How will "big data" technologies shift the type of questions that can be pursued in social sciences, literary studies or linguistics?

The time of Big Data has been activated with a big bang. Computer scientists, economists, physicists political scientists mathematicians, biologist, sociologists, and many other academic disciplines are demanding access to the massive amounts of information produced by our societies’ interactions indicating preferences and behaviors in the way they search for specific data.

Diverse groups debate about the potential benefits and costs of analyzing information from social sites such as Google Facebook Twitter, Wikipedia, and every other location where large groups of people leave digital traces as activity data. This significant amount of data can be used to help or hurt people depending how this information is used and analyzed.

In the recent past historians, psychologists, sociologists and anthropologists were the leading scholars with interest in social networks. At the time, data about personal relationships was collected through interviews surveys, observations, and investigation. Big Data introduces two new popular types of social networks derived from data analyses which contrasts the explicit (articulated) and implicit (behavioral) networks.

But, the big question has to be who gets access to this data for a specific application and where to place boundaries of legality and privacy. Today, the torrent of research using data sets from social media sources would suggest that access is available in a straightforward way. However, only social media companies have access to the data they collect, especially, financial transactions, like ordering, invoicing and paying for goods or services.

A social scientist working for Google or another giant data collector can have access to data that the rest of the academic community will not. These companies restrict access to their data entirely while others sell the access for a high fee and offer only small data sets to university-based researchers. The result is a multiple-tier-access-system restricted to those with money or those inside a data collecting company which can produce a different type of research than those on the outside who have no privileged access to the same data.

Given the rise of Big Data as a socio-technical phenomenon, it is critically important and a must ask question is—what the assumptions and biases of Big Data in this new emerging socio-technical culture with two diverging dispositions: A utopian view that this new technology can build social chains of understanding or a dystopian view of the same technology used for destruction of sociological progress and modernity.

Supporters argued that it will advance innovating research, but opponents challenge the premise as unpredictably and out of context data, with inadequate sourcing for accurate prediction or understanding of social science research of a mobile society. On the other hand, scientists need effective tools to measure big data and interpret errors and how these data points are being associated in context. Traditionally, these tasks are accomplished using trained research assistants or specific algorithmic applications. However, such approaches may not be viable when using massive but unfiltered data that can only increase skepticism. An alternative method is needed for validating data that may increase value for researchers when interpreting the significance of big data in a given context. Perhaps the solution is data expansion with particular emphasis on how it can be applied to tasks that will accelerate the acceptance of big data among scientists. For instance, expand data points into using automated coding verification of the academic discipline being researched; linking the Library of Congress catalogue with the existing literature of a subject matter; gathering as much validating data from colleges, universities and existing research banks. The costs and benefits of expanding big data to include verifiable resources will provide better guidelines and best practices for academic research using dependable information. Additionally, a standardized methodology should be developed that is accepted across the spectrum of all scientific research institutions around the world.

Notwithstanding, a boundary needs to be place between privacy scientific research and commercial interests when consumers enter personal data in a search box but have not been previously warned that the information entered will become part of the public domain and be sold to vendors and advertisers. Consumers are the owners of the data and must agree that any personal information entered on a personal transaction can be sold to commercial interests. Without proper privacy safeguards, the jury for Big Data is still out there waiting for legislators to act.

Does increase in exports mean higher receivables for a business?

Alfonso Llanes, Master Degree in International Development

Answered just now

In general, higher receivables turnover ratios suggest that a company is managing its accounts receivable efficiently. Nonetheless, analysis of receivables turnover ratio in terms of credit policy management is split-level in nature. The ratio informs the company about the proficiency of credit policy management. As the ratio computes how many times a company’s accounts receivable are generated and collected during the year, the higher the ratio, the more competent the receivables management. A low or declining accounts receivable turnover ratio may indicate the company is either becoming too lax in its efforts to collect receivables or is not writing off receivables that are unlikely to be ultimately collected.

When these same ideas are applied to international trade the method commonly used is an open account meaning that the goods are shipped and delivered before payment is due, usually in 30-90 days. This is the most beneficial option to the importer in cash flow and cost terms, but it is also the highest risk option for an exporter. Because of the intense competition for export markets, foreign buyers often press exporters for open account terms. In addition, the extension of credit by the seller to the buyer is very common abroad. Therefore, exporters who are reluctant to extend credit may face the possibility of losing sales to their competitors. However, while this method of payment will definitely improve export competitiveness, exporters should thoroughly examine the political, economic, and commercial risks, as well as cultural influences to ensure that payment will be received in full and on time. A preferred way to mitigate the risk of nonpayment associated with open account sales is by using trade finance as export credit insurance and factoring. Exporters may also wish to pursue export working-capital-financing to ensure that they have access to financing export production and for a credit extension that might arise, while waiting to be paid. This effort can work well specially when interest rates are favorably low and waiting to be paid is not a significant cost to the business. On the other hand, the business would be affected if the waiting period between payments is beyond the cash reserves of the firm to continue production and borrowing money becomes expensive.

Here is an outline from the U.S. Department of Commerce International Trade Administration

Characteristics of an Open Account Applicability

Recommended for use

(1) In secure trading relationships or markets

(2) In competitive markets to win customers with the use of one or more appropriate trade finance techniques.

Risk

Exporter faces significant risk as the buyer could default on payment obligation after shipment of the goods.

Pros

• Boost competitiveness in the global market

• Establish and maintain a successful trade relationship

Cons

• Exposed significantly to the risk of nonpayment

• Additional costs associated with risk mitigation measure

Is globalization reducing income mobility?

Globalization cannot by itself be credited with the effects of income disparity as many socioeconomic factors come into play when doing a fair assessment of the international arena where the issue takes place. In this respect many professional efforts have been spent studying the issue.

A curve was introduced in a 2012 speech by chairman of the Council of Economic Adviser Alan Krueger called “The Great Gatsby” curve which is a chart plotting between inequality and inter generational social immobility in several countries around the world.

Paul Krugman, Nobel laureate, Princeton economist and New York Times columnist introduced the “Great Divergence” term given to a period in late 1970s, when income differences increased in the US but in a lesser extent in other countries.

Classic economist, use the Gini coefficient which is a measure of statistical dispersion representing the income distribution in a nation as a measure of inequality. It was developed by the Italian statistician and sociologist Corrado Gini and published in his 1912 paper Variability and Mutability.

The Organization for Economic Co-operation and Development (OECD) collects and publishes data focused on eight types of income inequality:

· Dispersion of hourly wages among full-time (or full-time equivalent) workers

· Wage dispersion among workers – E.g. annual wages, including wages from part-time work or work during only part of the year.

· Individual earnings inequality among all workers – Includes the self-employed.

· Individual earnings inequality among the entire working-age population – Includes those who are inactive, e.g. students, unemployed, early pensioners, etc.

· Household earnings inequality – Includes the earnings of all household members.

· Household market income inequality – Includes incomes from capital, savings and private transfers.

· Household disposable income inequality – Includes public cash transfers received and direct taxes paid.

· Household adjusted disposable income inequality – Includes publicly provided services.

According to the 2007 "American Dream Report" study, "by some measurements"—relative mobility between generations -- "we are actually a less mobile society than many other nations, including Canada, France, Germany and most Scandinavian countries. This challenges the notion of America as the land of opportunity."

Other research places the U.S. among the least economically mobile countries. In recent years several large studies have found that vertical inter-generational mobility is lower in the United States than in most developed countries.

In the past two decades, trade deals have also progressively dealt with non-trade areas of international commerce such as foreign investment, intellectual property, and domestic standards regimes. it’s very country-specific, and it depends on where countries started off and on the nature of trade reform.

Current research does not directly address the impacts of globalization on economic mobility. However, a large body of literature addresses the implications that globalization has for unemployment and inequality in the United States. Together, these measures provide a reasonable accounting of the effects globalization is transmitting to all corners of the globe.

Some conclusions regarding the effects of globalization on inter generational mobility will be more speculative, since globalization itself is a relatively new phenomenon that requires more study. However, globalization is a promoter of economic growth and over the long run, it will likely lead to upward absolute mobility.

Research on globalization has been grouped in three main categories according to the type of good or service. The first group seeks to measure the implications of international trade and the increasing tendency of corporations to import intermediate goods for assembly in U.S. products.

The second addresses the commonly termed outsourcing services like customer service call centers that have in the past been reserved for American workers.

The third considers the consequences of foreign direct investment (FDI) such as U.S. firms’ international investments, and foreign investments in the United States. This three area review considers the implications that international trade, outsourcing, and FDI have as patterns of intra generational mobility, on wages, employment, and inequality.

The summary of the research findings are outlined by each area:

International Trade

Changes in trade relationships with less-developed countries decreased the relative wages of high school dropouts by about 10 percent between 1980 and 1995 (Borjas, Freeman, and Katz 1997).

Approximately 36 percent of displaced manufacturing workers in import-competing industries are reemployed at similarly paying or higher-paying jobs; about 35 percent experience earnings losses of more than 15 percent (Kletzer 2004).

Services Outsourcing

Between 2001 and 2003, workers in trade-competing service industries were approximately 75 percent more likely to experience job loss than were workers in service industries that did not compete with trade (Jensen and Kletzer 2005).

Services outsourcing increased labor productivity by about 5 percent between 1992 and 2000—approximately 10 percent of the total increase over the period (Amiti and Wei 2006).

Foreign Direct Investment

Foreign investment by U.S. firms likely has little impact on exports or aggregate domestic employment (Lipsey 2004). Investment by foreign firms in the United States has not contributed noticeably to skill-based technical change, one of the major drivers of increasing inequality (Blonigen and Slaughter 2001)

The research also concludes that international trade over the long term, mobility consequences will likely be more positive. By allowing countries to specialize in what they do best, trade may increase real income, at least at the aggregate level. Frankel and Romer (1999), for instance, estimate that, ceteris paribus, a one percentage-point increase in the ratio of trade to GDP increases a country’s average per capita income by at least half a percent.

Defined as the internationalization of services--Service Outsourcing like computer programming and call-answering—are the frequent subject of political inquiry. However, because the technology required to integrate the service sector has only recently become available, long term effects are too recent to measure properly. Economic theory suggests that the mobility consequences could be pronounced: just as importing intermediate outputs could exert downward pressure on wages of U.S. workers who produce competing goods, importing services traditionally, provided by middle-class service and IT workers could depress wages for those workers while raising corporate profit.

Foreign Direct Investment

Here a controversy surfaces on the measurement of FDI which is closely linked to both international trade and services outsourcing. By definition--purchasing intermediate goods abroad is international trade; purchasing the foreign company that produces those goods is FDI. Likewise, employing a foreign firm to process insurance claims is services outsourcing, while purchasing that firm is FDI. As with these examples and other manifestations of globalization, FDI is continuing to play an increasing role in production economics the world over.

How is Cloud Computing for Big Data at Lambton College Toronto? Is it worth doing?

Alfonso Llanes, studied at Florida International University

Answered just now

Cloud Computing, Big Data and Machine learning are no longer the sole domain of data scientists. The skill to apply machine learning to vast amounts of data is greatly increasing in its importance and being widely adopted.

Oracle Big Data Predictions for 2017-18

“We can expect a huge increase in the availability of machine learning capabilities into tools for both business analysts and end users—impacting how both corporations and governments conduct their business. Machine learning will affect user interaction with everything from insurance and domestic energy to healthcare and parking meters.

The Internet of Things is for more than inanimate objects. Everything from providing a higher level of healthcare for patients to enhancing customer experience via mobile applications requires monitoring and acting upon the data that people generate through the devices they interact with. The enterprise must simplify IoT application development and quickly integrate this data with business applications. By blending new data sources with real-time analytics and behavioral inputs, enterprises are developing a new breed of cloud applications capable of adapting and learning on the fly. The impact will be felt not only in the business world, but also in the exponential growth of smart city and smart nation projects across the globe.”

Whether the question is about The Lambton College Cloud Computing for Big Data, Ontario College Graduate Certificate is worth the time or investment becomes purely academic.

Big data is being thought in many colleges and universities worldwide with variance on the curriculum, methodology, equipment labs and the academics or researchers teaching the subjects of enhanced virtualization deployment, cloud computing and Big Data theory.

Harvard University Division of Continuing Education offers an Introduction to the Challenges and Opportunities of Big Data, the Internet of Things, and Cybersecurity. The course work is divided into three parts, each presented by leading MIT experts in their field. “MIT researchers continue to conduct ground­breaking research on topics that are presented ranging from RFID to cloud technologies, from sensors to the World Wide Web.”

Engineering and Physical Sciences Research Council New Castle University Digital Institute (EPSRC)

New Castle University offers an advance degree in its EPSRC Centre for Doctoral Training in Cloud Computing for Big Data. This is an innovative and highly prestigious program offer only to a selected 11 students per year to study for a PhD.

Most industrialized countries are facing a huge skills gap in this area as the demand for big data staffing needs has risen exponentially over the past five years from about 400 advertised vacancies in 2007 to almost 4,000 in 2012. In addition, the demand for big data skills will continue to outperform the demand for standard IT skills, with big data vacancies forecast to increase by around 18% per annum in comparison with 2.5% for IT. Over the next five years this equates to a 92% rise in the demand for big data skills with around 132K new jobs being created in the UK alone in 2013.

Data dependency and the nature of a business activity in today’s world in the context of individual characteristics such as business size, will affect the potential for organizations to benefit from big data, however, organizations don’t have to be big to have big data opportunities. The problems and benefits are as true for many small enterprises as they are for big business which inevitably expands the demand for cloud and big data skills. Furthermore, even when security concerns prevent the use of external “public” clouds for certain types of data, organizations are need to find approaches to their own internal IT resources, using perhaps virtualization to create “private” clouds for data analysis.

Addressing these challenges requires expert specialists who can bridge the gap between design of scalable algorithms, and the underlying theory in the modelling of data analysis

Traditional undergraduate and postgraduate courses produce experts in one or the other of these areas, but not both. Advance degrees are required to produce multi-disciplinary experts in mathematics, statistics and computing science for extracting knowledge from big data. In addition, practical experience in developing this knowledge is a most in order to solve problems across a range of application domains.

What are some best example of creativity?

Alfonso Llanes, studied at Florida International University

Answered just now

Most people connect creativity with the arts but not all creative thinkers are artists. Many endeavors requiring creative thinking, do not have anything to do with the arts. One can be creative either on an original task or an innovation of an existing one and it will provide an advantage in whatever field is chosen.

Creative thinking means imagining new things or thinking about old things in new ways. The ability to perceive patterns that are not obvious to many people. Creative thinking can be practice by solving riddles, puzzles, and problems that bring a fresh and sometimes unorthodox perspective to a traditional existing organization.

Opportunities for creative thought can vary from the obviously artistic to the highly technical and yet inspired reasoning. Generally, anything that involves a “Eureka” moment at some point in the process of thinking is creative. Problem-solving stands out as innovative thinking. A creative problem solver will find new solutions, rather than simply identifying the standard solution.

Many consider science and engineering as the exact opposite of art and creativity but designing a more efficient robot, writing an efficient computer program, and developing new methods for old tasks are all highly creative acts.

Create first, judge later. Forget judgement and perfection in your individual flow of ideas while perseverance in the creative process is the key to great work and success. If you pay attention to your body’s response to work for a period of time, you will be able to find out what works best for you and when you are more likely to be creative.

One’s daily routine is a choice, or a whole series of choices. Creation requires finely calibrated mechanism that takes advantage of a range of limited resources for instance time which is the most limited resource in life. One must exercise willpower, self-discipline, optimism, be adventurous, take chances, have willingness to learn and study in order to apply mental energies that help stave off emotions or feelings of failure. Having consistent behavior and character in all situations is very important. Also, not depart from basic principles of conduct and reason when designing new methods or using new materials as credibility scores high. Choosing a direction and moving consistently towards it but constantly improving over it when a prolong period of time is needed to complete the task.

Practice makes mastery of any skill as performer are known to practice the same amount every day, including holidays as more practice equals better performance—commit and stay committed and transformation will occur!

COMPENSATING LOST REVENUE IN REGIONAL TRADE AGREEMENTS

According to The World Bank the increase of free trade agreements and customs unions since the early 1990′s has been significant and has promoted economic integration at the regional level. However, as the shifts occur organizational and fiscal adjustments cannot be avoided and in some cases special provisions to cover adverse impacts on countries economic methods have been devised for mitigation of negative trade effects among members.

One such provision compensates for losses of government revenue from intraregional tariff reductions. Regional trade liberalization does not necessarily lead to revenue losses if tariff reductions activate a proportional increase in trade flows expanding economic activity and if government revenues from trade taxes increase. Revenues from taxes on value-added (VAT) and income taxes are likely to grow because of higher domestic consumption resulting from lower prices of goods and allocation of resources in the economy. Nevertheless, if revenue shortfalls occur, countries with rigorous administrative capacity will often be able to recover the losses by strengthening domestic indirect taxation, broadening the tax base, and increasing the efficiency of raising funds for the government. Notwithstanding, poor countries, and particularly the least developed ones lack sufficient administrative capacity and a well-functioning domestic tax system. Under these conditions poor countries tend to rely heavily on trade taxes as sources of government revenue and lowering or eliminating tariffs on trade with regional partners can become a significant risk to a country’s fiscal position. For instance, the prospective impact of the Economic Partnership Agreement between the European Union and the Economic Community of West African states (ECOWAS) indicate that some of the participating African countries could lose more than 20 percent of their government revenues from preferential tariff reductions. In order to lessen such potentially impact on fiscal policy, revenue loss compensation arrangements (RLCA’s) have been introduced into some regional integration initiatives (RII’s). Most RLCA’s involve the establishment of a compensation fund from which payouts for tariff revenue losses are made.

The World Bank indicates that the RLCA’s in the Common Market of Eastern and Southern Africa (COMESA) and the Economic Community of Central African states (ECCAS) appear even further away from effective implementation. By contrast, the revenue sharing funds in the southern African Customs Union (SACU) and the West African Economic and Monetary Union (WAEMU) have been operational for several years. “RLCA’s differ in their design and implementation characteristics, particularly with respect to their duration and their handling or resource mobilization and payout criteria.”

The funds available for compensation or revenue sharing are distributed among member countries in proportion to their shares in total intraregional imports. Compensation is paid on the basis of submitted customs declarations on intra-RII trade for the period under consideration and the loss in revenue associated with the non-application of most-favored-nation (MFN) tariffs to partner country trade.
 There is no doubt that poor countries need help if they are to be assimilated successfully into the global economy. The WTO can help but it can offer no guarantees, it can provide only opportunities.

Why would commodities price fall according to the Prebisch–Singer hypothesis?

Alfonso Llanes, studied at Florida International University

Answered just now

The short answer is that it all comes down to the terms of trade. Terms of trade (TOT) indicates the relative price of imports in terms of exports and is defined as the ratio of export prices to import prices (landed price) excluding transportation cost, taxes and border crossing duties.

The Singer–Prebisch thesis works with different negotiating positions of labor in developed and developing countries. As a result, the hypothesis was prevalent in the 1960s and 1970s with neo-Marxist economists which provided a rationalization for the expansion of the role of the commodity futures exchange as a tool for development.

The ideas posed by economics of development introduced the “Modernization theory” of development which states that all societies progress through comparable periods of development. It follows that today’s underdeveloped areas of the world are in the same path that developed areas of the world had to trek in their past. The task at hand was therefore; help the underdeveloped areas with investments and technology transfer to accelerate the transition to global market integration.

The “Dependency theory” arose as a reaction to the modernization theory as the notion that resources flow from a "peripheral" of poor and underdeveloped regions to a "center" of wealthy nations, enriching the latter at the expense of the former. This is the basic assumption that is fundamental to the contention of the dependency theory “poor states are impoverished and rich ones enriched by the way poor states are integrated into the "world system".

On the other had the dependency theory also argues that underdeveloped countries are not merely primitive versions of developed countries, but have unique features and structures of their own. Dependency theory no longer has many proponents as an overall theory, but some observers have argued for its continuing relevance as a conceptual orientation to the global division of wealth.

A common account for this economic behavior is that manufactured goods have a greater income elasticity of demand than primary products, especially food. Therefore, as incomes increase, the demand for manufactured goods rises more rapidly than demand for primary products. In addition, primary products have a low price elasticity of demand, so a decline in their prices tends to reduce revenue even when sales volume increase it does not reflect on capital gains.

In basic microeconomics, the terms of trade are usually set in the interval between the “opportunity costs” for the production of a given good of two countries whether primary, semi-manufactured or manufacture products.

An improvement of a nation's terms of trade benefits that country in the sense that it can buy more imports for any given level of exports. Nevertheless, terms of trade are also influenced by the exchange rate because a rise in the value of a country's currency lowers the domestic prices of its imports but may not directly affect the prices of the commodities it exports. (Currency manipulation)

In the simplified case of two countries and two commodities, terms of trade is defined as the ratio of the total export/import commodity to the total export revenue it pays for its import commodity. In this case, the imports of one country are the exports of another country. For example, “if a country exports 100 dollars' worth of product in exchange for 100 dollars' worth of imported product, that country's terms of trade are 100/100 = 1. The terms of trade for the other country must be the reciprocal (100/100= 1). When this number is falling, the country is said to have deteriorating terms of trade. If a country's terms of trade fall from 100/80= 0.8, it has experienced 20% deterioration in its terms of trade. When doing a time series calculations, it is common to set a value for the base year in order to make interpretation of the results easier to evaluate.

Terms of trade do not reveal the volume of the countries' exports, only relative exchanges between countries. To understand how a country's social utility is affected, it is necessary to include changes in volume of trade, productivity, resource allocation, and direction of capital flows.

The notion of Pareto efficiency has been used in engineering quite often. It states that given a set of choices and a way of valuing them, the Pareto frontier is the set of choices that are Pareto efficient. By restricting attention to the set of choices that are Pareto-efficient, a designer can make trade offs within this set, rather than considering the full range of every parameter in the set.

It would be incorrect to treat Pareto efficiency as equivalent to societal optimization, as the latter is a normative concept that is a matter of interpretation that would account for the degrees of inequality of distribution. Generally, more equal distribution occurs with the help of government redistribution of wealth.

A Pareto efficiency does not require a totally equitable distribution of wealth in an economy in which wealthy elites hold the vast majority of resources can still be Pareto efficient. This distribution of wealth within the status quo is Pareto efficient regardless of the degree to which wealth is equitably or not being distributed.

A simple illustration of this concept is to divide pie among three people where the most equitable distribution would to assign one third to each person. Nonetheless, assigning a half section to each of two individuals and none to the third is also Pareto optimal despite the fact of not being equitable. In this scenario, none of the recipients could be made better off without decreasing someone else's share; and there are many other such distribution scenarios to choose from.

A Pareto inefficient distribution of the same pie would be to allocate a quarter of the pie to each of the three persons with the remainder quarter discarded. The origin and value of the pie is considered irrelevant in these cases, whereby an individual gained is made while none of the beneficiaries contributed to it in anyway i.e., land, inherited wealth, a tax cut to a selected group in a society and so on as the criterion of Pareto efficiency does not regulate a unique optimal allocation. For instance wealth consolidation may exclude others from wealth accumulation because of impediments to market entry, etc.

Other methods for studying resource allocation in a society include the partial equilibrium analysis where the determination of the price of a good is simplified by just viewing the price of one good, and assuming that the prices of all other goods remain fixed. The Marshallian theory of supply and demand is a good example of partial equilibrium analysis when the first-order effects of a shift in the demand curve do not shift the supply curve as if one was independent from the other.

Continental European economists made important advances towards a broad “General equilibrium theory” one of them being Leon Walras who introduced the tâtonnement process which translates from French as a "trial and error model.” Walras' proofs of the existence of general equilibrium theory in economics were often based on the counting of equations and variables which are inadequate for non-linear systems of equations.

Walras also proposed a dynamic process by which general equilibrium might be reached, that of the attunement or groping process for investigating stability of equilibra. Prices are announced in this case by an "auctioneer" and agents which state how much of each good they would like to offer or purchase and a given price (supply and demand). According to Walras, no transactions and no production take place at disequilibrium prices. Instead, prices are lowered for goods with positive prices and excess supply. Prices are raised for goods with excess demand. What happens in such process terminates in equilibrium where demand equals supply of goods with positive prices and demand does not exceed supply for goods with a price of zero. Walras was not able to provide a definitive answer to this question.

General equilibrium is designed to investigate such interactions between markets. The modern conception of general equilibrium is provided by a model developed jointly by Kenneth Arrow, Gérard Debreu, and Lionel W. McKenzie in the 1950s.

Three important interpretations of the terms of the theory have been often cited:

1.-Commodities are distinguished by the location where they are delivered making the Arrow-Debreu model a spatial model of as in the case of international trade.

2.-Commodities are distinguished by the time when they are delivered. The Arrow–Debreu model of intertemporal equilibrium contains forward markets for all goods at all dates. No markets exist at any future dates.

3.-Commodity contracts specify states of nature which affect when and how a commodity is to be delivered: "A contract for the transfer of a commodity specifies, in addition to its physical properties, its location and its date, an event on the occurrence of which the transfer is conditional.”

These interpretations are not exclusive of each other and can be combined. The complete Arrow–Debreu model applies to when, where and how goods are to be delivered. Therefore, there would be a complete description and set of prices for each contract: For instance 25 Metric Tons of winter red wheat, delivered on river elevator on 1st week of August in Minneapolis, if there is a hurricane in New Orleans during the summer months. A general equilibrium model of this sort appears to be a long way from describing the workings of trade economics, however, it is argued that it is useful as a simplified guide of how a real economy function under the general equilibrium model describing the workings of the complex economics of trade.

How can free trade prevent war?

Alfonso Llanes, I am a Vietnam veteran interested in military history

Answered just now

Over the years, many scholars have argued the favorable link between trade and peace, because of self-interest centered in the phrase coined by Scottish economist, Adam Smith, “invisible hand” in his 1776 publication of the Wealth of Nations.

Years later, another economist made a follow up argument in his native France expressed in the words of Frederic Passy in the 1840s:

"Someday all barriers will fall; someday mankind, constantly united by continuous transactions, will form just one workshop, one market, and one family. . . . And this is . . . the grandeur, the truth, the nobility, I might almost say the holiness of the free-trade doctrine; by the prosaic but effective pressure of interest it tends to make justice and harmony prevails in the world."

The challenge today is still the same as when Ludwig von Mises quoted the passage from Passy in 1924 and when Boudin in his economy of subsistence and commercial activities joined the same ideas in 1939. We must continue to fight and hopefully prevail through reason and argument against what Adam Smith referred to in 1776 as the "prejudices of the public" or the economic ignorance of our fellow men and the opposition of the "private interests" meaning those who wish to use the power of the state to plunder others in society. Until we do, free trade will not replace economic trade, however, it still makes a significant difference. Once trade is in play, a network of exchanges is structured as nations form a web of trading alliances, which creates financial motivation not only to keep peace with trading partners, but also to protect them from losing their investments so as not to disrupt the established order. In this context of alliances and partnerships trade motives are essential to avoid wars and sustain stable commercial networks. In theory, it is believed that trade networks and military alliances, help prevent future wars. The literature on the subject indicates the incidence of interstate war has decreased nearly tenfold compared with the period from 1850 to 1949. At the same time, since 1950 international trade networks have increased nearly fourfold, becoming significantly more structured. However there are other real-world factors that have influenced war and trade trends since World War II, mainly, the proliferation of nuclear weapons and the threat of Mutually Assure Destruction (MAD doctrine).

Protectionism promotes hostility. This is why free trade, in the aggregate leads to peace. If the United States imposes a tariff on German products, that tariff hurts German businesses and consumers. It creates hostility in Germany toward the United States. As a result, Germany might even retaliate with a tariff on U.S. products, hurting U.S. manufacturers and angering our government, which would retaliate with another tariff. By the end of the day, both countries now have an excuse to leverage nationalist feelings and stir up support in both countries making it an easier sell for war to settle economic issues. In academia this is called the Richardson process of reciprocal and increasing hostilities; the United States harms Korea, which retaliates, causing the United States to retaliate again. History shows that the Richardson process can easily be applied to protectionism.

Wars have been waged despite international business interests, but the world today is far more globalized than ever before and well-connected making domestic interests more dependent on access to global markets, resources, and capital markets which become huge disincentives to start a war.

Thomas Friedman in his book The World Is Flat is an updated version of his previous "Golden Arches Theory of Conflict Prevention" and the Dell theory:

"The Dell Theory stipulates: No two countries that are both part of a major global supply chain, like Dell’s, will ever fight a war against each other as long as they are both part of the same global supply chain. This is mainly due to the economic interdependence between nations that arises from a large corporation (such as Dell) having supply chain operations in multiple global locations and the reluctance of developing nations (in which supply chain operations commonly take place) to give up their newfound wealth”

In his previous book The Lexus and the Olive Tree, Friedman argued that no two nations with a McDonald's franchise had ever gone to war with one another: this was known as the Golden Arches theory. Later, Friedman included that people or nations don't just want to have a better standard of living as symbolized by McDonald's franchise, but also want to participate in labor market that is created by globalization in the global supply chain.

Friedman nevertheless indicates that the Dell Theory should not be considered a guarantee that countries won’t go to war but rather that a government-population in one of these nations will have very heavy economic costs to consider as they reflect on the option of war to settle economic differences.

Unfortunately, “The breakdown” argument was made by Walter Thomas Mills last century in his Struggle for Existence and the collapse of capitalism and global markets. His reasoning is based in the fact that the success of capitalism depends on the sale of surplus products in foreign markets which will lead to global markets “globalization”but as a consequence, it will end the foreign markets. A parallel argument Mills made is that capital markets depend on growth and expansion of markets in order to invest profits from capital gains but as the opportunities for investments collapse so do the opportunities for profit which leads to a financial meltdown of the system of value such as the financial collapse we witnessed in 2008 housing market which was not based on any tangible assets but just promissory notes that were traded for future profit that fail because of its faulty math of expectation of greater value in hollow assumptions.