Please help.

[xieu...@gmail.com]

This is a briefing of a lecture.
Please, make questions for furter elaboration, doubts, disagreements
or whatever.

[xieu...@gmail.com]

This is a very usual example of what we could be asked for. This will
be an starting case example to work about it deeper and deeper.

A certain village wants to create a new economic structure. Local
officers define these priorities:
- Each citizen shall have food enough as defined in a basket of
goods.
- Each couple and each single shall own one house.
- Final structure must be sustainable

Current situation:
100 citizens. 50 houses.
Savings = 1,000 €pp, Net income = 1,000 €pp/month.
Basket of food pp/month: 30 bread + 30 apple per month. Price per
piece = 1 €
1 house = 100,000 €,, monthly expenses 200 €
This village produces 1 tn. of wheat per year harvest in one month. <>
1,000 breads a month, 5,000 apples a month (when harvest 0 apples)
Unemployment rate out of harvest seasson= 80%, (income=0 €)
unemployment in harvest=0%
Situation in villages around is alike

What we have to do:
1.- Translate requirements to the final set of parameters, constrains
and values
2.- Define policies to be stated in order to achieve such goals, if
posible give options to decission makers. Define monthly milestones.
3.- Defines risks (both under ceteris paribus and under omnia mobilis)

Next messages we will go into further details, but keep in mind our
first task. To develop this first case exercise.

[Xi Ling]

This is a basic diagram of how traditional economic structure understands economic flows or value chain.

Not all steps are required. For example, in services, natural resources are not mandatory into a production process.

We have to understand consumption as the final step of the process, not necesarilly a "consumer".

As we see see in the diagram, from this perspective, natural resources increases the value of the product in one unit (+1 in red).

[Xi Ling]

Along the production process some value is added to the product. In this case, we see that the production process and logistics has added an aditional unit of value in this example. Therefore the current value is two units.

Notice that as they must match bookkeeping, that value is just economic, and only reflects the cost that the corporation has received, either from suppliers (with their profits embedded) or labor. On top of this value, the corporation should add a profit not reflected in the example.

Now, the value is 2 units, 1 comes from raw materials and another one was adden during the produccion process. 

[Xi Ling]

If we take a break, this is what traditional models would reflect at this point.

In theory, we have created two units of wealth. From a macro perspective this process has agregated to the GDP two units.

This is the basic way in which after millions and billions of agregations we reach a GDP and most indicators. Most of them add value. You can see a first difference with book keeping, where each plus (+) has a minus (-) to counter it.

[Xi Ling]

This is a more modern diagram.

We can see that we have two different sources:

1:- Renewable resources

2.- Non-renewable resources

In traditional models, the price that we pay for resources is just what the owner (a corporation) of those resources charge on its invoice. From a global perspective, we should not act like that. We will see it a bit later.

Also, we see that consumption is a process, not just the end of a porcess. Consumption processes may destroy wealth totally or partly.In this way, comsumption may counter the value of the production process.

We can see a new process. Durable goods and assets. That process work as temporary accounts between production and consumption. They can be used several times, even infinitely. Therefore, they will increase our assets, our real wealth.

However, each time we use them they become part of a consumption process.

The consumption process might produce either the complete destruction of the product (for example if we use weapons or weaponry, or we eat food) or we can destroy just a part of it producing a waste.

This waste still migh have a value if technology can recycle it. Or might have not any value if we simply destroy it.

Therefore we define another process, recycling, that uses the value of wastes and adds it either to a renewable source of raw materials or directly into the production process.

[Xi Ling]

Here we see in more detail each of the key parts of the process, in particular those who differ from the traditional perspective.

[Xi Ling]

These slights are related very much to book keeping and how we aggregate value to corporate banlace sheets and P&L, and to macro economic indicators. Both in traditional ways and under more modern perspectives.

In you are interested on any of them, please tell me. I will be more than happy to elaborate.

 

[xieu...@gmail.com]

Economic structure (1)

The part of economic sciences that study the actual economic processes
for improvement
through economic policies.

Structure is a model with its parameters fixed. One can discuss
properties of a model with various parameters, but 'structural‘
properties are those that are fixed unless parameters change.

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[xieu...@gmail.com]

Economic structure (2)

In macro-economics, economic structure departments aims to offer
economic structures that satisfy social and politic requirements.
Economic structures, as economics, is a tool, not a goal.
----------------------------------------------------
"Economic structures, as economics, is a tool, not a goal". This is a
very important difference with other apporaches, we do not necessarily
look for growth, higher sales, moderate inflation, etc. We are
humbler, we help to build economic structures that satisfy whatever
people migh want. Always under an economic point of view, of course.

But not all individuals and all communities, corporations, countries,
etc. want the same.

If a community wants growth (GDP growth) that is what have to help
for. If a community wants to improve consumer confidence index (CCI)
that is what we have to help for, even if that goal means zero
growth.

[Xi Ling]

In this two slights we make the first exercise to define indicators. And we see that it is not so easy as one might think.

For example, if we have to define indicators for "saving", we have to think for a while what "saving" means in each particular case. Therefore, sometimes our first task is to agree on a precise definition of the concepts that we use.

Savings could seem related to "value", traditional monetary units. Or to natural resources, or to less work, etc.

Also, we have to discern differences among concepts that apparently look similar. In this particulaer case, between "saving" and "sustainibility" from a "green" perspective. Because we can realize that they are different concepts. Saving is related to lower usage while sustainibility is related to a model that might last forever.

The second problem is to find indicators, parmeters, that identify if we are reaching such goals. And also, once that model is in `place, to identify indicators that allow us to realize if the economic structures is behaving as people (decission makers) want or if it must be fixed somehow through some policies.

[xieu...@gmail.com]

And finally we attack the case example that we stated the first day.

A certain village wants to create a new economic structure. Local
officers define these priorities:

Each citizen shall have food enough as defined in a basket of goods.

Each couple and each single shall own one house.

Final structure must be sustainable (both under ceteris paribus and
uder omnia mobilis assumptions)

Current situation.
100 citizens. 50 houses.
Savings = 1,000 €pp, Net income = 1,000 (*) €pp/month. Basket of food

pp/month: 30 bread + 30 apple per month. Price per piece = 1 €
1 house = 100,000 €,, monthly expenses 200 €
This village produces 1 tn. of wheat per year harvest in one month. <>
1,000 breads a month, 5,000 apples a month (when harvest 0 apples)
Unemployment rate out of harvest seasson= 80%, (income=0 €)
unemployment in harvest=0%
Situation in villages around is alike

(*) Use Gini index=50 if you already want to use it or flat equality
if not.


Assumptions
Ceteris paribus. Assumptions that we need to check with local
authorities (suppose that they agree on all of them).
Omnia mobilis. Define assumptions related to current situation,
uncertainties and important risks (migration, migration upon gender,
import, export, prices, etc.) and therefore indicators.

(Further readings. Is it Possible to Relax Ceteris Paribus Assumption
in Economic Models?and Beyond the Ceteris Paribus Assumption: Modeling
Demand and Supply Assuming Omnia Mobilis. 2007. and Mario Arturo Ruiz
Estrada, Yap Su-Fei, Shyamala Nagaraj. University of Malaya.)

Homework

Translate requirements to the final set of parameters, constrains and
values

Define policies to be stated in order to achieve such goals. Define
monthly milestones.

Defines risks (both under ceteris paribus and under omnia mobilis)

End of first phase.

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[xieu...@gmail.com]

Sorry.I have to add something.

These sort of exercises have infinite solutions. In fact, many
solutions are related to the assumptions that we do and ussually, that
we have to agree with decission makers.

For example. This example would be trivial if we assume that the
village is rish or if the village can get as uch funds as it wants
from its province, state, or whatever, or if we can convince a
corporation to come to the village and do exactly what we want.

Or we can make this example extremely complex if our assumptions are
very restrictive and even enter into ecological en technologic
contrains.

In first steps, the aim if to be familiar with indicators,
requirements, assumptions, policies, risks, etc.

This village will be refined deeper and depper in further phases, adn
will be part of higher communities (provinces, countries, etc.)
offering different sort of indicators as required by those broader
communities.

Peace and best wishes.

Xi

[Justice]

Usual example:

When you write that the final “structure” must be sustainable, I don’t
exactly know which structure you are talking about. The house, the
economics, the family? There are different “costs” for each and
different solutions for each.


Under “what we have to do” you write "final set of parameters" – are
you asking how to accomplish one home for each couple and single? How
many are of each? How many homes do we actually need? Or are they
already there?

Constraints? What are the constraints? Do we need work for everyone
when it’s not apple/wheat season? Are we trying to create another
economy that is not land-based to take care of workers for the rest of
the time AND generate more income?

I didn’t do the math – probably I should to see if the problems are
inherent in the math and maybe the shortages or overages are obvious.

If you have provided a problem where the houses are in place (any
mortgages ? – you mentioned expenses which I assume include heating,
cooling, machinery breakdown or loss of roof or flooding) and the food
meets the minimum needs you outlined then I guess we are talking about
using the savings in order to develop a more “sophisticated” economy
to take care of people in the off season and help them when they must
purchase seeds and fertilizer to keep their own economy running.

Does this unit only feed itself? Are there surpluses to sell? Is it
a closed circle? Do they need to eat anything besides wheat and
apples?

---------
Suggestion: try to solve this problem for yourself – not in your head
but on paper, and see what information, if anything, you need to add
to it to make it totally understandable before you can answer your
questions.




On Sep 25, 10:48 am, "xieu.l...@gmail.com" <xieu.l...@gmail.com>

> > or whatever.- Hide quoted text -
>
> - Show quoted text -

[xieu...@gmail.com]

Great !

Thank you very much !

(((((Justice)))))

The first step is to make assumptions and to validate them with
decission makers. In this case, the student has to produce such
assuptions and to rolepay as a decission maker. Therefore, any answer
to your questions is correct. (Except Do they need to eat anything
besides wheat and
apples? because decission makers told us that the basket of food is
that one, 30 breads and 30 apples, although maybe we can suggest them
something else if we want, or we can assume that they would produce
something else and sell it in markets at a certain price, but it would
make the example a bit "fantastic" or trivial depending how we use
such invent).

I have to unveil a trick about couples. I guess that nobody will use
any demographic model (it would be terrific LOL) combined with
marriage habits such as average age to create a family. In that case,
the only assumption that we can do is that we need as many houses as
citizens, we know that many of them will not be occupied but, unless
decission makers give us a certain constraint related to spare time
between a couple is build (or a divorce) and people find an apropiate
house, we could not use any algorithm or technique to answer your
question. Thus, my advise, have as many houses as individuals.

<<Suggestion: try to solve this problem for yourself – not in your
head
but on paper, and see what information, if anything, you need to add
to it to make it totally understandable before you can answer your
questions. >>

I did it. There are many answers and many structures that satisfy the
requirements that decission makers gave us. Our first step is to be
familiar with this sort of problems,

[xieu...@gmail.com]

<< When you write that the final “structure” must be sustainable, I
don’t exactly know which structure you are talking about.  The house,
the economics, the family?>>

I am sorry. Also, I will suggest in the step to limit it to the
economy of that village. But the question is very relevant.

On Sep 25, 6:57 pm, Justice <JusticeWithh...@gmail.com> wrote:

[Justice]

These charts are very helpful in the overall understanding. Clearly
you have worked out about 3 months worth of work here, yes? It will
take a lot of time to work out these "real world" models.

There is an overall I want to ask about. Some of the wording seems to
assume that these are Chinese villages (checking with the authorities
comes to mind) that may not be the actual way a Spaniard approaches
these problems.

Maybe all things being equal - means that these circumstances don't
change in order to find a solution.

Maybe change is constant -- means that the rules change when the
instructor adds or subtracts another variable.

Am I clear that the "politics" will make it relevant for the students
or not. If you account for the method or steps to consider how we
approach the problem, it will be more "real world" to them???

And then one other general comment. It is always better to introduce
a concept when you intend to use it, rather than say it, and then
disregard it right away as you did above with "In traditional models,

the price that we pay for resources is just what the owner (a
corporation) of those resources charge on its invoice. From a global
perspective, we should not act like that. We will see it a bit

later." This is a warning without a context. Maybe if all solution
are local and the global differences are set out at another time. Or
if all solutions but this one are both local and global then it is
grand exception??? I do not know.
.

And example would be if I show you my city, and start to talk about
buildings that we have just passed as opposed to telling you before we
get there, and then slowing down so that the words I have said and
continue to say is relevant to exactly what you are seeing.

It's a matter of timing of course. Presenting the answers or the
solutions or the terminology only as they are needed so that they can
be practiced at that moment.

Does anything help you? I feel so out of my safety zone, as I
approach my teacher with words that may not meet her needs.

Now in the next hours I must study these charts to see if I understand
them or if I need to ask you to clarify. What I have seen so far
seems very understandable to me, but again, I didn't work on the
original problem and so in a sense, I am not working from a real life
example that I can pull apart and examine.

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[Justice]

I just looked at the top again and I see you remarked that these are
lecture notes -- one lecture? No, it can't be for just one lecture
can it? So much information? Really?

[Justice]

I have to explain myself. I didn't re-read what I wrote. I was just
questioning in my head.

1) some of the wording appears to reflect the way in which this
problem would be solved in a Chinese village. I point to the example
of checking with authorities. Is that what a Spainard would do, check
with the authorities? It will be more real world to them if the
processes you identify come from their political world. What would be
an example of checking with authorities? About what issue?

2) I was just guessing at what your latin phrases might mean in the
solution of the problems you are presenting. What does all things
being equal actually mean? Is it a term of art in Economics? Will
the students know how to apply that? It is the same with Change is
constant, which is how I interpret omnia mobilius. Again, this might
be a term of art that is applied in a very structured way.

3) Again I get back to the example, and ask you if your real world
village is Chinese or Spanish? Putting them in a village of their own
with their own real world problems will make it more interesting and
more understandable. Whatever the "politics" of the place -- checking
with authorities -- if you respect those in your problems, it gives it
another dimension. Instead of just learning from a book, they now
have the sensation that they are getting a feel for something about
which they may have some familiarity.

4) The last one seems clear to me. I was on a little more solid
ground when I made that question, since I have some idea about
imparting information at the time it can be used.

I'm sorry for all the gibberish. I should do the problem.

On Sep 25, 5:23 pm, Justice <JusticeWithh...@gmail.com> wrote:

[Mercury.Sailor]

How can you pay for a 100,000 house making only 1,000 a month? How
many years would it take to pay that house off?

On Sep 25, 10:48 am, "xieu.l...@gmail.com" <xieu.l...@gmail.com>

[xieu...@gmail.com]

Thank you very much (((((Mercury)))))

You are right. It would take about 9 years if they save all their
money and then buy a home. Obviously it is imposible, firstable
because those who only work in harvest hardly survive even while they
are not paying a house.

In this phase when we do not want to handle many variables, there are
several options.

1) To share houses in first stages. One buys, several rent. We should
make some assumptions (such as a constraint that limits the maximum
number of people dwelling in the same home)
2) To increase net incomes, in particular those who work only 1 month
per year. Also, we have to make asumptions on what they should
produce,and when.
3) To create taxes and subsidiase houses with them.

It is posible to use these, or other policies that one can invent, at
the same time.

Thank you very much !

Peace and best wishes.

Xi

[xieu...@gmail.com]

I started to work in September, this month, but, I have studied most
of these models years ago.

I expect to cover this in 5 hours along 5 days plus their homework
with case examples.

1) <<some of the wording appears to reflect the way in which this
problem would be solved in a Chinese village. >>

Yes. On the one hand, bosses here want that I teach Chinese
methologies (the Western approach is completely diferent). On the
other hand, I try to force myself to use the word "decission makers"
instead of "authorities". I know that, in Spain, decission makers use
to be a group of people that includes authorities, wealthy people,
politicians, high managers of local important companies, some people
with strong influence since years ago, etc. it is not so clear and
structured as it is in China but they seem to be the people who really
make decissions according to what people tell over here.

Politics will play an important role in further steps as we have to
define organization models. Based on private companies? based on
cooperative corporations (workers own the company)? based on communes?
village-owned companies? etc. All types of organization provide
solutions, I mean this methodology does not force any particular type
and allows to compare all of them if decission makers so want.

2) Yes, those are technical words extensively used in economics.
Ceteris paribus is how 99.99% of economists around the world works. It
is when you define a particular structure and you assume that the rest
of the world has no influence on it, somehow, it does not change how
you change one particular value . Then you can work with one parameter
(it can be a parameter that combine several ones) while all the rest
stay unchanged. Then you could repeat such process with each parameter
and finally you have a rough idea of the final value of all of them
using several techniques. Results are not so precise as using omnia
mobilis.

Omnia mobilis means that when you change one value all the rest change
accordingly. This approach is much more difficult to handle, but this
is how the real world works. Techniques to use this approach are very
recent, but according to my mentor in Beijing it has started to be
ready to use for real works this year and first robust approaches are
done in 2007. Probably most students are not aware of it. That is why
I give them some clues on how to handle it as some people developed in
Malaysia (recommended by my mentor in Beijing, so it must be robust
enough). The approach that we will use is described in "beyond ceteris
paribus" assuming that only a particular set of parameters are really
relevant for our problem (I give some examples such as migration
related to gender, etc.) when each particular value changes and
defining risks and indicators that allow us to control the validity of
our model in the future.

3) I invented this village. It is not a real village, although I
checked my notes in August when I went home to refresh it from when I
studied it in Shijiazhuang, we used a similar invented village, so
somehow it is an invented Chinese village. Anyway, in further steps we
enhance this village with more constraints, more parameters, new
requirements, etc. I mean, the model grows with each lecture.

This problem /temporary unemployment) is real in some parts of Spain,
in particular in Andalucia. They have a particular subsidy for
unemployment in those cases. I checked it. I could use another village
based on fishermen, but my knowledge about fishing is very limited and
I did not feel so "safe", also, their incomes are not so predictible
as in farmery (except natural disasters).

4) Yes, you are right. Maybe I have to change the timing and pass the
modern value chain flows after the example has been explained to let
them think about it while they work in this case example although they
are using traditional parameters only.

Thank you very much !!!!

((((((Justice)))))

Peace and best wishes.

Xi

[Justice]

On the one hand, bosses here want that I teach Chinese
methologies

I suspect, maybe I'm wrong, that they want you to teach that Chinese
people save in their banks before they do anything else. In other
words, they pay themselves first and foremost, and then with the
remainder they work out how everythig else must be paid. If that
means there will be less for food or less for expenses, so be it.

If I am right about this assumption, then there are elements within
your problem that you MUST transfer to a spanish model so that they
can integrate it into their own lives.

If you teach a Chinese model using Chinese props (all elements) it
will be removed from them in a way that you do not wish it to be.
Your model will be "over there" and their own way of living will be
"over here."

You want to integrate it I suspect. I don't think you have to go to a
fishing village -- I think there are enough agricultural places around
for you to use -- Valencia for sure. oranges instead of apples. And
rice instead of wheat -- don't they eat more rice instead of wheat??

anyway, I can't wait to see your answer.

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[xieu...@gmail.com]

About savings. Spanish people (and European people) save enough during
good times to pass bad times comfortably. I think that Spanish bosses
want that students learn something else. Let me explain.

In very capitalistic economies, economists do not design economic
structures. Supposedly, they are market driven, the market creates the
structure. Europe is not so capitalistic as USA is, I think they are
cherrypickers too, or cherrypickers-alike. Therefore economists have
to design economic structures, yes.

But universities use capitalistic approaches, therefore they do not
teach how to create an economic structure, how to define economic
policies, how to define indicators, etc. They just teach standard
indicators (GDP, CPI, etc.) how they relate to each other, how to
study and how to model (but not how to design) economic structures,
and also they teach local, regional and global economic structures (in
this particular case they teach economic structure of Spain, of Europe
and the global one).

In Europe, at least in Spain and in some other countries as I have
been told, once students find a job in governments suddently they have
to work in a new economic policy or to design a new economic
structure, and economists do not know how to face such challenge
because they never did before.

That is just my opinion. Nobody told me why they want that I teach
this, therefore I could be wrong.

There is a part that I do not understand. <<If you teach a Chinese

model using Chinese props (all elements) it will be removed from them
in a way that you do not wish it to be. Your model will be "over
there" and their own way of living will be "over here.">>

About wheat and apples. I learned that around Madrid they have a lot
of wheat, this area is called Castilla, it is their main harvest, that
is why I used wheat. I used apples because I remember that people have
them in Cataluña (I was in an organic farm over there during a trip at
the end of 2007). I have been told that the only fruit that they have
in Madrid and surrounding areas is grape for wine, and I did not want
to push alcoholism during lectures LOL (that is true, they could make
lot of jokes about wine instead of serious work)

Peace and best wishes.

Xi

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