Foreign direct investment (FDI) flows amounted to 1,697 billion USD in 2008, while
global FDI stocks reached a level of more than 16,205 billion USD.1 These figures
underline the fact that FDI has gained an importance that is comparable to trade in
providing foreign markets with goods and services.2 In addition, FDI constitutes the
largest source of external finance for developing countries.3 Nevertheless, the global
financial crisis had a significant impact on FDI at the end of 2008, reducing flows by
approximately 14.2% compared to the all-time high of 1,978 billion USD in 2007.
For the philosopher of history, G.W.F. Hegel, the fundamental challenge for any
student of societal evolution is to apprehend in thought the spirit of the age (or the
zeitgeist)—i.e., to understand the motive force of change while it is still at work
(Lauer, 1974). Catching the zeitgeist ‘in the act,’ so to speak, is a matter of practical
importance; for gaining such an understanding would seem to be a necessary,
if not sufficient, condition for successfully shaping ‘for the better’ any future state
of affairs. Hegel does not give us much cause for optimism here.
Principle of comparative advantage: “Two countries can both gain from trade if, in the absence of trade, they have different relative costs for producing the same goods” ( David Ricardo)
Transnational corporation: “corporations which operate in more than one country or nation at a time and have become some of the most powerful economic and political entities in the world today.”
The rapid erosion of privacy poses numerous puzzles. Why is it occurring, and why do
people care about it? This paper proposes an explanation for many of these puzzles in terms of
the increasing importance of price discrimination. Privacy appears to be declining largely in order to
facilitate di®erential pricing, which o®ers greater social and economic gains than auctions or shopping
The equilibrium of supply and demand balances the quantity demanded and the
quantity supplied, so that there is no excess of either. Would it be desirable, from a
social perspective, to force more trade, or to restrain trade below this level?
There are circumstances where the equilibrium level of trade has harmful consequences,
and such circumstances are considered in Chapter 6. However, provided that the only
people affected by a transaction are the buyer and seller, the equilibrium of supply and
demand maximizes the total gains from trade.
One of the ten principles of economics highlighted in chapter 1 is that trade can make everyone better off. This principle explains why people trade with their neighbors and why nations trade with other nations. In this chapter we examine this principle more closely. What exactly do people gain when they trade with one another? Why do people choose to become interdependent?
Chapter 37 - International trade. After completing this unit, you should be able to: Comparative advantage and the gains from trade, exports and imports, economic effects of tariffs and quotas, arguments for protectionism.
Chapter 3 presents an overview of the concepts of supply and demand, perhaps the most basic and familiar tools used by economists. These tools are used to show the final two Core Principles: the Efficiency Principle (efficiency is an important social goal because when the economics pie grows larger, everyone can have a larger slice) and the Equilibrium Principle (a market in equilibrium leaves no unexploited opportunities for individuals but may not exploit all gains achievable through collective action).
In chapter 8 we will investigate the economic forces by which the invisible hand of the marketplace guides profit-seeking firms and satisfaction-seeking consumers in ways that, to a surprising degree, serve society’s ends. These forces encourage aggressive cost cutting by firms, even though the resulting gains will eventually take the form of lower prices rather than higher profits.
Chapter 2 - Specialization and exchange. In this chapter you will learn: How to construct a production possibilities frontier, describe what causes shifts in production possibilities curves, define absolute and comparative advantage, define specialization and explain why people specialize, explain how the gains from trade follow from comparative advantage.
Chapter 3 - The gains from trade: A partial equilibrium view. After completing this chapter, students will be able to: Introduce the general equilibrium model of international trade, first in its “small country” version and then in its “two-country” version; use the small country model to make it very clear that imports and exports are closely related; reducing imports inevitably causes a reduction in exports;...
Chapter 5 - International trade and economic growth. After completing this chapter, students will be able to: Extend the analysis of trade beyond the traditional static models of international trade and analyze the relationship between international trade and economic growth; show how the power of compounding makes international trade’s effect on economic growth much more important for human welfare than the static gains in welfare; familiarize students with the recent statistical evidence on the relationship between trade and economic growth;...
Chapter 7 - Why do countries restrict foreign trade? After completing this chapter, students will be able to: Review the partial equilibrium, general equilibrium, and growth models and distinguish the distribution of the welfare gains and losses from international trade, explain the strategic trade and infant industry arguments for protection, distinguish the assumptions that must be satisfied for the strategic trade and infant industry arguments for protection to be valid.
Chapter 10 - The economics of international investments. After studying this chapter you will be able to: Show how international investment raises the total value of world output and income, and why all countries share in the net gains, explain how international investment permits investors to spread their risk among a greater variety of assets, present evidence and models suggesting that international investment also facilitates the flow of technology between countries.
Chapter 15 - The international migration of people. After completing this chapter, students will be able to: Present a brief history of international migration, the oldest of the three components of globalization, take the student beyond the popular labor supply model of immigration by introducing the labor supply and demand model of immigration, use the labor supply and demand model of immigration to frame the analysis of the gains and losses from immigration on source and destination countries,...
The global economy has been developing rapidly and gaining many achievements which have a lot
of motivating influences on the wealth of many countries in the recent decades. However, there still
remain a number of difficult problems that need proper solutions brought in by the governments.
Financial crisis is not out of the case. For many years now, financial crisis is deemed to offend so
many countries and people including economists, brokers, bankers, policy makers, and so on.
Through the summer of 1997 the Dow Jones Industrial Average hit new high after new high, continuing the breathtaking advance it began seven years earlier. It took ninety years for the average to make its first thousand - oint gain, Now it hurdled each new barrier in a matter of months.
Why does anyone invest money? Why place yourself at risk and expose yourself
to the volatility of the stock market? Why not just leave your capital in an
insured savings account?
Of course, there are logical answers to these questions. As an astute investor,
you already know that taking risk is an inherent part of investing your capital
anywhere. For example, you could opt to place all of your capital in an insured
account at your bank; in fact, many highly conservative investors do just that.
This option also involves risk, however...
The effort to achieve a single set of global accounting standards has gained
significant momentum during the past three years. The logic behind the development
of a single set of high-quality global accounting standards for the
world’s integrating capital markets has been evident for some time.