The Schumpeter Issue 4

8/14/2019 The Schumpeter Issue 4

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THE SCHUMPETERThe Economics Society Magazine

Issue 4

theschumpeter.blogspot.com


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The Economics Society Magazine isfunded by member contributions, and

relies on the contribution of students

and lecturers for articles. If you wouldlike to get involved writing for us

please email:

[email protected]

[email protected]

Government : Problem or Solution?

Adrian Booth

How Hoarding Helps

Timothy Robinson

Brave New World

Folarin Araromi

En Route to Golden Glory

Fahad Memon

Defending Defence

Balraj Singh Sura

The Sky Wars

David Osborne

From the Department

THE SCHUMPETER CONTENTS

News & Extra

Economics

Society

News

If you are interested in joining

the Economics Society, pleasesign up using the Students Un-ion Website

In the First week of the New

term, there will be a social forthe Economics Society. Further

details of this will be availableat the Re-Freshers fayre on the26th of January.


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Brave New World

Folarin Araromi

Written in 1931, Aldous Huxleys BraveNew World gives a bleak vision of a fu-ture where technology has altered the face of

humanity, and people have become nothing

more than cold, empty automatons, existing

only to fulfil a predetermined function. Usu-

ally pronounced as a chilling prophecy of the

tide of things to come, many tend to overlook

its value as a disturbingly poignant commen-

tary on the contemporary issues of 20th cen-

tury western social climate. Issues that have

amassed even greater weight today in a soci-

ety that strives to exist at the cutting-edge.

However, with modern science breaking newand hazardous ground on an almost daily ba-

sis, there is a fear the rapid advance of technol-

ogy in recent years may very well soon bring

us to the brink of Huxleys nightmare.

One may ask how the byzantine technol-

ogy and unbending social Darwinism of Brave

New World relates to economics, much less

the bright-eyed, happy-go-lucky liberal econ-

omy of the modern west? It is in that econom-

ics provides the medium to discuss the grow-

ing concerns surrounding the increasing

prevalence of technology in society, and its

implications not only on the economy but our

individual rights and liberties. The digital

revolution of the 1980s saw the birth of the

personal computer, symbolising humanitys

evolution from the archaic mechanical ana-

logue system to radical new methods of digital

processing. Correspondingly, Moore's Law de-

scribes a common trend in computing, in

which the number of transistors on an inte-

grated circuit doubles approximately every

two years. Beyond the desktop, Moore's Law is

effectively a business practice based upon an

exponential growth in technology; a growth

society bore witness to throughout the late20th century. While technology may have ad-

vanced humanity beyond its wildest dreams,

how many of us actually know where its go-

ing? We are still a long way away from the war

-stricken streets customary to many works of

dystopian science fiction, but the precipitous

advent of technology has produced gadgets

and gizmos that present the possibility of a

world where technology may infringe upon

our identity and freedom.

Modern society is built upon a founda-tion of technology that has a long and trying

history. A history that stretches beyond the

20th century, back to the 18th century and the

Industrial Revolution, marking the transition

from manual labour to machine-based manu-

facturing. Thus the demand for technological

innovation arose from the need to achieve

greater operational efficiency, as to thereby

better satisfy consumer demand. But technol-

ogy has had just as much to do with economic

reform as social reform. Computers were oncepredicted to be able to facilitate complete cen-

tral planning of the economy, but as weve ex-

perienced for ourselves technology has played

a far more eminent role in globalisation and

the expansion of the free market. The digital

revolution radically changed the way individu-

als and businesses interact. Small companies

were suddenly given access to much larger
http://upload.wikimedia.org/wikipedia/commons/d/d9/Arduino_ftdi_chip-1.jpghttp://en.wikipedia.org/wiki/File:BraveNewWorld_FirstEdition.jpg


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markets, and consumers now had the power to

trade with businesses on the other side of theworld at the touch of a button.

The study of economics itself is becom-

ing increasingly technologically inclined,

adopting elements from relatively new fieldssuch as engineering and computer science. So

whilst we may live in a society that assigns the

highest value to order, if engineering methods

are taken out of the laboratory and imposed

on the people, it could potentially undermine

the economic and political foundations of soci-

ety. Economic theory dictates greater degrees

and sophistication of technology results not

only in productive efficiency, but in greater

economies of scale. However, large firms have

a distinct advantage because the research &development required for technological inno-

vation now requires access to vast economic

resources. From substantial amounts of money

needed to finance the research, to owning the

resources and facilities available to attract the

highly specialised labour characteristic of the

technological industries. The result of this is

that only the biggest firms possess a competi-

tive advantage, and it is from this that we start

to see monopolies emerge. Additionally, we

may find that emerging technologies, such asthe computerised prosthetics produced by

Touch Bionics of Edinburgh, would be dispro-

portionately available to those with greater

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-

nology grows at such a rate that the positive

externalities arising from the elimination of

asymmetry in the markets are outweighed by

subsequent nullification of variations neces-

sary for competition.

Huxley envisaged a world where the role

of technology is to create the conditions in

which a select few combine control over all

social, political and economic aspects of life, to

in effect manufacture society. While one can

certainly applaud the rise of technology for

helping to further bring all aspects of life and

the universe under the reign of rational sci-

ence, the rules and ideals that have defined the

social systems in place today are becoming

increasingly permeable. Nonetheless, technol-

ogy is a tool of not only economic but philoso-phical vision. However, despite the social pro-

gress it has instigated, and despite all our so-

phistications we exist in what is still very

much a Darwinian world. Technology may be

the greatest force for social and economic evo-

lution, but humanity as we know it has no

master plan in store, and we have yet to un-

cover a grand architect hiding behind the cur-

tain. Therefore the burden lies upon us to en-

sure the successful convergence of social and

technological progression, and enforce the de-mocratic measures needed to ensure the risks;

cost and benefits are shared equally amongst

all stakeholders in the future.

THE SCHUMPETER BRAVE NEW WORLD


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Government: Problem or Solution?

Adrian Booth

The eight most dangerous words in theEnglish language, according to RonaldReagan, are Im from the Government, and Im

here to help. The debate among economists

and policymakers today is not whetherthe

markets need more regulation, but how much

regulation they require. The argument put for-

ward by pro-regulation economists is that the

crisis would not have occurred had regulation

been much tougher and government not been

as passive. The argument put forward by those

against regulation is that government involve-

ment causes the problem it intends to solve.

In 2004, the Bush Administration askedthe Federal Housing Administration to lift the

down-payment requirement altogether for

150,000 new homeowners. Bush declared, To

build an ownership society, well help even

more Americans to buy homes. Some families

are more than able to pay a mortgage but just

dont have the savings to put money down.1

The President of the United States had a goal

to abolish traditional lending standards, which

were enforced to minimise the risk of mort-

gage defaults. Even today, we see policymak-ers acting indecisively; trying to curb risky be-

haviour in the banking sector and simultane-

ously trying to force them to lend money out.2

The debate over having a systemic risk

regulator is also rarely challenged and is ac-

cepted for granted by economists as some-

thing necessary to ensure stability. In a paper

delivered to the Eurobank EFGs conference on

real estate in 2006, two economists at the Fed-

eral Reserve presented a paper declaring that

there was no bubble in the housing market.Richard Peach and Jonathon McCartney wrote,

House prices have been rising strongly

prompting concerns that a bubble exists and

that home prices are vulnerable to a collapse.

A close analysis of the US housing market finds

little basis for such concerns...the upturn in

home prices is attributable to strong market

fundamentals.3 Even during 2006, at the

height of the largest credit bubble in world

history, Ben Bernanke said in a speech in Las

Vegas, Our examiners tell us that lending

standards are generally sound and are not

comparable to the standards that contributed

to broad problems in the banking industry two

decades ago. In particular, real estate appraisal

practices have improved.4 The main qualifica-

tion to be a systemic risk regulator is to spot

systemic risks. If an institution cannot meet

this criterion, its hard to justify giving them

the position.

Some argue it was the position of the

government to encourage risky lending and

expand homeownership that contributed to

the bubble. In 1999, the New York Times re-

ported on Fannie Maes recent easing of credit

requirements to low income families. Fannie

Mae is whats known as a Government Spon-

sored Enterprise or (GSE). This means that

although Fannie Mae (along with sister com-pany Freddie Mac) is privately owned, they

have an implicit guarantee from the govern-

ment which means the government would not

allow them to default on their debt or go bank-

rupt. Its a typical example of privatising prof-

its and socialising risks as all risks would be

placed on the taxpayer.


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The problem with Fannie and Freddie is

because they have special privileges granted

by the Federal government, they distorted the

housing market by attracting capital that could

not have been raised under pure market con-

ditions. This directs capital to the GSEs and

raises the cost of capital for everyone else. The

Treasury department ironically admitted this

in its Treasury Report in 1996: "While the

benefits of GSE status provide an important

subsidy that promotes homeownership, such a

subsidy has economic costs... The economic

effect of the subsidy to mortgage credit--

absent increases in the savings pool or attract-

ing capital from abroad--is to raise the price or

reduce the amount of credit for other uses,

such as small businesses, exporters, rural com-munities, and other business and consumer

borrowers.

If exposed to the ruff-and tumble rigour

of the free market, these companies would

have never existed. As a result of the distortion

and subsidy by the government, capital was

diverted from its most productive use and

placed into housing. The initiative, the Times

wrote, would encourage banks to extend

home mortgages to individuals whose credit is

generally not good enough to qualify for con-ventional loans. Fannie Mae had been under

increasing pressure from the Clinton Admini-

stration to expand mortgage loans among low

and moderate income people.5 One of the pro-

grams 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

were $198.3 billion, compared with $171.0

billion on June 30, 2009, and $119.2 billion on

December 31, 20087. By bailing out the GSEs,

this merely directs resources (capital) to un-

profitable and inefficient enterprises. No econ-

omy can remain viable as long as capital is be-

ing forcefully diverted into wasteful and un-

economical ventures.

References:

1 Chris Reidy, Zero-down Mortgage Initiative by Bush

is Hit: Budget Office Says Plan Likely to Spur More

Loan Defaults, Boston Globe, October 5, 2004

http://www.boston.com/business/

articles/2004/10/05/

zero_down_mortgage_initiative_by_bush_is_hit/

2 Suzy Jagger, Government will compel Lloyds and RBS

to lend 27bn to SMEs, The Times, October 10th,

2009

3 Jonathon McCarthy and Richard W. Peach, Are Home

Prices the Next Bubble? Economic Policy Review

10, December 2004

4 Ben Bernanke Speech to Independent Community

Bankers of American National Convention, Las

Vegas, Nevada, March 8, 2006; http://

www.federalreserve.gov/BoardDocs/

Speeches/2006/20060308/default.htm

5 U.S. Department of the Treasury, "Government Spon-

sorship of the Federal National Mortgage Associa-

tion and the Federal Home Loan Mortgage Corpora-

tion," July 11, 1996, pg 78

6 Steven A. Holmes, Fannie Mae Eases Credit to Aid

Mortgage Lending, New York Times, September 30,

1999 http://www.nytimes.com/1999/09/30/business/fannie-mae-eases-credit-to-aid-mortgage

-lending.html

7 Ibid

8 Fannie Mae Third Quarter Earnings News Release

http://www.fanniemae.com/media/pdf/

newsreleases/q32009_release.pdf

THE SCHUMPETER GOVERNMENT: PROBLEMOR SOLUTION


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pic Committee (IOC). Beyond the period of the

event, the Beijing Olympic Economic Research

Association estimates that foreign tourist

population will grow between 8 to 9% annu-

ally in ten years from 2008.

Londons Organising Committee for the

Olympic Games (LOCOG) has similar acts in

place, in preparation for 2012. Innovations to

East London via the construction of Olympic

Park and Village in Stratford and IOC-required

amendments to public transport, such as the

Olympic Javelin rail service, serve as direct

examples to the designated plans for the

Games. The London Underground is scheduled

for numerous other improvements to rail line

services until 2012, in order to construct faster

and more effective facilities for the public andvisiting tourists in time for the Games.

Business opportunities related to the

Olympic Games of 2012 have given rise to a 5

billion worth in contracts. More specifically,

the construction of the highly-regarded Strat-

ford-based projects will reportedly create an

approximate 30,000 jobs for the industry dur-

ing its production period.

Londoners are expected to reap addi-

tional benefits through funding arrangements

made by the likes of the Greater London Au-thority, whom have contributed 925 million

to the Olympic Delivery Authority for purposes

of regeneration and building of facilities that

will assist the citys 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.

Rising budgetary costs, however, have

led to criticisms with regard to the addedbenefits not being worth their costs. Promises

made by the London 2012 Olympic bid and

LOCOG chairman, Lord Sebastian Coe, suggest

otherwise: that a Legacy 2012 plan is being

considered, to take account of the uses for the

facilities after the summer of 2012.

The UK sporting calendar, yet, occupies

numerous other events of significance

(preciously five) before the Olympics even

come into play. 2010 sees golfs Ryder Cup to

be held at Newport, Wales; the Womens

Rugby World Cup to be held in locations in

Surrey and London, and the World Lacrosse

Championships scheduled in Manchester. The

2011 International Children's Games, an IOC-

sanctioned event, are scheduled in Lanark-

shire, Scotland while Wembley Stadium hosts

the 2011 UEFA Champions League Final.

In the aftermath of the 2012 Summer

Olympics in London, the UK has been selected

to host the 2013 Rugby League World Cup.

Thereafter in 2014, Glasgow hosts the Com-

monwealth Games while the Ryder Cup ap-

pears for the second time in the UK during the2010s at the Gleneagles Hotel in Scotland. Eng-

lands hosting rights, at present, conclude with

the Rugby World Cup and Cricket World Cup

to be held in 2015 and 2019 respectively. De-

spite the impressive list, however, the UK does

not appear satisfied just yet: for bids are cur-

rently in place for the 2018 FIFA World Cup as

well as to host the American football phe-

nomenon that is: the Super Bowl. Moving for-

ward from the first ten years of the second

millennium, the United Kingdom, with Londonat the forefront; is heading into a well-worded

golden decade for British sport.

2012 Olympic Stadium (Photo by David Osborne)

THE SCHUMPETER EN ROUTETO GOLDEN GLORY


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Defending Defence: Why is the US Military Budget so Big?

Balraj Sura

Throughout his career, Obama has alwaysbeen an outspoken critic of the dumbwar in Iraq. It comes as no surprise therefore

that now as President of USA, the man of

change has announced the imminent with-

drawal of troops from Iraq stating that

[Americas] combat mission in Iraq will end

by August 31st, 2010. Despite this with-

drawal and winding down of operations in

Iraq, the 2009 Budget sees the Department of

Defences Military Budget rise 5.7% from 2008

to an astonishing $515.4 Billion; and that does-

nt include the cost of operations in Iraq and

Afghanistan which is forecast to cost another$170 Billion in 2009 alone! Obama would tell

you the US military budget is set to decline in

the coming years, but I believe the US budget is

too important a GDP injection for it to be al-

lowed to significantly decline. So I pose the

question: What does the US military budget

contribute to the US economy?

The pie chart below shows Global mili-

tary spending in 2008 and the US accounts for

~47% of the total, which means the US spends

more on defence than the next 45 highestspending nations combined; clearly the US

military budget is the largest in the World but

what is it comprised of, and how does it affect

the economy?

The first major component of the US

budget is wages. The US military as of 31st

January 2009 employs 1,452,337 with addi-

tional plans to grow the Army and Marine

Corps by 2012. Due in part to its large popula-

tion base (~305 Million in 2009), the US has

the 2nd largest military force in the World and

of course, the Total Wages come to a high sum;

$110.4 Billion in 2007 is forecast to grow to

$125.2 Billion in 2009. This is a significant

amount of Taxpayer money being spent on

wages but even if just a proportion of this in-

come returns to the US economy, it would cre-

ate a wave of spending and this boost to con-sumption in the US economy would of course

make a large addition to the US GDP once the

Money Multiplier has been applied.

The US Military is not just a large per-

sonnel based force but also boasts the largest

Navy and Air Force, with 284 currently opera-

tional ships (including 11 aircraft carriers) and

around 5,778 active aircraft as of 2007. It also

has a large amount of armoured personnel car-

riers and vehicles (M1 Abrams tanks, Humvees

etc) and the vast majority of this equipmentcan be sourced to a US company. Lockheed

Martin, Northrop Grumman, Boeing, General

Dynamics, Bell and Sikorsky Aircraft; all estab-

lished US companies specialising in Defence

and Aerospace which have/

had major contracts with

the Government.

Lockheed is a case in point;

the US has currently ac-

quired 97 F-22A RaptorFighter Jets from them at an

eye-watering $142.6 Million

(as of 2009), each! In 2007,

an astounding 91% of Lock-

heeds revenue came di-

rectly from the Government,

while the Government con-

tributed 78% of the total

United States - $711

(47%)Europe - $289 (20%)

China -$ 122 (8%)

East Asia/Australasia

-$120 (8%)

Middle East/North

Africa -$82 (6%)

Russia - $70 (5%)

Latin America - $39

(3%)

Central/South Asia -

$30 (2%)

Sub-Saharan Afirca -

$10 (1%)

2008 Global Military Spending

Total = $1.473 Trillion

in Billions of US $

(including % of total)Source:International Institute for

Strategic Stu dies, The Military

Balance 2008, U.S. De partment of
http://upload.wikimedia.org/wikipedia/commons/f/fa/United_States_Department_of_the_Army_Seal.svg


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revenues of Northrop Grumman and General

Dynamics. The vast majority of the estimated

$104.2 Billion procurement budget proposed

for 2009 will go towards US companies, there-

fore being injected back into the economy.

Unlike in Europe where the Eurofighter Ty-

phoon was a joint venture between many na-

tions in a bid to share costs, the US is able to

bankroll these militaristic investments single-

handedly and most of the time, it chooses to do

so in domestic firms, meaning the revenue

stays within the country. The Government

alone virtually props up these Aerospace and

Defence firms and this of course creates em-

ployment throughout the nation. This money

not only leads to wages and spending in the US

but of course reinvestment, which brings meon to my next point.

The US military is not only responsible

for procurement within the Billions every year,

but it actively invests Billions of Dollars in

Military and Defence Projects. Its safe to say

America is at the forefront of weapons and

arms development and a look at the Research,

Development, Test and Evaluation section of

the 2009 budget shows why, with $79.6 Billion

being penned solely as investment. Lockheeds

2,480 registered patents and Northrops 1,843patents are testament to the extent of R&D re-

quired to survive in this highly competitive

industry. This section of the budget helps new

and established firms cover the large costs of

development, resulting in such projects as the

Buffalo-H vehicle and the iconic F-117 Night-

hawk Stealth Attacker and helping these US

firms grow and flourish.

The US Government creates an injec-

tion of spending in the economy through mili-

tary personnel wages and by bringing businessto US weapons and vehicles contractors. Not

only do they procure the majority of their

equipment from US companies, but are also

heavily involved in capital formation and back-

ing R&D within these companies. It would ap-

pear that the military budget plays a major

role in the US economy but is this Government

spending the best use of resources to boost the

economy?

In May 2007, Dean Barker released the

paper The Economic Impact of the Iraq War

and Higher Military Spending. Barkers model

predicts that high military spending leads to a

short run boost to demand but inflation and

unemployment in the long run. He compares

high military spending to spending on the en-

vironment because resources would be

pulled away from their market directed uses,

resulting in slower growth and fewer jobs.

The view that the market would make better

use of the resources with better long term eco-

nomic benefits is one shared by Joseph Stiglitz,

winner of the 2001 Nobel-Prize for Economics.

Stiglitz sees War as an unambiguously bad

use of resources and cites the 1991 Gulf Waras an example where War can actually be bad

for an economy, in contrast to the long held

view that War is beneficial to the Economy.

War is usually associated as being beneficial to

the economy due to the booming period after

World War 2 which some say helped the US

economy recover after the deep problems of

the 1929 Depression, still being felt more than

a decade after it began.

Although defence cannot be left to the

private sector and must be provided by theGovernment, it is perhaps fair to question the

wisdom of directing so much public money

towards such a large military. Is it really neces-

sary to have a Military that accounts for 47%

of total Global military spending each year?

Perhaps the answer is a little more complex

than just saying the US Military Budget can be

justified by the boost to GDP. The US Military is

the largest because the US remains the World

superpower and it is integral to its status as

being the biggest and best. We could see this inthe sheer number of Sherman Tanks deployed

by the US during World War 2 in mainland

Europe; we can see it during the arms-race

days of the Cold War period; even the techno-

logical innovation in the Space Age under Dr.

Wernher von Braun - it is a constant fight to

maintain dominance and superiority.

THE SCHUMPETER DEFENDING DEFENC


11/16

The Sky Wars : Boeing versus Airbus

David Osborne

On December 18th 1970, a new EconomicInterest Group,Airbus Industrie came intoexistence. This group was a result of a govern-

ment initiative between France, Germany andthe United Kingdom three years earlier.

Up until the 90s, Boeing had no seri-ous competition in terms of commercial airlin-ers. There were many smaller firms competingwith Boeing, however no large ones. Airbusbroke this trend. In the late 90s, Airbus nar-rowed the gap in market considerably andsince then competition between them hasbeen fierce. The majority market share haschanged hands between both companies manytimes in the past two decades.The Superjumbo

In 2005, after over a decade of researchand development (mostly in secret), Airbusunveiled its new superjumbo the A380. Thisaircraft was a response to Boeings proposal to

build fully double-decker superjumbo, whichnever materialised. Boeing scrapped the planin order to focus on the tried-and-tested 747.To date, Airbus has had 200 orders of theA380. In the first four years of the Boeing 747,there were 126 orders for the aircraft made.

These figures however only tell a small

part of the story and do not provide an accu-rate comparison. In the 1970s the demand for

long-haul air travel was much less as both a

consequence and a result of the price beingmuch higher in relative terms than today. Thismeant that Airlines would not have been re-ceiving as much revenue as they are today, andwere not achieving the economies of scale asthey are nowadays. It is also interesting tonote that the first four years orders of the 747for passenger use were from airlines based incountries all over the world, compared withthe A380, which have only been ordered byairlines in Europe and Asia. All the majorAmerican operators such as American Airlines,Delta and United Airlines have stated that theyhave no intent in placing orders for the A380.This leads to a question; is it that the US airlinecompanies are boycotting the A380 in prefer-ence to their home-grown Boeing 747?Boeings Response to the Competition

Inevitably, Boeing deems the A380 athreat to the dominance of its 747 in the largeaircraft market. However, they have no inten-tions of resurrecting the plan of their super-jumbo to compete with it. Instead, the com-

pany has designed a larger and more efficient
http://upload.wikimedia.org/wikipedia/commons/8/85/Contrails.jpg


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variant of the 747, called the 747-8. The extentto which this will cushion the effects of the 747is subject for debate.

Boeing also dominates the mid-rangeaircraft market. For both Boeing and Airbus,many of the aircraft on in that market are due

to become obsolete in the next few years. Con-sequently, both Boeing and Airbus are set torelease new mid-range aircraft to replacethem. Airbus is in the early production phaseof the A350 and Boeing is in the same phasefor the 787 dreamliner for Boeing. In this

segment of the market, it is much easier tocompare the results because the aircraft are inthe same class, and in the same time-period.Looking at the orders, Boeing is definitely leading

this competition with 840 orders for the 787to date, compared with just 500 for the A350.

The futureThe competition between Airbus and

Boeing represent a rivalry between the Euro-pean Union and the United States, which arethe most powerful economies in the world.Both companies take up a combined marketshare of 88% of the passenger aircraft market.However, commercial aerospace programmesin Brazil, Canada, China, Japan and Russiathreaten to break the Euro-American duopolyin the commercial aircraft market. Projectsfrom competitors in all of these countries are

well underway and although they may not besuccessful internationally, their success intheir respective domestic markets is sufficientto erode the global dominance of Airbus andBoeing. According to a report: The ComingSqueeze: Commercial Aerospace Programs in

Brazil, Canada, China, Japan & Russia byAirin-sight, the emerging aerospace programmescould reduce the market share of Boeing andAirbus to just 40%.

This challenge presents an opportunityfor Boeing and Airbus. With growing environ-mental concerns related to flight, the newcompetitors give the big two an opportunityto keep their marker dominance by jumpingahead of the new competition though develop-ing greener, more efficient engine technologyand aircraft design.

Useful statistics:The Airbus A380 has a maximum capacity of

853 passengers, a range of 15,200 km and a

maximum cruising speed of 900 km/h. Boeings

747-400 (the largest and most common variant

of the 747) has a capacity of 524 passengers, arange of 13,450 km and a maximum cruising

speed of 913 km/h.

The Airbus A350 has a maximum capacity of

412 passengers, a range of 15,400 km and a

maximum cruise speed of 945 km/h. Boeings

787 has a maximum capacity of 330 passengers,

a range of 15,750 km and a maximum cruising

speed of 945 km/h

The Airbus A380 (Photo from Wikipedia Commons)

The Boeing 787. (Photo by Yasuhiko Obara Yasobara)

THE SCHUMPETER THE SKY WARS
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How Hoarding Helps

Timothy Robinson

Pecunia non olet (Money doesnt smell)

Titus Flavius Vespasianus (Emperor

Vespasian)

In 2000 a barley field in Somerset yielded acollection of Roman denarii with a range ofissuers from Mark Antony (an issue of coins tohis legions just prior to the battle of Actium 31BC), to Severus Alexander (the last of theSeveran Emperors, assassinated in 235AD).This silver coin hoard was valued at about265,000.

While this may have been one of the lar-

ger such finds are not uncommon, especiallyaround former Roman military sites; soldiersbeing one of the professions which com-manded a regular salary in coin. This was es-pecially the case with earlier bronze coins,since it took time for monetization to developin the rest of the British colony. Notably alsoits composition is not terribly unusual; the

hoards of Roman Coins follow the infamousnormal distribution, a larger cluster of coinsaround a mean date surrounded by tails of de-creasingly smaller amounts of coins as we

move further from the date of the most com-monly circulated coin. The abandonment of ahoard is then the date that hoard seems tohave been stopped being added to, which mustat least be after the final date of coinage in thehoard.

Aside from gathering a momento of theancient past the coins have a use, political;they illustrate the political climate at the time.Coinage was a simple, effective method of dis-tributing the image and the names of the Em-peror and usurpers. Secondly there is the eco-nomic reason, the debasement of the coinagein the third century gives both an indication ofthe poor state of imperial finances, to necessi-tate such a move (a good enough quality hoardwill give a broad sample of the weight stan-dards used for coinage), and the degree of in-flation occurring in the empire (Diocletian im-

posed price freezes, and attempted to restabi-lise the currency to combat this.)

Silver, Gold and Bronze

The types of coins available in the Em-pire varied across time, the early silver de-nomination was the Denarius; the Sesterius, Asand Dupondius were copper alloys and theAureus was gold. The Radiate was introducedin around 215 AD (and was worth around 2Denarii), eventually the silver content fell and

the coin was diluted with bronze (barbarousradiates). Part of Diocletian's reforms was toreplace the radiate with a copper-alloy coin,the Nummi, in 295 AD. Constantine the Greatintroduced two coins, the Solidus and the Sili-qua, gold and silver respectively. (These how-

ever are not common in Britain). Thegolden Aureus was also uncommon inBritain during the crisis of the 3rd Cen-tury.

In the third century Britain be-

came a user of large amounts of coin-age produced by rebel emperors, likeCarausius and Allectus (who assassi-nated the former).

The Cunetio hoard, of 54,951coins, finishes with coins from around270-4 AD (Tetricus the First and Sec-ond, rulers of the breakaway GallicEmpire); the area controlled by the

Some coins get together in a normal distribution


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usurpers had not been infiltrated with as muchof the debased radiates compared to the cen-tral Empire controlled by Gallienus (Gallienuslost control of Germania, Britain, Spain andlarge parts of Gaul to Postumus; this began theGallic Empire). Initially a hoard closed early in

the reign of Postumus (he died in 268), foundnear the M1, has a large proportion of the lessdebased Postumus; the Cunetio hoard containsa large portion of the Gallienus (from a ratio of1:12, Gallienus to Postumus, to 4:1) thehoards had closing dates just 4 years apart.This rapid change could largely be because thePostumus coins were reclaimed for their ex-cess silver.

The reformed radiates (introduced inaround 275 AD) of the emperor Aurelian were

larger than the barbarous radiates, but are lesscommon in the UK. This lack of regular ap-pearance in coins hoards is interesting, espe-cially considering the speed with which thedebased coins entered circulation in Britain.The pre-reform radiates could have effectivelycirculated as a separate, lower valued cur-rency, alongside the reformed ones, and even-tually the nummus; indeed this would fit withthe tendency to segregate hoards of differentvaluations of coinage.

Forgery!

A hoard found in Kempsford, Gloucester-shire contained forged coins, however theywere not forgeries made with motivations oftrickery (although this undoubtedly occurred,

people would have produced severely adulter-ated coins. The nature of coin flows to Britain,a supply shortage during the late Claudian andearly Neronian period, meant that coins wereoften recycled (restamped). The hoard foundat Coleshill, Warwickshire (in 1939) containedabout 7% imitation coins (around 234 coins),such imitations tended to vary from the origi-nals, the officially minted coins having slightlylarge diameter (but the difference is usuallynot significant). The Coleshill hoard also pro-vides another note, the last coin in the hoard is

from c.388 AD, however the prediction is thatthe coin hoard was buried around 354-355 ADand that the aberrations are 'intruders'. Thiswould date the hoard to just after the fall ofMagnentius.

A final note

This has been a short overview of thehoards of Roman Coins in Britain; coins sur-rounding the introduction of the Empire toBritain would contain pre-Roman coins and inthe latter days coins of the barbarian Empires.Hoards have shown the gradual debasementand reform, the rise and fall, of currencies andcoins. They have shown the usurpers whocontrolled portions of the Empire, and thepropaganda of the Emperors, the change inreligion (a number of later coins had the chi-rho symbol of Christ on) and the change in theeconomic fortunes of the Empire. In short thesimple act of hoarding savings has given anoverview of the whole of British-Roman his-

tory.

Diocletian

THE SCHUMPETER HOW HOARDING HEL


15/16

THE SCHUMPETER FROMTHE DEPARTMENT

The Department of Economics would like to con-gratulate Chuanzi Yang who is now in the secondyear of Economics and Accountancy , and Magda-lena Tzekova, who is now in the third year of herEconomics Programme for winning academicprizes for the year 2008-2009. Magdalena scoredin the 90s for seven out of her eight modules in the

academic year. Both students have made state-ments.

As an international student, I came to London with

the resolve to take every possible chance to improve

myself in this new environment. I have enjoyed ex-

ploring the subjects of my joint degree, which ideally

combines a solid understanding of economics theory

and pragmatic approaches to accountancy and fi-nancial studies. And I find that the resource and sup-

port provided by the Department of Economics quite

beneficial.

Chuanzi Yang

Second Year BSc Economics and Accountancy

__________________________

I think it is a very good idea to make students aware

that successful results bring benefit not only to the

students themselves but also enhance the status of

our university. Hard work pays back and everyone of

us would feel much more confident and prepared forthe challenges which will come up in both career

and private life in future. I would like to ask our col-

leagues to be more motivated and willing to achieve

high results, because taste of success is really sweet.

And last, but not least, I regard academic achieve-

ment as a way to thank all the lecturers for their

professionalism and devotion to us, the students.

Magdalena Tzekova

Third Year BSc Economics

Along with the Department of Economics, TheSchumpeter and the Economics Society would liketo with both Chuanzi and Magdalena the best ofluck in the remainder of their studies and in theircareer aspirations.

Dr. Andy Denis, Director of UndergraduateStudies in the Department of Economics hasrecently published a paper about Joseph

Schumpeter, the great economist who TimRobinson decided to name this magazine af-ter. In his paper; A Century of MethodologicalIndividualism Part 1: Schumpeter and Menger,

Dr. Denis speaks about the contributions toMethodological Individualism (MI) from itsfounding fathers, Joseph Schumpeter and CarlMenger.

In the paper, Dr. Denis highlights themisinterpretation of the phrase, MI, and at-tempts to refine its true essence. By examin-

ing the primary literature; Schumpeter (1909)and Menger (1985), as well as works that suc-ceed these ideas; Schumpeter (1980) andHeath (2009)among othersthe paper pro-vides value judgments to the discussion andasserts the underlying principal knowledge.

With further reference to his 2004 pa-per, Dr Denis explores the ontological issuesat play: reductionism and holism and appliesthese theories to the works of Schumpeter,Menger as well as other economists.

We would like to encourage everyone to completethe Your Voice student experience survey as soonas possible.

A chance to give your feedback on your ex-

perience at City so far Its important as it will help us to make im-

provements for you and for future City stu-dents

Recent improvements include the modern-

ised library and more spaces for students The survey has been emailed to either your

City account or to the email address yougave us when you enrolled

Complete the survey by December 4th andyou have the chance of winning 100 ofAmazon vouchers


16/16

God isn't compatible with machinery and sci-

entific medicine and universal happiness. Youmust make your choice. Our civilization haschosen machinery and medicine and happi-ness.Mustapha Mond, from Aldous Huxleys

Brave New World.

"Government does not solve problems; it subsi-dizes them."Ronald Wilson Reagan.

Winning the World Cup would be the hat-trickin a golden era for the UK following the Olym-pics in 2012 and the Commonwealth Games in2014.Lord Sebastian Coe, chairman of the Lon-don Organizing Committee for the OlympicGames and committee member for Eng-lands 2018 World Cup bid.

A nation that continues year after year to

spend more money on military defense than onprograms of social uplift is approaching spiri-tual doom.Martin Luther King, Jr., in his 1967 book,The Trumpet of Conscience.

"In 2010, you should see a continued increasein traffic levels. In 2011 you should see airlinesreturning to profitability and in 2012 we expectto see a demand for new airplanes."Randy Tinseth, Vice President of Market-ing for Boeing, at the Dubai Airshow 2009,to the Zawya Dow Jones News Service.

There seems to be a minimum of 10,000

coins... they are known as nummi and were

common during the 4th century AD... it is likelythat the hoard represents a person or commu-nities wealth, possibly as a payment for a har-vest. Why it was not collected by the owner is amystery, but one that we can share and enjoy1,700 years after the fact."Peter Reavill, of the Portable AntiquitiesScheme, upon Nick Davies find of one of thelargest stocks of Roman coins in Shropshire.

City University London enters the top 500 inTimes Higher Education QS World UniversityRankings (Citys exact position cannot be revealeddue to QSs agreements with media partners.)

Saints or sinners: the role of the media in the

financial crisis (forum held December 2, 2009).Speakers: Gillian Tett (FT), Hugh Pym (BBC),Larry Elliott (The Guardian), Prof. Charles Good-hart (LSE), Alistair Milne (Cass) and DamianTambini (LSE).Chaired by City Graduate School of Journalisms

Prof. Steve Schifferes.

With 2009 drawing to a close, Id like to simply state

that I am immensely proud to be a part of the secondissue of the magazines second year of publication.

David and I are keen to make The Schumpeter a morefrequent staple within the walls of City University andthus far, our plan has been flawless. We cannot giveenough praise to our contributing students for theirexceptional work and enthusiasm. Reading such thor-oughly researched work makes me especially proudto be a part of such a grand legion of students. Lastly,I would like to give a very special thank you to our

predecessor, Timothy Robinson, who has, along withguiding us in our new roles as editors, found time inhis life after City to write for The Schumpeter. Wecannot thank you enough, Tim. All the best to you andyour future!Fahad Memon, co-Editor of The Schumpeter

As the first semester draws to a close, I would like to

thank everyone whos contributed to this edition and

made it what it is. It has been a stressful time of year ,with all students having to meet coursework dead-lines and revise for class tests. I hope everyone read-

ing this edition finds The Schumpeter truly informa-tive and enlightening.I would also like to ask more people to come forwardand submit articles and suitable art work, as Fahadand I aim to make The Schumpeter Bigger and Betternext year.In closing, I would like to wish you all a Merry Christ-mas and a Blessd New year!David Osborne, co-Editor of The Schumpeter

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