A part of my chapter: Institutions and information

It takes me a long time to read, think and understand what the book is talking about. I am still reading the book 'The Economics of Business Enterprise'- Martin Ricketts- Page 16-20. Now i just focus on the meaning of this section: Institutions and information (PART 1: Basic concepts) So that i just have a look on dictionary briefly and have some note-taking what i read.

INSTITUTIONS AND INFORMATION:
FIRMS:
- characterised by a system of bilateral contracts, or 'nexus of contracts' (in more complex case- agreement is signed between employees, bondholders, landowners and a 'legal fiction' such as: BP, US Steel)
- formed as an institutional response to transactions costs.

CONTRACTS:
imperfectly specified, because the lack of specificity abtains from the simple fact that the precise details of the contract is made at the same time when requires the employees of a firm maybe unknown.

INFORMATION:
- collected concerning opportunities for productive collaboration, on the skills and attributes of employees, on new technical innovations, on the demands of consumers
- transmited to the relevant decision-maker who must choose, implement a plan of action.

INSTITUTIONS AND CONTRACT ENFORCEMENT:
THE EXCHANGE GAME:
I found that international trade as the exchange game. That is very simple, interesting although it is not true in practice, but i like the way thw writer wrote. I will explain what is exchange game. Firstly, have a look of this table

The structure of payoffs in a game of exchange:

		Company A
		Cooperate	Cheat
Company B	Cooperate Cheat	1,1 (a) 2, -1 (b)	-1,2 (c) 0,0 (d)

I supose in the commercial world, there are 2 firms: company A and B. A sells 1 product x, B sells 1 product y. The goods exchange will be happened if A and B sign the contract. In practice, there are 4 cases could be happended:
(a) A and B trust together and cooperate. Each company will get what they want.
(b) A cooperates but B cheats in which A sent his goods x to B before receiving y from B as the B's promise in contract. It means A will receive nothing and lost his goods. So A got -1 goods, B got 1 x and 1 y.
(c) The same case (b)
(d) If A say that please send your goods firstly and then i will send you back my goods. B also say that. Then noone believe each other. It means no comercial exchange.
The reason of these transactions will be explained in next chapters. I am still reading ..

However, to understand that i have to scan these new vocabulary:

- equilibrium method: a condition of balance between oppsed forces
- instantaneous: occuring or completed without perceptible delay
- reconcile: to bring (oneself)) to accept; to make compatible or consistent, reconcile opposing views
--> All transactions are costlessly and instantaneously reconciled.
- gi'gantic: extremely large or extensive, huge
- myriad (a) constituting a very large, identifinite number
(n) a vast number
--> The economy is made up of a myriad of individual contractors, each one in an comprehensive only with painstaking effort, have many complexly arranged elements.
- contractor: one that agrees to perform services at a specified price, especially for construction work
--> contractual (a)
- institution: an established custom, practice or relationship in a society
- firms: a commercial partnership of 2 or more person especially when unincorporated
- rationale: a fundamental reason, rational basic
- sufficient (a) being as much as it needed
- bilateral contracts: contract between 2 sides
- single proprietor: an owner, as of a business, small business
nexus of contracts: a connected services or group, a means of connection, link
- discretion: freedom of action or judgment
--> The choice was left to our considerable discretion.
- collaborate: to work together
--> productive collaboration
- forth (adv) out into view
- implement a plan of action
- decentralise: to cause to withdraw from am area of concentration, to distribute (phan quyen dia phuong)
--> The outcome of entirely decentralised decisions
- conscious decisions of planners: capable of thought, will, perception, deliberate (nhan thuc ro dieu dang xay ra)
- initial characterisation of the firm: su bieu thi dac diem, mo ta tinh cach
- advantage (n)--> advantageous (a) cooperation
- comlementary (a) forming or serving as a complement supplying mutual needs/lacks, addition (su bo sung)
--> complimentary: express a compliment (ca ngoi)
- possession: a territory subject to foreign control
- coalition illustrated: an alliance or union, especially a temporary one (khoi dong minh)
- payoff: a final settlement or reckoning, a bribe
- symmetrical: doi xung
- outcome=result
- dilemma: a situation that requires a choice between options, usually equally unfavourable or mutual exclusive(doc quyen): tien thoai luong nan
- sucker: who is cheated easily

Lecture: Free Business and Economic System

Segment 3: 1.3 (Clip 3) Free Enterprise & Economic Systems (0:23)

I don't listen lecture for a long time because of many reasons. So i try to take note another chappter of internet lesson today. Basically, i understand it widely in the way i had read from a book before but my knowledge is not deeply. That is why i should read more on my subject, but i think many books connected to business is difficult to choose the best one. Finally i think i will search something what i don't understand.

This is my note-taking of this lesson:

1. Business: Definition

- organized effort of individual and organisation.

- to produce and sell product--> profit

(profit is so important for enterprise to do business and for shareholder, customer)

2. Fundamental Business Resources:

- Human resource

- Information resources: know partner, customer

- Material resource(for manufacturing)

- Financial resource

--> Businesses must combine aff 4 resources to produce goods and supply service

3. Economic system: society's rules: allocating its resources--> produce, distribute goods and service for consumption.

- Impacts economic growth and development.

- Different society as different approach.

4. Types of economic system:

- Communism: everyone have the same benefit, without differrent classes

- Socialism: distribute based on needs, reallocate resources, get higher tax to provide social programme. Everyone don't have high income individually because they work hard, they pay more tax.

- Capitalism: business really sastisfy, don't react well, have a lot of mechandise of goods

5. Key feature of US 'Free Enterprise' system:

System of business in which individual are free to produce, sell

- Customer freedomm of choice

- Private ownership of land and real property

- Competition: among business for the customer's dollar

- Supply and demand: determined by customers'demand

ex: my money is my choice, can get and decide, but careful in terms of procedure. It doesn't work well bu law.

- Circular flow: of money for labour, resource and capital exchang

- Business cycles: driven by growth and contraction--> profit motives for reinvestment

6. Circular Flow of resource in ' Free Economics' system:

I have drawn a diagram on this section (circular flow), but i don't know why i can't copy and paste here.:-(
First disadvantage of this website i found.

7. Types of competition:

Competition - the rivalry mong businesses for sales to potential customer

- Pure competition: many sellers and buyers--> must accept going price

- Monopolistic competition: many buyers, large sellers--> buyers compete with product differences.

- Oligopoly: few Seller--> each Seller consider price control

- Monopoly: only 1 seller--> buyer complete control overprice

+ Natural monopoly: require huge capital

+ Legal monopoly: with partner, copyright or trademark (but a lot od money on design, advertisment)

Short video clip about USA economy:

USA 's business: Function of value production: you can compete in global world.

Expenditure is changing: 95% world population outside USA, a lot of people dirnk a alcohol because some companies oversea increase their profit by cheap row material (not available in their countries) or they adapt new technology.

A company has 2: comparetive advantages, absolutely advantages, for example, Brazil has advantage of producing coffee, South Afria has advantage of dimond.

Technology can do product better in quality, cheaper in price. Marketing is a key effect on brandname.

Dictionary

As Steve's suggestion, i found a dictionary connected to my subject: Business economics. To buy a heavy dictionary is not convenience to bring anywhere i need to look up so that i found it on internet like Cambridge Dictionary Online which i often use for academic purpose.





Here is my dictionary:
Business Dictionary Online
Oxford dictionary of business ( book on amazon)


Economic Dictionary Online:
Dictionary 1
(explanation of economic terms in detail)

Dictionary 2
(explanation of economic terms briefly)

Dictionary 3
(explanation of economic terms briefly and grammar, comparison)

Oxford dictionary of economics (book on amazon)

Lecture 3: Basic for international Business- Ken Wendeln, MBA

http://www.imds.iupui.edu/imds/W200bb.shtml
Segment 1: 2.1 (Clip 4) Basis for International Business (0:12)

Here is my note-taking after searching a suitable topic for a long time:

BUSINESS IN GENERAL:

1.WHAT IS INTERNATIONAL BUSINESS?
Exchange across national boundaries:
- Absolute advantage- ability to produce special goods more effective than any other countries
- Comparative advantage: - ability to produce special goods more effective than other countries
--> Goods and service products : more effective when one country specialise

2. PRINCIPLE OF NATION 'S COMPARATIVE ADVANTAGE:
- Lower cost labour markets
- Financial market

- Technology
- Nation resource
- Geographic areas
Why?
- Cheap price products
- Financial market are now global market
- With technology, internet..per add decrease value
- Companies easy bring work to employees
- Easy move to another countries

3. ARTIFICIAL RESTRICTIONS ON INTERNATIONAL TRADE:

Tariff Barriers:

+ Import duty (tariff)

+ Dumping = drive reduce price

Non-tariff Barriers:

+ Embargo-complete halt to trade of product

+ Import quota

+ Foreign exchange control

+ Currency devaluation--> increase cost of foreign exchange rate

Reason for and against trade restriction:

For restriction:

+ Balance of trade

+ Protect industries

+ Protect domestic jobs

+ National security

+ Health of citizens

+ Retaliate for another nation's restriction

Against trade restriction:

+ More prices for customers

+ Restricts of customers' choice

+ Misallocations of international resources

+ Loss of jobs

GATT- General Agreement on Tariffs and Trade (established in 1947) - Reductions in Trade Tariff and Barriers --> Big driver

WTO- dedicated or reducing or eliminating tariff or other barriers of trade

I can take note this lecture because i have read on a book before, and because the lecture is shown by slides. I feel better now.

First lecture:Global Financial Volatility- Robert Engle

http://www.abc.net.au/rn/bigidea/stories/s1360308.htm

I searched the aboved website on google but it is dfficult for me to understand although i listen to it twice. Not nearly i don't understand but i can't connect the meaning of the issues from the lecture. Or perhaps i don't like this subject what limits me to listen. I wonder why i can recognise many words but i can't connect the meaning of whole subject from those words the lecturer speaks. Maybe it is not enough time for me to connect it.

So i change topic but what i found is the website without transcript or without listening like:
http://www.slideshare.net/GregFish/top10-basic-business-principles/
http://www.lse.ac.uk/collections/meetthedirector/articlesReviewsAndLectures.htm

It is what i am looking for:
http://www.ft.com/cms/a5dd621a-e39d-11dc-8799-0000779fd2ac.html?_i_referralObject=470090835&fromSearch=n

FT Business school: Global Financial Volatility: Day 1


I am very suprised myself by my very limited understanding after listening. When i read the transcript, my understanding is more than 50% but it is so bad at listening (30%). Absolutely, disappointed myself.

Here is my poor taking-note:

- What is volatility? volatility of financial market, global market perspective
+the number is high--> high volatility
+the number is low--> low volatility
+ volatility: essential aspect, key feature in financial market

- Example of USA financial market
How much change evaryday?
market increase very high--> very high volatility--> turn down--> stuck on= called volatility

- Patterns in different asset class:
+IBM: 40%
+S&P: 20%...
--> Question: Why are volatilities different across asset class?
Answer: Yes, depends on the profit of the company and how long have to wait to get them

Transcript:
http://www.ft.com/cms/s/2/aa135dd4-36ba-11dc-9f6d-0000779fd2ac,dwp_uuid=27e7df5c-2e44-11dc-821c-0000779fd2ac.html

Robert Engle: Hello, I’m Robert Engle. I’m a professor of finance at the Stern School of Business of New York University. We are here in the heart of Manhattan and we’re going to talk about volatility.
Volatility’s a subject that’s very close to my heart because I won the Nobel Prize for my volatility research in 2003, but this is a topic that’s of interest to everybody. It’s of interest to traders in Wall Street, it’s of interest to CEOs of major corporations and it’s of interest to individual investors.
We’ll spend five days talking about various aspects of the measurement, the explanation and the consequences of volatility in our complicated, modern world. So why don’t you come on up to my office and let’s begin.
Welcome to my office. We’re going to talk about volatility. We’re going to talk about volatility of financial markets and take a global perspective. When I say volatility, I want you to think about the newscaster who comes on the news every day and says the market is up or the market is down. If those are big numbers, then we say the volatility is high; if they’re small numbers, volatility is low.
It’s this kind of a bumpy ride that makes investors uneasy about investing in the stock market, or in fact in any other financial asset. But in fact, the volatility is an essential part of financial markets because otherwise they wouldn’t be able to do their job. They wouldn’t be able to allocate resources to the highest and best companies because if prices never changed then there would be no chance for small companies to become large companies or large companies to decline.
So volatility is a key feature of financial markets. And I’d like to take you on a little tour of the US financial markets from a volatility point of view.
If we look at the first slide, you can see what’s happened to the Standard and Poor’s 500 asset price for the last 40 years. In the blue curve you see on the left has started at a low value and has basically risen dramatically over this 40 year period with a fairly sharp decline at the end of the sample. From a volatility point of view we’re going to be interested in the rate of change of that index, and that’s shown on the top. For every day we look at how much it changed from the previous day. The top curve is a volatility picture, and when we say that the volatility is high, what we mean is the amplitude of that curve is high, and when volatility is low, the amplitude is low.
So let’s take a look at a couple of episodes. Turn to the next slide. We see that the periods when volatility is high are exactly the same as the periods when the market is in decline. So, you look below an episode of high volatility, you can see in the blue curve, the market is declining.
If you look on the next slide we see the period in the middle 90s when volatility was very low. In fact it was a record low for the time. That’s when I first started consulting for Wall Street, and when I went to Wall Street they asked me, why is volatility so low and is it likely to stay low? One of the things I had learned about volatility was that it tends to mean revert so that when it’s low, ultimately it comes back up again, and when it’s high, ultimately it declines.
Well, it turns out that was the right answer. As you can see by looking further to the right on that graph, when we came to the market increase around 2000, which we now call the internet bubble, we see very high volatility corresponding to high levels of risk for stock investing at that point in time.
And on the next slide you see what happened afterwards. The market turned down. We had a substantial decline in the level of the S&P 500 but we also had high volatility as this market declined. So this is all a discussion about stock market volatility, but what about other financial assets? In fact all financial assets have some degree of volatility and we can take a look at what it is.
If we look at the next graph we have a chance to look at the volatility by asset class, and what we’re calculating is the standard deviation of the returns calculated on an annualised basis for a period from 1997 to 2003. And the first bar on this chart is for IBM stock. The volatility for IBM is about 40 per cent, and that means that if you invested in a portfolio which was just IBM stock, this portfolio would have a volatility of 40 per cent. If you look at other large-cap stocks like General Electric and Citigroup and McDonalds and Wal-Mart, you see those are all between 30 and 40 per cent. This is a lot higher than the S&P itself, which has a volatility of about 20 per cent over this period, as you can see in the next bar on the chart. And that illustrates immediately the advantage of diversification because the broad index has a lower volatility than its components.
Looking further on this chart you can see some small-cap companies that have volatilities that range from 30 per cent to 70 per cent, and some small-caps have much higher volatility even than this. Fixed income assets also have volatility because interest rates change, and if you look at the next segment of the graph you can see a small green square which illustrates the volatility of the one month treasury bill. That is very low, which means it’s a very safe, un-volatile asset. The five-year bond is a little more volatile. The 20-year bond has a volatility of about 10 per cent.
So the question that you probably are wondering is, why are these volatilities different across asset classes? Is there anything that we can say from economics that would help us understand those differences? Well, I think the answer is yes, but the first thing we have to do is we have to say, why are asset prices what they are anyway?
The price that you’re willing to pay as an investor for a share of a company stock depends on what you think the future profits of this company’s stock are and how long you’re going to have to wait to get them. The more profitable the company, the more you’re willing to pay for its stock. Some assets are more volatile than others. We have to talk about how important the news is.
For small-cap stocks the news is very important. We really wonder whether a small -cap stock is the next Microsoft or whether it’s going to go bankrupt. Every piece of information that tells us whether this is an up-and-coming company or one that’s not going to make it, is tremendously important, so the volatility of small-cap stocks is very high.
So this news theory of volatility is pretty successful in explaining the qualitative features across asset classes. What about across countries? Could we use this news theory to explain the difference in volatility across countries?
Well, on the next graph we’ve got the median volatility of the equity markets of each of about 50 countries over the same sample period, 1997 to 2003. And what you’ll see is that these median volatilities range from about 10 per cent to about 50 per cent. So that is, they range from the volatility of the bond market to the volatility of a small-cap stock. What do we see when we look at the countries? Well, the low volatility countries are Chile, the UK, Australia, New Zealand, Austria, Canada and a few others. The high volatility countries are Turkey, Korea, Brazil, Finland, Russia and many others, and there’s a whole range in between. Can we talk about the news in a way that enables us to explain why these countries are different from each other?
Well, you’ll have to wait because we’re going to have to develop some more tools before we can do that, but that’s going to be one of the goals of our research this week.
Come back tomorrow and we’ll talk about measuring volatility when it’s changing over time.


New word/ phrase:
volatile (adjective) likely to change suddenly and unexpectedly
volatility (noun) tell something unstable
degree of volatility
median volatilities range
un-volatile asset
consequences of volatility (n)
complicated (a) involving a lot of different parts, in a way that is difficult to understand
global perspective (n) a particular way of considering something (vien canh, phoi canh)
Her attitude lends a fresh perspective to the subject.
newscaster (n) someone who reads out the reports on a television or radio news programme
bumpy ride (n) (informal) to have a difficult time
bumpy (a) not smooth
allocate resources
blue curve (n) a line without straight parts
fairly sharp decline
amplitude (a) a large amount, wide range (bie^n do^.)
couple of episodes (n) a single event or group of related events
episodic (a) (formal) happening only sometimes and not regularly
The war between these two countries has been long-drawn-out and episodic.
revert to doing something/revert to somebody (v) to return to doing, using, being or referring to something, usually something bad or less satisfactory
- Why does the conversation have to revert to money every five minutes?
- A woman's maiden name is the family name she has before she gets married.
- When they divorced, she reverted to using her maiden name.
- A woman's maiden name is the family name she has before she gets married.
ultimately it declines (adv) finally, after a series of things have happened ( more emphasize the most important fact in a situation)
bubble (n) a ball of air in a liquid
afterwards (adv) after the time mentioned; later
And on the next slide you see what happened afterwards.
substantial decline (a) large in size, value or importance
We had a substantial decline in the level of the S&P 500.
asset class
deviation (n) something which is different from the usual or common way of behaving (di chech huong)
what we’re calculating is the standard deviation of the returns calculated on an annualised basis for a period from 1997 to 2003.
annualised (a) specialise
diversification (n) <-- deversify The more profitable the company, the more you’re willing to pay for its stock
For small-cap stocks the news is very important.
go bankrupt (n) legal unable to pay what you owe
up-and-coming company
Can we talk about the news in a way that enables us to explain why these countries are different from each other?
--> enable someone to do something

My subject: Business Economics

I am still reading my book relating to my subject: 'The Economics of Business Enterprise'- Martin Ricketts. Although i was studied "comparative advantage" - David Ricardo (1772-1823) who was a famous economist, i feel difficult to read it again in English. The explaination is a bit different but i can understand basically. What called 'basic concepts' are the consumption levels with no trade, the gains from trade.

In my understanding, a country always has a advantage and disadvantage compared to another country. However, the importance is that a such country recognizes what its advantage and focuses on it It means a country should specialize in producing its' advantage goods and exchanging to another goods with another countries where have different advantage. This also creates a larger goods market or a new allocation of consumption.

business vocabulary

I received an email of my MSc Business Economics Course from Londonmet last week. They sugested me find some books related to my subject and read in advance. I found 'Business Economics' of Thompson, 2000 and some new vocabulary from it.

alocation (n) delivery
contract (v) to shorten
(n) agreement
equilibrium (n) a state of balance
moral hazard (n) risk, danger
moral (a) good or bad behaviour, fairness, honesty
rationality (n) reasonablity
nexus (n) link, group
communal (a) public
alienable (a) can transfer
managerial (a) relating a manager, management
entrepreneur (n) someone who starts their own business, especially when this involves risks
enterprise (n) factory, business organisation
observability (n) the ability of absering/ watching/ noticing
incentive (a) encourage
idiosyncratic (a) special characteristic
boundary (n) the edge or limit of something
breach (of faith and the takeover) (v) to break a promise, agreement, rule
hold-up (n) delay
bureaucracy (n) the system of managing a country
neoclassical (a) new classic
radical (a) believing or expressing the belief, basic view
critique (n) critic
flotation (n) remark, outstanding something
scarcity (n) rarely, something is not too easy to find
convention (n) agreement, for examble: Geneva convention
norm (n) standard
purely (n) completely
asymmetry (n) with two halves, sides or parts which are not exactly the same in shape and size
enormously (n) vast, giant
explicit (a) clearly
bilateral (contract) 2 parties in a contract
elaborate (v) disbrice something in detail


I also found the link of this book on internet so that i can reread it after i return this book to library. It is really an interesting book of business.
http://books.google.co.uk/books?id=lhLkGTFHOGIC&dq=the+economics+of+business+enterprise+-+martin+ricketts&pg=PP1&ots=rF3aA53FkB&sig=440k7x7RSnStu2QBp7jURFYOENo&hl=en&sa=X&oi=book_result&resnum=1&ct=result