Saturday, January 25, 2020
Telecommunications Services of Trinidad and Tobago Company I have been employed with the Telecommunications Services of Trinidad and Tobago Company Limited (TSTT) for the past fourteen years. TSTT was historically, the single provider of telecommunications services in Trinidad and Tobago until the mid 1990s when, pursuant to a World Trade Organisation Agreement in 1997 on Basic Telecommunications, 69 countries agreed to liberalise their telecommunications sectors and to open their domestic markets to foreign companies. This agreement resulted in the entry of several competitors in Trinidad and Tobagos telecommunications market thereby ending TSTTs monopoly status. Against this backdrop, TSTT which provided primarily fixed line, mobile and internet services, engaged Goulet Telecom International Inc. to examine the impact of globalization on its operations. Strengths Weaknesses Opportunities Threats Analysis (SWOT) Gregory G. Dess, G.T. Lumpkin, Alan B. Eisner (2007) Strategic Management Text and Cases, 3rd ed. , New York, McGraw-Hill Irwin states One of the most basic techniques for analysing firm and industry conditions is SWOT analysis. SWOT stands for strengths, weaknesses, opportunities, and threats. SWOT analysis provides a framework for analyzing these four elements of a companys internal and external environment. It provides raw material-a basic listing of conditions both inside and surrounding your company. The strengths and weaknesses portion of SWOT refers to the internal conditions of a firm-where your firm excels (strengths) and where it may be lacking relative to competitors (weaknesses). Opportunities and threats are environmental condition external to the firm. Opportunities and threats are also present in the competitive environment among firms competing for the same customers.(p 49) An analysis of the strengths, weaknesses, opportunities and threats for TSTT in a competitive environment is highlighted, at Appendix A. Strengths One of the major strength of TSTT is its human resource capital and in particular, the leadership and experience of its executive management team which has steered the Company through the process of liberalisation in 2006, to its current position of sustained profitability. The strength of the Company is reflected in the leadership skills and managerial acumen of the executive team who ensured that the Company retained significant market share since the liberalisation of the sector. Management of TSTT have become more strategic in their thinking and in their of way developing new and innovative technology. TSTT are also developing the intellectual capacity of the workforce through e-learning, training and development program and courses. The strength of the Companys human resource capital is also reflected in the Companys middle management and Senior and Junior Staff employees who have successfully implemented the Companys strategic initiatives such as the deployment on new customer services such as Internet Protocol Television (IPTV) and BLINK Broadband. Weaknesses One of the major weaknesses which have been identified at TSTT is its poor network infrastructure and aged plant which has occasionally resulted in the delivery of poor customer service to its subscribers in many instances customers are made to wait for as long as a year to have their phones repaired especially if it is cable related issue. TSTTs aged outside plant has also had an impact on the Companys ability to provide new services such as IPTV to some of its customers due to the unavailability of upgraded plant facilities in certain areas of the country. As a result of the aged plant facilities, the Company has not rolled outits IPTV service throughout the country, thereby precluding it from effectively competing with FLOW, the dominant Cable TV provider which services the entire country. Another weakness is that TSTT was only able to focus on customer service when it was faced with competition, only then did the prices of the companys goods and services were reduced. Opportunities TSTT has sought to capitalize on by its foray into the entertainment sector through the provision of IPTV, a new service which it now provides in selected areas in Trinidad. The IPTV product which is branded Blink Entertainmentis a digital television service which, instead of delivering content through traditional broadcast and cable formats, is received by the viewer using internet protocol technology. TSTT, like many of the worlds major telecommunications providers is exploring IPTV as a new revenue opportunity from its existing and potential subscriber base and as a defensive measure against encroachment from competitors such as FLOW, a conventional cable television provider which now provides internet and voice services. Another new market which TSTT has sought to penetrate is the security services sector with the launch of its Blink Vigilance Security Service. This product which was launched on November 3rd 2009 (along with Blink Entertainment) is a wireless security surveillance system which TSTT offers to both commercial and residential subscribers. Trinidad and Tobago Guardian Newspapers, November 4th 2009 stated The opportunity to pursue this strategic initiative is as a result of the growing criminal activity in Trinidad and Tobago which has driven a demand for security services a point which was made by Dennis Gordon, Vice President, Organisational Risk and Security Services at the launch of the product. TSTT provides the infrastructure used by security companies to operate their business, its entrance into the security services sector provides an excellent opportunity for the Company to increase its revenue streams and maintain its viability in a competitive telecommunications market. The provision of these two new services, Blink TV and Blink Vigilance are therefore two examples of how TSTT has created new opportunities for itself based on consumer needs and changes in the social environment. Threats One of the most significant threats faced by TSTT was that provided by its competitors in the mobile services market as a result of the deregulation of the telecommunications sector in 2006. As a consequence of the liberalisation of the market, Digicel, began offering mobile service which for the first time gave the population of Trinidad and Tobago a choice of wireless providers. The introduction of Digicel into the Sector was expected to remove substantial market share from TSTT which had previously enjoyed monopoly status. TSTT Financial Reports stated The extent of the threat posed to TSTT by its main competitor is reflected in the Companys financial results in the immediate aftermath of Digicels entry into the market. In the financial year 2006 to 2007, TSTT suffered a financial loss of TT $122 M as compared to the financial year 2005 to 2006 where it made a profit of $261 million. Likewise, FLOW, a Company that had traditionally provided only Cable TV service, became in May of 2008, the first Triple Playprovider of telecommunications services in Trinidad with its offering of Cable TV, Broadband and Landline Voice Services to the population at large. As a result of FLOWs strategic initiatives, TSTT is now faced with an additional threat to its revenue streams in the Broadband and Landline Voice sectors. PEST ANALYSIS TSTTs PEST analysis focuses on the following factors, Political, Economic, Social and Technological scan of the macro-environment in which the organisation operates. The political environment as it presently relates to TSTT is one of uncertainty. This has been mainly as a result of the change in government of Trinidad and Tobago on 24 May 2010 the board of directors resigned since they were politically appointed and to date no board has been appointed. This has result in the capital expenditure budget for the various departments not being past. To this extent certain activities have been at a stand-still such as the cut-over of new infrastructure in Penal, Fyzabad areas which would allow the company to provide a more efficient and reliable telephone service to the people living in these areas. TSTT has also been impacted by economic factors from the environment with the liberalisation of the telecommunications market TSTT has not given an increase in salary to its junior and senior staff workforce. Due to the liberalisation of the market as stated before this has resulted in TSTT loosing part its customer base to its competitor resulting in a decrease in the companys profit margins in 2005-2006 of TT$122m. TSTT has been a socially responsible organisation, sponsoring local sporting activities and teams, TSTT has been and still is the main sponsor for the Soca Warriors Trinidad and Tobagos national football team. Through its Employee Wellness Program various initiatives have been made available to employees such as Domestic and Substance Abuse Programs. Recently, due to the outbreak in the H1N1 virus TSTT has taken the initiative to bring-in at the various work locations, personnel from the Ministry of Health to immunize staff against the virus and other illnesses. Among the social and cultural events covered by TSTTs Employee Relations department are Thanksgiving prayer meetings at the end of the last year and start of the new-year, Employees calypso competition, secretarys day, Sports and Family day, Emancipation and Indian arrival day activities etc. These are undertaken to allow the various levels staff in this multi-cultural, racial country to interact as one and enjoy the social, cultural and sporting activities. It fosters a culture of trust, harmony and cooperation between the hierarchical levels in the organisation. These activities also encourage or motivate both customers and employees to buy-in to the policies of the company and encourage loyalty. Through the use of innovation, research and development TSTT has been able to develop new technologies which would allow it to maintain its competitive advantage in the face of competition. This can particularly be seen through the companys use of technology to penetrate new markets such as the provisioning of Internet Protocol Television and residential and business security and alarm systems. Industry Attractiveness In determining Industry Attractiveness, the issue of Competition must be taken into consideration, as this will have an impact on the threat of new entrants and competitive rivalry within the market from FLOW and Digicel. TSTT no longer enjoys being a monopoly but now has to share its market with other competitors. Buyers would also have more bargaining power since they have a wider variety from which to choose as a consequence of the liberalisation of the telecommunications market as a result consumers are more likely to purchase where they can get value for their money. TSTT also has to compete against substitute goods and services, for example customers may not purchase their mobile phones from TSTT but from its competitor. The customer may simple pay TSTT for the use of the service of being attached to its network, therefore the company loses on it sale of mobile phone. Suppliers of TSTT would also have bargaining power as to what price they charge you for their goods since they can sell the same goods to your competitors and it you want to maintain competitive advantage over your competitors you would want to enjoy first market advantage and market leadership by providing new and innovation technology to your customers before your competitors. (See Appendix B) STAKEHOLDER ANALYSIS Stakeholder Analysis is necessary because it provides information indicating the level of influence and expectations of the various stakeholders within the environment. As it relates to the Companys (TSTT) relationship with its employees and the representative Union a great deal of mistrust exists between this group and Management. In addition during times of industrial unrest it is alleged that the Union is able to influence workers to either work-to-rule or down tools. With regards to the customers, if customers are not satisfied with the quality or price, the opening-up of the Telecommunications Sector could cause customers and have caused customers to migrate to other service providers. Customers feel that they can getting better service for their money have chosen to migrate to Digicel or FLOW where they believe they are getting better value for their money. The management group needs to understand, in addition to managing, emphasis needs to be placed on effective Leadership and to an extent leadership by example. Over the past seven years junior and senior staff employees have not received a salary increase while management level continue to be paid incentives on a yearly basis for meeting their set objectives. This has left employees feeling disenchanted and de-motivated with management. (See Appendix C) Assessment of TSTTs position Having assessed the SWOT elements that TSTT is faced with in its internal and external environment since the advent of competition, one may conclude that the organisation has been able to maintain its position as the dominant entity Trinidad and Tobago telecommunications sector. This has been facilitated by the leadership of the executive management team which has taken strategic initiatives such as the investment of over $700 million in new technology in order to address the weakness associated with the Companys aged plant. This investment has also given TSTT a competitive advantage in the IPTV and Security services market as the Company has exploited the opportunities in its external environment to create new revenue streams for itself. Porters five forces can be seen through the threat of potential entrants in this case FLOW and Digicel, since TSTT no longer exist in a monopolistic market customers have bargaining power and this was seen when TSTT had to reduce its prices to be more competitive. Suppliers in this case also bargaining power with more than one telecommunications company to sell mobile telephones so they are able to bargain as to which telecommunications company what to sell them and at what price. Competitive rivalry is evident when TSTT promotes it mobile phones at reduced prices and the competitor Digicel also reduces its prices in order to compete with TSTT. The financial results of TSTT since the liberalisation of the market therefore supports the proposition that the organisation has been able to manage the threats posed by its competitors as evidenced by its after tax profits since 2006. In this type of arrangement, emphasis is being placed on maintaining Strengths, exploring and analyzing Opportunities, improving or outsourcing Weaknesses and identifying, developing and implementing Plans to overcome Threats this is the strategic direction of the company. Conclusion Through strategic planning and implementation TSTT was successfully able to maintain its leadership position in the telecommunications market in Trinidad and Tobago in a liberalised, global market. The organisation was able to convert its weaknesses into strengths and threats in to opportunity to maintains competitive advantage. Though its leadership and strategic management, innovative strategies and technologies were developed allowing for training and development of staff thereby providing opportunities for staff to be promoted within the organisation.
Friday, January 17, 2020
Crically Evaluate the Claim That Infants Have an Innate Knowledge of Object Properties. Use Evidence to Support Your Argument
Critically evaluate the claim that infants have an innate knowledge of object properties. Use evidence to support your arguments. Object properties have been systematically associated with the Piagetian approach of cognitive development and in particular the sensorimotor period. Until the 1970Ã¢â¬â¢s, PiagetÃ¢â¬â¢s influential stance that knowledge of object properties is only learned from around nine months old had not been questioned.However, due to more contemporary studies there have been claims that not only do younger infants exhibit behaviours suggesting that PiagetÃ¢â¬â¢s assumptions may underestimate cognitive abilities but some studies have controversially suggested that newborns have shown to have a certain amount of innate knowledge. This has lead to claims that there are some innate or core cognitive abilities for dealing with object properties, in contrast to PiagetÃ¢â¬â¢s view that Ã¢â¬Ëhumans do not start out as cognitive beingsÃ¢â¬â¢ (Berk, 2009).It is im portant to state the significance of grasping the notion of object properties because according to Piaget this represents the start of symbolic thought or mental representation Ã¢â¬â an expression of intellectual behaviour (Davies & Houghton, 1991). However, this claim is a subject of dispute for investigators, who disagree on the degree of this inbuilt knowledge. This essay shall be using relevant research to critically evaluate the claim that infants have an innate knowledge of object properties, concentrating on the notion of object permanence.Piaget theorised that knowledge of object permanence does not begin until the coordination of secondary circular reaction substage of sensorimotor period. He provided evidence for his assumptions, such as obscuring an object from an infant using a hand and seeing whether the child would reach for the object. Piaget concluded that the lack of searching by the infant implied a lack of object permanence, but Bower (1971) criticised PiagetÃ¢ â¬â¢s use of search tasks because infants could be lacking the performance ability for reaching rather than competence to understand object permanence.Therefore, studies were conducted using visual methods, whereby the infantsÃ¢â¬â¢ looking was used to measure object permanence (Bower et al, 1971, 1972) to address the flaw in PiagetÃ¢â¬â¢s method by bypassing the need for the infant to perform the reach. Bower (1971) conducted a study showing infants a moving object disappearing behind a screen, and the results suggest infants from four to six months old show evidence of object permanence and as early as eight weeks old in a few participants, thus strongly contradicting PiagetÃ¢â¬â¢s assumptions.In addition to this visual method, Baillargeon (1985; 1987) used habituation as it is concluded that infants spend longer looking at new stimuli, therefore infants are familiarised with it. Baillargeon and DeVos (1991) habituated infants to a small carrot, then a tall carrot moving s ide to side behind a screen, alternately. Violation-of-expectation test trials were conducted, whereby the screen that had previously hidden the carrots changed in colour and included a window. The infants were shown the small carrot trial which follows physical laws, and were then shown the tall carrot trial which violates physical laws.Results showed that infants as young as two and a half months looked longer at the tall carrot event than the short carrot event, suggesting that younger infants have some understanding of object properties. However, there have been criticisms of both the habituation technique and the violation-of-expectation-method. Bogartz (2000) is suspicious of the use of the habituation technique as he states that infants will react with interest to any novel stimuli. He also criticised the way the results were analysed separately, suggesting they should have been analysed together.Further, the violation-of-expectation method has been labelled as only measuring some sort of implicit understanding of object properties rather than the fully-conscious understanding that Piaget was referring to in his theory (Berk, 2009). Nevertheless, Baillargeon insists that the consistent findings from this and other studies use essential controls that arenÃ¢â¬â¢t included in opposing studies (Bogartz, Shinskey & Schilling, 2000), and also uphold that the findings can be generalised to lots of object related unexpected events (Berk, 2009).Interestingly though, some researchers do not halt at the suggestion that Piaget underestimated younger infants cognitive abilities, but instead refute PiagetÃ¢â¬â¢s assumption that Ã¢â¬Ëhumans do not start out as cognitive beingsÃ¢â¬â¢ (Berk, 2009) and in fact have some innate cognitive abilities. There have been suggestions that knowledge of object properties depends on visual information relating to perceptual abilities of the infant, addressed in a study by Valenza, Zulian and Leo (2005). They tested infantsÃ¢ â¬â¢ ability to recognise a correspondence between one version of a simple shape with another.Results showed infants recognised a correspondence more between a partly occluded shape and a non occluded shape than a non occluded shape and an unoccluded shape with a gap, implying that there may be some innate ability. The importance of the simplicity of the shapes used in Valenza et alÃ¢â¬â¢s study (2005) had been addressed by other researchers such as Kellman and Spelke (1983) who stated that the type of visual information used by younger infants differs from the visual information used by older children, therefore implying that there may be different thresholds of information needed for different ages (Johnson, 1995).A study was conducted using a rod and box display with additional motion cues on two and four month olds. Despite the first experiment showing that infants at two months old held no preference for the disjointed rod, when the proportion of the box occluding the rods was decreased the two month olds showed a preference for the broken rod display over the complete rod display, therefore suggesting that there may be an innate low level representation of object properties (Kellman & Spelke, 1983).This and further studies (Kamawata et al, 1999) lent support to JohnsonÃ¢â¬â¢s (1995) threshold model where visual information must match the perceptual abilities of infants in order to show knowledge of continuous object properties along with attending abilities. However, some researchers take on a more reserved view, giving potential alternative explanations for the innate knowledge of object properties.For example, following on from certain studies using darkness to hide objects resulting in evidence that infants search in the darkness earlier than they search for objects hidden by an occluder (Bowers and Wishart, 1972), Shinskey and Munakata (2003) conducted a study comparing the two conditions. Infants were given toy and no-toy trials in both the da rkness and the occluder (a cloth) conditions. Results support the notion that infants are ore sensitive to searching for objects in darkness compared to objects hidden by an occluder. Researchers gave three potential explanations for this dissociation. Firstly, a means-end explanation was given, stating that they simply searched more in the dark because they donÃ¢â¬â¢t have the physical ability to retrieve the occluder, lending support to PiagetÃ¢â¬â¢s concept that the ability to problem-solve lays with means-end action sequences (Berk, 2009).Secondly, graded representations may explain why infantsÃ¢â¬â¢ representations can resist an interference of darkness to allow reaching but the interference may be too severe when an object is occluded. The results also introduced the notion of interruption of a plan to reach for the object due to a one second delay before the infantsÃ¢â¬â¢ arms were released which may have led to less searching on occluder trials (in addition to anothe r object in the way).The researchers seemed to conclude that this study has supported the concept of a genuine sensitivity to objects hidden in darkness and that the origin of this dissociation between an occluder and darkness lies with the complications of retrieval. However, another potential explanation could be linked to PiagetÃ¢â¬â¢s observation that when one object is placed on top of another the infant cannot distinguish one from the other, leading back to idea that it can be representatively complicated.On the whole, a large section of the research on knowledge of object properties conflict with PiagetÃ¢â¬â¢s assumptions. Findings show his theory underestimates the abilities of infants (Bower, 1971; 1972; Baillargeon, 1985; 1987; 1991), and although these studies are not free from criticisms (Bogartz, 2000), support of these findings is abundant, along with some controversial findings which suggest low level innate knowledge of object properties.Valanza, et al (2005) stu dy was supported by others (Kellman & Spelke, 1983; Kamawata et al, 1999) and the threshold model was proposed (Johnson, 1995). Nevertheless, other studies showing dissociations between abilities of searching for objects using darkness and occluders are less willing to settle for the explanation of innate knowledge and provide alternatives, including a means-end explanation, the notion of graded representations and interestingly the concept of interruption of a plan (Shinskey & Munakata, 2003).In conclusion, while there is convincing evidence that Piaget strongly underestimated the abilities of younger infants, the claim that infants have an innate knowledge of object properties remains questionable, as although evidence for it introduces some potentially interesting advances, there is simply not enough known, specifically into where the complications of the knowledge lies and if this were ascertained then a greater understanding could be reached. References Berk, L. E. (2006). Chil d Development (7th ed. . Needham Heights: Allyn & Bacon Davies, R. & Houghton, P. (1991). Mastering Psychology, The MacMillan Press Ltd: London Kellman, P. J. & Spelke, E. R. (1983). Perception of partly occluded objects in infancy. Cognitive Psychology, 15, 483-524. Shinskey, J. L. , & Munakata, Y. (2003). Are infants in the dark about hidden objects? Developmental Science, 6(3), 273-282. Valenza, E. , Zulian, L. , & Leo, I. (2005). The role of perceptual skills in newborns' perception of partly occluded objects. Infancy, 8(1), 1-20.
Thursday, January 9, 2020
Language death is aÃ linguistic term for the end or extinction of a language. Also called language extinction. Language Extinction Distinctions are commonly drawn between an endangered language (one with few or no children learning the language) and an extinct language (one in which the last native speaker has died).Ã A Language Dies Every Two Weeks Linguist David Crystal has estimated that one language [is] dying out somewhere in the world, on average, every two weeks (By Hook or by Crook: A Journey in Search of English, 2008). Language Death Every 14 days a language dies. By 2100, more than half of the more than 7,000 languages spoken on Earth--many of them not yet recorded--may disappear, taking with them a wealth of knowledge about history, culture, the natural environment, and the human brain. (National Geographic Society, Enduring Voices Project)I am always sorry when any language is lost, because languages are the pedigree of nations. (Samuel Johnson, quoted by James Boswell in The Journal of a Tour to the Hebrides, 1785)Language death occurs in unstable bilingual or multilingual speech communities as a result of language shift from a regressive minority language to a dominant majority language. (Wolfgang Dressler, Language Death. 1988)Aboriginal Australia holds some of the worlds most endangered languages including Amurdag, which was believed to be extinct until a few years ago when linguists came across speaker Charlie Mangulda living in the Northern Territory.(Holly Bentley, Mind Your Language. The Guardian, Aug. 13, 2010) The Effects of a Dominant Language A language is said to be dead when no one speaks it any more. It may continue to have existence in recorded form, of course--traditionally in writing, more recently as part of a sound or video archive (and it does in a sense live on in this way)--but unless it has fluent speakers one would not talk of it as a living language. . . .The effects of a dominant language vary markedly in different parts of the world, as do attitudes towards it. In Australia, the presence of English has, directly or indirectly, caused great linguistic devastation, with 90% of languages moribund. But English is not the language which is dominant throughout Latin America: if languages are dying there, it is not through any fault of English. Moreover, the presence of a dominant language does not automatically result in a 90% extinction rate. Russian has long been dominant in the countries of the former USSR, but there the total destruction of local languages has been estimated to be only (sic) 50%.(David Cryst al, Language Death. Cambridge University Press, 2002) Aesthetic Loss The main loss when a language dies is not cultural but aesthetic. The click sounds in certain African languages are magnificent to hear. In many Amazonian languages, when you say something you have to specify, with a suffix, where you got the information. The Ket language of Siberia is so awesomely irregular as to seem a work of art.But letÃ¢â¬â¢s remember that this aesthetic delight is mainly savored by the outside observer, often a professional savorer like myself. Professional linguists or anthropologists are part of a distinct human minority. . . .At the end of the day, language death is, ironically, a symptom of people coming together. Globalization means hitherto isolated peoples migrating and sharing space. For them to do so and still maintain distinct languages across generations happens only amidst unusually tenacious self-isolation--such as that of the Amish--or brutal segregation. (Jews did not speak Yiddish in order to revel in their diversity but because they lived in an apartheid society.)(John McWhorter, The Cosmopolitan Tongue: The Universality of English. World Affairs Journal, Fall 2009) Steps to Preserve a Language [T]he best non-linguists can do, in North-America, towards preserving languages, dialects, vocabularies and the like is, among other possible actions, (French linguist Claude HagÃ ¨ge, author of On the Death and Life of Languages, in Q and A: The Death of Languages. The New York Times, Dec. 16, 2009) Participating in associations which, in the US and Canada, work to obtain from local and national governments a recognition of the importance of Indian languages (prosecuted and led to quasi-extinction during the XIXth century) and cultures, such as those of the Algonquian, Athabaskan, Haida, Na-Dene, Nootkan, Penutian, Salishan, Tlingit communities, to name just a few;Participating in funding the creation of schools and the appointment and payment of competent teachers;Participating in the training of linguists and ethnologists belonging to Indian tribes, in order to foster the publication of grammars and dictionaries, which should also be financially helped;Acting in order to introduce the knowledge of Indian cultures as one of the important topics in American and Canadian TV and radio programs. An Endangered Language in Tabasco The language of Ayapaneco has been spoken in the land now known as Mexico for centuries. It has survived the Spanish conquest, seen off wars, revolutions, famines and floods. But now, like so many other indigenous languages, its at risk of extinction.There are just two people left who can speak it fluently--but they refuse to talk to each other. Manuel Segovia, 75, and Isidro Velazquez, 69, live 500 metres apart in the village of Ayapa in the tropical lowlands of the southern state of Tabasco. It is not clear whether there is a long-buried argument behind their mutual avoidance, but people who know them say they have never really enjoyed each others company.They dont have a lot in common, says Daniel Suslak, a linguistic anthropologist from Indiana University, who is involved with a project to produce a dictionary of Ayapaneco. Segovia, he says, can be a little prickly and Velazquez, who is more stoic, rarely likes to leave his home.The dictionary is part of a race against time to re vitalize the language before it is definitively too late. When I was a boy everybody spoke it, Segovia told the Guardian by phone. Its disappeared little by little, and now I suppose it might die with me. (Jo Tuckman, Language at Risk of Dying Out--Last Two Speakers Arent Talking. The Guardian, April 13, 2011)Those linguists racing to save dying languages--urging villagers to raise their children in the small and threatened language rather than the bigger national language--face criticism that they are unintentionally helping keep people impoverished by encouraging them to stay in a small-language ghetto. (Robert Lane Greene, You Are What You Speak. Delacorte, 2011)
Wednesday, January 1, 2020
When making the claim that free, unregulated markets maximize the amount of value created for a society, economists either implicitly or explicitly assume that the actions and choices of producers and consumers in a market dont have any spillover effects onto third parties who are not directly involved in the market as a producer or a consumer. When this assumption is taken away, it no longer has to be the case that unregulated markets are value-maximizing, so its important to understand these spillover effects and their impacts on economic value. Economists call effects on those not involved in the market externalities, and they vary along two dimensions. First, externalities can be either negative or positive. Not surprisingly, negative externalities impose spillover costs on otherwise uninvolved parties, and positive externalities confer spillover benefits on otherwise uninvolved parties. (When analyzing externalities, its helpful to keep in mind that costs are just negative benefits and benefits are just negative costs.) Second, externalities can be either on production or consumption. In the case of an externality on production, the spillover effects occur when a product is physically produced. In the case of an externality on consumption, the spillover effects occur when a product is consumed. Combining these two dimensions gives four possibilities: Negative Externalities on Production Negative externalities on production occur when producing an item imposes a cost on those not directly involved in producing or consuming the item. For example, factory pollution is the quintessential negative externality on production, since the costs of pollution are felt by everyone and not just those who are producing and consuming the products that are causing the pollution. Positive Externalities on Production Positive externalities can occur during produciton such as when a popular food, such as cinnamon buns or candy, produces a desirable smell during manufacturing, releasing this positive externality to the nearby community. Another example would be adding jobs in an area with high unemployment can benefit the community putting more consumers with money to spend into that communitryÃ and also reducing the number of unemployed people there. Negative Externalities on Consumption Negative externalities on consumption occur when consuming an item actually imposes a cost on others. For example, the market for cigarettes has a negative externality on consumption because consuming cigarettes imposes a cost on others not involved in the market for cigarettes in the form of second-hand smoke. Positive Externalities on Consumption Because the presence of externalities makes unregulated markets inefficient, externalities can be viewed as a type of market failure. This market failure, at a fundamental level, arises because of a violation of the notion of well-defined property rights, which is, in fact, a requirement for free markets to function efficiently. This violation of property rights occurs because there are is no clear ownership of air, water, open spaces, and so on, even though society is affected by what happens to such entities. When negative externalities are present, taxes can actually make markets more efficient for society. When positive externalities are present, subsidies can make markets more efficient for society. These finds are in contrast with the conclusion that taxing or subsidizing well-functioning markets (where no externalities are present) reduces economic welfare.