, reprinted in Richard C. Lipsey, Microeconomics, Growth and Political Economy. Selected Essays, Vol. 1. Cheltenham: Edward Elgar, pp. 153–180. Machovec, Frank (1995) Perfect Competition and the Transformation of Economics. London: Routledge. Medema, Steven G. , and Richard O. Zerbe (2000), ‘The Coase Theorem’, in Bouckaert and De Geest, eds. , pp. 36–92. Nelson, Richard R. (1981) ‘Assessing Private Enterprise: An Exegesis of a Tangled Doctrine’, Bell Journal of Economics, 12, 93–100, in Peter Boetke, eds. , The Legacy of Friedrich von Hayek, Vol. III. Cheltenham: Edward Elgar, pp. 80–98. Parisi, Francesco, ed. 2000) The Economic Structure of the Law: The Collected Essays of Richard A. Posner, Vol. I. Cheltenham: Edward Elgar. Reder, Melvin W. (1982) ‘Chicago Economics: Permanence and Change’, Journal of Economic Literature, 20, 1–38. Stigler, George J. (1966) Theory of Price, 3rd edn. New York: Macmillan. Van Cayseele, Patrick, and Rog er Van den Bergh (2000) ‘Antitrust Law’, in Bouckhaert and De Geest, eds. , Vol. III, pp. 467–498. Vickers, John (1995) ‘Concepts of Competition’, Oxford Economic Papers, 47, 1–23. Walker, Donald A. (1996) Walras’s Market Models. Cambridge: Cambridge University Press.

Freedom of speech from the perspective of mass media, to what extend it has been practiced in Malaysia? Essay

Mass media are means of communications (as newspapers, radio, or television) that is designed to reach the mass of the people1. Besides playing the role to inform individual with news, the media together with a sound legal system and an independent judiciary is part of a triumvirate that is essential for a well-functioning democracy2. In a democratic system of government, mass media is performing a number of essential functions. First, they serve on information or surveillance function. Second, they serve an agenda-setting and interpretation function. Third, they help us to create and maintain connections with various groups in society. Fourth, they help us to socialize and to educate us. Fifth, they persuade us to buy certain items or accept certain ideas. Sixth, they entertain us. Freedom is the power or right to act, speak or think freely. We are now living a media culture and its influence is become very pervasive. The number of hours we spend on the media is mind-boggling. Although the freedom of the media should not be in toto, yet the degree of the freedom of the media will affect the function of the media. Citizens of countries that are democratic see media freedom as a right, not a privilege. Nevertheless, there is no mention of freedom of the press or freedom of the electronic media in our Constitution. However, freedom of media to exercise its role and functions in society has been enshrined as a fundamental human right by way of recognition for the right to freedom of speech, expression and opinion.3 Pre-independence In 1930-1940, there are nearly 80 newspaper and magazines published in the Malay State, such as Utusan Melayu, Saudara, Warta Malaya and Majlis. In Warta Malaya, it published article that talk about the social and economic problems faced by the Malay. However, it did not ask for the British to be chased out. The newspaper, Majlis, discussed the political issues. Majlis not only brings to the awakening and fights for Malays right, their office became the place for the nationalist to meet up and exchange their thoughts. In the newspapers Saudara, there was a column named ‘Persaudaraan Sahabat Pena’ where the Malay readers exchanged their point of view. British was worried on the development of this column and therefore took the step to overseen those who involved in the said column. In view of the number of publications that existed during the time and the situation whereby those newspapers are free to discussed any issues, and the fact that the newspapers has played a vital role in the movement towards independence, we can conclude that under the administration of British, the media was enjoying the freedom of speech. The law on the freedom of speech became clearer during the time prior to independence. Certain law has been introduced to the Malay State. One of the laws which governed the freedom of speech at that time was the Sedition Act 1948. Section 4 of the Act makes it an offence to make, prepare, or to conspire, to do a seditions act, to utter seditious words, and to propagate or import any seditious publications. Section 3 provides that a seditious tendency is one which tends to (a) bring hatred or contempt to the government or excite disaffection against any Ruler or government, (b) excite the countrymen to revolt, (c) bring into hatred or contempt or excites disaffection against administration of justice, (d) raise discontent or disaffection among the countrymen, or (e) promote feelings of ill-will and hostility amongst the inhabitants of the country. Besides, there were two ordinances specifically deal with the printed media at that time, i.e. Printing Press Act 1948 (Ord 12 of 1948) and Control of Imported Publications Act 1958 (Ord 14 of 1955). The former deal with the publisher in the Malay State while the later governing the printed material from other country. Those laws were limiting freedom of speech of the media at the British colonial the light of the freedom of speech only shine at the colonial since 1956, when an attempt to draft a Federal Constitution started. The recommendations were submitted by Reid Commission in 1956-1957 Reports. In the report, there were two paragraphs provides under the title ‘Fundamental Rights’ 161. A Federal Constitution defines and guarantees the right of the Federation and the states; it is usual and in our opinion right that it should also define and guarantee certain fundamental individual right which are generally regarded as essential conditions for a free and democratic way of life. The rights which are recommend should be defined and guaranteed are all firmly established now throughout Malaysia and it may seen unnecessary to give them special protection in the Constitution. But we found in certain quarters vague apprehension about the future. We believe such apprehensions to be unfound, but there can be no objection to guaranteeing these rights subject to limited exceptions in conditions of emergency and we recommend that this should be done†¦.. 162. our recommendations afford means of redress, readily available to any individual, against unlawful infringements of personal liberty in any of its aspects†¦ we further recommend (Art 10) that freedom of speech and expression should be guaranteed to all citizens subject to restrictions in the interest of security, public order or morality or in relation to incitement, defamation or contempt of court†¦ For the Malaysian citizen, the objectives of those who framed the Federal Constitution were but little affected by the epidemic of human rights in the Western world4. It has been observed that the commission’s recommendation on the freedom of speech has been vague, particularly on the importance of the rights. The commission only devoted two paragraphs. The reason why it was so was clear in the paragraph itself. The draft Article 10 in our Constitution was as follow: 10 (1) every citizen shall have the right to freedom of speech and expression, subject to any reasonable restriction imposed by federal law in the interest of the security of the Federation, friendly relations with other countries, public order, or morality, or in relation to contempt of court, defamation, or incitement to any offence. Mr. Justice Abdul Hamid on his note of dissent stated that â€Å"the word ‘reasonable’ wherever it occurs before the word ‘restrictions’ in the three sub-clauses of Article 10 should be omitted. Right to freedom of speech, assembly, and association has been guaranteed subject to restrictions which may be imposed in the interest of security of the country, public order and morality. If the Legislature imposes any restrictions in the interest of the aforesaid matters, considering those restrictions to be reasonable, that legislation should not be challengeable in a court of law on the ground that the restrictions are not reasonable. The Legislature alone should be the judge of what is reasonable under the circumstances. If the word ‘reasonable’ is allowed to stand, every legislation on this subject will be challengeable in court on the ground that the restrictions imposed by the legislature are not reasonable. This will in many cases give rise to conflict between the views of Legislature and the views of the court on the reasonableness of the restrictions. To avoid a situation like that it is better to make the Legislature the judge of the reasonableness of the restrictions. If this is not done the legislatures of the country will not be sure of the state of the law which they will enact. There will always be fear that the court may hold the restrictions imposed by it to be unreasonable. The laws would be lacking in certainty.† Later, when the Constitution comes into force, the Article 10 provides that: (1) subject to clause (2): (a) Every citizen has the right to freedom of speech and expression; (2) Parliament may by law impose: –   (a) on the rights conferred by paragraph (a) of clause (1), such restrictions as it deems necessary or expedient in the interest of the security of the Federation, friendly relations with other countries, public order or morality and restrictions designed to protect the privileges of Parliament or of any legislative Assembly or to provide against contempt of courts, defamation, or incitement to any offence; There are one case regarding to press reported prior to independence i.e. Public Prosecutor v. The Straits Times Press Ltd5 In this case, upon the application of the Public Prosecutor, the Respondents, who are the proprietors of the Straits Times Press Ltd, were alleged contempt in publishing a report of the trial of Tan Seng Ann of the Straits Times dated 5 August 1948. The report appeared which, it is now admitted, was misleading and inaccurate in that it gave the impression, contrary to the facts, that the first step in the proceedings in that case was a voluntary confession by Tan Seng Ann that he was in possession of a fire-arm and that his arrest was made solely as the result of such voluntary confession in the issue. The Notice of Motion having set out the terms of the letter complained of went on to allege inter alia that the criminal case referred to in the letter was sub judice when the letter was published in that an appeal was pending; that the terms of the letter did not constitute a fair or accurate account of the trial nor fair comment thereon; and that its publication tended to prejudice the fair disposal of the proceedings and tended to bring into contempt the administration of justice by that Court. Spenser-Wilkinson J held that: â€Å"†¦I would hesitate to follow too closely the decisions of English Courts on this subject without first considering whether the relevant conditions in England and this country are at all similar. Quite apart from the present emergency in this country, I do not think it could be suggested that the development of the Press, the general standard of education or the composition of the general public in the two countries are at all comparable and it may, therefore, be necessary to take a stricter view here of matters which pertain to the dignity of the Courts and the impartial administration of justice than would be taken at the present time in England.† Newly Independence (1957-1980) At this period, Art 10 Federal Constitution has been amended twice. The first amendment was on 19636 where the words ‘Clause (2) and (3)’ had been substituted for the words ‘clause (2)’ of clause (1) with effect from 16 September 1963.and the words ‘or any part thereof’ were added to the Art10(2)(a). Further, clause (3) which provides that: â€Å"Restrictions on the right to form a associations conferred by paragraph (c) of clause (1) may also be imposed by any law relating to labour or education.† The second amendment was made on 19717 after considering the trouble of May 1969. This time, Clause (4) was added with effect from 10 March 1971. Article 10(4) provides that Parliament may pass laws prohibiting the questioning of four sensitive matters: right to citizenship under Part III of the Constitution; status of the Malay language; position and privileges of the Malays and the native of Sabah and Sarawak; and prerogatives of the Malay Sultans and the Ruling Chiefs of Negeri Sembilan. The constitutional changes enable Parliament to amend the Sedition Act of 1948 in order to add a new definition of ‘seditious tendency’8. The amended sections were: Section 3 (1) A seditious tendency is a tendency (f) To question any matter, right, status, position, privilege, sovereignty or prerogative established or protected by the provisions of Part III of the Federal Constitution or Article 152, 153 or 181 of the Federal Constitution Section 2 â€Å"seditious† when applied to or used in respect of any act, speech, words, publication or other thing qualifies the act, speech, words, publication or other thing as one having a seditious tendency; Official Secrets Act 1972 is a new law that be introduced at that time. This is the most important statute on government secrecy. The gist of the law is that ‘official secrets’ cannot be received, retained, released or used without prior authorization.9 The Act is drafted in the widest possible terms and is not limited in its operation to spies, saboteurs, traitors and mercenaries. The term ‘official secret’ is not defined in the Act. The courts have given the term the broadest possible definition, and on the generally accepted construction any communication pertaining to the Executive would constitute an offence.10 The right to free speech can be further eclipsed by the special provisions of Art 149 and 150 relating to subversion and emergency. Art 149 authorises legislative action designed to stop or prevent subversion, organized violence and crimes prejudicial to the public. Art 150 permits any legislative action required by reason of emergency. The grounds enumerated above permitting curtailment of free speech are so broad and comprehensive that in 49 years no Act of parliament even been found by the courts to have violated the Constitution. Besides printed media, television was introduced in Malaysia in 1963. The television was under the control of the Department of Broadcasting (RTM). What is apparent is that television and more generally broadcasting in Malaysia was form its inception closely aligned to the government. Both the RTM channel were established via decisions made by the then Alliance coalition government. Because of the circumstances at that time, there was no any specifics rule to govern the broadcasting. One of the cases that being heard at that time was Melan bin Abdullah v Public Prosecutor.11 The fact of the case was that On 6 April 1971 the Utusan Melaya newspaper published a report of a talk given by given by Inche Musa Hitam, a prominent Malay leader and member of Parliament, at the National Education Congress held in the Dewan Bahasa dan Pustaka, Kuala Lumpur.. In the report was an editorial sub-heading, which in the English translation reads: â€Å"Abolish Tamil or Chinese medium schools in this country.† The first appellant was the editor-in-chief of the Utusan Melayu, and the second appellant the author of the sub-heading inserted in the report. Sanction for their prosecution was given under s 5(1) of the Sedition Act 1948, and they were tried in due course in the special sessions court on a charge of publishing a seditious publication in contravention of s 4(1)(C) of the Sedition Act, punishable under the same section. The learned special president held the publication to be seditious, that the first appellant â€Å"was responsible for all publication in the Utusan Melayu†, that the second appellant was the author of the impugned subheading, and that consequently they were both guilty. They were convicted and fined the sum of $500 and $1,000 respectively, in default one month and two months’ imprisonment, both appellant appealed. CJ Ong, on hearing of the appeal accepted the first appellant evidence that he had organised seminars and discussions, relating in particular to the â€Å"sensitive issues† and had instructed his staff on the relevant law as he understood it. He had sponsored a talk to journalists given on this subject in February 1971 by the Attorney General as well as the Solicitor-General. Therefore, the first respondent appeal was allowed. But the court dismissed the second respondent appeal. Another case is Public Prosecutor v Straits Times (Malaya) Bhd.12 The Public Prosecutor applied in this case for leave to issue a writ or writs of attachment for contempt of court on the respondents for publication of articles in The Straits Times. The grounds upon which relief was sought was that â€Å"the publications of the said articles contain matters which are tendentious and constitute contempt of court, because they are prejudicing and embarrassing the applicant in the exercise of his statutory functions and also prejudicing a fair trial concerning the circumstances of the death of one Robert Lee.† Abdul Hamid J held that: ‘I do not think that it is reasonable to construe these words as having any special meaning. There is no dispute that the reports do reveal that there had been an assault, a commotion and firing of a shot and that allegedly, a police officer was involved. But these facts are not challenged. As regards the previous episode encountered by Robert Lee there is nothing to show that this was not true. Further it is not uncommon for newspapers to publish matters concerning scholastic achievement of and other good deeds rendered by a person on his death particularly if the dead person enjoys a certain standing in the community or he is in one way or another related to any prominent personality. For that reason it is unreasonable to isolate certain passages from the reports and construe them unfavourably or to impute improper motive on the publisher. What may appear to be an embarrassment or prejudicial if that part is read in isolation may not be so if the reports are read as a whole taking into account the circumstances surrounding such publication particularly if it relates to a matter which will promote public sensation or a matter of unusual occurrence.† The application was therefore dismissed. Malaysia under Tun Dr. Mahathir (1981-2002) Over this period, more laws are introduced and come into force to govern the media. In 1984, Printing Presses and Publications Act came into force on the 1st of September 1984 as a consolidating Act, and in turn repealed the Printing Presses Act 1948 and the Control of Imported Publications Act 1958. The Act is designed ‘to regulate the use of printing, presses and the printing, importation, production, reproduction, publishing and distribution of publications and for matters connected there with’. Through such control, the government uses it power to determine what it is the public has a right to know, or exactly what form freedom of speech should take13. This is an Act designed clearly to ensure that the press does not get out of line, imposes both a system of licensing and censorship14. Section 3 of the Act makes it mandatory to obtain a license to own a printing press. The Minister has absolute discretion on giving, refusing, and revoking a license15. Further, judicial review of the Minister’s discretion is not allowed16 and the Minister is not required to give the parties a prior hearing17. The period of the license is 12 months or shorter period as minister specifies18. This means that all publishers in this country must suffer the pangs of uncertainty about whether their permit will be renewed for the following year. There is less control of what may be written in foreign publications, controls have been exercised through deliberate delay in distribution and sometimes outright ban on their sale where officials deemed reports to be offensive or inaccurate19. In 1988, another law governing the media came into force on 1st August i.e. The Broadcasting Act 1988. The preamble to the Act states: ‘An act to provide for the control of broadcasting services and for matters connected therewith’. The Act is both stringent and inflexible. It bestows enormous powers on the government to determine the type of television made available to the Malaysian public. In the midst of the supposed ‘deregulation’ of broadcasting, the Act now gives the Minister of Information virtually total powers to determine who will and who will not broadcast and the nature of the broadcast material. Under the Act, any potential broadcaster would need to apply for a licence from the minister beforehand. Later, the Act was amended on October 1996. By the amendment, this already-stringent piece of legislation were aimed at taking into account the introduction of new services, such as cable and satellite television, satellite radio, pay TV and video-on demand. Due to the drastic development in the electronic media, the Legislature has to repeal the old Telecommunication Act 1950 and the Broadcasting Act 1988 and introduced a new law which is the Communications and Multimedia Act 1998. The Act’s breakthrough was to bring together the previously disparate industries of broadcasting, telecommunications and internet services combined under legislation and more importantly, one regulator the Communications and Multimedia commission.20 The Communication and Multimedia Act brings to the creation of Communication and Multimedia Commission Act 1998. the Communication and Multimedia Commission performing several functions including advising the Minister all matters concerning the national policy objectives for communication and multimedia activities and implementing and enforcing the provisions of the communications and multimedia law. Interestingly, Information Malaysia 1980-81 and Information Malaysia 1985 revealed that between 1981 and 1985 alone, the number of titles of local newspapers, magazines, and journals in circulation increased from 56 to 10221. However, the increase in number cannot be the proof supporting the allegation that during that time, the media was enjoying freedom of speech. There are some facts that we should not forget. In 1987, during the Operasi Lalang, a number of newspapers were closed by the government22. Later, Harakah being categorizes as publications of political parties meant for party members and there is law forbids the publication being openly sold to the public. Besides, Barisan Nasional owned and controlled major Malaysian media organization. Further, prior to Dato Seri Anwar’s sacking, expulsion, and detention, the editor of Utusan Malaysia and Berita Harian, and the director of operations of TV3 were forced to resign because they were allied to Anwar. In 1990, there was a case of Aliran Kesedaran23 In this case, the respondents had applied for a permit under s 6(1) of the Printing Presses and Publications Act 1984 to print and publish in Bahasa Malaysia a magazine under the name and style of Seruan Aliran. The application was refused by the Minister of Home Affairs. The respondents applied for an order of certiorari to remove into the High Court for the purpose of quashing the decision of the Minister and for an order of mandamus directing the Minister to hear and determine the application for the permit according to law. The High Court made an order quashing the decision of the Minister and ordered that the Minister shall hear and determine according to law the application for the permit. The appellant appealed. The court allowing the appeal and held that; ‘Section 12(2) of the Printing Presses and Publications Act 1984 gives the Minister of Home Affairs ‘absolute discretion to refuse an application for a license or permit’. So unless it can be clearly established that the Minister for Home Affairs had in any way exercised his discretion wrongfully, unfairly, dishonestly or in bad faith, the High Court cannot question the discretion of the Minister.† One of the significant cases during this period was the case of Irene Fernandez. The facts were that in 1995, Tenaganita released a report documenting beatings, sexual violence against detainees by prison guards, and inadequate food and water in Malaysia’s immigration detention camp. Irene Fernandez was arrested and charged with malicious publication of false news under the Printing Presses and Publications Act. Magistrate Juliana Mohamed found Irene guilty and was sentence to one year imprison. Current Situation (2003-2006) Between these periods of time, there is no any new law designed to control the media. However, recently, Government has released the Media Council Bill (2006) which seeks to ameliorate some of the worst excess of the Printing Presses and Publications Act in regard to the local media. On page 4 of the Bill, it was stated: â€Å"An Act to establish the Malaysian Press Council for the purpose of preserving, promoting and protecting the freedom of the Press, of maintaining and improving the ethical and professional journalistic standards of newspapers, press publications and news/press agencies in Malaysia.† Nevertheless, there is fear in public that this piece of legislation will create another unnecessary public body with wide powers to curb press freedom despite its apparent duty to uphold that right. It might also act as a censorship board, only dealing with complaints against the press organisations and journalists and not against denial of freedom of expression by other entities such as ministers or organisations whose actions effectively suppress the right of freedom of expression. Besides, bear in mind that all the laws governing the media before this are still firmly in place and the main stream media also continue to be owned by interests directly or indirectly tied to the main component parties of the BN, especially UMNO and MCA. Some incidents happened during this time of period, showing to us that despite of the changes of the head of the Government, the media are not freer compared to the years before. The government shut down the Sarawak tribune for the editors made a mistake of reprinting caricatures of Prophet Muhammad following Muslim protests of a Danish paper that first published them. Another incident was that the Minister of Information, Datuk Zainuddin had sought the sacking of top NST editor at a meeting of UMNO’s information bureau because he was unhappy with the way the NST had played up certain issues such as the religious rights of minorities and the government’s policy on bumiputras.24 The government also delays in reviewing the publishing permit of the Oriental Daily and censor certain news that the government were not comfortable with. Moreover, the debate on Ninth Malaysia Plan was given wide publicity in the media, but it was the official view and rationale for the Plan that enjoyed one-sided coverage. The leader of the opposition who spoke foe six hours on the Plan did not get any substantive coverage.25 Another issue was that Tun Dr. Mahathir had called a press conference to express his deep disappointment after Datuk Seri Abdullah dismissed the ‘crooked bridge’ project. However, the mainstream media hardly covered it. Conclusions The freedom of the media has seen become more restrictive from the time prior to independence until now. At the early day, the British Colonial has a freer media compare to the media after independence. This might be because of the British regarded the individual freedom as up most important. When came to the early day after independence, the laws being designed were more restricted. However, this was understandable as the situation at that time, where Malaysia was in an Emergency. Unmindful speech might cause riot to the nation. Therefore, the government had to take step to prevent this. In 1970-1985, there was more cases on freedom of speech, after the stand of the courts are clear in these issues, there was lesser cases. During the time frame from 1981 to 2002, many laws were designed and many existing laws were amended. Tun Dr. Mahathir tried to justify this by saying that: ‘the truth is that there is no absolute press freedom anywhere in the world, be it in a liberal democratic country or in countries governed by dictators.†26 He further claimed that journalists and foreigners read a few newspapers which support the government and immediately concluded that there is no press freedom in Malaysia. This was in conjunction with his view points that: â€Å"Malaysian newspapers are free. But this freedom does not mean freedom to criticize the government alone. It also means freedom to support the government.†27 Further in Tun Dr. Mahathir speech at the national union of Journalists dinner on 15th June 1990, he stated that: ‘According to an old English proverb, power corrupt and absolute power tends to corrupt absolutely. If there are restrictions on press freedom, especially pertaining to reports on violence, sex and obscenity, then they are imposed because no one should be given absolute power. This is to prevent the possibility of ‘absolute corruption’. This constraint no way suggests there is no press freedom in Malaysia. Government leaders in this country have no absolute power. The people can change the government while the courts can reverse government decisions. Therefore, newspapers in Malaysia must accept these restrictions. This is done in the national interest and not aimed at destroying press freedom†. It is true that freedom of the media has to be limited but over limiting will only result to a closed society. Looking at the current situation, many are thinking that the new government would promote media freedom in view of the government transparency policy. However, one should bear in mind that since Datuk Seri Abdullah took over the government until today, it was only three years passed. It is unfair to judge him at this moment. Whether or not there is free media under Datuk Seri Abdullah, we shall wait and see. Comparing to our nearest neighbor, Singapore, media in Malaysia enjoy more freedom. Singapore as a police state, the press is mobilized to explain and support the policies of the Singapore government, as an aid to development rather than assuming a counter-checking posture. In Chee Siok Chin case28, the Singapore court held that: â€Å"it bears emphasis that the phrase ‘necessary or expedient’ confers on Parliament an extremely wide discretionary power and remit that permits a multifarious and multifaceted approach towards achieving any of the purposes specified in Art 14(2) of the constitution. In contrast to the Indian Constitution, there can be no questioning of whether the Legislations are ‘reasonable’. The court’s sole task, when a constitutional challenge is advanced, is to ascertain whether an impugned law is within the purview of any of the permissible restrictions.† As for electronic media, the media Corporation of Singapore, an evolution from a series of government owned broadcast Corporations, dominances the broadcasting media. The PAP government guards the broadcast turf with rigour, grudgingly allowing foreigner broadcasters to operate for commercial and public relations reasons but legislating them off local politics. Today, Malaysian society has an economic level of existence which provides for basic needs, health facilities, adequate housing and equal opportunities to education. Therefore, there is no reason why freedom of speech and free media should be restricted. Values of freedom of expression, exposure to critical thinking and the importance of a civil society should be emphasizes. After 49 years of independence, Malaysian should not only concern with earning a livelihood and basic quality of life issues. Society shall have desire to acquire knowledge especially in social concerns such as freedom of speech. Bibliography: 1. â€Å"A Case of the Media Freedom: Report of the SUHAKAM†, Workshop on Freedom of the Media at Kuala Lumpur, Aug. 1, 2002. (Kuala Lumpur: Suruhanjaya Hak Asasi Manusia Malaysia, 2003). 2. Abdul Aziz Bari, ‘Freedom of Speech and Expression in Malaysia After Forty Years’, (1998) 27.3 INSAF 149-161. 3. Abraham, C.E.R., â€Å"Freedom of Speech for Whom? The Malaysian Case†, (1998) 27.3 INSAF 1-8. 4. Asian Human Rights Commission, homepage, 10 Sept. 2006 5. Asian Human Rights Commission, homepage, 10 Sept. 2006 6. Broadcasting Act 1988 (Act 338). 7. Centre for Independent Journalism, 10 Sept. 2006 8. Communications and Multimedia Act 1998 (Act 588). 9. Communication and Multimedia Commission Act 1998. (Act 599). 10. Constitution (Amendment) Act 1971 (Act A30). 11. Control of Imported Publications Act 1958 (Ord 14 of 1955) 12. Cyrus V. Das, â€Å"Press Freedom & Contempt of Court†, (1986) 19.3 INSAF 61. 13. Faruqi, Shad Saleem, â€Å"Access to Information†, [1993] 4 Malaysia Current Law Journal xxiii. 14. —, â€Å"Curbing Excesses of Free Speech†, Sunday Star, 10 Feb, 2002, Focus. 15. —, â€Å"Cyber Challenge to Freedom of Speech†, Sunday Star, 27 Jan, 2002, Focus. 16. —,†Keeping A Tight Lid on Official Secrets†, Sunday Star, 17 Feb, 2002, Focus. 17. —, â€Å"Life-blood of Free Society†, Sunday Star, 20 Jan, 2002, Focus. 18. —, â€Å"Pifalls for the Unwary Media†, Sunday Star, 3 March, 2002, Focus. 19. —, â€Å"Principles That Govern Free Speech†, Sunday Star, 3 Feb, 2002, Focus. 20. Federal Constitution. 21. â€Å"Freedom of the Press? A Quick Look At the Borneo Mail Affair and the Question: How Free Is the Local Press?†. 1994 (June) Malaysian Law News, 36-37. 22. Hashim Makaruddin, ed., Ensiklopedia Dr. Mahathir Bin Mohamed: Perdana Menteri Malaysia, (Cairo: Dar al-Kitab al-Masri, 2005). 23. Hickling, R.H., Hickling’s Malaysian Public Law, (Petalng Jaya: Longman, 2003). 24. â€Å"I Know How The People Feel†, (1986) 19.4 INSAF 18. 25. Kanesalingam, A., â€Å"Democracy and the Law†, (1998) 27.4 INSAF 105-115. 26. Mahathir Mohamed, â€Å"Freedom of the Press: Malaysian Perspective†, 1990 (Aug) Malaysian Law News, 521-522. 27. Malaysia Act 1963 (No.26/63). 28. Merriam-Webster Online Dictionary 3 Sept. 2006 29. Mohamad Ariff Yusuf, â€Å"Freedom of the Press in Malaysia†, 10th Law Asia Conference, (Kuala Lumpur, June 21 – July 4, 1987). 30. Mustafa K. Anuar, Anil Netto, â€Å"Malaysian Ready for Press Freedom†, 5 Sept. 2006, 31. —, Joint Coordination, Charter 2000, Aliran Online, 6 Sept. 2006 32. Officials Secrets Act 1972 (Act 88) 33. Officials Secrets (Amendment) Act 1983 34. Officials Secrets (Amendment) Act 1986 35. Padmanabha Rau, â€Å"Federal Constitutional Law in Malaysia & Singapore†, 2nd ed., (Singapore: Butterworths Asia, 1997). 36. â€Å"Press Council Bill A Farce†, Aliran Online, 5 Sept. 2006 37. Printing Press Act 1948 (Ord 12 of 1948) 38. Printing Presses and Publications Act 1984 (Act301). 39. Printing Presses and Publications (Amendment) Act 1987 (Act684) 40. Reme Ahmad, â€Å"Malaysia Former Media Bosses Duel Over Press Issues†, Asia Media News 22 Feb. 2006, 9 Sept. 2006 41. Ruslan Zainuddin, Fauziah Soffie, â€Å"Sejarah Malaysia† (Selangor: Penerbit Fajar Bakti, 2001). 42. .Salleh Buang, â€Å"The Broadcasting Act 1988†, 1994 (April) Malaysian Law News, 5&14. 43. Shafruddin Hashim, â€Å"The Constitution and the Federal Idea in Peninsular Malaysia†, (1984) Journal of Malaysia and Comparative Law, 139-178. 44. Sheridan, L.A. & Groves, Harry E., â€Å"The Constitution of Malaysia†, 5th ed., (Singapore: Malaysian Law Journal, 2004). 45. Sedition Act 1948 (Revised – 1969) (Act 15). 46. Sopiee, Mohamed Nordin, â€Å"Freedom of the Press†, 10th Law Asia Conference, (Kuala Lumpur: June 29 – July 4, 1987). 47. Tan, Kevin & Thio Li-Ann, â€Å"Constitutional Law in Malaysia & Singapore†, 2nd ed., (Singapore: Butterworths Asia, 1997). 48. â€Å"The Officials Secrets (Amendment) Bill 1986: Why Are They Taking Away Our Rights?† 1986, 19.4 INSAF 1. 49. Tun Mohamed Suffian, ed., â€Å"The Constitution of Malaysia: Its Development: 1957-1977†, (Kuala Lumpur: Oxford University Press, 1978). 50. Wong, Kok Keong, â€Å"Propagandists for the BN (Part 1)†, 2004 Vol. 24 No. 5 Aliran Monthly, 14-17. 51. —, â€Å"Propagandists for the BN (Part 2)†, 2004 Vol. 24 No. 6 Aliran Monthly, 13-17. 52. —, â€Å"Freer Media Under PM Abdullah?†, Aliran Online 3 Sept. 2006 53. Zaharom Naim, Mustafa K Anuar, â€Å"Ownership and Control of the Malaysia Media†, World Association for Christian Communication, homepage, 10 Sept. 2006 54. Zalina Abdul Halim, â€Å"Media Law†, 2000 Survey of Malaysian Law, 411-439. 55. —, â€Å"The media System and Co-operative Regulatory Systems in the Media Sector of Malaysia†, Hans-Bredow-Institut, 2 Sept. 20 06

Local Literature

A significant amount of literature is available on inventory systems. A majority of the findings are derived from experiences in the US, Japan and Western Europe. Some inventory systems however, can be affected by variations in local conditions such as infrastructure, customs, duties, and regulations. Hence, it is essential to view such systems in an international context. To frame this research, we will examine the literature on operations in NIC countries followed by an analysis of local conditions in Thailand. A number of articles are available that examine the inventory setups in Singapore, Hong Kong, and Korea (Amsden, 1989). For example, Cheng (1988) and Hum and Ng (1995) examine the workings of Just In Time (JIT) systems in Hong Kong and Singapore, respectively. Other studies related to inventory management include facility location decisions (Sisodia, 1992; Nambiar, fielders, and Van Wassenhove, L. N, 1989; Mathews, 1997) and distributed systems. These studies indicate that Thailand is not as industrialized as the other NIC countries such as Singapore, and infrastructure shortcomings play an important role. Next, we will examine the literature on the quality of infrastructure in Thailand. Infrastructure affects both the productivity and effectiveness of manufacturing companies. It has a direct impact on the distribution of raw materials, parts, and finished goods to customers. The few studies focused on Thailand have primarily addressed infrastructural problems in Thailand (Chalamwong, Chalongphob and Wattanalee, 1994; Chalamwong, 1993). In identifying the infrastructure-related problems, Yukio (1990) calls for the Thai government to pay closer attention to transportation systems in their effort to attract more Japanese and foreign investment. Sibunruang (1986) also points to infrastructural constraints having a bearing on the development of the Thai economy. The present government, however, does realizes the importance of infrastructure for the country's overall economy. In its efforts to improve infrastructure, the Thai government has privatized telecommunication service and has started seeking help from private local and foreign companies to cope with the road shortage. The government has also approved a number of projects for the construction of highways in and around Bangkok. Furthermore, the airports in Thailand are now better managed. Although infrastructure remains a problem, there is a substantial pool of investors looking to open shop in Thailand. Information on production and inventory management practices in Thailand can help managers better understand and identify approaches that might be suitable for their companies' operations in that country. As noted earlier, no research on inventory management in Thailand has been undertaken and reported in the literature. The next section presents the methodology used in examining the types of inventory systems employed by foreign companies in Thailand.

Thirty Years' War caused by religious tensions Essay

Thirty Years' War caused by religious tensions - Essay Example Perhaps the most significant outcome of the religiously coloured tensions between adherents of the Protestantism and the Roman Catholic Church, that ensued from the actual religious division within Germany, was represented by the devastating Thirty Years' War of 1618-48. Indeed, it is estimated that up to one-third of the German population was lost due to military activities and ensuing diseases and famine. Historians suppose that the pre-war population level was reached only in almost a century after the end of Thirty Years' War. Economy of Germany was also in disarray due to the ruin brought in by the Thirty Years' War, so that the economic deterioration that already was significant in the second half of the 16th was further worsened. The prosperous economies that some German towns had in the late Middle Ages and in the beginning of the 16th century declined, and Germany was about to face a long period of economic depression that would end only in the second half of the 19th centur y (Bonney, 2002, p.74). Considering the long-lasting consequences of the devastating Thirty Years' War, it is important to understand what factors caused its outbreak. We have already mentioned the religious factor, and it is hardly a coincidence that such an important development as the spread of Protestantism preceded the war. But to what extent was the Thirty Years' War caused by religious tensions and to what degree such factors as a struggle for power or for territories within the Holy Roman Empire were involved To answer this question let us overview the historical developments that occurred before the 17th century, and try to establish the link between the religious factor and the causes of the Thirty Years' War. All too often it happens in history that the connection between the studied events that seems to be self-evident is by far not the only explanation but rather just a part of the general picture. In the same vein, the effect that the Protestant Reformation seems to have had on Germany was equally just a part of the story. The other characteristic of the Germany before the beginning of the Thirty Years' War, which is important for our study, was inherited from an earlier time. This characteristic is the so-called German particularism - the presence of numerous states of different types, like free cities, electorates, principalities, and ecclesiastical territories. The roots of this peculiarity of Germany go back to the Carolingian Dynasty (752-911), when Charlemagne's empire was separated into three kingdoms, but in the East Kingdom regional duchies (namely Franconia, Saxony, Bavaria, Swabia, and Lorraine) strengthened and obtained form of small kingdoms. Such eastern subdivision initi ated the German particularism, when territorial sovereigns pursued their particular interests without consideration of interests of the kingdom. When the Carolingian line ended in 911 such duchies were further reinforced because now there was no direct blood heritage of the

The Pilgrimage to Mecca Essay Example | Topics and Well Written Essays - 1000 words

The Pilgrimage to Mecca - Essay Example This religious journey is referred to as Hajj in Arabic. Most consider the visit to Mecca as beneficial but it is recommended to make the pilgrimage during the last month of the Islamic calendar also known as Dhu al-Hijja. By doing this, one will have fulfilled the requirements of Hajj. I personally chose to make the pilgrimage during this period and the experience was priceless.I come from Kuwait which is a neighboring nation to Mecca. I was in the company of my father and elder brother and together our Hajj began back at home in Kuwait, where we put on the ihram, a dressing that is made up of two white sheets put on by all men during Hajj. Before leaving, my dad helped me tie one of the sheets around the waist, and wrapped the other around the shoulders. As he did this, I could feel the anticipation and anxiety in his breath and I could almost hear his heart beating next to me. The case was indifferent with my elder brother who kept saying that his ultimate dream was about to be fu lfilled. Upon arrival to Mecca, I could now understand the significance of ihram. All male Muslims are required to put on this attire during Hajj. I noticed that it would be hard to differentiate people under this state. All people became equal; young, old, poor, rich among others. On arrival to Mecca, my imaginations and anticipations were stunned by the scene of the Ka’ba. Ka’ba is the Holy place of Allah and when I finally stood before it, I realize the magnitude of emotions going through me were more than I could handle. Mecca is also graced with the Masjid al-Haram mosque which stands out uniquely. It is one of the most beautiful and attractive mosques I have ever seen. At this stage, we performed the tawaf which entails going round the Ka’ba seven times. As we do this, we recited the talbiya, and then followed by kissing the Black Stone  found in the Ka'ba.

Analytical methods for engineers Assignment Example | Topics and Well Written Essays - 1250 words

Analytical methods for engineers - Assignment Example 4)2(31-52.14)2+(16-52.14)2+(27-52.14)2+(82-52.14)2+(42-52.14)2+(57-52.14)2+(67-52.14)2+(51-52.14)2+(23-52.14)2+(56-52.14)2+(66-52.14)2+(59-52.14)2+(37-52.14)2+(62-52.14)2+(35-52.14)2+(43-52.14)2+(31-52.14)2+(57-52.14)2+(59-52.14)2+(70-52.14)2+(38-52.14)2+(47-52.14)2+(61-52.14)2]= Variance=√ [(57-48.74)2+ (40-48.74)2+ (12-48.74)2+ (24-48.74)2+ (67-48.74)2+ (47-48.74)2+ (37-48.74)2+(44-48.74)2+(71-48.74)2+(55-48.74)2+(55-48.74)2+(54-48.74)2+(53-48.74)2+(53-48.74)2+(51-48.74)2+(52-48.74)2+(55-48.74)2+(45-48.74)2+(49-48.74)2+(44-48.74)2+(46-48.74)2+(50-48.74)2+(60-48.74)2+(57-48.74)2+(63-48.74)2+(35-48.74)2+(39-48.74)2(52-48.74)2+(79-48.74)2+(59-48.74)2+(62-48.74)2+(43-48.74)2+(36-48.74)2+(34-48.74)2+(43-48.74)2+(28-48.74)2+(61-48.74)2+(42-48.74)2+(42-48.74)2+(47-48.74)2+(32-48.74)2+(33-48.74)2+(75-48.74)2+(53-48.74)2+(55-48.74)2+(45-48.74)2+(25-48.74)2+(48-48.74)2+(58-48.74)2+(84-48.74)2]=11065.62 The performance of the longercells batteries is lower as compared to that of the powersure batteries. This is because the frequency of the cells that have a frequency of two is 6 for the longercell batteries as compared to 3 for the powersure batteries. There is a better way of modeling the relationship between y and x. This can be achieved by producing a cubic curve rather than a linear curve. This would have produced a better model of the relationship between x and y. a. The diameters of a random sample of 100 rivets produced by this machine in a day have a mean value of 4.76 mm. find a 95% confidence interval for the mean diameter of all the rivets produced by the machine in that day. b. The manufacturer becomes concerned if the lower 95% confidence limit falls below 4.6 mm. A random sample of 80 rivets on another day gave a mean diameter of 4.65 mm. Will the manufacturer be

Corporate Profits versus the Protection of Natural Environment Essay

Corporate Profits versus the Protection of Natural Environment - Essay Example Therefore, it is advisable that while organizations work towards increasing their profit margins and expanding their businesses, they should as well put in place measures to protect and conserve the natural environment, as the latter is more important than any aspect in the business world (Sharfman, Shaft & Tihanyi, 2004 p. 23). This paper seeks to analyze the significance of profits and protection of the natural environment in an organization, clearly the most important of them while at the same time discussing the impact of media involvement on this issue. According to Steiner & Steiner (2012 p. 567), virtually all organizations set up with the sole aim of making profits within a given business environment. While profits play an important role in determining the solvency or otherwise of the said organization, it is imperative to consider that profits do not come from vacuum. The accumulation of profits and the conservation of the natural environment are an inseparable pair that ena bles corporates to operate their businesses in a sustainable manner. It is true that no business can survive without making profits that will sustain it even in times of economic hardships and propel its growth and expansion. That said it is apparent that the need to make profits is crucial to all businesses more than any aspect within the business concept, as this is the driving force (Sharfman, Shaft & Tihanyi, 2004 p. 26). ... Due to the significant aspect attached to profits within the corporate world, it serves to say that urge to make profits can never be overestimated, the approach notwithstanding (Sharfman, Shaft & Tihanyi, 2004 p. 30). The concept of environmental protection and sustainable development has been with us for a while, at least in the wake of concerns about global warming. Natural environment is important in that virtually every business enterprise and all organizations derive part of their resources directly or indirectly from the environment (Michalisin & Stinchfield, 2010 p. 138). Organizations may use natural resources as their raw materials or products from natural resources for their production processes. Perhaps it would be appropriate to confess at this point that the protection of the natural environment is more important than the need to make profits. Since the most businesses have their operations surrounded by the natural environment, they ought to take into consideration the impact of their activities on the natural environment (Steiner & Steiner, 2012 p. 537). In the recent past, the world has been very conscious on the environment especially due to the adverse effects of climate change, a revolution that has affected most businesses across the globe. More environmental organizations like the UNEP and the NRDC have advocated for sustainable development and have particularly put up a spirited campaign for the adoption of clean energy and cleaner production (Natural Resources Defense Council, 2013 para. 4). The environmental issue has gained more support prevalence especially in the business world where the rating of business enterprises is based on their efficiency in production and

Astronomy Assignment Example | Topics and Well Written Essays - 500 words - 2

Astronomy - Assignment Example Research has shown that Venus has no tectonic plates and this characteristic feature of Venus makes it quite different from Earth. In the absence of the tectonic plates, the internal heat accumulated in the mantle chooses a completely different course of action than what happens in the case of the Earth. It causes the internal temperature of the Venus to rise to a certain level. Once that level is achieved, the accumulated heat tends to weaken the Venus’s surface and it undergoes a thorough renewal over a long period of time and the cycle continues. Erosion is solely a geological process and one reason why geological activities in the Mercury and the Earth’s moon have declined is their size that is too small to keep their interiors hot enough for a geological activity to continue. â€Å"Smaller bodies, such as the Moon and Mercury, have cooled further and are not thought to be presently active, but their features tell geologists of an active past.† (www.lpi.usra. edu, 2010). Earth is the fifth-largest planet of all in the Solar system. Its large size and distance from the Sun has contributed a lot toward the development of a unique atmosphere. The large size permits a lot of heat in the core to dwell that is ultimately released in the form of lava resulting in earthquakes, which in turn affect the atmosphere of Earth directly or indirectly. Earth is the third-distant planet from the Sun and comes after Mercury and Venus. Ozone layer is a very important part of the Earth’s atmosphere and provides it with protection against the ultraviolet (UV) rays emitted by the Sun. The Ozone layer is formed as a result of the Sun’s UV rays colliding with Oxygen molecules in the atmosphere which are broken down by the UV rays to form monoatomic Oxygen which combines with other Oxygen molecules to form the Ozone layer. Besides, the distance of a planet from the Sun influences the temperature on a planet. Earth’s distance from the Sun is long enough to

Comparison of Accounting Standards of FASB and IASB Research Paper

Comparison of Accounting Standards of FASB and IASB - Research Paper Example The International Accounting Standards Board (IASB) is an independent body in the private sector. It develops and approves International Accounting and Financial Reporting Standards. The International Accounting Standards Board (IASB) functions under the International Financial Reporting Foundation oversight. It was formed in 2001 in replacement of the International Accounting Standards Committee. International Accounting Standards Board (IASB), under the constitution of International Financial Reporting Foundation, has a full responsibility for all technical issues of the financial reporting standards such as: preparation and issuing the interpretations of exposure drafts and International Financial Reporting Standards, full discretion in pursuing and developing technical agenda dependent on requirements of consultation with the public and trustees, the issuing and approval of interpretations by the International Financial Reporting Standards Interpretations Committee.

The Rising of the Moon Criminal or Patriot Essay

The Rising of the Moon Criminal or Patriot - Essay Example It is this realization that leads him to make the decision to allow the man to escape. Older than his colleagues, wise in his understanding of the probability that their man will try to escape by boat, our policeman has his eye on the reward and the likelihood of promotion in the start of this play. Encouraging his co-workers to do their duty, he sends them off to put up other Wanted posters, while choosing to stay at the quay alone in wait of the revolutionary. When his man does indeed turn up he is disguised as a ballad singer and the policeman doesn't realize who he is. Claiming to be in town due to the fact that they are holding the assizes, which gives him the opportunity to make some money, the revolutionary tries to get past the policeman but is refused access. It is at this point that he tells the policeman, while pointing at the poster of the wanted man, that he knows who the revolutionist is. Fear is the first factor that the man uses to enforce his plan to get past the policeman, which persuades the policeman to allow him to stay. "There's not a weapon he doesn't know the use of," he says, "and as to strength, his muscles are as hard as that board." ('The Rising Moon', p. 907). And the second is complicity. And, as they sit together, back-to-back, while smoking their

Written Assignment Essay Example for Free

Written Assignment Essay Answer all of the following questions. Title your assignment Written Assignment 4, unless your mentor directs otherwise. This assignment covers text chapters 18 through 23. 1. Explain the relationship among savings, investment, and net capital outflow. Savings are equal to domestic investment + net capital outflow. In an open economy, both net capital outflow ( which is the purchase of foreign assets by domestic investors minus the purchase of domestic investments by foreigners) and savings and domestic investments are both ways of saving, and are both used to get the full picture of total saving. 2. Describe the economic logic behind the theory of purchasing-power parity (PPP). What factors might prevent PPP from holding true? The purchasing power parity tells us the a unit of any given currency should be able to buy the same quantity of goods in all countries. This principle is based on the fact that prices should remain constant for goods no matter where the goods are purchased, otherwise there is an opportunity for profit that was left un-exploited. The theory has 2 holes in it. Firstly, some goods are not easily traded, and secondly, some goods cannot easily be substituted for another. 3. Describe supply and demand in the market for loanable funds and the market for foreign currency exchange. How are these markets linked? Supply and demand of loanable funds is determined by the real interest rate. A higher interest rate causes people to save and raises supply where a lower real interest rate does the opposite. In the market for foreign currency exchange, the real exchange rate balances out supply and demand. A higher U.S. real exchange rate increases U.S. goods compared to foreign goods, and exports fall. These 2 markets are linked because between the 2 of them, they determine national saving, domestic investment, net capital exports and net exports. 4. What is capital flight? When a country experiences capital flight, what is the effect on the countrys interest rate and exchange rate? Capital flight is a large and sudden reduction in the demand for assets located in a country. The currency of the country depreciates in value and the interest rate rises. 5. List and explain the three theories for why the short-run aggregate-supply curve is upward sloping. Sticky wages. Wages are slow to adjust and may not be able to be changed. Steady wages can be harmful to a company and cause them to have lower production levels. Nominal wages are based on expected prices and are slow to respond when the actual prices ends up being different. Sticky price. Prices for some goods and services also are â€Å"sticky† and take time to adjust. This is due in part to â€Å"menu costs†, or the administrative costs incurred by changing the prices of a product in a firm. Misperceptions. Different businesses read the market different ways. A misperception in the trend of the market can cause suppliers to supply more product, even when the demand is not truly there. 6. What might shift the aggregate-demand curve to the left? Use the model of aggregate demand and aggregate supply to trace through the short-run and long-run effects of such a shift on output and the price level. Use the following diagram to help explain your answer. Point A is the short-run equilibrium point whereas Point C is the long run equilibrium point. Higher prices lower costs and shift demand to the left (lower). If for say, the current market price of this item is at Point C, and the market price drops, the demand for the item will rise, shifting the curve to the left. 7. Suppose the Fed expands the money supply, but because the public expects this Fed action, it simultaneously raises its expectation of the price level. What will happen to output and the price level in the short run? Compare this result to the outcome if the Fed expanded the money supply but the public didn’t change its expectation of the price level? Use the diagram below to explain your answer. The output should remain constant if the FED had raised its expectation of the price level over time, but immediately, the raise is price would cause in increase in production. The equilibrium point should shift from point a, to point c temporarily, then up to point out as it balances out. If the FED did not change it’s expectations in the price levels, than the equilibrium should move to pint c from pint a, and stay there. 8. What is the theory of liquidity preference? How does it help explain the downward slope of the aggregate-demand curve? This is the theory that the interest rate adjust to bring the money supply and demand into equilibrium. A higher price level increases the demand for money, as people will carry more to pay the higher prices. Higher prices in turn causes a higher interest rate. The higher interest rate reduces goods demanded, and supply will also shift downward. 9. Suppose that survey measures of consumer confidence indicate a wave of pessimism is sweeping the country. If policymakers do nothing, what will happen to aggregate demand? Explain what the Fed should do if it wants to stabilize aggregate demand. If the Fed does nothing, explain what Congress might do to stabilize aggregate demand. If policy makers do nothing, demand will fall, so will production and employment. Eventually, recession and possible depression afterwards. The Fed can do things such as lowering the interest rate to help stimulate the economy. Congress may decide to cut taxes in an attempt to simulate the economy, but they can also increase government spending to stabilize the economy. 10. What is natural about the natural rate of unemployment? Explain why the natural rate of unemployment might differ across countries. The natural means that it is beyond the influence of monetary policy. Different countries have different abilities, laws and demand for employment. For instance, the country may not be able to organize in the same fashion as a union shop here is the US. might. 11. What causes the lags in the effect of monetary and fiscal policy on aggregate demand? What are the implications of these lags for the debate over active versus passive policy? Aggregate demand has lags in policy due to the time it takes for the policy to take affect. Additionally, the spending plans are set in advance so it also takes time for changes to affect spending. The biggest issue is the ability to time the policy correctly, since it takes time for everything to adjust. 12. Some economists say that the government can continue running a budget deficit forever. How is that possible? Since population and technological progress grow over time, so do a nation’s ability to repay the interest on it’s debt. As long as the debt grows slower than the nation’s income, this is possible. Reference: Mankiw, N. G. (2008). Principles of Macroeconomics. Fifth Edition. Ohio: South-Western Cengage Learning.