information systems
...ent: encourage competition between private producers by outlawing monopolies. • Command Economy: good that a country produced, quantity, prices all dictated by government. o Goal: government allocate resources for “the good of society” o Little incentive to control costs and be efficient because they cannot go out of business, and no good customer service. • Mixed Economy: some are private, some are state-owned Legal Systems: rules or laws that regulate behavior along the process by which the laws are enforced • Different Legal Systems o Common Law: based on tradition, precedent, and custom. (ex: U.S.) o Civil Law: detailed set of laws organized into codes. (ex: Japan, Germany, etc) o Theocratic Law: law is based on religious teachings • Differences in Contract Law: Civil vs Common o Contract: document that specifies the conditions under which an exchange was made o Contract law: body of law that governs contract enforcement o Common Law view: very detailed because of common laws flakiness. o CISG: set of rules government certain aspects of the making and performance of commercial contracts between seller and buyers. • Property Rights: legal rights over the use of which a resources is put and over the use if made of any income that may be derived from that resource. o Private Action: theft, piracy, blackmail, and stuff done by private individuals or groups. o Public Action and Corruption: public officials (politicians), extort income or resources from property holders. o Foreign Corrupt Practices Act: prohibits bribing a foreign government official in order to obtain business over which that person has authority • The Protection of Intellectual Property: property that is the product of intellectual activity (music) o Patent: grants inventor of a new product right for a period of time for sale of invention o Copyrights: exclusive rights of authors, composers, playwrights, artists o Trademarks: designs and names by which manufacturers differentiate their products • Product Safety and Product Liability o Product safety: laws that set certain standards to which a product must adhere o Product liability: holding a firm responsible when a product causes injury, death, damage The Determinates of Economic Development • Differences in Economic Development: measures of economic development o GNI: gross national income per head of population. Problem: don’t consider difference in the cost of living o Purchasing Power Parity: cost of living in the U.S. • Broader Conceptions of Development: Amartya Sen o Developments should be seen as a process of expanding the real freedoms that people experience o Development is POLITICAL o Human Development Index: measure the quality of human life in different nations (life expectancy, educational attainment, whether average incomes can meet basic needs of life) • Political Economy and Economic Progress o Innovation and Entrepreneurship are the Engines of Growth: if a country’s economy is to sustain long-run growth, the business environment must be conductive to the consistent production of products and process innovations and toe entrepreneurial activity. o Innovation and Entrepreneurship Require a Market Economy o Innovation and Entrepreneurship Require Strong Property Rights: people must be able to profit from innovative ideas. o The Required Political System: democratic regimes are more conductive to long term growth than dictatorships. o Economic progress leads to Democracy • Geography, Education, and Economic Development o Geography can influence economic growth: coastal states, climates, mountainous areas o Certain societies were more likely to engage in trade than others, which promote faster economic growth States in Transition • The Spread of Democracy: reasons o Many totalitarian regimes failed to deliver economic progress to their people. (collapse of Communism in E. Europe) o New information and communication technologies. (satellite, fax, email, etc) o Increasing middle and working class people who have pushed for democratic reform • The New World Order and Global Terrorism o Fukuyama: End of History War of ideas may be at the end and that liberal democracy has triumphed o Huntington: Clash of Nations Modernization in non-Western societies can result in a retreat toward the traditional (ex: rebirth of Islam) Emergency of Islamic and Sinic civilizations Conflict of West vs Island and West vs China • The Spread of Market-based Systems: command and mixed economies failed to deliver. • The Nature of Economic Transformation: step that shift toward market-based economies o Deregulation: removing legal restrictions to the free play of markets, the establishment of private enterprises, and how they operate. Removing price controls and allow “invisible hand” to play Abolishing laws prohibiting private establishment Removing restrictions on direct investment by foreign companies o Privatization: (stated previously) Unlock gains in economic efficiency by giving new private owners a powerful incentive – reward of greater profits. o Legal Systems – without legal system the incentive to engage in economic activity can be reduced by substantially private and public entities. (ex: crime) o The Rocky Road: • Implications Chapter 3: Differences in Culture What is Culture? A system of values and norms that are shared among a group of people and that when taken together constitute a design for living. • Values and Norms: o Values: abstract ideas about what a group believed to be good, right, and desirable. provide context within which a society’s norms are established and justified, such as attitudes towards such concepts as individual freedom, democracy, truth, justice, honesty, loyalty, social obligation, etc. o Norms: social rules and guidelines that prescribe appropriate behavior in certain situations. Social rules that govern people’s actions toward one another. Folkways: routine conventions of everyday life. (ex: appropriate dress code, good social manners, etc) Mores: norms that are central to the functioning of a society and to its social life. (ex: indictments against theft, adultery, incest, etc) • Culture, Society, and the Nation-State o Society: group of people who share a common set of values and norms. o Relationship between culture and country is often ambiguous. One cannot characterize a country as having a single homogenous culture, and even when one can, one must also often recognize that the national culture is a mosaic of subcultures. • The Determinants of Culture o Culture is the evolutionary product of a number of factors: political and economic philosophy, the social structure of a society, and the dominant religion, language, and education. Social Structure • Individuals and Groups: the degree to which the basic unit of social organization is the individual, as opposed to the group o The Individual: the West, individual is the basic building block of social organization • Good: high level of entrepreneurial activity • Bad: high degree of managerial mobilitylack of loyalty and commitment o The Group: individuals who share sense of identity and who interact with each other in structured ways on the basis of a common set of expectations about each other’s behavior. (Japan) • Also discourages managers to move from company to company • Social Stratification: hierarchical basis of social categories, such as family background, occupation, income o Social Mobility: extent to which individuals can move out of the strata into which they are born. • Caste System: closed system of stratification in which social position is determined by the family into which a person is born, and change in that position is usually not possible during an individual’s lifetime. • Class System: less rigid form of social stratification in which social mobility is possible. A form of open stratification in which the position a person has by birth can be changed through his own achievements or luck. o Significance • If it affects the operation of business organizations • Class consciousness: conditions where people ten to perceive themselves in terms of their class background, and shapes their relationship with members of other classes. Religious and Ethical Systems: Religion is the system of shared beliefs and rituals that are concerned with the realm of the sacred. Ethical system is a set of moral principles or values that are used to guide and shape behavior. • Christianity o Economic Implication of Christianity: The Protestant Work Ethic Weber: Protestant ethics emphasize the importance of hard work and wealth creation (for the glory of God) and thrift was needed to facilitate the development of capitalism. Their belief suggested that rather than consuming this wealth by indulging in worldly pleasures, they should invest in the expansion of capitalist enterprises. Thus, the combination of hard work and the accumulation of capital, paved the way for the development of capitalism. Protestantism gave individuals more freedommore entrepreneurshipencourage capitalism. • Islam: requires unconditional acceptance of the uniqueness, power, and authority of God and the objective of life is to fulfill his will in hope of admission to paradise. o Islamic Fundamentalism Rise: response to the social pressures created in traditional Islamic societies by the move toward modernization and by the influence of Western ideas, such as democracy. Fundamentalists demand a rigid commitment to traditional religious beliefs and rituals. o Economic Implications of Islam Pro-free enterprise: free enterprise and earning legitimate profit through trade. Protection of right to private property • Property holders are trustees, and are entitled to receive profits, but not to use it in a righteous, socially beneficial, and prudent manner. • Has to do with Islam’s social structure. OK to earn profit just as long as it’s not based on the exploitation of others Prohibits the payment or receipt of interest. • Hinduism: acceptance of certain responsibilities (dharma). Believe in reincarnation and karma (spiritual progression of each person’s soul). Goal in life is to achieve nirvana, state of complete spiritual perfection that make reincarnation unnecessary. o Economic Implication of Hinduism Weber: emphasize individuals should not be judged by their material achievements, but they their spiritual ones. Therefore, less likely to engage in entrepreneurship activities. Has caste system Hindus see mobility between castes as something that is achieved through spiritual progression and reincarnation. • Buddhism o There is suffering everywhere that originates in people’s desires for pleasure o Cessation of suffering can be achieved through a path of transformation o No caste system, therefore entrepreneurial activity may be higher than Hindu cultures • Confucianism: built upon ethical codes that set down guidelines for relationship with others. o Economic Implications of Confucianism Loyalty: loyalty to one’s superiors is regarded as a sacred duty, therefore can reduce conflict. Reciprocal obligations: superiors are obliged to reward the loyalty of their subordinates by bestowing blessing on them Honesty: when companies can trust each other not to beak contractual obligations, the costs of doing business are lowered. Language • Spoken Language: the nature of the language also structures the way we perceive the world. • Unspoken Language: non verbal communication (ex: rising of eyebrows) Education: the medium through which individuals learn many of the language, conceptual, and mathematical skills that are indispensable in modern society. • Education’s role as a determinant of national competitive advantage. • General level of education of a country is a good index of the kind of products that might sell in a country and of the type of promotional material that should be used. Culture and the Workplace (Hofestede’s experiment) • Power distance: how society deals with the face that people are unequal in physical and intellectual capabilities. o High power distance: let inequalities grow over time into inequalities of power and wealth. o Low power distance: found in societies that tried t play down such inequalities as much as possible. • Individualism vs collectivism: relationship between the individual and his follows. o Individualistic: ties between individuals were loose and individual achievement and freedom were highly valued o Collectivism: ties between individuals were tight. • Uncertainty avoidance: the extent to which different cultures socialized their members into accepting ambiguous situations and tolerating uncertainty. o High uncertainty avoidance: placed premium on job security, career patterns, retirement benefits, and so on. o Low uncertainty avoidance: greater readiness to take risks and less emotional resistance to change. • Masculinity vs Femininity: relationship between gender and work roles. o Masculine: sex roles are sharply distinguished o Feminine: sex roles were less sharply distinguished • Criticism o Assumes one to one correspondence between culture and the nation state, but many countries have more than one culture. o Research is culturally bound, composing of only Europeans and American of IBM o From a single industry, and one company, IBM o Too outdated (1960’s) Culture Change: culture evolves over time • As countries become richer, shift from “traditional values” linked to religion, family, toward “secular rational” values. • Also shift from “survival values”, values people hold when the struggle for survival is of importance, to “well-being values”, stress the importance of diversity, belonging, and participation in political process. Chapter 4: International Trade Theory An Overview of Trade Theory: Free trade is where a government does not attempt to influence through quotas or duties what its citizens can buy from another country, or what they can produce and sell to another countries. • The Benefits of Trade o Country’s economy may gain if its citizens buy certain products from other nations that could be produced at home. o Gains arise because international trade allows a country to specialize in the manufacture and export of products that can be produced most efficiently in a country, while importing products that can be produced more efficiently in other countries. • The Pattern of International Trade o Ricardo: theory of competitive advantage offers explanation in terms of international differences in labor productivity. o Heckscher-Ohlin: emphasized the interplay between the proportions in which the factors of production (land, labor, and capital) are available in different countries. o Vernon: Product Life-Cycle theory suggests that early in their life cycle, most new products are produced in and exported from the country in which the were developed. o New Trade Theory: countries specialize in the production and export of particular products because in certain industries the world market can support only a limited number of firms. o Porter: explains why particular nations achieve international success in particular industries. • Trade Theory and Government Policy: all these theories lack agreement in their recommendations for government policy. Mercantilism: gold and silver were the mainstays of national wealth and essential to vigorous commerce. • Country’s best interest to maintain a trade surplus, to export more than import, therefore the country would accumulate gold and silver. • Maximize exports, and minimize imports, therefore imports were limited by tariffs and quotas. • Flaw: view trade as a zero-sum game (one in which a gain by one country results in a loss by another) Absolute Advantage: in a product when it is more efficient that any other country in producing it. • Smith: countries should specialize in the production of goods for which they have an absolute advantage and then trade these for goods produced by other countries. Comparative Advantage: specialize in the production of those goods that it produces most efficiently and to buy the goods that it produces less efficiently from other countries, even if this means buying goods form other countries that it could produce more efficiently itself. • The Gains from Trade o Using this theory, trade is a positive sum gave in which all countries that participate realize economic gains. • Simple Extensions of the Ricardian Model o Immobile Resources Theory states that benefits of free trades outweigh the costs, however, moving costs are not small. Resources do not always move easily o Diminishing Returns Theory suggests constant returns to specialization Not all resources are of the same quality Different goods use resources in different proportions o Dynamic Effects and Economic Growth Theory assumes that trade does not change a country’s stock of resources or the efficiency with which it utilizes those resources. Opening trade is likely to generate dynamic gains of two sorts • Free trade might increase a country’s stock of resources as increased supplies of labor and capital from abroad become available for use within the country. • Free trade might increase the efficiency with which a country uses its resources o Evidence for the Link between Trade and Growth Adopt an open economy and embrace free trade, and over time your nation will be rewarded with higher economic growth rates. Higher growth will raise income levels and living standards. Heckscher-Ohlin Theory: comparative advantage arises from differences in national factor endowments, such as land, labor, and capital. Predicts that countries will export those goods that make intensive use of factors that are locally abundant, while importing goods that make intensive use of factors that are locally scarce. • The Leontief Paradox o Since US was relatively abundant in capital compared to other countries, the US would be an exporter of capital intensive goods and an importer of labor intensive goods. However, it turns our that US exports were less capital intensive than US imports. The Product Life-Cycle Theory: wealth and size of US market gave US firms a strong incentive to develop new consumer products. Most new products were initially produced in US. As the market in the US and other advanced nations matures, the product becomes more standardized and price become the main competitive weapon. • Evaluating the Product Life-Cycle Theory o PLC theory: products tend to go out of the US and into low cost assembly locations. o From Asian and European view: PLC theory seems ethnocentric New Trade Theory: industries where there are economies of scale, both the variety of goods that a country can produce and the scale of production are limited by the size of the market. Also if the output required to realize significant scale of economies represent a substantial proportion of total world d...