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THE SCHUMPETERThe Economics Society Magazine
Issue 4
theschumpeter.blogspot.com
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The Economics Society Magazine isfunded by member contributions, and
relies on the contribution of students
and lecturers for articles. If you wouldlike to get involved writing for us
please email:
Government : Problem or Solution?
Adrian Booth
How Hoarding Helps
Timothy Robinson
Brave New World
Folarin Araromi
En Route to Golden Glory
Fahad Memon
Defending Defence
Balraj Singh Sura
The Sky Wars
David Osborne
From the Department
THE SCHUMPETER CONTENTS
News & Extra
Economics
Society
News
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the Economics Society, pleasesign up using the Students Un-ion Website
In the First week of the New
term, there will be a social forthe Economics Society. Further
details of this will be availableat the Re-Freshers fayre on the26th of January.
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Brave New World
Folarin Araromi
Written in 1931, Aldous Huxleys BraveNew World gives a bleak vision of a fu-ture where technology has altered the face of
humanity, and people have become nothing
more than cold, empty automatons, existing
only to fulfil a predetermined function. Usu-
ally pronounced as a chilling prophecy of the
tide of things to come, many tend to overlook
its value as a disturbingly poignant commen-
tary on the contemporary issues of 20th cen-
tury western social climate. Issues that have
amassed even greater weight today in a soci-
ety that strives to exist at the cutting-edge.
However, with modern science breaking newand hazardous ground on an almost daily ba-
sis, there is a fear the rapid advance of technol-
ogy in recent years may very well soon bring
us to the brink of Huxleys nightmare.
One may ask how the byzantine technol-
ogy and unbending social Darwinism of Brave
New World relates to economics, much less
the bright-eyed, happy-go-lucky liberal econ-
omy of the modern west? It is in that econom-
ics provides the medium to discuss the grow-
ing concerns surrounding the increasing
prevalence of technology in society, and its
implications not only on the economy but our
individual rights and liberties. The digital
revolution of the 1980s saw the birth of the
personal computer, symbolising humanitys
evolution from the archaic mechanical ana-
logue system to radical new methods of digital
processing. Correspondingly, Moore's Law de-
scribes a common trend in computing, in
which the number of transistors on an inte-
grated circuit doubles approximately every
two years. Beyond the desktop, Moore's Law is
effectively a business practice based upon an
exponential growth in technology; a growth
society bore witness to throughout the late20th century. While technology may have ad-
vanced humanity beyond its wildest dreams,
how many of us actually know where its go-
ing? We are still a long way away from the war
-stricken streets customary to many works of
dystopian science fiction, but the precipitous
advent of technology has produced gadgets
and gizmos that present the possibility of a
world where technology may infringe upon
our identity and freedom.
Modern society is built upon a founda-tion of technology that has a long and trying
history. A history that stretches beyond the
20th century, back to the 18th century and the
Industrial Revolution, marking the transition
from manual labour to machine-based manu-
facturing. Thus the demand for technological
innovation arose from the need to achieve
greater operational efficiency, as to thereby
better satisfy consumer demand. But technol-
ogy has had just as much to do with economic
reform as social reform. Computers were oncepredicted to be able to facilitate complete cen-
tral planning of the economy, but as weve ex-
perienced for ourselves technology has played
a far more eminent role in globalisation and
the expansion of the free market. The digital
revolution radically changed the way individu-
als and businesses interact. Small companies
were suddenly given access to much larger
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markets, and consumers now had the power to
trade with businesses on the other side of theworld at the touch of a button.
The study of economics itself is becom-
ing increasingly technologically inclined,
adopting elements from relatively new fieldssuch as engineering and computer science. So
whilst we may live in a society that assigns the
highest value to order, if engineering methods
are taken out of the laboratory and imposed
on the people, it could potentially undermine
the economic and political foundations of soci-
ety. Economic theory dictates greater degrees
and sophistication of technology results not
only in productive efficiency, but in greater
economies of scale. However, large firms have
a distinct advantage because the research &development required for technological inno-
vation now requires access to vast economic
resources. From substantial amounts of money
needed to finance the research, to owning the
resources and facilities available to attract the
highly specialised labour characteristic of the
technological industries. The result of this is
that only the biggest firms possess a competi-
tive advantage, and it is from this that we start
to see monopolies emerge. Additionally, we
may find that emerging technologies, such asthe computerised prosthetics produced by
Touch Bionics of Edinburgh, would be dispro-
portionately available to those with greater
financial resources, thereby exacerbating eco-
nomic inequality. The underlying problem is
that with reduced contestability, existing firms
actually have less incentive to develop new
technologies, limiting productive efficiency
and thereby impeding the progress of technol-
ogy. Interestingly, this highlights the impor-
tance underlying the debate over intellectual
property, in conjunction with decentralised
distribution systems, such as the internet. As
the cost of information tends towards zero,
with ever more efficient tools being designed
every day to distribute information to an in-
creasingly large consumer base, the rate of dis-
intermediation in markets is escalating. This
presents the possibility of a future where tech-
nology grows at such a rate that the positive
externalities arising from the elimination of
asymmetry in the markets are outweighed by
subsequent nullification of variations neces-
sary for competition.
Huxley envisaged a world where the role
of technology is to create the conditions in
which a select few combine control over all
social, political and economic aspects of life, to
in effect manufacture society. While one can
certainly applaud the rise of technology for
helping to further bring all aspects of life and
the universe under the reign of rational sci-
ence, the rules and ideals that have defined the
social systems in place today are becoming
increasingly permeable. Nonetheless, technol-
ogy is a tool of not only economic but philoso-phical vision. However, despite the social pro-
gress it has instigated, and despite all our so-
phistications we exist in what is still very
much a Darwinian world. Technology may be
the greatest force for social and economic evo-
lution, but humanity as we know it has no
master plan in store, and we have yet to un-
cover a grand architect hiding behind the cur-
tain. Therefore the burden lies upon us to en-
sure the successful convergence of social and
technological progression, and enforce the de-mocratic measures needed to ensure the risks;
cost and benefits are shared equally amongst
all stakeholders in the future.
THE SCHUMPETER BRAVE NEW WORLD
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Government: Problem or Solution?
Adrian Booth
The eight most dangerous words in theEnglish language, according to RonaldReagan, are Im from the Government, and Im
here to help. The debate among economists
and policymakers today is not whetherthe
markets need more regulation, but how much
regulation they require. The argument put for-
ward by pro-regulation economists is that the
crisis would not have occurred had regulation
been much tougher and government not been
as passive. The argument put forward by those
against regulation is that government involve-
ment causes the problem it intends to solve.
In 2004, the Bush Administration askedthe Federal Housing Administration to lift the
down-payment requirement altogether for
150,000 new homeowners. Bush declared, To
build an ownership society, well help even
more Americans to buy homes. Some families
are more than able to pay a mortgage but just
dont have the savings to put money down.1
The President of the United States had a goal
to abolish traditional lending standards, which
were enforced to minimise the risk of mort-
gage defaults. Even today, we see policymak-ers acting indecisively; trying to curb risky be-
haviour in the banking sector and simultane-
ously trying to force them to lend money out.2
The debate over having a systemic risk
regulator is also rarely challenged and is ac-
cepted for granted by economists as some-
thing necessary to ensure stability. In a paper
delivered to the Eurobank EFGs conference on
real estate in 2006, two economists at the Fed-
eral Reserve presented a paper declaring that
there was no bubble in the housing market.Richard Peach and Jonathon McCartney wrote,
House prices have been rising strongly
prompting concerns that a bubble exists and
that home prices are vulnerable to a collapse.
A close analysis of the US housing market finds
little basis for such concerns...the upturn in
home prices is attributable to strong market
fundamentals.3 Even during 2006, at the
height of the largest credit bubble in world
history, Ben Bernanke said in a speech in Las
Vegas, Our examiners tell us that lending
standards are generally sound and are not
comparable to the standards that contributed
to broad problems in the banking industry two
decades ago. In particular, real estate appraisal
practices have improved.4 The main qualifica-
tion to be a systemic risk regulator is to spot
systemic risks. If an institution cannot meet
this criterion, its hard to justify giving them
the position.
Some argue it was the position of the
government to encourage risky lending and
expand homeownership that contributed to
the bubble. In 1999, the New York Times re-
ported on Fannie Maes recent easing of credit
requirements to low income families. Fannie
Mae is whats known as a Government Spon-
sored Enterprise or (GSE). This means that
although Fannie Mae (along with sister com-pany Freddie Mac) is privately owned, they
have an implicit guarantee from the govern-
ment which means the government would not
allow them to default on their debt or go bank-
rupt. Its a typical example of privatising prof-
its and socialising risks as all risks would be
placed on the taxpayer.
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The problem with Fannie and Freddie is
because they have special privileges granted
by the Federal government, they distorted the
housing market by attracting capital that could
not have been raised under pure market con-
ditions. This directs capital to the GSEs and
raises the cost of capital for everyone else. The
Treasury department ironically admitted this
in its Treasury Report in 1996: "While the
benefits of GSE status provide an important
subsidy that promotes homeownership, such a
subsidy has economic costs... The economic
effect of the subsidy to mortgage credit--
absent increases in the savings pool or attract-
ing capital from abroad--is to raise the price or
reduce the amount of credit for other uses,
such as small businesses, exporters, rural com-munities, and other business and consumer
borrowers.
If exposed to the ruff-and tumble rigour
of the free market, these companies would
have never existed. As a result of the distortion
and subsidy by the government, capital was
diverted from its most productive use and
placed into housing. The initiative, the Times
wrote, would encourage banks to extend
home mortgages to individuals whose credit is
generally not good enough to qualify for con-ventional loans. Fannie Mae had been under
increasing pressure from the Clinton Admini-
stration to expand mortgage loans among low
and moderate income people.5 One of the pro-
grams goals was to increase the number of
minority and low-income home owners who
[tended] to have worse credit ratings than non
-Hispanic whites.6 It is a weak argument to
blame risky behaviour on the free market and
call for more government regulation when
policymakers are most responsible for encour-aging and subsidising these risky practices.
Fannie Mae recently posted a net loss of
$18.9bn in the third quarter 2009. They also
submitted a request to the US Treasury for
$15bn to cover their deepening losses. Non-
performing loans are also digging Fannie
deeper into the red. Total nonperforming
loans in our guaranty book of business
were $198.3 billion, compared with $171.0
billion on June 30, 2009, and $119.2 billion on
December 31, 20087. By bailing out the GSEs,
this merely directs resources (capital) to un-
profitable and inefficient enterprises. No econ-
omy can remain viable as long as capital is be-
ing forcefully diverted into wasteful and un-
economical ventures.
References:
1 Chris Reidy, Zero-down Mortgage Initiative by Bush
is Hit: Budget Office Says Plan Likely to Spur More
Loan Defaults, Boston Globe, October 5, 2004
http://www.boston.com/business/
articles/2004/10/05/
zero_down_mortgage_initiative_by_bush_is_hit/
2 Suzy Jagger, Government will compel Lloyds and RBS
to lend 27bn to SMEs, The Times, October 10th,
2009
3 Jonathon McCarthy and Richard W. Peach, Are Home
Prices the Next Bubble? Economic Policy Review
10, December 2004
4 Ben Bernanke Speech to Independent Community
Bankers of American National Convention, Las
Vegas, Nevada, March 8, 2006; http://
www.federalreserve.gov/BoardDocs/
Speeches/2006/20060308/default.htm
5 U.S. Department of the Treasury, "Government Spon-
sorship of the Federal National Mortgage Associa-
tion and the Federal Home Loan Mortgage Corpora-
tion," July 11, 1996, pg 78
6 Steven A. Holmes, Fannie Mae Eases Credit to Aid
Mortgage Lending, New York Times, September 30,
1999 http://www.nytimes.com/1999/09/30/business/fannie-mae-eases-credit-to-aid-mortgage
-lending.html
7 Ibid
8 Fannie Mae Third Quarter Earnings News Release
http://www.fanniemae.com/media/pdf/
newsreleases/q32009_release.pdf
THE SCHUMPETER GOVERNMENT: PROBLEMOR SOLUTION
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pic Committee (IOC). Beyond the period of the
event, the Beijing Olympic Economic Research
Association estimates that foreign tourist
population will grow between 8 to 9% annu-
ally in ten years from 2008.
Londons Organising Committee for the
Olympic Games (LOCOG) has similar acts in
place, in preparation for 2012. Innovations to
East London via the construction of Olympic
Park and Village in Stratford and IOC-required
amendments to public transport, such as the
Olympic Javelin rail service, serve as direct
examples to the designated plans for the
Games. The London Underground is scheduled
for numerous other improvements to rail line
services until 2012, in order to construct faster
and more effective facilities for the public andvisiting tourists in time for the Games.
Business opportunities related to the
Olympic Games of 2012 have given rise to a 5
billion worth in contracts. More specifically,
the construction of the highly-regarded Strat-
ford-based projects will reportedly create an
approximate 30,000 jobs for the industry dur-
ing its production period.
Londoners are expected to reap addi-
tional benefits through funding arrangements
made by the likes of the Greater London Au-thority, whom have contributed 925 million
to the Olympic Delivery Authority for purposes
of regeneration and building of facilities that
will assist the citys population for generations
to come. The London Development Agency is
providing 250 million towards infrastruc-
tural costs for Olympic venues and 220 mil-
lion for cleansing services for the Park.
Rising budgetary costs, however, have
led to criticisms with regard to the addedbenefits not being worth their costs. Promises
made by the London 2012 Olympic bid and
LOCOG chairman, Lord Sebastian Coe, suggest
otherwise: that a Legacy 2012 plan is being
considered, to take account of the uses for the
facilities after the summer of 2012.
The UK sporting calendar, yet, occupies
numerous other events of significance
(preciously five) before the Olympics even
come into play. 2010 sees golfs Ryder Cup to
be held at Newport, Wales; the Womens
Rugby World Cup to be held in locations in
Surrey and London, and the World Lacrosse
Championships scheduled in Manchester. The
2011 International Children's Games, an IOC-
sanctioned event, are scheduled in Lanark-
shire, Scotland while Wembley Stadium hosts
the 2011 UEFA Champions League Final.
In the aftermath of the 2012 Summer
Olympics in London, the UK has been selected
to host the 2013 Rugby League World Cup.
Thereafter in 2014, Glasgow hosts the Com-
monwealth Games while the Ryder Cup ap-
pears for the second time in the UK during the2010s at the Gleneagles Hotel in Scotland. Eng-
lands hosting rights, at present, conclude with
the Rugby World Cup and Cricket World Cup
to be held in 2015 and 2019 respectively. De-
spite the impressive list, however, the UK does
not appear satisfied just yet: for bids are cur-
rently in place for the 2018 FIFA World Cup as
well as to host the American football phe-
nomenon that is: the Super Bowl. Moving for-
ward from the first ten years of the second
millennium, the United Kingdom, with Londonat the forefront; is heading into a well-worded
golden decade for British sport.
2012 Olympic Stadium (Photo by David Osborne)
THE SCHUMPETER EN ROUTETO GOLDEN GLORY
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Defending Defence: Why is the US Military Budget so Big?
Balraj Sura
Throughout his career, Obama has alwaysbeen an outspoken critic of the dumbwar in Iraq. It comes as no surprise therefore
that now as President of USA, the man of
change has announced the imminent with-
drawal of troops from Iraq stating that
[Americas] combat mission in Iraq will end
by August 31st, 2010. Despite this with-
drawal and winding down of operations in
Iraq, the 2009 Budget sees the Department of
Defences Military Budget rise 5.7% from 2008
to an astonishing $515.4 Billion; and that does-
nt include the cost of operations in Iraq and
Afghanistan which is forecast to cost another$170 Billion in 2009 alone! Obama would tell
you the US military budget is set to decline in
the coming years, but I believe the US budget is
too important a GDP injection for it to be al-
lowed to significantly decline. So I pose the
question: What does the US military budget
contribute to the US economy?
The pie chart below shows Global mili-
tary spending in 2008 and the US accounts for
~47% of the total, which means the US spends
more on defence than the next 45 highestspending nations combined; clearly the US
military budget is the largest in the World but
what is it comprised of, and how does it affect
the economy?
The first major component of the US
budget is wages. The US military as of 31st
January 2009 employs 1,452,337 with addi-
tional plans to grow the Army and Marine
Corps by 2012. Due in part to its large popula-
tion base (~305 Million in 2009), the US has
the 2nd largest military force in the World and
of course, the Total Wages come to a high sum;
$110.4 Billion in 2007 is forecast to grow to
$125.2 Billion in 2009. This is a significant
amount of Taxpayer money being spent on
wages but even if just a proportion of this in-
come returns to the US economy, it would cre-
ate a wave of spending and this boost to con-sumption in the US economy would of course
make a large addition to the US GDP once the
Money Multiplier has been applied.
The US Military is not just a large per-
sonnel based force but also boasts the largest
Navy and Air Force, with 284 currently opera-
tional ships (including 11 aircraft carriers) and
around 5,778 active aircraft as of 2007. It also
has a large amount of armoured personnel car-
riers and vehicles (M1 Abrams tanks, Humvees
etc) and the vast majority of this equipmentcan be sourced to a US company. Lockheed
Martin, Northrop Grumman, Boeing, General
Dynamics, Bell and Sikorsky Aircraft; all estab-
lished US companies specialising in Defence
and Aerospace which have/
had major contracts with
the Government.
Lockheed is a case in point;
the US has currently ac-
quired 97 F-22A RaptorFighter Jets from them at an
eye-watering $142.6 Million
(as of 2009), each! In 2007,
an astounding 91% of Lock-
heeds revenue came di-
rectly from the Government,
while the Government con-
tributed 78% of the total
United States - $711
(47%)Europe - $289 (20%)
China -$ 122 (8%)
East Asia/Australasia
-$120 (8%)
Middle East/North
Africa -$82 (6%)
Russia - $70 (5%)
Latin America - $39
(3%)
Central/South Asia -
$30 (2%)
Sub-Saharan Afirca -
$10 (1%)
2008 Global Military Spending
Total = $1.473 Trillion
in Billions of US $
(including % of total)Source:International Institute for
Strategic Stu dies, The Military
Balance 2008, U.S. De partment of
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revenues of Northrop Grumman and General
Dynamics. The vast majority of the estimated
$104.2 Billion procurement budget proposed
for 2009 will go towards US companies, there-
fore being injected back into the economy.
Unlike in Europe where the Eurofighter Ty-
phoon was a joint venture between many na-
tions in a bid to share costs, the US is able to
bankroll these militaristic investments single-
handedly and most of the time, it chooses to do
so in domestic firms, meaning the revenue
stays within the country. The Government
alone virtually props up these Aerospace and
Defence firms and this of course creates em-
ployment throughout the nation. This money
not only leads to wages and spending in the US
but of course reinvestment, which brings meon to my next point.
The US military is not only responsible
for procurement within the Billions every year,
but it actively invests Billions of Dollars in
Military and Defence Projects. Its safe to say
America is at the forefront of weapons and
arms development and a look at the Research,
Development, Test and Evaluation section of
the 2009 budget shows why, with $79.6 Billion
being penned solely as investment. Lockheeds
2,480 registered patents and Northrops 1,843patents are testament to the extent of R&D re-
quired to survive in this highly competitive
industry. This section of the budget helps new
and established firms cover the large costs of
development, resulting in such projects as the
Buffalo-H vehicle and the iconic F-117 Night-
hawk Stealth Attacker and helping these US
firms grow and flourish.
The US Government creates an injec-
tion of spending in the economy through mili-
tary personnel wages and by bringing businessto US weapons and vehicles contractors. Not
only do they procure the majority of their
equipment from US companies, but are also
heavily involved in capital formation and back-
ing R&D within these companies. It would ap-
pear that the military budget plays a major
role in the US economy but is this Government
spending the best use of resources to boost the
economy?
In May 2007, Dean Barker released the
paper The Economic Impact of the Iraq War
and Higher Military Spending. Barkers model
predicts that high military spending leads to a
short run boost to demand but inflation and
unemployment in the long run. He compares
high military spending to spending on the en-
vironment because resources would be
pulled away from their market directed uses,
resulting in slower growth and fewer jobs.
The view that the market would make better
use of the resources with better long term eco-
nomic benefits is one shared by Joseph Stiglitz,
winner of the 2001 Nobel-Prize for Economics.
Stiglitz sees War as an unambiguously bad
use of resources and cites the 1991 Gulf Waras an example where War can actually be bad
for an economy, in contrast to the long held
view that War is beneficial to the Economy.
War is usually associated as being beneficial to
the economy due to the booming period after
World War 2 which some say helped the US
economy recover after the deep problems of
the 1929 Depression, still being felt more than
a decade after it began.
Although defence cannot be left to the
private sector and must be provided by theGovernment, it is perhaps fair to question the
wisdom of directing so much public money
towards such a large military. Is it really neces-
sary to have a Military that accounts for 47%
of total Global military spending each year?
Perhaps the answer is a little more complex
than just saying the US Military Budget can be
justified by the boost to GDP. The US Military is
the largest because the US remains the World
superpower and it is integral to its status as
being the biggest and best. We could see this inthe sheer number of Sherman Tanks deployed
by the US during World War 2 in mainland
Europe; we can see it during the arms-race
days of the Cold War period; even the techno-
logical innovation in the Space Age under Dr.
Wernher von Braun - it is a constant fight to
maintain dominance and superiority.
THE SCHUMPETER DEFENDING DEFENC
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The Sky Wars : Boeing versus Airbus
David Osborne
On December 18th 1970, a new EconomicInterest Group,Airbus Industrie came intoexistence. This group was a result of a govern-
ment initiative between France, Germany andthe United Kingdom three years earlier.
Up until the 90s, Boeing had no seri-ous competition in terms of commercial airlin-ers. There were many smaller firms competingwith Boeing, however no large ones. Airbusbroke this trend. In the late 90s, Airbus nar-rowed the gap in market considerably andsince then competition between them hasbeen fierce. The majority market share haschanged hands between both companies manytimes in the past two decades.The Superjumbo
In 2005, after over a decade of researchand development (mostly in secret), Airbusunveiled its new superjumbo the A380. Thisaircraft was a response to Boeings proposal to
build fully double-decker superjumbo, whichnever materialised. Boeing scrapped the planin order to focus on the tried-and-tested 747.To date, Airbus has had 200 orders of theA380. In the first four years of the Boeing 747,there were 126 orders for the aircraft made.
These figures however only tell a small
part of the story and do not provide an accu-rate comparison. In the 1970s the demand for
long-haul air travel was much less as both a
consequence and a result of the price beingmuch higher in relative terms than today. Thismeant that Airlines would not have been re-ceiving as much revenue as they are today, andwere not achieving the economies of scale asthey are nowadays. It is also interesting tonote that the first four years orders of the 747for passenger use were from airlines based incountries all over the world, compared withthe A380, which have only been ordered byairlines in Europe and Asia. All the majorAmerican operators such as American Airlines,Delta and United Airlines have stated that theyhave no intent in placing orders for the A380.This leads to a question; is it that the US airlinecompanies are boycotting the A380 in prefer-ence to their home-grown Boeing 747?Boeings Response to the Competition
Inevitably, Boeing deems the A380 athreat to the dominance of its 747 in the largeaircraft market. However, they have no inten-tions of resurrecting the plan of their super-jumbo to compete with it. Instead, the com-
pany has designed a larger and more efficient
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variant of the 747, called the 747-8. The extentto which this will cushion the effects of the 747is subject for debate.
Boeing also dominates the mid-rangeaircraft market. For both Boeing and Airbus,many of the aircraft on in that market are due
to become obsolete in the next few years. Con-sequently, both Boeing and Airbus are set torelease new mid-range aircraft to replacethem. Airbus is in the early production phaseof the A350 and Boeing is in the same phasefor the 787 dreamliner for Boeing. In this
segment of the market, it is much easier tocompare the results because the aircraft are inthe same class, and in the same time-period.Looking at the orders, Boeing is definitely leading
this competition with 840 orders for the 787to date, compared with just 500 for the A350.
The futureThe competition between Airbus and
Boeing represent a rivalry between the Euro-pean Union and the United States, which arethe most powerful economies in the world.Both companies take up a combined marketshare of 88% of the passenger aircraft market.However, commercial aerospace programmesin Brazil, Canada, China, Japan and Russiathreaten to break the Euro-American duopolyin the commercial aircraft market. Projectsfrom competitors in all of these countries are
well underway and although they may not besuccessful internationally, their success intheir respective domestic markets is sufficientto erode the global dominance of Airbus andBoeing. According to a report: The ComingSqueeze: Commercial Aerospace Programs in
Brazil, Canada, China, Japan & Russia byAirin-sight, the emerging aerospace programmescould reduce the market share of Boeing andAirbus to just 40%.
This challenge presents an opportunityfor Boeing and Airbus. With growing environ-mental concerns related to flight, the newcompetitors give the big two an opportunityto keep their marker dominance by jumpingahead of the new competition though develop-ing greener, more efficient engine technologyand aircraft design.
Useful statistics:The Airbus A380 has a maximum capacity of
853 passengers, a range of 15,200 km and a
maximum cruising speed of 900 km/h. Boeings
747-400 (the largest and most common variant
of the 747) has a capacity of 524 passengers, arange of 13,450 km and a maximum cruising
speed of 913 km/h.
The Airbus A350 has a maximum capacity of
412 passengers, a range of 15,400 km and a
maximum cruise speed of 945 km/h. Boeings
787 has a maximum capacity of 330 passengers,
a range of 15,750 km and a maximum cruising
speed of 945 km/h
The Airbus A380 (Photo from Wikipedia Commons)
The Boeing 787. (Photo by Yasuhiko Obara Yasobara)
THE SCHUMPETER THE SKY WARS
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How Hoarding Helps
Timothy Robinson
Pecunia non olet (Money doesnt smell)
Titus Flavius Vespasianus (Emperor
Vespasian)
In 2000 a barley field in Somerset yielded acollection of Roman denarii with a range ofissuers from Mark Antony (an issue of coins tohis legions just prior to the battle of Actium 31BC), to Severus Alexander (the last of theSeveran Emperors, assassinated in 235AD).This silver coin hoard was valued at about265,000.
While this may have been one of the lar-
ger such finds are not uncommon, especiallyaround former Roman military sites; soldiersbeing one of the professions which com-manded a regular salary in coin. This was es-pecially the case with earlier bronze coins,since it took time for monetization to developin the rest of the British colony. Notably alsoits composition is not terribly unusual; the
hoards of Roman Coins follow the infamousnormal distribution, a larger cluster of coinsaround a mean date surrounded by tails of de-creasingly smaller amounts of coins as we
move further from the date of the most com-monly circulated coin. The abandonment of ahoard is then the date that hoard seems tohave been stopped being added to, which mustat least be after the final date of coinage in thehoard.
Aside from gathering a momento of theancient past the coins have a use, political;they illustrate the political climate at the time.Coinage was a simple, effective method of dis-tributing the image and the names of the Em-peror and usurpers. Secondly there is the eco-nomic reason, the debasement of the coinagein the third century gives both an indication ofthe poor state of imperial finances, to necessi-tate such a move (a good enough quality hoardwill give a broad sample of the weight stan-dards used for coinage), and the degree of in-flation occurring in the empire (Diocletian im-
posed price freezes, and attempted to restabi-lise the currency to combat this.)
Silver, Gold and Bronze
The types of coins available in the Em-pire varied across time, the early silver de-nomination was the Denarius; the Sesterius, Asand Dupondius were copper alloys and theAureus was gold. The Radiate was introducedin around 215 AD (and was worth around 2Denarii), eventually the silver content fell and
the coin was diluted with bronze (barbarousradiates). Part of Diocletian's reforms was toreplace the radiate with a copper-alloy coin,the Nummi, in 295 AD. Constantine the Greatintroduced two coins, the Solidus and the Sili-qua, gold and silver respectively. (These how-
ever are not common in Britain). Thegolden Aureus was also uncommon inBritain during the crisis of the 3rd Cen-tury.
In the third century Britain be-
came a user of large amounts of coin-age produced by rebel emperors, likeCarausius and Allectus (who assassi-nated the former).
The Cunetio hoard, of 54,951coins, finishes with coins from around270-4 AD (Tetricus the First and Sec-ond, rulers of the breakaway GallicEmpire); the area controlled by the
Some coins get together in a normal distribution
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usurpers had not been infiltrated with as muchof the debased radiates compared to the cen-tral Empire controlled by Gallienus (Gallienuslost control of Germania, Britain, Spain andlarge parts of Gaul to Postumus; this began theGallic Empire). Initially a hoard closed early in
the reign of Postumus (he died in 268), foundnear the M1, has a large proportion of the lessdebased Postumus; the Cunetio hoard containsa large portion of the Gallienus (from a ratio of1:12, Gallienus to Postumus, to 4:1) thehoards had closing dates just 4 years apart.This rapid change could largely be because thePostumus coins were reclaimed for their ex-cess silver.
The reformed radiates (introduced inaround 275 AD) of the emperor Aurelian were
larger than the barbarous radiates, but are lesscommon in the UK. This lack of regular ap-pearance in coins hoards is interesting, espe-cially considering the speed with which thedebased coins entered circulation in Britain.The pre-reform radiates could have effectivelycirculated as a separate, lower valued cur-rency, alongside the reformed ones, and even-tually the nummus; indeed this would fit withthe tendency to segregate hoards of differentvaluations of coinage.
Forgery!
A hoard found in Kempsford, Gloucester-shire contained forged coins, however theywere not forgeries made with motivations oftrickery (although this undoubtedly occurred,
people would have produced severely adulter-ated coins. The nature of coin flows to Britain,a supply shortage during the late Claudian andearly Neronian period, meant that coins wereoften recycled (restamped). The hoard foundat Coleshill, Warwickshire (in 1939) containedabout 7% imitation coins (around 234 coins),such imitations tended to vary from the origi-nals, the officially minted coins having slightlylarge diameter (but the difference is usuallynot significant). The Coleshill hoard also pro-vides another note, the last coin in the hoard is
from c.388 AD, however the prediction is thatthe coin hoard was buried around 354-355 ADand that the aberrations are 'intruders'. Thiswould date the hoard to just after the fall ofMagnentius.
A final note
This has been a short overview of thehoards of Roman Coins in Britain; coins sur-rounding the introduction of the Empire toBritain would contain pre-Roman coins and inthe latter days coins of the barbarian Empires.Hoards have shown the gradual debasementand reform, the rise and fall, of currencies andcoins. They have shown the usurpers whocontrolled portions of the Empire, and thepropaganda of the Emperors, the change inreligion (a number of later coins had the chi-rho symbol of Christ on) and the change in theeconomic fortunes of the Empire. In short thesimple act of hoarding savings has given anoverview of the whole of British-Roman his-
tory.
Diocletian
THE SCHUMPETER HOW HOARDING HEL
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THE SCHUMPETER FROMTHE DEPARTMENT
The Department of Economics would like to con-gratulate Chuanzi Yang who is now in the secondyear of Economics and Accountancy , and Magda-lena Tzekova, who is now in the third year of herEconomics Programme for winning academicprizes for the year 2008-2009. Magdalena scoredin the 90s for seven out of her eight modules in the
academic year. Both students have made state-ments.
As an international student, I came to London with
the resolve to take every possible chance to improve
myself in this new environment. I have enjoyed ex-
ploring the subjects of my joint degree, which ideally
combines a solid understanding of economics theory
and pragmatic approaches to accountancy and fi-nancial studies. And I find that the resource and sup-
port provided by the Department of Economics quite
beneficial.
Chuanzi Yang
Second Year BSc Economics and Accountancy
__________________________
I think it is a very good idea to make students aware
that successful results bring benefit not only to the
students themselves but also enhance the status of
our university. Hard work pays back and everyone of
us would feel much more confident and prepared forthe challenges which will come up in both career
and private life in future. I would like to ask our col-
leagues to be more motivated and willing to achieve
high results, because taste of success is really sweet.
And last, but not least, I regard academic achieve-
ment as a way to thank all the lecturers for their
professionalism and devotion to us, the students.
Magdalena Tzekova
Third Year BSc Economics
Along with the Department of Economics, TheSchumpeter and the Economics Society would liketo with both Chuanzi and Magdalena the best ofluck in the remainder of their studies and in theircareer aspirations.
Dr. Andy Denis, Director of UndergraduateStudies in the Department of Economics hasrecently published a paper about Joseph
Schumpeter, the great economist who TimRobinson decided to name this magazine af-ter. In his paper; A Century of MethodologicalIndividualism Part 1: Schumpeter and Menger,
Dr. Denis speaks about the contributions toMethodological Individualism (MI) from itsfounding fathers, Joseph Schumpeter and CarlMenger.
In the paper, Dr. Denis highlights themisinterpretation of the phrase, MI, and at-tempts to refine its true essence. By examin-
ing the primary literature; Schumpeter (1909)and Menger (1985), as well as works that suc-ceed these ideas; Schumpeter (1980) andHeath (2009)among othersthe paper pro-vides value judgments to the discussion andasserts the underlying principal knowledge.
With further reference to his 2004 pa-per, Dr Denis explores the ontological issuesat play: reductionism and holism and appliesthese theories to the works of Schumpeter,Menger as well as other economists.
We would like to encourage everyone to completethe Your Voice student experience survey as soonas possible.
A chance to give your feedback on your ex-
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provements for you and for future City stu-dents
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Complete the survey by December 4th andyou have the chance of winning 100 ofAmazon vouchers
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God isn't compatible with machinery and sci-
entific medicine and universal happiness. Youmust make your choice. Our civilization haschosen machinery and medicine and happi-ness.Mustapha Mond, from Aldous Huxleys
Brave New World.
"Government does not solve problems; it subsi-dizes them."Ronald Wilson Reagan.
Winning the World Cup would be the hat-trickin a golden era for the UK following the Olym-pics in 2012 and the Commonwealth Games in2014.Lord Sebastian Coe, chairman of the Lon-don Organizing Committee for the OlympicGames and committee member for Eng-lands 2018 World Cup bid.
A nation that continues year after year to
spend more money on military defense than onprograms of social uplift is approaching spiri-tual doom.Martin Luther King, Jr., in his 1967 book,The Trumpet of Conscience.
"In 2010, you should see a continued increasein traffic levels. In 2011 you should see airlinesreturning to profitability and in 2012 we expectto see a demand for new airplanes."Randy Tinseth, Vice President of Market-ing for Boeing, at the Dubai Airshow 2009,to the Zawya Dow Jones News Service.
There seems to be a minimum of 10,000
coins... they are known as nummi and were
common during the 4th century AD... it is likelythat the hoard represents a person or commu-nities wealth, possibly as a payment for a har-vest. Why it was not collected by the owner is amystery, but one that we can share and enjoy1,700 years after the fact."Peter Reavill, of the Portable AntiquitiesScheme, upon Nick Davies find of one of thelargest stocks of Roman coins in Shropshire.
City University London enters the top 500 inTimes Higher Education QS World UniversityRankings (Citys exact position cannot be revealeddue to QSs agreements with media partners.)
Saints or sinners: the role of the media in the
financial crisis (forum held December 2, 2009).Speakers: Gillian Tett (FT), Hugh Pym (BBC),Larry Elliott (The Guardian), Prof. Charles Good-hart (LSE), Alistair Milne (Cass) and DamianTambini (LSE).Chaired by City Graduate School of Journalisms
Prof. Steve Schifferes.
With 2009 drawing to a close, Id like to simply state
that I am immensely proud to be a part of the secondissue of the magazines second year of publication.
David and I are keen to make The Schumpeter a morefrequent staple within the walls of City University andthus far, our plan has been flawless. We cannot giveenough praise to our contributing students for theirexceptional work and enthusiasm. Reading such thor-oughly researched work makes me especially proudto be a part of such a grand legion of students. Lastly,I would like to give a very special thank you to our
predecessor, Timothy Robinson, who has, along withguiding us in our new roles as editors, found time inhis life after City to write for The Schumpeter. Wecannot thank you enough, Tim. All the best to you andyour future!Fahad Memon, co-Editor of The Schumpeter
As the first semester draws to a close, I would like to
thank everyone whos contributed to this edition and
made it what it is. It has been a stressful time of year ,with all students having to meet coursework dead-lines and revise for class tests. I hope everyone read-
ing this edition finds The Schumpeter truly informa-tive and enlightening.I would also like to ask more people to come forwardand submit articles and suitable art work, as Fahadand I aim to make The Schumpeter Bigger and Betternext year.In closing, I would like to wish you all a Merry Christ-mas and a Blessd New year!David Osborne, co-Editor of The Schumpeter
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