Ideology, Economics and Policy

The following post has two assignments namely;

1.Ideology, Economics and Policy

1. What is deadweight loss and why is it important for understanding why neo-liberals (or economic conservatives) oppose taxes? 2. What is Larry Bartel’s main point in “Homer Gets a Tax Cut.”? What are the implications for political appeals and voting? Part II: the neo-liberal perspective (40%) Milton Friedman’s Capitalism and Freedom lays out neo-classical liberal economic arguments for limited government. Government, in Friedman’s view, should be limited to providing law and order, protection of property rights, limiting monopolies (ensuring some economic competition), providing for a stable supply of money, and a few other policy areas. Friedman argues for active monetary policy by the Treasury and Federal Reserve to ensure adequate credit for the economy. He opposes government use of fiscal policy (taxes and spending) to manage economic growth and for redistributing wealth (promoting economic equality). He argues that limited government is necessary for [economic] freedom and that economic freedom is necessary for political freedom. The questions are: 1) what are Friedman’s main points, 2) what are the positive or strengths of Friedman’s arguments, and 3) what are the weaknesses or flaws of Friedman’s argument. Good answers will draw on the readings, but don’t simply repeat Friedman’s arguments. You can ignore chapters 7, 8, and 9 but should see chapters 10 and 11 for his arguments about social welfare and alleviation of poverty. Part III The Supply-Side Perspective (40%) Arthur Laffer was an economist who raised the idea of the “Laffer Curve” to Nixon and later played a major role as an economic advisor for Ronald Reagan. Supply-siders argue foremost, for policies that will reduce the costs of production, and thus expand both supply and demand (by lowering prices). Regulatory policy and tax policies are central to the argument, though not the only ones. The essential argument taxes suppress individual incentive to earn more money and suppress investment and innovation. If taxes are lowered, the theory goes, then investment will increase and the economy will grow. Laffer, along with Stephen Moore and Peter Tanous, credit Kennedy and Reagan’s tax policies (lower taxes, deregulation, anti-union policies) for enabling the prosperity of the 1960s and 1990s. They argue that Obama’s policies will slow the economy. The questions for your essay include: 1) what are the central pillars of supply-side economic theory, 2) what are the advantages of pursuing these policies, according to supply-siders, and 3) what are the weaknesses or flaws of the supply-side argument.

2.International Marketing Incident: Japanese Tsunami

On March 11, 2011, Japan was hit by a 9.0 magnitude earthquake, which subsequently produced a devastating tsunami. The effects of these events were numerous, including entire towns being washed away, nearly 500,000 people displaced, a nuclear power plant left in critical condition, and thousands of lives tragically lost. The earthquake was one of the largest in modern history, and though hard to estimate, could cost nearly $300 billion to clean up. Your group currently has a plant in Japan. While the AllStar plant is not located in an area hardest hit by this disaster, imagine the destruction to the infrastructure alone. Roads, trains, airports, electrical grids, buildings, all of these things are left in need of serious repair, affecting companies supply chains. In addition, there are major concerns about water safety due to a possible nuclear reactor meltdown that could leak into groundwater sources. Your Japanese plant serves the Japan and Korean markets. Currently production at your Japan plant is 200 million units per year. Demand for next year will be 100 million units in Japan, and 100 million units in Korea. Manufacturing costs in Japan will increase 10% due to damaged infrastructure. Production is expected to decrease 25% in the next year due to this disaster (that is, your capacity next year will drop 25%). As a result, you will still be able to meet all of the Japan demand from the local plant. Korea, however, will have to source products from both the Japan and home plants. How will this scenario affect your total landed cost (cost + freight + tariff in USD) for next year? You will need to show your calculations. Plant Location Home Japan Average Unit COGS ($) 0.53 0.46 To: S. Korea Shipping 0.06 0.02 COGS + Shipping 0.59 0.48 Tariff % 0.08 0.08 Tariff $ 0.0472 0.0384 Total Unit Landed Cost (COGS + Shipping + Tariff) 0.6372 0.5184 To: Japan Shipping 0.060 0.01 COGS + Shipping 0.590 0.47 Tariff % 0.00% Tariff $ 0.000 0 Total Unit Landed Cost (COGS + Shipping + Tariff) 0.590 0.47 Please answer the following additional questions. a) What can a company do when it experiences supply chain issues in a particular country? Suggest two recommendations and explain your answers. b) When landed costs increase, what can you do to minimize the loss of gross margin (where net revenue – landed costs = gross margin) and contributions (where gross margin – marketing costs = contribution after marketing)? Suggest two recommendations and explain your answers.