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Free exchange

The geography of povertyWorking out how to help the worlds poorest depends on where they live

S-a demonstrate ca majoritatea populatiei sarace a globului (sub 2 $ pe zi) traieste in tari cu veniturimijlocii (MIDDLE INCOME), adica tari care isi pot ajuta singure populatia saraca printr-o politica adecvata =>ajutorul din afara devine irrelevant ( de asemenea aceste tari mai pot fi clasificate pe criteriul - GDP per capintre $1000-$12500 ). Aici avem mai ales pe China si India, care au devenit middle-income.

Totusi, acesta tendinta este in continua schimbare. DIN 1990pana acum numarul populatiei sarace dintarile middle-income a scazut de 4 ori de la 2,000 mil la 500 mil, in schimb numarl oamenilor saraci din tarsarace se mentine la 500m oameni, si va creste si mai mult pana in 2025.

Concluzii: Cei ce ofera ajutoare art b sa se concentreze pe tarile fragile, a.i. acestea sa poata devein mstabile. Cat despre tarile middle-income, ajutorul art b sa fie mai ales acela de co-directiona mai bine ajutoarstatului spre populatia saraca.

Space lifts

A lunatic idea?Building a lift to the moons surface might make routine visits feasible

A ajunge pe orbita lunii este un lucru greu, insa nu la fel de greu ca a ateriza pe luna. Pentru aterizarelui Neil Armstrong, s-au folosit masinarii f scumpe.

Intr-o conferinta de pe 25-27 August, s-a adus ideea construirii unui tub intre luna si un satelit care saorbiteze in jurul acesteia, prin care sa se poata cobora cu greutati de pana la 200kg pan ape suprafata lunii.

Materialele necesare nu pot fi construite sau testate pe Pamant intrucat nu exista un material suficentputernic pentru a face acest lucru si pentru ca ar fi irrelevant deoarece, Luna are o gravitatie de 6 ori mai mic=> pot fi folosite material care pe Pamant ar ceda.

Desfasurarea operatiunii ar fi pe 8 ani si $ 800 mil.

** Exista dj turism spatial: 7 turisti au existat dj. 1 dintre ei de 2 ori! Costul = $150mil .

Solar lighting

Lighting the wayEnergy technology: Cheaper and better solar-powered electric lightspromise to do away with kerosene-fuelled lanterns

Noul dispozitiv al viitorului = lampile cu energie solara, la fel de revolutionare ca si telefoanele mobile. Vor puteaajuta cele 1.4 mld oameni care in momentul de fata nu au acces/ au putin acces la energia electrica.

** In zona ecuatoriala soarele apune f repede, existand doar o scurta periaoada de inserare/apus. **

In momentul de fata pentru crearea luminii de la lampi este folosit Kerosenul. Economiile ce s-ar putea face prinaceasta schimbare ar fi de approx. $10mld /an pentru cei 1.4 mld si $36 mld/ an world wide.

In momentul de fata este approximat ca in Tanzania (exista energie electrica pentru 2 ore) consumul de kerosenreprezinta 10-25% din venitul unei familii.

** Lampile cu Kerosen sunt folosite de mai bine de un secol, insa produc o lumina de la care nu se poate citi +particulele eliberate in aer pot produce malformatii pulmonare. chiar si cele mai de baza lampi depasesc pe cele cukerosen**

In New York, Kenya si Cambridge exista initiative sau devices capabile sa asigure sis a mentina circuite electricepentru o familie intreaga. Costul consumului unei astfel de energii este din cel pentru kerosene, iar investitia poate fiamortizata in 18 luni de catre cei ce o cumpara.

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Purchasing power parityFrom Wikipedia, the free encyclopedia

http://en.wikipedia.org/wiki/File:GDP_PPP_per_capita_2009_IMF.pnghttp://en.wikipedia.org/wiki/File:GDP_PPP_per_capita_2009_IMF.pnghttp://en.wikipedia.org/wiki/File:GDP_PPP_per_capita_2009_IMF.pnghttp://en.wikipedia.org/wiki/File:GDP_PPP_per_capita_2009_IMF.png

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GDP per capita adjusted for purchasing power parity (PPP) in the world, 2007

Purchasing power parity adjustment for the world (2003). The economy of the United States is used as a reference and is set 100. Bermuda has the highest index value at 154; this means that goods sold there are more over priced than in the US.

Purchasing power parity (PPP) is aneconomictheory and a technique used to determine the relative valueofcurrencies,estimating the amount of adjustment needed on theexchange ratebetween countries in order for the exchange to be equivalto (or on par with) each currency'spurchasing power.[1]It asks how much money would be needed to purchase the same gooand services in two countries, and uses that to calculate an implicit foreign exchange rate. Using that PPP rate, an amount ofmoney thus has the same purchasing power in different countries. Among other uses, PPP rates facilitate international

comparisons ofincome, as market exchange rates are often

volatile, are affected by political and financial factors that dolead to immediate changes in income and tend to systematiunderstate the standard of living in poor countries, due totheBalassaSamuelson effect.

The idea originated with theSchool of Salamancain the 16tcentury and was developed in its modern form byGustavCasselin 1918.[2][3]The concept is based on thelaw of oneprice, where in the absence oftransaction costsandofficialtrade barriers, identical goods will have the same pricdifferent markets when the prices are expressed in the samcurrency.[4]

Another interpretation is that the difference in the rate of change in prices at home and abroadthe difference in the inflationratesis equal to the percentage depreciation or appreciation of the exchange rate.

Deviations from parity imply differences in purchasing power of a "basket of goods" across countries, which means that for thpurposes of many international comparisons, countries' GDPs or other national income statistics need to be "PPP-adjusted" aconverted into common units. The best-known purchasing power adjustment is theGearyKhamis dollar(the "internationaldollar"). Thereal exchange rateis then equal to the nominal exchange rate, adjusted for differences in price levels. If purchaspower parity held exactly, then the real exchange rate would always equal one. However, in practice the real exchange ratesexhibit both short run and long run deviations from this value, for example due to reasons illuminated in theBalassaSamuelstheorem.

There can be marked differences between purchasing power adjusted incomes and those converted via market exchangerates.[5]For example, theWorld Bank'sWorld Development Indicators 2005estimated that in 2003, oneGeary-Khamis dollarequivalent to about 1.8Chinese yuanby purchasing power parity[6]considerably different from the nominal exchange rate. Tdiscrepancy has large implications; for instance, when converted via the nominal exchange rates GDP per capitainIndiaisaboutUS$1,704.063[7]while on a PPP basis it is about US$3,608.196.[8]At the other extreme,Denmark'snominal GDP per

capita is around US$62,100, but its PPP figure is US$37,304.

[edit]Measurement

The PPP exchange-rate calculation is controversial because of the difficulties of finding comparablebaskets of goodsto compurchasing power across countries.[citation needed]

Estimation of purchasing power parity is complicated by the fact that countries do not simply differ in an uniformprice level;rather, the difference in food prices may be greater than the difference in housing prices, while also less than the difference inentertainment prices. People in different countries typically consume different baskets of goods. It is necessary to compare thcost of baskets of goods and services using aprice index. This is a difficult task because purchasing patterns and even thegoods available to purchase differ across countries. Thus, it is necessary to make adjustments for differences in the quality ofgoods and services. Furthermore, the basket of goods representative of one economy will vary from that of another; America

eat more bread, Chinese more rice. Hence a PPP calculated using the US consumption as a base will differ from that calculausing China as a base. Additional statistical difficulties arise with multilateral comparisons when (as is usually the case) morethan two countries are to be compared. Various ways of averaging bilateral PPPs can provide a more stabile multilateralcomparison, but at the cost of distorting bilateral ones. These are all general issues of indexing; as with otherprice indicesthis no way to reduce complexity to a single number that is equally satisfying for all purposes. Nevertheless, PPPs are typicallyrobust in the face of the many problems that arise in using market exchange rates to make comparisons.

For example, in 2005 the price of a gallon of gasoline in Saudi Arabia was $0.91 US, and in Norway the price was $6.27US.[9]The significant differences in price wouldn't contribute to accuracy in a PPP analysis, despite all of the variables thatcontribute to the significant differences in price. More comparisons have to be made and used as variables in the overallformulation of the PPP.

When PPP comparisons are to be made over some interval of time, proper account needs to be made ofinflationaryeffects.

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PPP levels will also vary based on the formula used to calculate price matrices. Different possible formulas include GEKS-Fisher,Geary-Khamis, IDB, and the superlative method. Each has advantages and disadvantages.

Linking regions presents another methodological difficulty. In the 2005 ICP round, regions were compared by using a list of some 1,identical items for which a price could be found for 18 countries, selected so that at least two countries would be in each region. Whthis was superior to earlier "bridging" methods, which is not fully take into account differing quality between goods, it may serve tooverstate the PPP basis of poorer countries, because the price indexing on which PPP is based will assign to poorer countries thegreater weight of goods consumed in greater shares in richer countries.

[edit]Need for PPP adjustments to GDP

Gross domestic product (by purchasing power parity) in 2006

The exchange rate reflects transaction values fortraded goodsbetweencountries in contrto non-traded goods, that is, goods produced for home-country use. Also, currencies aretraded for purposes other than trade in goods and services, e.g., to buycapital assetswhoprices vary more than those of physical goods. Also, differentinterestrates,speculation,hedgingor interventions bycentral bankscan influence theforeign-exchange market.

The PPP method is used as an alternative to correct for possible statistical bias. ThePenn World Tableis a widely cited source of Padjustments, and the so-calledPenn effectreflects such a systematic bias in using exchange rates to outputs among countries.

For example, if the value of theMexican pesofalls by half compared to theUS dollar, the MexicanGross Domestic Productmeasurin dollars will also halve. However, this exchange rate results from international trade and financial markets. It does not necessarilymean that Mexicans are poorer by a half; if incomes and prices measured in pesos stay the same, they will be no worse off assuminthat imported goods are not essential to the quality of life of individuals. Measuring income in different countries using PPP exchangrates helps to avoid this problem.

PPP exchange rates are especially useful when official exchange rates are artificially manipulated by governments. Countries withstrong government control of the economy sometimes enforce official exchange rates that make their own currency artificially strongcontrast, the currency's black market exchange rate is artificially weak. In such cases, a PPP exchange rate is likely the most realistbasis for economic comparison.

Since global PPP estimates such as those provided by the ICP are not calculated annually, but around once every f ive to ten yePPP exchange rates for years other than the benchmark year need to be updated. This is done using the country'sGDP deflator. Incase of calculating the PPP exchange rate of a country's currency inGearyKhamis dollarsfor a particular year, the calculation is asfollows:

Where PPPrateX,i is the PPP exchange rate of country X for year i, PPPrateX,bthe PPP exchange rate of country X for the benchmark year, PPPrateUthe PPP exchange rate of theUnited States(US) for the benchmark ye(equal to 1), GDPdefX,i is the GDP deflator of country X for year i,

GDPdefX,b is the GDP deflator of country X for the benchmark year,GDPdefU,i is the GDP deflator of the US for year i, and GDPdefU,b is the GDP deflator of the Ufor the benchmark year.

[edit]Difficulties

There are a number of reasons that different measures do not perfectly reflect standards of living.

[edit]Range and quality of goodsThe goods that the currency has the "power" to purchase are a basket of goods of different types:

1. Local, non-tradable goods and services (like electric power) that are produced and sold domestically.

2. Tradable goods such as non-perishablecommoditiesthat can be sold on the international market (likediamonds).

The more that a product falls into category 1, the more that its price will be from the currencyexchange rate, moving towards the PPexchange rate. Conversely, category 2 products tend to trade close to the currency exchange rate. (See alsoPenn effect).

More processed and expensive products are likely to betradable, falling into the second category, and drifting from the PPP exchanrate to the currency exchange rate. Even if the PPP "value" of the Ethiopian currency is three times stronger than the currencyexchange rate, it won't buy three times as much of internationally traded goods like steel, cars and microchips, but non-traded goodlike housing, services ("haircuts"), and domestically produced crops. The relative price differential between tradables and non-tradafrom high-income to low-income countries is a consequence of theBalassa-Samuelson effectand gives a big cost advantage to labintensive production of tradable goods in low income countries (likeEthiopia), as against high income countries (likeSwitzerland).

The corporate cost advantage is nothing more sophisticated than access to cheaper workers, but because the pay of those workersgoes farther in low-income countries than high, the relative pay differentials (inter-country) can be sustained for longer than would bthe case otherwise. (This is another way of saying that the wage rate is based on average local productivity and that this is below thper capita productivity that factories selling tradable goods to international markets can achieve.) An equivalentcostbenefit comes f

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non-traded goods that can be sourced locally (nearer the PPP-exchange rate than the nominal exchange rate in which receipts arepaid). These act as a cheaperfactor of productionthan is available to factories in richer countries.

The Bhagwati-Kravis-Lipsey view provides a somewhat different explanation from the Balassa-Samuelson theory. This view states tprice levels for nontradables are lower in poorer countries because of differences in endowment of labor and capital, not because oflower levels of productivity. Poor countries have more labor relative to capital, so marginal productivity of labor is greater in richcountries than in poor countries. Nontradables tend to be labor-intensive; therefore, because labor is less expensive in poor countrieand is used mostly for nontradables, nontradables are cheaper in poor countries. Wages are high in rich countries, so nontradables relatively more expensive.[4]

PPP calculations tend to overemphasise the primary sectoral contribution, and underemphasise the industrial and service sectoralcontributions to the economy of a nation.

[edit]Trade barriers and nontradablesThe law of one price, the underlying mechanism behind PPP, is weakened by transport costs and governmental trade restrictions, wmake it expensive to move goods between markets located in different countries. Transport costs sever the link between exchangerates and the prices of goods implied by the law of one price. As transport costs increase, the larger the range of exchange ratefluctuations. The same is true for official trade restrictions because the customs fees affect importers' profits in the same way asshipping fees. According to Krugman and Obstfeld, "Either type of trade impediment weakens the basis of PPP by allowing thepurchasing power of a given currency to differ more widely from country to country."[4]They cite the example that a dollar in Londonshould purchase the same goods as a dollar in Chicago, which is certainly not the case.

Nontradables are primarily services and the output of the construction industry. Nontradables also lead to deviations in PPP becausthe prices of nontradables are not linked internationally. The prices are determined by domestic supply and demand, and shifts in thcurves lead to changes in the market basket of some goods relative to the foreign price of the same basket. If the prices of nontradarise, the purchasing power of any given currency will fall in that country.[4]

[edit]Departures from free competitionLinkages between national price levels are also weakened when trade barriers and imperfectly competitive market structures occurtogether. Pricing to market occurs when a firm sells the same product for different prices in different markets. This is a reflection of icountry differences in conditions on both the demand side (e.g., virtually no demand for pork or alcohol in Islamic states) and the suside (e.g., whether the existing market for a prospective entrant's product features few suppliers or instead is already near-saturatedAccording to Krugman and Obstfeld, this occurrence of product differentiation and segmented markets results in violations of the lawone price and absolute PPP. Overtime, shifts in market structure and demand will occur, which may invalidate relative PPP.[4]

[edit]Differences in consumption patterns and price level measurementMeasurement of price levels differ from country to country. Inflation data from different countries are based on different commoditybaskets; therefore, exchange rate changes do not offset official measures of inflation differences. Because it makes predictions aboprice changes rather than price levels, relative PPP is still a useful concept. However, change in the relative prices of basketcomponents can cause relative PPP to fail tests that are based on official price indexes.[4]

[edit]PPP and global poverty line

The global poverty line is a worldwide count of people who live below an international poverty line, referred to as the dollar-a-day linThis line represents an average of the national poverty lines of the world's poorest countries, expressed in international dollars. Thenational poverty lines are converted to international currency and the global line is converted back to local currency using the PPPexchange rates from the ICP.

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