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Brave New World News
Folarin Araromi
markets, and consumers now had the power to nology grows at such a rate that the positive
trade with businesses on the other side of the externalities arising from the elimination of
world at the touch of a button. asymmetry in the markets are outweighed by
The study of economics itself is becom- subsequent nullification of variations neces-
ing increasingly technologically inclined, sary for competition.
adopting elements from relatively new fields Huxley envisaged a world where the role
such as engineering and computer science. So of technology is to create the conditions in
whilst we may live in a society that assigns the which a select few combine control over all
highest value to order, if engineering methods social, political and economic aspects of life, to
are taken out of the laboratory and imposed in effect manufacture society. While one can
on the people, it could potentially undermine certainly applaud the rise of technology for
the economic and political foundations of soci- helping to further bring all aspects of life and
ety. Economic theory dictates greater degrees the universe under the reign of rational sci-
and sophistication of technology results not ence, the rules and ideals that have defined the
only in productive efficiency, but in greater social systems in place today are becoming
economies of scale. However, large firms have increasingly permeable. Nonetheless, technol-
a distinct advantage because the research & ogy is a tool of not only economic but philoso-
development required for technological inno- phical vision. However, despite the social pro-
vation now requires access to vast economic gress it has instigated, and despite all our so-
resources. From substantial amounts of money phistications we exist in what is still very
needed to finance the research, to owning the much a Darwinian world. Technology may be
resources and facilities available to attract the the greatest force for social and economic evo-
highly specialised labour characteristic of the lution, but humanity as we know it has no
technological industries. The result of this is master plan in store, and we have yet to un-
that only the biggest firms possess a competi- cover a grand architect hiding behind the cur-
tive advantage, and it is from this that we start tain. Therefore the burden lies upon us to en-
to see monopolies emerge. Additionally, we sure the successful convergence of social and
may find that emerging technologies, such as technological progression, and enforce the de-
the computerised prosthetics produced by mocratic measures needed to ensure the risks;
Touch Bionics of Edinburgh, would be dispro- cost and benefits are shared equally amongst
portionately available to those with greater all stakeholders in the future.
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-
Government: Problem or Solution?
Adrian Booth
The problem with Fannie and Freddie is were $198.3 billion, compared with $171.0
because they have special privileges granted billion on June 30, 2009, and $119.2 billion on
by the Federal government, they distorted the December 31, 2008”7. By bailing out the GSEs,
housing market by attracting capital that could this merely directs resources (capital) to un-
not have been raised under pure market con- profitable and inefficient enterprises. No econ-
ditions. This directs capital to the GSEs and omy can remain viable as long as capital is be-
raises the cost of capital for everyone else. The ing forcefully diverted into wasteful and un-
Treasury department ironically admitted this economical ventures.
in its Treasury Report in 1996: "While the
benefits of GSE status provide an important References:
subsidy that promotes homeownership, such a 1 Chris Reidy, “Zero-down Mortgage Initiative by Bush
is Hit: Budget Office Says Plan Likely to Spur More
subsidy has economic costs... The economic
Loan Defaults,” Boston Globe, October 5, 2004
effect of the subsidy to mortgage credit-- http://www.boston.com/business/
absent increases in the savings pool or attract- articles/2004/10/05/
zero_down_mortgage_initiative_by_bush_is_hit/
ing capital from abroad--is to raise the price or 2 Suzy Jagger, “Government will compel Lloyds and RBS
reduce the amount of credit for other uses, to lend £27bn to SMEs”, The Times, October 10th,
such as small businesses, exporters, rural com- 2009
3 Jonathon McCarthy and Richard W. Peach, “Are Home
munities, and other business and consumer Prices the Next ‘Bubble’? Economic Policy Review
borrowers.” 10, December 2004
4 Ben Bernanke Speech to Independent Community
If exposed to the ‘ruff-and tumble’ rigour
Bankers of American National Convention, Las
of the free market, these companies would Vegas, Nevada, March 8, 2006; http://
have never existed. As a result of the distortion www.federalreserve.gov/BoardDocs/
Speeches/2006/20060308/default.htm
and subsidy by the government, capital was 5 U.S. Department of the Treasury, "Government Spon-
diverted from its most productive use and sorship of the Federal National Mortgage Associa-
placed into housing. The initiative, the Times tion and the Federal Home Loan Mortgage Corpora-
tion," July 11, 1996, pg 78
wrote, would encourage banks “to extend 6 Steven A. Holmes, “Fannie Mae Eases Credit to Aid
home mortgages to individuals whose credit is Mortgage Lending”, New York Times, September 30,
1999 http://www.nytimes.com/1999/09/30/
generally not good enough to qualify for con-
business/fannie-mae-eases-credit-to-aid-mortgage
ventional loans”. Fannie Mae had been “under -lending.html
increasing pressure from the Clinton Admini- 7 Ibid
8 Fannie Mae Third Quarter Earnings News Release
stration to expand mortgage loans among low http://www.fanniemae.com/media/pdf/
and moderate income people”.5 One of the pro- newsreleases/q32009_release.pdf
gram’s 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
En Route to Golden Glory
Fahad Memon
pic Committee (IOC). Beyond the period of the numerous other events of significance
event, the Beijing Olympic Economic Research (preciously five) before the Olympics even
Association estimates that foreign tourist come into play. 2010 sees golf’s Ryder Cup to
population will grow between 8 to 9% annu- be held at Newport, Wales; the Women’s
ally in ten years from 2008. Rugby World Cup to be held in locations in
London’s Organising Committee for the Surrey and London, and the World Lacrosse
Olympic Games (LOCOG) has similar acts in Championships scheduled in Manchester. The
place, in preparation for 2012. Innovations to 2011 International Children's Games, an IOC-
East London via the construction of Olympic sanctioned event, are scheduled in Lanark-
Park and Village in Stratford and IOC-required shire, Scotland while Wembley Stadium hosts
amendments to public transport, such as the the 2011 UEFA Champions League Final.
‘Olympic Javelin’ rail service, serve as direct In the aftermath of the 2012 Summer
examples to the designated plans for the Olympics in London, the UK has been selected
Games. The London Underground is scheduled to host the 2013 Rugby League World Cup.
for numerous other improvements to rail line Thereafter in 2014, Glasgow hosts the Com-
services until 2012, in order to construct faster monwealth Games while the Ryder Cup ap-
and more effective facilities for the public and pears for the second time in the UK during the
visiting tourists in time for the Games. 2010s at the Gleneagles Hotel in Scotland. Eng-
Business opportunities related to the land’s hosting rights, at present, conclude with
Olympic Games of 2012 have given rise to a £5 the Rugby World Cup and Cricket World Cup
billion worth in contracts. More specifically, to be held in 2015 and 2019 respectively. De-
the construction of the highly-regarded Strat- spite the impressive list, however, the UK does
ford-based projects will reportedly create an not appear satisfied just yet: for bids are cur-
approximate 30,000 jobs for the industry dur- rently in place for the 2018 FIFA World Cup as
ing its production period. well as to host the American football phe-
Londoners are expected to reap addi- nomenon that is: the Super Bowl. Moving for-
tional benefits through funding arrangements ward from the first ten years of the second
made by the likes of the Greater London Au- millennium, the United Kingdom, with London
thority, whom have contributed £925 million at the forefront; is heading into a well-worded
to the Olympic Delivery Authority for purposes ‘golden decade’ for British sport.
of regeneration and building of facilities that
will assist the city’s 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.
Balraj Sura
Diocletian
T HE S CHUMPETER
FROM THE DEPARTMENT
The Department of Economics would like to con- Dr. Andy Denis, Director of Undergraduate
gratulate Chuanzi Yang who is now in the second Studies in the Department of Economics has
year of Economics and Accountancy , and Magda- recently published a paper about Joseph
lena Tzekova, who is now in the third year of her Schumpeter, the great economist who Tim
Economics Programme for winning academic
Robinson decided to name this magazine af-
prizes for the year 2008-2009. Magdalena scored
ter. In his paper; A Century of Methodological
in the 90’s for seven out of her eight modules in the
academic year. Both students have made state- Individualism Part 1: Schumpeter and Menger,
ments. Dr. Denis speaks about the contributions to
Methodological Individualism (MI) from its
As an international student, I came to London with founding fathers, Joseph Schumpeter and Carl
the resolve to take every possible chance to improve Menger.
myself in this new environment. I have enjoyed ex- In the paper, Dr. Denis highlights the
ploring the subjects of my joint degree, which ideally misinterpretation of the phrase, MI, and at-
combines a solid understanding of economics theory tempts to refine its true essence. By examin-
and pragmatic approaches to accountancy and fi- ing the primary literature; Schumpeter (1909)
nancial studies. And I find that the resource and sup-
and Menger (1985), as well as works that suc-
port provided by the Department of Economics quite
ceed these ideas; Schumpeter (1980) and
beneficial.
Heath (2009)—among others—the paper pro-
Chuanzi Yang vides value judgments to the discussion and
Second Year BSc Economics and Accountancy asserts the underlying principal knowledge.
__________________________ With further reference to his 2004 pa-
I think it is a very good idea to make students aware per, Dr Denis explores the ontological issues
that successful results bring benefit not only to the at play: reductionism and holism and applies
students themselves but also enhance the status of these theories to the works of Schumpeter,
our university. Hard work pays back and everyone of Menger as well as other economists.
us would feel much more confident and prepared for
the challenges which will come up in both career
and private life in future. I would like to ask our col- We would like to encourage everyone to complete
leagues to be more motivated and willing to achieve the “ Your Voice student experience survey” as soon
high results, because taste of success is really sweet. as possible.
And last, but not least, I regard academic achieve-
ment as a way to thank all the lecturers for their • A chance to give your feedback on your ex-
professionalism and devotion to us, the students. perience at City so far
• It’s important as it will help us to make im-
Magdalena Tzekova provements for you and for future City stu-
Third Year BSc Economics dents
• Recent improvements include the modern-
Along with the Department of Economics, The ised library and more spaces for students
Schumpeter and the Economics Society would like • The survey has been emailed to either your
to with both Chuanzi and Magdalena the best of City account or to the email address you
luck in the remainder of their studies and in their gave us when you enrolled
career aspirations. • Complete the survey by December 4th and
you have the chance of winning £100 of
Amazon vouchers
News Summary Quotes
City University London enters the top 500 in “God isn't compatible with machinery and sci-
Times Higher Education QS World University entific medicine and universal happiness. You
Rankings (City’s exact position cannot be revealed must make your choice. Our civilization has
due to QS’s agreements with media partners.) chosen machinery and medicine and happi-
ness.”
Saints or sinners: the role of the media in the —Mustapha Mond, from Aldous Huxley’s
financial crisis (forum held December 2, 2009). Brave New World.
Speakers: Gillian Tett (FT), Hugh Pym (BBC),
Larry Elliott (The Guardian), Prof. Charles Good- "Government does not solve problems; it subsi-
hart (LSE), Alistair Milne (Cass) and Damian dizes them."
Tambini (LSE). —Ronald Wilson Reagan.
Chaired by City Graduate School of Journalism’s
Prof. Steve Schifferes. “Winning the World Cup would be the hat-trick
in a golden era for the UK following the Olym-
Words from the Editors pics in 2012 and the Commonwealth Games in
2014.”
—Lord Sebastian Coe, chairman of the Lon-
“With 2009 drawing to a close, I’d like to simply state don Organizing Committee for the Olympic
that I am immensely proud to be a part of the second Games and committee member for Eng-
issue of the magazine’s second year of publication. land’s 2018 World Cup bid.
David and I are keen to make The Schumpeter a more
frequent staple within the walls of City University and “A nation that continues year after year to
thus far, our plan has been flawless. We cannot give spend more money on military defense than on
enough praise to our contributing students for their programs of social uplift is approaching spiri-
exceptional work and enthusiasm. Reading such thor- tual doom.”
oughly researched work makes me especially proud —Martin Luther King, Jr., in his 1967 book,
to be a part of such a grand legion of students. Lastly, The Trumpet of Conscience.
I would like to give a very special ‘thank you’ to our
predecessor, Timothy Robinson, who has, along with
guiding us in our new roles as editors, found time in "In 2010, you should see a continued increase
his life after City to write for The Schumpeter. We in traffic levels. In 2011 you should see airlines
cannot thank you enough, Tim. All the best to you and returning to profitability and in 2012 we expect
your future!” to see a demand for new airplanes."
Fahad Memon, co-Editor of The Schumpeter —Randy Tinseth, Vice President of Market-
ing for Boeing, at the Dubai Airshow 2009,
“As the first semester draws to a close, I would like to to the Zawya Dow Jones News Service.
thank everyone who’s contributed to this edition and
made it what it is. It has been a stressful time of year , “There seems to be a minimum of 10,000
with all students having to meet coursework dead- coins... they are known as nummi and were
lines and revise for class tests. I hope everyone read-
common during the 4th century AD... it is likely
ing this edition finds The Schumpeter truly informa-
tive and enlightening. that the hoard represents a person or commu-
I would also like to ask more people to come forward nities wealth, possibly as a payment for a har-
and submit articles and suitable art work, as Fahad vest. Why it was not collected by the owner is a
and I aim to make The Schumpeter Bigger and Better mystery, but one that we can share and enjoy
next year. 1,700 years after the fact."
In closing, I would like to wish you all a Merry Christ- —Peter Reavill, of the Portable Antiquities
mas and a Blesséd New year!” Scheme, upon Nick Davies’ find of one of the
David Osborne, co-Editor of The Schumpeter largest stocks of Roman coins in Shropshire.