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Start an economics discussion in eng tips
10

Start an economics discussion in eng tips

Start an economics discussion in eng tips

(OP)
I begin to find economics very interesting these days. Not the  highly extrapolated academic stuff but the more broad issues that may be attacked with common sense analysis.

I have read frequently more thoughtful analysis on this site than can be attained anywhere else. No we are not economists and don't pretend to be. We certainly don't want economists designing bridges and engines. But there are three reasons we could do moderately well at informing each other about economic idea.

1  We don't have a reputation or ax to grind. (its not our profession)

2  We do have a much above average ability to see dynamics and establish cause and effect of things.

3  We are located at the source of business although used as a service to this but we have a distance that allows us to see a little more than the stakeholders.

As a benefit to ourselves the more we understand the free market and its direction the better we can guide our careers .

   

RE: Start an economics discussion in eng tips

In school I had to take the old economics 1 and 2, supply demand, butter and guns...  I also took engineering economics.  Unlike all those econ sissies, we derived the discount factors from scratch using calculus and yes the realtime discount factor ends up with an eponential function.  

Engineers can see the actual costs and call BS when there is market force driven difference and then predict when the artificial difference will disappear or at least discuss it with our peers at work (the marketting guys just assume that 1 point makes a straight line line and that 2 points makes a trend and 3 points just confuse them).

RE: Start an economics discussion in eng tips

3
I dont have much faith in the simplifications that 'economics' professionals use.

csd

RE: Start an economics discussion in eng tips

After taking both general economics and also enginering economics in school, I was pretty excited to apply the principals to my first job.  The more I tried to find the basic information to do some of the simpler types of calculations, more I realized much of the theory was based on the assumption of http://en.wikipedia.org/wiki/Perfect_information.  I am finding out the world of money actually operates "just barely enough information."

RE: Start an economics discussion in eng tips

I find that Walter Williams, PhD, provides some of the best economic analysis to everyday problems you will find.  He is very pro-market, anti-monopoly, anti-government intervention and all that.  I hope you can find what you want from his site at George Mason University.

RE: Start an economics discussion in eng tips

Dinosaur,

How can you ensure that you dont have monopolies if you dont have government intervention?

csd

RE: Start an economics discussion in eng tips

2dye4,

I think we are economists, but of a much more practical manner. I would go so far as saying we are ultimate economists. We don't sit around theorizing, we actually design and build within the constraints of our resources (time, money, labor, materials, energy, etc.) The goal of almost every design is efficiency. The goal of most research is to increase efficiency while maintaining an adequate level of safety. Anybody could design and build bridges (maybe not engines) if they had unlimited time, material and labor. For example, the Romans were building bridges 2000 years ago, and we are still building bridges today. What has changed since then? The overall economy of the bridges being built.

However, I think you are discussing the more theoretical concepts of economics. I have difficulty even deciding where I stand on many of the economic issues. For example, I believe in capitalism, but inherently dislike WalMart and other companies that send vast sums of money overseas. Also, many of the theories seem to contradict each other, and they are idealized. What scares me the most about "economics" is that we have folks in DC that constantly tinker with our economy. They are not the first people I would put in charge.

RE: Start an economics discussion in eng tips

Economics is second to covering your own butt. When in doubt, oversize.

RE: Start an economics discussion in eng tips

I just dug out my "Macro Economic POlicy" lecture notes from 89/90 and had a nose through them.  Loads of mathematical models relating inflation, tax, money supply, investment, capital, etc.  Then they get Fiscal and/or Monetary policy run through them to see the dynamics and eventual equilibrium.  All interesting stuff, mostly rubbish though.  Apart from the (obvious) relationship between interest rates and inflation, all the rest of it was hypothetical and constructed after the fact to explain history.  It didn't even do that very well.

One thing missing from all the models was the feedback loop provided by economists continually fiddling with the controls based on model predictions.

Did anybody else get forced to sit a course like this?

RE: Start an economics discussion in eng tips

Yes Enconomics was one of the required courses, but it counted as a humanities course (creative writing etc)

RE: Start an economics discussion in eng tips

What really blew it for me was that we (in the UK) had some kind of financial catastrophe during the course (might have been "Black Friday" or something??) where interest rates were raised 3 or 4 times in a week.  Our lecturer was like a Cheshire cat during the next lecture, explaining why it happened and how obvious it was to those who knew.

As a hungover student with grades to achieve I ignored the obvious "How come you didn't know this last week and cash in on it?" types of question.

RE: Start an economics discussion in eng tips

(OP)
No not interested in anything you learned in school.
We know that was crock.

I would like to know opinions about the globalization trend and its sustainability. What do you think about currency impacts on international trade??
Is it possible that an ever increasing specialization in manufacturing and design is similar to growing instability in markets. As economic efficiency increases is it possible that it also becomes less stable. Meaning as resources are stretched to the maximum does it take less stimulus to create a positive feedback event, ie a setback or crash.

See as engineers we have have a dynamic system model of thinking that may just be very useful for analyzing a situation like this. Can the specialization of manufacturing and design continue indefinitely or is there a natural saturation point where returns are diminished.
Where the noise of business processes render the ideal unrealistic.  

RE: Start an economics discussion in eng tips

I can't really see a good argument AGAINST globalization, if by that you mean the tendency for industries/organisations to migrate to where the conditions are best suited to that activity.

On the other hand that doesn't mean that all industries or activities will be performed everywhere, leastways I won't be buying shares in the Eskimo Banana plantation, or the Kuwait Umbrella factory.



Cheers

Greg Locock

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RE: Start an economics discussion in eng tips

It seems to me that companies take globalization to mean make or buy your products where labor is the cheapest.  I don't see how that helps anyone.

RE: Start an economics discussion in eng tips

Globalization helps the poor third world counties stabilized because they have a flow of money which inherently increases the quality of life, makes people lazier and, less hostile.

Although along with this, there is the Newton’s Third law... someone has to loose their quality of life and become more destabilized… See most of the “Rust Belt” area’s in the US, example. Chicago has such a nice crime rate, poverty, etc… when it once was a great industrial city.

Greg- I would say arguing this is very relative… a Steel worker from the US that is unemployed because the market move over seas may have a good argument. I saw a nice picture of a welder somewhere in Asia using a news paper to protect his face from the weld! How can a US/EU company compete with that? If they have to comply with OSHA, unions, insurance, etc…. I am sure when the Asian dies from skin cancer or some other work related issue from welding, no one but his mother knows/hears about it…
I found the Img.
http://www.weldreality.com/welding%20without%20helmet.JPG

I would say there is no way you can argue against globalization, if life was considered a right around the world. This would keep things inexpensive and provide a higher standard of life for the lower classes around the world.

RE: Start an economics discussion in eng tips

I have seen guys in nepal, crushing rocks with a hammer for concrete aggregate. I really dont think it is these small businesses that are competing with the west.

Anyway, you cant call yourself a capitalist and then argue against free trade.

csd

RE: Start an economics discussion in eng tips

Allocation of resources, on a global scale, is what most people think of when they think globalisation.

If you can get the same product, from a cheaper source, wouldn't you? That is capitalism.

If two people sell the same product, I should be able to buy from either, without imposed penalty. That is free trade.

All of these things sound good, and in principle, are. The problems are in the details, in this case, the execution of these ideas. Usually, there is short term pain for the entrenched, and the long term gain usually goes to someone else.

"Do not worry about your problems with mathematics, I assure you mine are far greater."   
Albert Einstein
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RE: Start an economics discussion in eng tips

Ashereng,

You forgot one thing,

Gov'ts are supposed to be for protecting their people. which also applies to "All of these things sound good, and in principle, are. The problems are in the details, in this case, the execution of these ideas. Usually, there is short term pain for the entrenched, and the long term gain usually goes to someone else."

RE: Start an economics discussion in eng tips

The world changes, some jobs change or even fade away. You cant start unnaturally propping every industry that doesnt work. People retrain and move on.

Just as you may have to do when the world runs out of petroleum (move over to biofuels perhaps?).

csd

RE: Start an economics discussion in eng tips

The one thing engineers can not model are peoples emotions (or if in an autocratic government, the single leader).  If we could model this, then I could model the stock market and predict price changes....  

But, because emotions run us we get to the ultimate where we protect ourselves at any cost. I'm not being heartless about this because the protection also covers lawsuits for emotional reasons. So the globalization is moved by (feel free to add on), resources, customer location, work force availability, and emotions.

I like the rust belt model, resources declined, customers moved, work force didn't want to move, and emotions said; no more ships, no more factories, people have rights to stay where they want, boom no more steel mills.

RE: Start an economics discussion in eng tips

Didn't the 'level playing field' issue come up in a previous thread?

Essentially is it 'fair'/reasonable/economic sense that:

In country A there are government imposed costs of business including health and safety rules, environmental rules, taxes for retirement/health benefits etc

In country B these costs either don't exist or are smaller/enforced less rigourously.

Items can be imported to country A from country B without any significant import duty.

Due to this country A loses jobs to country B.



To me it's one thing if country B were cheaper just because the people accepted a 'lower' standard of living.  However when the government in country A causes a big chunk of the cost difference by rules that aren applied to country B isn't it a little different?

KENAT, probably the least qualified checker you'll ever meet...

RE: Start an economics discussion in eng tips

Gymmeh,

Nope, I didn't forget.  Governments, ideally, are supposed to protect the people. The problem is, often, you protect one group of people at the expense of the another.

Like I said, even in an ideal situation where people are trying to do the very best, the devil is in the details. Which group do you protect?

"Do not worry about your problems with mathematics, I assure you mine are far greater."   
Albert Einstein
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RE: Start an economics discussion in eng tips

Should the rust belt steel worker's job be protected, so the price of American steel rises, so that the price of American made refrigerator is higher than it would have been, so it is uncompetitive against imported units made from overseas steel, so the American refrigerator industry goes bust, as well as the American steel industry? Exactly where do you want your job protection scheme to stop?

I find it hilarious that people from the land of free enterprise end up backing socialist solutions like job protection schemes, however implemented (tarriffs, anti dumping laws, unique market regulations etc).

The argument about OHS is a red herring, Australian occupational safety standards in dangerous occupations are generally higher than US ones (do all of your workers near forklifts wear fluoro jackets yet?), yet our steel is cheaper, and has long been subject to all sorts of anti-import actions by the USA. As third world economies get richer they will introduce the same sort of OHS and environmental legislation as first world countries, for the same reason.

You can have hours of fun data mining on http://laborsta.ilo.org/



Cheers

Greg Locock

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RE: Start an economics discussion in eng tips

Greg,

I agree with the OHS comment. In my experience both Australia and the UK have far more stringent Health and safety standards than the US.

I would, however, agree to a restriction of trade with countries that have shown a particularly poor level of health and safety. This I would not see so much as a barrier as a kick up the pants to get their act together.

csd

RE: Start an economics discussion in eng tips

Greg, what can I say having spent the first 20 or so years of my life under a conservative government in the UK I may have the odd socialit tendancy.

Eventually things in a free market should find their equilibrium but the time that takes, and the interference that happens from various governments can make it real painful for the people caught up in it.

As to your comments about OHS, up to a point you're correct although the level of regulation in the US, especially here in sunny CA seems higher than I'd been led to believe.

One problem with putting a tarif on countries that don't meet say 66% of the level of your OHS, benefits, environmental laws... is that some of the poorest nations may suffer most along with some that could perhaps do better.  Then again, maybe part of the reason some could now do better is because historically haven't.  Certainly 50 years ago, was the US & Europe much worse than China & India are today?  I remember driving into the capital of one european city less than 20 years ago and seeing what appeared to be a shanty town.

KENAT, probably the least qualified checker you'll ever meet...

RE: Start an economics discussion in eng tips

KENAT,

I disagree with your arguement regarding the poorest countries being disadvantaged.

The poorest countries have the lowest production cost, so all it serves to do is level the playing field. All countries that want to sell goods would have to meet the same minimum standards.

I believe that if it increases the prodution cost of the goods then this may actually have a beneficial result on a poor country. More money will be going into this country and probably more workers will be required increasing employment.

csd

RE: Start an economics discussion in eng tips

CSD, I probably agree with you, which is why I said may not will.

It's an argument I think I've heard from others but I'm not sold on it.

Hopefully it would force them to improve conditions but...

KENAT, probably the least qualified checker you'll ever meet...

RE: Start an economics discussion in eng tips

Greg, Touche! (I knew that was coming)…There shouldn’t have to be a real “protection scheme,” ultimately the market will adapt (you can’t fight change). The hardest thing is changing people’s mindsets and adjusting to change, accept lower pay or working more efficiently.

The problem is that in the “land of free enterprise” there are rules to protect business/consumers.    Such rules prevent/limit company X from stealing company Y’s design/ideas/research. Would you like to work on a project spending $$X/ your time to develop a product, put it in the market, and then have a foreign company, make the exact thing you are, and sell if for less because they stole your design, then lose your job? They can sell it for less because they did not have to spend the time/money/materials developing the product. This is technically free market, but what is the point in developing anything if someone can copy it and make all the money. The same is for protecting consumers; foreign toys with lead in them, is a current issue.  So these toys are produced cheap and unsafe. This draws money away from the companies they play by the rules, which may force them to lay off people to stay competitive.

So an answer to your question, Exactly where do you want your job protection scheme to stop?

I would not ask for a “job protection scheme,” more of a free/fair market scheme.  Which insures bad business practice aboard is regulated or those products kept out of the country.

The labor market will adjust.

RE: Start an economics discussion in eng tips

Greg said: "Australian occupational safety standards in dangerous occupations are generally higher than US ones (do all of your workers near forklifts wear fluoro jackets yet?)"


No, but our CEO's and upper management get paid much better than yours.............. Sorry for the smart alec comment.

As usual, I concur.

RE: Start an economics discussion in eng tips

Gymmeh,

This is a separate issue altogether. Western countries should refuse to allow importation of these good which violate the copyright law of any other western country.

Western countries should also refuse to allow importation of goods that do not follow sufficient standards of quality control. Particularly if the results may be hazardous.

If this was done, then countries like China and India would lose a large chunk of their market from non-compliance.

I see this one as a black and white issue that has nothing to do with free trade (or otherwise).

csd

RE: Start an economics discussion in eng tips

csd

I am confused, what "this" is,
This is a separate issue altogether. Western countries should refuse to allow importation of these good which violate the copyright law of any other western country.

Are you saying the discussion on importation regulations is a separate from free trade?

I am a little confused...morning

RE: Start an economics discussion in eng tips

When I worked on something that might have been worth patenting, the advice I got was that patenting was more or less a gamble, and probably not worth it unless we were prepared to get good lawyers.

The first developer of a product has an advantage that no copier has - he knows WHY that design is the best, and so knows how to design the second generation more effectively. In other words, constant innovation is a good defence against copiers.

For examples look at the iPod. There's a thousand rip-offs of it, yet Apple is selling them very succesfully, and with a decent profit margin.

To be honest the USA government's stultification of creative freedom at the behest of Disney's lawyers is one of the more disgustingly unethical acts I've seen them perpetrate. And that'd be a long list...

Cheers

Greg Locock

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RE: Start an economics discussion in eng tips

Gymmeh,

'Are you saying the discussion on importation regulations is a separate from free trade?'

In a word, no.

I am saying that imported good should be subjected to the same restrictions that a locally produced product would.

csd

RE: Start an economics discussion in eng tips

(OP)
Good responses.  Thanks
The discussion has been heavy on the side of the ethics of free trade. And it is of course a strong issue for engineers as some of us export, and some of us work for industries supporting domestic consumption.
On the issue of free trade there is no doubt that it is beneficial for trade to occur where there is a surplus of ability in one location and demand in another. I still have two questions.

In a third world country that is rapidly industrializing do the people who continue their present lifestyle find it difficult to do so given the changes brought about by the changing economy. For instance if there is a mass movement to industrial production do their customers diminish? Or do they find they can no longer afford to purchase items for the labor input they used previously? In essence do they have a choice, or is industrialization of the workforce destroy their ability to act economically independent of the change.

Second is it possible that the division of labor that makes the economy run inherently limited. Or does the system become unstable after a sufficient degree of division of labor occur. For instance, when efficiency dictates centralizing production in ever larger and larger and more dominant manufacturing centers because of efficiency, is there a possibility of domino effect if a transportation route closes? The essence of the game is to stretch resources so there is no waste. We all know that in engineering design you can't predict how to trim all the fat without making an unstable design. Does the economy do the same?

RE: Start an economics discussion in eng tips

csd72,

I agree that in practice some government oversite is necessary to protect against monopoly practices.  Your question however, did appear confrontational.  It made me think you were strongly against capitalism, but I may be mistaken.

Good Luck.

RE: Start an economics discussion in eng tips

Sorry everyone for being confrontational, just trying to challenge peoples views on this.

Anyway, I believe that capitalism (as well as communism) is an ideal that does not necessarily work in the real world. Both have their flaws, and I believe that the best solution is somewhere between.

csd

RE: Start an economics discussion in eng tips

2
Markets are the best way we've found to distribute resources and to organize an economy.  But capitalism is inherently unstable without government taxation and regulation and the rule of law to act as a counter-lever in the public interest.  Capital naturally accumulates power which tends to centralize both in the hands of a few.  Monopolies and oligarchies result, such that the market no longer functions properly.  Ultimately, the rich get greedy enough to really p*ss off the poor to the point where there's a revolution, where numbers trump power.  

There is no such thing as a truly free market, locally or globally.  Both capital AND governments interfere to make sure markets are neither free nor fair.  Case in point:  most western nations maintain significant trade tarrifs against agricultural products from Africa, yet let Chinese manufactured goods flood into their countries with only minimal duties.  Who benefits in each case, and who suffers- and who has the power to change that, and why don't they?

Capitalism without the rule of law is a disaster.  The biggest thief and the most unethical dealer wins.  

RE: Start an economics discussion in eng tips

Quote:

livingston (Mechanical)    6 Nov 07 7:17
It seems to me that companies take globalization to mean make or buy your products where labor is the cheapest.  I don't see how that helps anyone.

This is the issue, you're talking about subsidizing usually a small group of trades people at the added expense of many more consumers.

  

RE: Start an economics discussion in eng tips

[quote Moltenmetal}Capitalism without the rule of law is a disaster.  The biggest thief and the most unethical dealer wins.[/quote]

I would not limit that to just Capitalism.  As you allude to, law provides the tools with which political entities compete with each other and the various arena's in which companies compete with each other.  All can be subject to unethical behavior as individuals or companies seek to attain advantage in the grey areas or "in between" areas of the law.  At times it seems there are attempts to circumvent statutory law by establishing a chain or path of case law in an attempt to get around the obstacle.

Participating on the global scale provides the largest (and most complicated) arena.  It is going to be a disruptive place for quite a while.  Countries with inexpensive labor pools attract "investment" by companies to produce goods thereby helping their "local" quality of life.  This in turn may put greater demands on raw resources.  This may make competition even more difficult for developed nations as due to higher standards of living, their margins become narrower.  

Question is, will we end up in economic boom, bust cycles on a national basis where a "first world" nation's economy self destructs into a 3rd world economy, or will there be a levelling effect as 3rd world nations improve their status and 1st world nations learn to reduce their reduce their currently disproportionate resource demand?  How/can we as engineers, influence or guide economics on such a scale?  Every country is a variable in the global equation with subvariables/equations within themselves.  If you were to start determining how to characterize a country, what variables would you use?  Population, resources, government type, education level, infrastructure, local interaction with other nations, global interaction, estimation of net worth, rate of economic growth.  These are just a few I can think of for a single country.  Multiplied by the number of countries and there would be a lot of work involved.

Regards,

RE: Start an economics discussion in eng tips

Has a significant 1st world economy dropped back to (long term) 3rd world status since say 1600, due to economic collapse rather than war?

I'm guessing not, and think there is a very good reason for that. The market (globally) would see a cheap labour pool with first world infrastructure and would exploit it.

As a famous economist once nearly said - the problem with the world's poor is not that they are exploited, it is that they are not exploited enough.

Cheers

Greg Locock

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RE: Start an economics discussion in eng tips

Greg,

I think what potentially prevented first world economic collapse in the past was colonization.  In essence having a "captive" market for exploitation maintained the ruling countries economy.  Colonization essentially ended in the 20th century.  It's a bit too early to tell I think the subsequent effects on the global marketplace.  I appreciate your point though as I consider the former soviet union.  It broke apart but was it primarily due to economics or politics.

First world infrastructure in some areas is significantly aging and in need of an overhaul.  Which might someone consider more economical, overhaul an existing system or build from scratch in a country that might be considered a "clean slate"?

I am also curious as to other's opinions on what variables they would use to characterize the economic viability of a nation.

Regards,

RE: Start an economics discussion in eng tips

Read Thomas Sowell's "Basic Economics".  It has a good discussion on what variables are important for a country to be a good investment; reliable rule of law, banking infrastructure (ease of obtaining capital), etc.  

RE: Start an economics discussion in eng tips

"Reliable rule of law"...is that why we have so many lawyers?

RE: Start an economics discussion in eng tips

Hmm:  if "rule of law" is so important to an economy, why exactly is China flourishing?  Intellectual property theft there is absolutely rampant, and no foreigner would willingly choose to put themselves at the mercy of the Chinese legal system...In investment terms, these things merely represent risk, against which benefit/profit is weighed.  With ethics removed entirely from the equation, it's a simple economic risk/reward analysis.  In other words, the thieves are winning and being allowed to keep their winnings as long as they give the right people a cut.  It sucks but it's unlikely to change any time soon.

RE: Start an economics discussion in eng tips

You can walk through any part of Shanghai without getting mugged or robbed. I think that is rule of law.

Cheers

Greg Locock

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RE: Start an economics discussion in eng tips

PSE,

   My understanding is that very few European powers made a net profit on their colonies.  The British did well in India.  King Leopold II made a killing in the Belgian Congo.  Individual business types did well elsewhere, but they were massively subsidized by taxpayers who paid mostly for the military forces who maintained order.

   Empires are the product of brute force.  Usually, they are feasible because the empire builder has the economic surplus to spend on their military.  The only way the enterprise makes money is if they conquer somebody richer.  The problem is that if the victim is richer, they have even more money to spend on their military.

                         JHG

RE: Start an economics discussion in eng tips

drawoh,

I have no information one way or the other that tells me if colonial powers made a net profit.  WW2 effectively brought an end to that era as it exhausted the wealth of europe and others making the retention of colonies unsustainable.

In my opinion, the "successful" former colonies such as India and (with the former spheres of influence), China, benefitted from greater creation by their former rulers of a basic infrastructure (transportation and energy) which they could leverage for growth bringing them on the way to "first world" status.  Current "third world" countries were not subject to this infrastructure investment and will have to create it on their own.  The advantage (if any) being that the infrastructure they create, will be modernized in comparison.

A large question that remains (in my mind) is the expanding draw on basic resources.  The "mantra" of economics seems to be one of continuing growth.  I don't see how this will be sustainable in the long term given a finite amount of natural resources.  Cancer is a biological equivalent of continuous growth, at least up until the point that the host dies.

Regards,

RE: Start an economics discussion in eng tips

PSE,

many of the third world countries (particularly in Africa) are the way they are because they were exploited by colonial powers.

Sometimes the existing stable political structure was forced aside by the brute force of colonial power.

Yes, there were some positive consequences, but just as many negative ones.  

RE: Start an economics discussion in eng tips

Greg:  why bother with muggings and petty thievery when there are better, richer pickings?

RE: Start an economics discussion in eng tips

csd72

Agreed.  Now that colonialism has effectively ended, what will be the net effect on the global marketplace.  As new players enter the arena of resource competition, the "law" of supply and demand would state that the price goes up.  Question (rhetorical) becomes how high before it has a de-stabilizing effect on a countries economy?  What effect would that then have?  

I have never had any "formal" classes or training in Economics so my statements are made at a novice level.  I do reasonably well with the (family level) micro-economics.  This thread appeals to me as a way to learn a bit more.  It would seem to me that a self sufficient capabililty (ideally with the capability of generating a surplus) is potentially the greatest asset a country could have.  Trade relationships based on dependence can put an economy at higher risk.

Regards,

RE: Start an economics discussion in eng tips

PSE,

I did economics at high school and macroeconomics as an elective at university (it fit my timetable).

It is pretty much all common sense sort of stuff. The law of demand and supply effects both prices and the values of currencies as well as inflation, so as long as you understand that the rest stems from there.

csd

RE: Start an economics discussion in eng tips

I subscribe to the Dilbert principles. As engineers we think we know what it should be but we smack our heads against the wall to understand what actually happens.

It's all a mystery; economic topics in a engineering forum will always go historical,cultural and emotional. We're not qualified. There's nothing I could learn from this forum. If I am interested in economics, and I am, I read Asia Times on line, www.atimes.com.

Robert Mote
www.motagg.com

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