Macroeconomics CDAE253                                                

Final Essays-Open book

Gary Flomenhoft

May 3, 2010

 

Survey only, not for credit.  No explanation needed, but comments welcome.

Based on what you learned in this course choose your macroeconomic philosophy.  These theories are based mainly on the perceived cause of the business cycle of depressions or recessions, and remedy.

A.   Classical-The economy is self-correcting if left alone. Goes through periodic troughs and crests.

B.    Keynesian-Business cycle caused by lack of aggregate demand.  Government spending needed to restart aggregate demand.

C.    Monetarist- Business cycle caused by contractionary monetary policy.  Banks need to increase money supply and credit during downturn, and maintain a steady increase in money supply during growth.

D.   Georgist-Real estate (land) bubbles driven by speculation causes business cycle.  Take profit out of land speculation through land value taxation or other means.

E.    Other? Describe.

 

 

2 Short Essay Questions.  1 typed page each minimum.  Extra credit for  longer.  1.5 spaced max, 12 font max, 1Ó margins.

 

1.     In the film and in this course we have studied numerous alternatives to GDP (growth).  Many consider GDP (growth) to be an intermediate goal, a means to the end, but not a final goal or end in itself.  We need a new paradigm.  What final goal would you propose to replace GDP (growth), and what index would you use to measure it?  Create an index and describe your index in detail.  Creativity rewarded.

 

Choose One:

2a. Herman Daly suggests the following 10 policies for a sustainable Òsteady-stateÓ economy.  Choose one or more and explain why you support or oppose and explain your macroeconomic reasons.  List is here:

http://www.uvm.edu/~gflomenh/CDAE253/readings/Daly-steady-state.htm

 

2b.  Since Iraq was not involved in 9/11 and had no weapons of mass destruction, many people are speculating about the true reasons for the invasion.  Some say oil, some say petrodollars, some say US control of the middle east, or other reasons.

 

Background:

1.     In 2000 Saddam Hussein demanded payment for oil in Euros.  See: http://www.time.com/time/magazine/article/0,9171,998512,00.html

 

2.     Dick CheneyÕs Energy Task Force which met between January and April, 2001 was classified top secret and the only documents released under Freedom of Information Act included maps of Iraqi oil fields.

 

3.     US oil extraction peaked in 1970.  In 2008 the United States consumed 23 percent of the worldÕs petroleum, 57 percent of which was imported. Yet the United States holds less than 2 percent of the worldÕs oil reserves. 

 

4.     After the March 20, 2003 invasion and occupation, Paul Bremer, head of the US Provisional Authority, issued his famous Ò100 ordersÓ including the following: 

 

"Order No. 17 grants foreign contractors, including private security firms, full immunity from IraqÕs laws. Even if they, say, kill someone or cause an environmental disaster, the injured party cannot turn to the Iraqi legal system. Rather, the charges must be brought to U.S. courts".

 

Order No. 39 allows for: (1) privatization of IraqÕs 200 state-owned enterprises; (2) 100% foreign ownership of Iraqi businesses; (3) 'national treatmentÕ - which means no preferences for local over foreign businesses; (4) unrestricted, tax-free remittance of all profits and other funds; and (5) 40-year ownership licenses",

 

Orders No. 57 and No. 77 ensure the implementation of the orders by placing U.S.-appointed auditors and inspector generals in every government ministry, with five-year terms and with sweeping authority over contracts, programs, employees and regulations.

 

Order 81 (April 26, 2004) - "Amendments to the Patents, Industrial, Undisclosed Information, Integrated Circuits and Plant Variety LawÓ crippled traditional farming by protecting developer rights of new and improved plant varieties (GMO seeds), forcing farmers to plant them, prohibiting traditional seed saving, and instituting Technology User Agreements, requiring annual royalties to companies like Monsanto.

 

In 1933 Marine Corps General Smedley Butler explained this phenomenon in the following essay on Intervention:

http://www.fas.org/man/smedley.htm

The examples Butler gave profited individual companies, so are in the realm of microeconomics.  In order to explore the possibility of an economic motivation for the Iraq invasion, regardless of whether you believe it or not, please provide a macroeconomic explanation, ie: balance of trade, value of currency, aggregate demand (C+G+II+NX), aggregate supply response, oil peak, etc.

 

Thank you for your interest and engagement in this course.

GFlo