Welcome! MBA 628 Global Trade & Finance

1. Welcome!MBA 628Global Trade & Finance Marriott School Professor Bryson TNRB 616, 422-2526 http://marriottschool.byu.edu/emp/employee.cfm?emp=pjb3

2. Session 1 • Introduce Website • Note that we will also use Blackboard • Please review the syllabus before our next meeting, where you can ask any questions you may have about policies or procedures.

3. Session 1 • Among the major tasks of the course • CD presentations. I have five basic theory presentations on a CD available in the computer lab (360 TNRB). Just take in a blank CD. • They are also available on line at sites listed in the syllabus.

4. Session 1 • The CD does not represent extra work. You will have one class day off for each CD topic and quiz, following the plan in the course outline. That time is to prepare to take the related CD quiz on Blackboard. • Advantages of the CD. You can study or review the topics at your own pace and review them as many (or as few) times as suits you.

5. Session 1 SECTION I, Introduction • Discuss “Why Economics.ppt,” which partially explain my views on economics. • An aside: my views on Power Point presentations. The ones in the File Directory for the course are my notes, not reading assignments.

6. Session 1 • Let us now take a moment to review why I am an advocate of free trade. • It’s simply because just about all economists are. You will review the theory from Smith and Ricardo through contemporary economists. The theory is clear and powerful.

7. Why Economics?Its Nature and Functions Prof. Bryson Marriott School

8. Significance of economics • Before we got endowments and named business or management school after rich benefactors, we often named them • College of Business and Public Administration or • College of Economics and Business • In Europe you often have Colleges of Economics and Business and, sometimes, • Universities of Economics

9. Significance of economics • If you believe economics is important for business, why? • Economics is to business what mathematics and physics are to engineering.

10. Significance of economics • What is the conventional definition of economics? “Economics is the study of the allocation of scarce resources for the satisfaction of (unlimited) human wants.”

11. Alfred Marshall: • “Economics is the study of mankind in the ordinary business of life.” • To you, what is “the ordinary business of life?”

12. Alfred Marshall: “Economics is the study of mankind in the ordinary business of life.” • “Man’s character has been moulded by his every-day work, and the material resources which he thereby procures, more than by any other influence unless it be that of his religious ideals…religious and economic influences have nowhere been displaced from the front rank even for a time; and they have nearly always been more important than all others put together. Religious motives are more intense than economic, but their direct action seldom extends over so large a part of life.” Marshall, Principles of Economics,p.1

13. Why is economics so exciting? • Economics is mathematics and more. • It is at the core of most things we are interested in. Beard’s history, for example. • Economics is a language • Economics is a system of logic • Economics is a method of prediction and forecasting

14. Great Conceptions of Economics • 1. Decision Optimization. Who optimizes? • Consumers • Firms • Governments and NGOs • 2. Markets • 3. Organizations (the “New Institutional Economics”)

15. Human life time for labor and service, scriptures, temples Homes, cars, machines and tools, human capital, land, technologies, productive capacities Consider God’s Gifts as Resources SpiritualTemporal

16. Consider God’s Gifts as Resources • The Lord has said: • “Wherefore, verily I say unto you that all things unto me are spiritual, and not at any time have I given unto you a law which was temporal. …my commandments are spiritual; they are not natural nor temporal.” • D&C 29: 34, 35.

17. Consider God’s Gifts as Resources • We are stewards, owning nothing. • (Psalms 24:1) • “The earth is the Lord’s, and the fullness thereof; the world, and they that dwell therein.” Our responsibility is to take care of (“to allocate”) these resources well, increasing them for the benefit of God’s children and for building the kingdom.

18. My Philosophy of Education • 1. There are revealed principles of the gospel that are true. “Happy are ye if ye do them.” • 2. There are foundation principles of theory. These are of particular interest when they are in harmony with divine principles such as agency, human dignity, regard for human life, etc.

19. 3. There are interpretations of theory’s implications. These suggest how the theory should be applied. These interpretations are influenced by the individual’s preferences, educational background, and experiences.

20. These interpretations may lead to a political orientation American’s call “liberal.” The philosophy here is concern for the little man and the disadvantaged and often implies well-financed social programs. • Such interpretations may also lead to a political orientation of conservatism. The philosophy here is concern for personal liberty and independence, with limited government.

21. 1. Principles 2.Theory 3. Interpretation • I am concerned about items 1 and 2. For this course the emphasis will be on item 2. I want you to understand the theory. The interpretation is usually a matter of family and previous educational experiences. Liberal and Conservative attitudes

22. Economics and Belief • I want you to understand, not to believe economic theory. • Science is the best set of hypotheses available. These should be accepted skeptically until the hypothesis can be disproved (rejected)* or until a better hypothesis comes along. • *In science, hypotheses must be set up so that they can be rejected if proved untrue. We accept them only until someone is able to reject them.

23. Economics and Belief • We shall try very hard to aid the student in understanding certain economic models. We shall try not at all to convince him of their truth. Indeed it would be counter to our purposes to instill in the student belief in our models. Belief is appropriate to theology. Science requires understanding of the theoretical system that one employs coupled with skepticism as to its validity. We shall attempt to provide the reader with the understanding. We trust that he will provide himself with the skepticism. Cliff Lloyd, Microeconomic Analysis

24. Economics and Abstraction Finally, consider the words of the Lord: • 78 Teach ye diligently and my grace shall attend you, that you may be instructed more perfectly in theory, in principle, in doctrine, in the law of the gospel, in all things that pertain unto the kingdom of God, that are expedient for you to understand; 79 Of things both in heaven and in the earth, and under the earth; things which have been, things which are, things which must shortly come to pass; things which are at home, things which are abroad; the wars and the perplexities of the nations, and the judgments which are on the land; and a knowledge also of countries and of kingdoms— (My emphases) D&C 88: 78, 79.

25. On the Beauty of Markets and Trade • Trade Synonymous with Markets “Fundamentally, the case for free trade is the case for the market system. The benefits come in the form of greater realization of the efficiencies available from specialization, from more rapid technology transfer and more productive allocation of resources, from comparative advantage, and from the spur of competition. They show up in higher rates of economic growth, leading to higher wages and higher returns to capital, leading to higher standards of living.” Larry Summers, Past President, Harvard University, Deputy Secretary of the Treasury, Clinton Administration

26. Session 1 • Henry George was a very famous early American economist. His greatest work was Progress and Poverty, 1879. • A little later he wrote a book on the topic of free trade, Protection or Free Trade: An examination of the tariff question, with especial regard to the interests of labor. (1886)

28. George found much wrong with the economic theories of his day, but he agreed with the growing tradition of free trade. • Consider, as an introduction to the course, some of his ideas on the topic.

29. I have not only gone over the ground generally traversed, and examined the arguments commonly used, but…I have sought to discover why protection retains such popular strength in spite of all exposures of its fallacies. Protection or Free Trade, p. 7

30. NEAR the window by which I write, a great bull is tethered by a ring in his nose. Grazing round and round he has wound his rope about the stake until now he stands a close prisoner, tantalized by rich grass he cannot reach, unable even to toss his head to rid him of the flies that cluster on his shoulders. Now and again he struggles vainly, and then, after pitiful bellowings, relapses into silent misery.

31. This bull, a very type of massive strength, who, because he has not wit enough to see how he might be free, suffers want in sight of plenty, and is helplessly preyed upon by weaker creatures, seems to me no unfit emblem of the working masses. • In all lands, men whose toil creates abounding wealth are pinched with poverty, and, while advancing civilization opens wider vistas and awakens new desires, are held down to brutish levels by animal needs.

32. Bitterly conscious of injustice, feeling in their inmost souls that they were made for more than so narrow a life, they, too, spasmodically struggle and cry out. But until they trace effect to cause, until they see how they are fettered and how they may be freed, their struggles and outcries are as vain as those of the bull. Nay, they are vainer. I shall go out and drive the bull in the way that will untwist his rope. But who shall drive men into freedom? Till they use the reason with which they have been gifted, nothing can avail. For them there is no special providence. Protection or Free Trade, p. 9

33. I propose in these pages to examine a vexed question which must be settled before there can be any efficient union in political action for social reform—the question whether protective tariffs are or are not helpful to those who get their living by their labor. The policy of protection is again raising its head. Here it is evident that the tariff question is the great political question of the immediate future. Protection or Free Trade, p. 9

34. For more than a generation the slavery agitation, the war to which it led and the problems growing out of that war have absorbed political attention in the United States. That era has passed, and a new one is beginning, in which economic questions must force themselves to the front. First among these questions, upon which party lines must soon be drawn and political discussion must rage, is the tariff question….one thing or the other must be true—either protection does give better opportunities to labor and raises wages, or it does not. Protection or Free Trade, p. 11

35. Protection’s Effects Protective tariffs are as much applications of force as are blockading squadrons, and their object is the same—to prevent trade. The difference between the two is that blockading squadrons are a means whereby nations seek to prevent their enemies from trading; …

36. Protection’s Effects …protective tariffs are a means whereby nations attempt to prevent their own people from trading. What protection teaches us, is to do to ourselves in time of peace what enemies seek to do to us in time of war. Protection or Free Trade, p. 47

37. Protectionism’s Bottom Line It is as natural for men to trade as it is for blood to circulate. Man is by nature a trading animal, impelled to trade by persistent desires, placed in a world where everything shows that he was intended to trade, and finding in trade the possibility of social advance. Without trade man would be a savage.

38. Where each family raises its own food, builds its own house, makes its own clothes and manufactures its own tools, no one can have more than the barest necessaries of life, and every local failure of crops must bring famine.

39. A people living in this way will be independent, but their independence will resemble that of the beasts. They will be poor, ignorant, and all but powerless against the forces of nature and the vicissitudes of the seasons. Protection or Free Trade, p. 51

40. Effects of Free Trade It is where trade could best be carried on that we find wealth first accumulating and civilization beginning. It is on accessible harbors, by navigable rivers and much-traveled highways that we find cities arising and the arts and sciences developing.

41. And as trade becomes free and extensive—as roads are made and navigation improved; as pirates and robbers are extirpated and treaties of peace put an end to chronic warfare—so does wealth augment and civilization grow. All our great labor-saving inventions, from that of money to that of the steam-engine, spring from trade and promote its extension. Trade has ever been the extinguisher of war, the eradicator of prejudice, the diffuser of knowledge.

42. It is by trade that useful seeds and animals, useful arts and inventions, have been carried over the world, and that men in one place have been enabled not only to obtain the products, but to profit by the observations, discoveries and inventions of men in other places. . Protection or Free Trade, pp. 53, 54 Fini

43. Session 2 • Fill out (non-required) information sheets. • Major tasks of the course • Team presentation and report. Organize in teams of five. • Submit your presentation priorities

44. Session 2 • Team presentation and report. Negotiate about a topic: • global role of some important country; • an international economic institution (World Bank, IMF, WTO, OECD); • an international economic problem (the US payments imbalance, US and EU anti-developmental agricultural policies, etc.)

45. Session 2 • Please submit your topics priority list with your team members and team name (I suggest names after some kind of electronic device).

46. Session 2 • Major tasks of the course • Team report. • The final reports will all be submitted on November 30. To provide some preparation time (either for the final or the written report) and to provide the fifth CD day, there will also be no class on that day.

47. Session 2 • Make a seating chart. • Are there any questions on the syllabus? • You should now begin to review the CD presentation “Markets” and prepare for the quiz. • In class we will review the Power Points “Balance of Payments” and “Foreign Exchange.”

48. Session 3 • Review team assignments. • Take the CD quiz on Markets today.

49. Session 3 SECTION II. Trade Theory • Review Power Points on • Fixed and Floating Rates, and • Exchange Rate Determination.

50. Session 4 • Review semester schedule, which now includes class presentations. • In the File Directory, see the Group Presentations folder. It gives examples of past presentations. Yours will be posted there in the course of the semester. • Discuss Power Point Presentation on “Comparative Advantage” and “Mercantilism”