First, doesn't your discussion of externality theory with regard to global warming assume that society possesses perfect information and no uncertainty regarding the "best" solution to global warming? Obviously, if we know the "best" solution with perfect certainty, then government can impose it on society with no apparent loss, but how would anyone know that any particular solution was "best"? Would we know that the solution was best" for everyone? What if the solution were only "best" for some, but harmful for others? What if the harm from government policy has a greater likelihood than the benefit? For example, how would we know for certain that a policy suppressing the use of fossil fuels is superior, for everyone, to a policy of adaption to warmer temperatures?

Second, in your discussion of government-imposed solutions to global warming, you make no mention of the possibility of government failure. Should we assume that our political class will impose a solution on the rest of us from which they will not disproportionately, if not solely, benefit? Should we assume that the government is free of the same cognitive bias, lack of information, or inability to negotiate said to cause our exercise of individual free choice to fail? Will government policy be more flexible, than markets, in response to new information? Hypothetically, later, if it was determined that global warming fears were unfounded, would the government subsidies and patronage clienteles rationally be disbanded? Would the political clienteles benefiting from subsidies have no ability to misinform the public?

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Basically in California they are becoming more environmentally friendly and therefore they are decreasing their demand for Oil.
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/03/09/BU6QVEVD3.DTL

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http://www.21food.com/news/detail22819.html

This summer, the United Stated government bought 17 million pounds of New Jersey blueberries for $14.7 million of American taxpayers’ money. Because of a significant leftover amount of last season’s blueberry harvest, this year’s price has dropped considerably, due to the producer surplus. The government’s purchase will be distributed to school lunch programs, nutrition programs, emergency meal assistance, and food banks.

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http://www.msnbc.msn.com/id/32988155/ns/us_news-life/

There is fear among gun enthusiasts that the Obama Administration may pass an antigun legistration. Gun owners across America are stocking up on ammunition in case a new law is passed. There have been significant shortages of ammunition, as the demand sky rockets.

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The price of gold rises to a new a high after a newspaper claimed that Gulf Nations wanted to replace the dollar for another currency as the main oil currency. The cause for the increase is an expectation for the price of oil to rise, therefore people start to invest their money and commodities in gold.

http://news.bbc.co.uk/2/hi/business/8292736.stm

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http://www.economist.com/opinion/displaystory.cfm?story_id=14548881

This is an article from the newest edition from the Economist. It says that the crises has passed more or less; the world's big economies have stopped contracting. However we cannot expect the world economy to be "normal again."

I found this interesting because it was relevant to what AKERLOF said. The article says that "spending has been driven by government largesse, not animal spirits." The writer emphasizes that the improvements have been through fiscal and monetary policies, not an increase in confidence and trust. This is why we cannot wait for normality to return right away.

According to the article, to make the best use of the recovery, demand has to be brought back and unemployment has to be controled. Also, the industries need new innovations and TRADE. (article refers to trade as the ultimate engines to growth).

Any comments?

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This unit on protectionism has enlightened me on something which I didn't really understand in the summer of 2008. While I was in Seoul, there was a huge protest and some riots because of US imported beef. Back then I didn't get what the big deal was.. To sum up what was happening, the newly elected president at that time had lowered the barriers on the trade of beef. This accounted for disadvantages for domestic beef producers. Also, there was an issue with the quality of US beef. The fear of mad cow desease was strong. SOO, people were furious. I was in a subway when literally 5 peole with signs and a loud speaker came into the train and started shouting out protests and handing out information sheets. At night, the city was full of protestors who sat on the streets with candles. The president who had just come into office was ridiculed. So here's my question. It is obvious that there is a huge trade of when it comes to protectionism. Politically the country was about to go crazy, but we have learnt that the benefits to trade a significant as well. Do we keep the population calm or do we benefit from trade?

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Iceland was one of the countries who saw the worst of the economic breakdown which has crippled the recent global economy. This may surprise those of you who though that the most imoprtant transactions of iceland were ice, and shark testicles, but in fact, Iceland is home of some of what were the most stable banks in the world. The point I am slowly creeping towards is this: Iceland are only now waking up to the disaster which should have had them on their knees a year ago. The GDP is expected to decrease by 9 percent this year, that is big. For more info go to this page: http://www.guardian.co.uk/business/2009/sep/28/iceland-crisis-one-year-on

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Obama cleverly aligned himself with a number of very politically central politicians throughout his election; this was done to assure that he would apeal to the largest number of people. Now however, the pressure is being put on him by both sides of the democrates, some want to see him lower tariffs to make consumer goods from abroad cheaper, thus potentially increasing consumer spending. While the other side argue that he should increase the tariffs to protect US jobs, thus protecting the US from further unemployment issues, however this would harm the comsumer, and potentially slow down the consumer spending. Which one do you think is the best choice?

Now that you have ha time to decide, I will tell you what he did. Obama has recently answered all questions by puting a high tariff on tires being imported from China; this is one product, however it may tell us a lot about his future plans. I find this an interesting choice, what do you think?

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I came across this blog on Reuters news about taxes which fits with what we have just been learning. Christopher Swann, the writer of the blog, suggests implementing a new VAT to help reduce the growing strain on the American budget, as well as cut back on income taxes. Furthermore, he predicts that a 15% VAT could result in $725 in revenue annually, almost equivalent to the Obama fiscal stimulus. Of course there are consequences in the implementation of a regressive tax, especially in a nation with such widespread income differences. This raises worries as to whether any new tax introductions could hinder the little economic activity there is, although Christopher Swann points out that a 6 month delay in bringing in the tax could increase consumption now in anticipation of it. Is it worth introducing the VAT in midst of the crisis, or wait til later to begin to pay off the billions of dollars of government spending ?? Or could the VAT have further negative impacts on America's economy today?



http://blogs.reuters.com/commentaries/2009/09/08/why-the-us-needs-a-value-added-tax/

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