RMI2302 Final Study Guide MODULE 10 The role of economic reasoning Overview o World poverty and economics o Causes of poverty and requisites of economic growth o Can governments help World poverty and economics o Our insatiable wants Our wants and desires spur economic activity o Our limited means Resources are scarce Technology Labor and capital The capacity of the economy to produce o GDP Primary measure of production Total value of production using market prices Doesn t take into account ownership Needs food water shelter and clothing Wants entertainment communication variety brownies unlimited GDP as the economic pie Doesn t tell us what is produced Production possibilities produce o Every economy has a stock of resources labor and capital and technology to o How they re combined to produce goods and services is virtually limitless o If only two products o Can be represented by the production possibility curve Can t government use GDP to measure well being o Are we producing more Real GDP o Are we using more labor resources Per capita real GDP What causes poverty o Quality of the labor force how well educated o Stock of capital capital accumulation o Technology o Efficiency o Population What can governments do o Less developed countries Communism vs capitalism Planned vs unplanned economy Attracted FDI Foreign Direct Investment Involvement in education Infrastructure o Developed countries Humanitarian aid World bank loans Partnership cooperation Outsourcing MODULE 11 Global Risks Report 2014 Overview o Many risks do not respect national borders o Survey of 700 experts o Orient and inform decision makers o Objectives Explore the nature of systemic risks Map 31 global risks Three constellations youth cyberspace geopolitics Underlying themes in reports o Trust o Long term thinking o Collaborative multitask holder action o Global governance Part 1 understanding systemic risks o Some definitions Global risks occurrence that causes significant negative impact for several countries and industries over a time frame of 10 years Systemic risk breakdowns in an entire system as opposed to breakdowns in individual parts or components Characterized by failures Modest tipping points combining indirectly to produce large Risk sharing or contagion as one loss triggers a chain of others Hysteresis or systems being unable to recover equilibrium after a shock o Categories of risk 31 global risks divided into 5 categories Economic Environmental Geopolitical Societal Technological o Risk analysis Risk analyzed along 3 parameters Highest concern qualitative Likelihood and impact quantitative Interdependence systemic o Top 10 highest concerns o Fiscal crisis in key economics Causes of fiscal crises Lack of confidence High level of government debt Results of fiscal policy o Structurally high unemployment underemployment o Water crises Connected to extreme weather Water security Not just a third world concern Cal FL Impact of food availability and prices o Severe income disparity o Failure of climate change mitigation and adaptation Economic growth vs climate change Vulnerability who can adapt best Cost 100B per year for developing countries Time 100 years until poorest countries can adapt as well as we can today o Greater incidence of extreme weather events o Global governance failure o Food crises o Failure of a major financial mechanism institution o Profound political and social instability The global risk landscape o The 31 risks mapped based on likelihood and impact o Includes the breakdown by the 5 categories Economic Environmental Geopolitical Societal Technological Urbanization Existential threats o Others Trends to watch o Demographic trends aging o Societal concerns extremism youth unemployment gender inequalities o Technological privacy mismanagement o Environmental fracking o Science and technology 3D printing self drive vehicles o Economics monetary policy o Social and political cost of living longer Part 2 risks in focus 3 specific risk foci o Geopolitical risks Low level conflicts Geopolitics and systemic sectors Energy US as exporter Financial services Healthcare o Youth risks o Cyber risks Education and unemployment Spain Greece 50 youth unemployment Professional vs formal education Education vs training Youth dissatisfaction and politics Digital disintegration So far cyberspace has proven resilient Cyber warfare Smart grid Global navigation satellite systems GNSS Snowden Disruptive technologies Strategies for managing global risks RM process ID risk 1 2 Prioritize top risks 3 Undertake risk assessment 4 5 Design crisis management strategy 6 7 Monitor ID risk management options Implement Strategy for managing global risks issues o The trade offs o Public private partnerships o Long term thinking o Large scale disasters MODULE 12 Natural disasters and the human population Overview Natural hazards Human population Natural disasters Natural risk assessment frequency magnitude Population size location demographics transitions exponential growth and carrying capacity Natural hazards But they are no humans there to experience it What is it o Natural hazards or disaster What makes it a disaster o Fatalities damage economic effects o Costliest or deadliest What is the difference between a natural disaster and a great natural disaster o Death toll damage effect on economy o Not a clear definition Recent disasters What is recent o Human vs geological timeframes o Typhoon Haiyan this week Philippines 10k dead o Earthquake Tsunami Japan 2011 Killed 19 k 330k buildings destroyed nuclear meltdown Ocean water 6 miles inland Insured losses 35B economic losses 200B o Earthquake Haiti o 1918 flu 230k killed of 10M 2 3 of population killed 8M dead in WW1 3 of world s population died 50M The role of government in natural disasters Gregory van der Vink study o 80 of deaths from disasters in 15 countries China Bangladesh Indonesia Of these 15 countries 87 below democracy index 73 below median GDP Deaths from natural disasters can no longer be dismissed as random acts of nature high risk areas with very poor people why Because they re not in the better areas Human response to disasters People tend to be altruistic in times of emergency Creates incentives in non emergency times o Why prepare for these disasters when others will help when I need it Why spend money when bailout is coming Economic losses 35 of top 40 insured losses o US Japan Europe Infrastructure biggest difference Role of insurance helps
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