Lesson 3 & 4

Governance & Yard Sale

Review Classification Memopg. 24 of Handbook

• WELCO = Mini Summit Currency– Wealthy Countries– Most Valuable Currency at the Summit– Division 1 Countries

• DEVCO = Mini Summit Currency– Developing Countries– Worth Half as much as a WELCO– Division 2 Countries

• LESCO = Mini Summit Currency– Less Developed Countries– Worth Half as much as a DEVCO– Division 3 Countries

Warm-Up Activity• Take out a blank piece of paper and fold it into thirds.

Then tear the paper into 3 parts.

• Write the #1, 2, & 3 on each piece of paper.

1. Write down an area of life in your country where people face uncertainty, unpredictability, or turmoil.

2. Write down an area of life in your country that is not chaotic, where things are not unpredictable, and no one faces any turmoil.

3. Write down an area of life in your country where people face uncertainty, unpredictability, or turmoil.

Follow These Directions• Places the pieces of paper in a row at the top of your desk.

They can be in any order.

1. Exchange the piece of paper which you wrote #1 with the piece of paper on its immediate right. If there is no paper on its immediate right, just leave the paper with the #1 written on it alone.

2. Exchange the paper on which you wrote the #2 with the paper on its immediate left. If there’s no paper on its immediate left, just leave the paper with the #2 written on it alone.

3. Exchange the paper on which you wrote the #3 with the paper on its immediate right. If there’s no paper on its right, just leave the paper with the #3 written on it alone. You have no thoroughly mixed up the papers.

Follow These Directions • Raise your right hand and slowly with great care,

pass your right hand over the row of papers from left to right and back again, while not touching the papers, but casting a shadow over all three.

• Let your hand slowly come down on the paper in the middle of the row.

• This paper represents an area of uncertainty, turmoil, or unpredictability in your country. ELMINATE IT BY CRUMPLING UP YOUR PAPER AND THROWING IT TOWARDS THE TRASH CAN!

Follow These Directions

• Slowly move your right hand over the remaining papers in the same manner as before.

• Let your hand come down on the paper on the right. Again, another area of uncertainty, turmoil, and unpredictability. ELMINATE IT!

Purpose of the Warm-Up• Why do you think some countries

experience so much more uncertainty and chaos than others?

• WRITE the underlined below under #1 on page 23 of your handbook

• Rules & structure are important foundations that promote greater certainty and predictability.

• Your job as the economic advisor is to understand the structures that exist within your country and how they impact your standard of living.

Governance = StructureRecord Notes on pg. 25 #2

• World Bank Monitors & Evaluates the structures that impact governance of a country.

• Governance = The Set of traditions and institutions by which authority is applied.

• Governance = Authority and how that authority is used. (Ex: Sales Tax)

Visual 3.1

Governance (pg. 25)• Each country is given a

score by the World bank on scale from -2.5 (poor governance) to 2.5 (good governance)

• 6 Categories of Governance

1. Control of Corruption2. Voice and Accountability3. Political Stability & Absence

of Violence4. Government Effectiveness5. Regulatory Quality6. Rule of Law

Control of Corruption• Control of Corruption =

Limiting the use of public power for individual gain.

• Voice & Accountability = Freedom of expression and the degree to which citizens participate in their government

• If investment = Higher GDP…then why don’t more countries take advantage of this idea?

• Bad Governance & Lack of Money cause the above.

Visual 3.3

Page 28 of Handbook• Working in pairs take 10 minutes to

answer the questions on page 28.

ANSWER REVIEW1. Investment Rates and Control of

Corruption Scores2. Upper Portion3. Lower Portion4. Revisit Governance Structure / Attract

More Investment $$5. Higher the Scores in Controlling

Corruption = higher the investment rateLower the Scores in Controlling Corruption = Low Investment Rate

So…What Attracts Investment?• Good Governance Attracts

Investment! (pg. 25)

• Corruption has a direct effect on the Investment Rate of a Country (pg. 25)

• Good Governance = Good Standard of Living = Your Job as an economic advisor

• This is also true with the 6 other category’s of governance

Visual 3.4

Computer Lab & Homework

• Go to World Bank Web Site located at Class Web Page under IES Project

• Complete pg. 26 of the handbook

• Review and Complete HW #3 by next class (Wednesday)