Economics

Official Cash Rate is the interest rate paid by bank to settle the interbank transfers which is done overnight and is regulated by the central bank. (Petro  Tripe, 2004) Where as Market rate of interest is the interest rate charged by commercial banks when it lends money to the public and is dependent on the demand and supply of money. (Petro  Tripe, 2004) The difference between the two is official cash rate is affected only by the transfer between the central bank and institution where as market rate is between the commercial banks and customers who borrow or deposit. (Petro  Tripe, 2004) The official cash rate doesnt affect the money supply in the system where as an increase or decrease in market rate affects the money supply. (Petro  Tripe, 2004)
The RBA uses monetary policy to manage the cash rate. The rate is determined by the RBA board and is announced in the meetings. (Scilly, 2009) Here they engage in open market operation. This is done through two ways. To raise the rate the following ways are used
Adjusting the price of short term finance RBA adjusts the short term finance making them costly. Commercial banks have to park more funds with Reserve bank. This results in less money to be lent to public. As a result interest rate rises. This is a policy used in short run.
Buying securities in the market This result in interest rate to rise. Here the RBA buys securities which results in banks having less amount to lend, as a result banks have less cash in their settlement accounts resulting in cash rate to increase. (Scilly, 2009) This policy thus helps to reduce money. It causes interest rate to rise. It is shown in the diagram below

Figure  SEQ Figure  ARABIC 1 Increase in Cash Rate
So, we see above how interest rate increases. Here the demand is kept the same. Though, in real life it also changes but the rate increases much more. It shows how the policy is used by RBA to control the economy.
Increase in interest rates affects pattern. When interest rate increases, the increased cost of borrowing tends to reduce capital investment and, as a result, total aggregate demand decreases. (Nicholson, 2008) The increases in interest rates make borrowing costly. This brings down consumption resulting in reduced production. Finally, it is seen that increasing rate of interest tends to pull both consumption and investment down thereby affecting the entire demand. (Nicholson, 2008) This is shown in the diagram below

It shows that increase in interest rates decreases money demanded. This is because borrowing becomes costly. This pulls down supply and the chain continues till equilibrium is reached. It ends when the demand matches supply. This happens but after consumption and investment has fallen. Thus it results in contraction. A look at the demand and supply shows as follows

Here we see that interest rate affects demand. An increase in interest causes aggregate demand to move down. It is seen by demand 1 line. The supply remains the same. This causes output to fall as a result prices also move downward. (Nicholson, 2008) Thus, we see that the demand shifts down showing how a rise in interest affects the demand pattern.
The rise in interest rate also affects inflation and employment. An increase in rate causes more unemployment as companies reduce their production because people consume less which gets translated into more people losing their job. (Nicholson, 2008) This also has an effect on inflation. With fewer goods being produced things become expensive. But as demand is low prices come down. These result in bringing down inflation rate. It is also seen that inflation and employment move in opposite direction which is also the case here. (Nicholson, 2008)
Credit creation is a process by which banks create money in the economy by lending money to the public out of the primary deposits. (Joseph, 2007) It is one of the activity banks pursue. Banks lend money to the public only after the requirements to comply by the law has been met.
The credit creation by commercial banks gets affected by monetary policy. The situation depends on the type of policy used. It affects credit creation in the following ways
Open Market Operation RBA is using contraction measures here. RBA is selling bonds and securities which have resulted in less money with the commercial bank to be lent to the public as they have less money and mostly all the sum is invested in bonds and government securities. (Joseph, 2007)
Reserve Requirement RBA has raised the reserve requirement for banks. Reserve requirement is the amount of money commercial banks have to keep with reserve bank or central bank and is calculated on the amount of time and demand deposits. (Joseph, 2007) Commercial banks have less money to lend as the requirements have been raised. This is a contraction method which is used and has affected the lending capability.
 Discount Window RBA has raised this rate for banks. It is the amount commercial bank has to pay as interest to the central bank for the sum borrowed from them. (Joseph, 2007) Increasing this rate has made it expensive for banks to take loan from reserve bank. Commercial banks are finding it tough to manage it. The cost of borrowing is high for commercial bank and the interest they receive from customers is not sufficient to manage it. (Joseph, 2007) Here also contraction measures are used by RBA.
RBA should follow the contraction measure. It will help them come out of recession. Demand is falling so raising interest rate will create an impression that economy is growing. The morale of the people will improve as they will see the situation improving. This will make people spend more money. As a result of this production will increase and so will employment This chain will continue till the economy revives. Thus these measures will help RBA and is under their control.

As a young student of economics and business, I have always been enthralled by the importance of economics in an individuals life. The way money and economic situation of a country affects every aspect of human life and develops it, has always intrigued me. It is this inquisitiveness and desire to learn more about economics and its affect on humanity and related issues like education, poverty and health that has motivated me to pursue a PhD in Development Economics. I want to pursue a doctoral degree in Development Economics because this would help me  understand in depth how the essential things in life can be developed for human being from an economic point of view. Having studied, heard and read a, lot about economies of the developed nations and also about developing nations, it is my aspiration to understand this disparity and the differences between international economies. A Doctoral degree would help me to better understand these issues and also help to find solutions to these problems. I wish to pursue this degree for the sheer love of Economics and the desire to know more about it.
I am one such individual who is extremely motivated and aspires to pursue a PhD degree from the University of California, Riverside in the area of Development Economics. I desire to pursue this degree as it would equip me to follow my dream of being an economics researcher and thereby work in the area of knowledge empowerment, by both undertaking research as well as imparting education to the youth. This is my ambition, for which this degree would be my first step.
Ever since I stepped into my undergraduate degree, my desire to be an economics researcher has molded my career. I pursued my Masters Degree in the area of International Finance and Development Economics. This helped me to understand the intricacies of the subject, thereby, arousing a great interest in the same. This is when I decided to pursue a PhD. My present MBA degree has helped me to understand the business aspects of economics as well as trained me in very complex subjects of economics. I decided to pursue an MBA because I feel it is important to understand the basics of finance and Human Resources in order to go in depth into the field of economics. An understanding of finance from a business point of view will help me to better understand the economic policies of developing economies and the reasons for differences in economies of different countries. This degree has not just enabled me to undertake tremendous work pressure but also helped me train in the area of capital investment, return to human capital and investment in education which would be very useful for my research in my doctoral degree. 
My years of working as a manager with different companies like Capital Protection and Sky Maintenance has helped me get an insight into the application of economics in the real word. This, coupled with my teaching experience, helped me to ascertain my interest in pursuing a PhD in development Economics. My work has been part time as well as full time which has enabled me to achieve a good degree as well as earned me critical work experience.
I have always been a bright student with a number of fellowships to my credits. The Sorbonne University Fellowship, French Government Fellowship are the significant ones. Both these fellowships helped me to develop my skills as a student and established my interests in the area of research. The prestigious Sorbonne University provides these fellowships with an intention to help develop students interest in the area of research by promoting team works and exchange of developmental ideas. This fellowship helped me achieve the same. One of my most significant work as a student has been my preparation for a PhD at the Sorbonne University, wherein, I studied a number of subjects such as Microeconomics, Macroeneomics and Econometrics. These years helped me understand the intricacies of carrying out research and also helped me strengthen my fundamentals with the help of some general courses and prepare me to undertake a full time PhD. This experience helped me to understand the course through text books and also helped me develop my thought process through exchange of ideas in a diversified education environment.
The PhD program of your university fits perfectly with my career objectives. The reason for me to choose Riverside as my destination is mainly due to the presence of Dr. Anil B. Deolalikar. I have a lot of regard for his work and it has particularly impressed me since this is my area of interest. His publications in the fields of Economic development, with special focus on human capital accumulation, Economics of education and education-sector reform, Poverty and human development in developing countries have been a source of inspiration to me. I have read his works which involves the study of different economies from round the world and their in depth analysis, which is what I aspire to undertake. I am familiar with all his publications such as,
 Gender Differences in the Returns to Schooling and in Schooling Enrollments in Indonesia,    Journal of Human Resources 28(4), Fall 1993 899-932.
The Role of Education Decentralization in Promoting Effective Schooling in Selected Developing Countries in Asia, June 2000
However, his most inspiring work is his publication titled Human Development in India Past Trends and Future Challenges, This is one paper which ahs greatly impressed me by the impact of a nations economy on its people and also the dependence of the economy on the people and region.  These works of Dr. Deolalikar has inspired me to pursue a doctoral degree under his guidance in his department.
University of California Riverside is a combination of superior faculty, state of the art facilities, and diverse student body is the perfect ingredient to broaden my knowledge in the area of Development Economics. This program will give me the training to perform research in Development modeling and valuation methodologies, including complex topics. With a degree in the field of economics at the undergraduate and post graduate level. I have the ability as well as commitment to pursue this degree, which when coupled with the facilities of the Riverside University would help me establish myself in the world of Development Economics, as a researcher and teacher.

Personal Statement
In the year 1995 when I joined the Birzeit University, Palestine for a degree in Economics, I had a dream. This dream was to understand the complex subject and its intricacies which drive the entire world. The effect of economics on the entire human race had always intrigued me. Right from the Stone Age, man had always centered himself around economy and money. This attraction of man is what had inspired me to pursue my bachelors degree.
After the completion of my degree, I realized that my interest in the field went deeper than what I learnt at the undergraduate level. This is when I decided to make a career in the field of economics, as a researcher and teacher. My experiences of working as a manger for Capital Protection, gave me my first experience of practical economics. It was here, that I understood clearly the subjects I had studied and the influence it had on millions of people. At the same time I also undertook the role of teaching economics, for I found a great interest in imparting knowledge to youngsters. These two jobs helped me to decide my future.
I want to obtain a PhD in Development Economics, for I have seen the importance of this subject to every single human being. My masters degree in International Economy and Development Economics helped me to realize that economics is greatly varied over continents. A clear understanding of these concepts is essential so as to build a good world economy as well as develop countries with potential but lack of guidance.
 The economic policies of any country impact its citizens, and that is the reason why I want to work in the development area so that I can help formulate good economic decisions in my capacity as an economics researcher. My dream of carrying out research as well as teaching as a Professor falls in line with my dream of working for the world. As a researcher I want to contribute in formulating economic policies and also as a teacher want to impart my experiences and knowledge to others. It is this dream that I aspire to fulfill through my PhD degree.

Work History
My work experience started off when I was very young. My first job was while I was in my undergraduate degree. I worked in the University library of BirZeit University in the classification section. This job was for three years, and I worked for 20 hours a week. This experience was very valuable as working in the library helped me get access to a number of books and publications.
During my stint in the Sorbonne University in France, I again took up a similar job. This time I was working in the documentation center for 20 hours a week. My responsibilities included documenting the activities and tasks undertaken and this gave me a good experience in document handling.
At present I am working as the Office manager for Sky Maintenance and Repair, California. Here my responsibilities include maintaining records of employees, vendor details and other payment details. This is a full time job and I am pursuing my MBA as well.

Long Term Goals
My motivation for pursuing a PhD in Development Economics is my desire to get into the education environment. I aspire to be a researcher and teacher of economics with a focus on Development Economics. This is a subject which is essential for under developed economies to strengthen their economic strategies. My study and thereby my career as an economics researcher would help in this endeavor. Also, I want to be a teacher of economics, which would help me to impart education and my knowledge to other students, of different communities and countries. I aspire to convert my education into a useful tool for the development of society and people at large. Economics is what drives the human race and I want to be an instrumental part in developing the same for the world.

Impediment to Your Advancement
I have always been a very motivated student with a clear ambition of becoming a researcher. However, as a lady, I had to face a number of hurdles in my career which resulted in some discontinuation of my studies.
After I completed my studies in France and was preparing for my PhD at the Sorbonne University, I got married. This resulted in me shifting to the USA which was a totally different country. There was a lot of difference in the studying environment of both countries. As a result I had to prepare slightly differently and which took some time. The adaptation to a new country wasnt easy and also I had personal commitments like young children. This naturally exerted a lot of financial pressure and thereby causing a big break in my career.
However, my determination and aspiration to be an Economist has motivated me to pursue my career despite these breaks. Keeping my career prospects in mind, I took up various jobs and also undertook my MBA degree. Now, with my family commitments fairly sorted out, I want to focus on my career and pursue my dream of becoming an Economics researcher.

Ryu  Hungs (2009) study, E-Commerce Transaction Mechanisms and Buyer-Supplier Relationship describes various advantages and disadvantages of e-marketplaces and EDI for managers in the process of selecting an efficient and economical transaction mechanism.  A qualitative meta-analysis, this research carries flaws as it is not objective from the standpoint of academicians.  Just the same, managers would find it easy to peruse and understand.  In fact, Ryu  Hungs research article is expected to inspire managers to opt for electronic transaction mechanisms over paper transactions.
     Ryu  Hungs (2009) study, published as E-Commerce Transaction Mechanisms and Buyer-Supplier Relationship was conducted so as to deepen managerial knowledge about electronic business relationships between suppliers and purchasers (79).  The research article is especially intended for managers given various choices of transaction mechanisms, including electronic marketplaces and electronic data interchanges (Ryu  Hung, 79).  With an emphasis on rational choices in the economic sense, this research is quite important as it examines a number of studies on e-commerce relationships, thereby supporting the managerial quest to cut costs by saving organizational time and money that would otherwise be spent perusing all of the studies mentioned.  This research is also essential in academia, as it gives shape and adds meaning to information gathered by many other researchers on various topics related to electronic business-to-business relations.  In fact, academicians must be grateful to Ryu and Hung for integrating this information and showing them the path to increase their understanding of the subject. 
     The study conducted by Ryu  Hung is a qualitative meta-analysis.  Considering the fact that it was written with managers in mind, the methodology is perfect, for this research paper may be understood by laymen, too.  From the academic standpoint, however, this methodology is controversial, as it allows the authors to evaluate previous studies however they deem fit (Rochford, 5).  There are questions of feasibility, validity, study selection, mechanism, and interpretation  and even ethics surrounding qualitative meta-analyses (Rochford, 5).  Even so, the fact that Ruy  Hung had clearly stated that their research paper was authored for managers rather than academicians allows readers to give them the benefit of the doubt (Ruy  Hung, 79).  Indeed, this study is comparable to a research-based article in Harvard Business Review, written for managers in particular.  Moreover, Ruy  Hungs article extensively covers the economics of electronic B2B relations, unlike Nakayamas (2000) study, for example, based on the survey method to discover that EDI reduces the perceived bargaining power of wholesalers (Nakayama, 195).  If Nakayamas study had been covered in Ruy  Hungs research, the latter would be expected to include many other studies on EDI to allow managers to understand the economics behind the subject with an integrative view.
     Ruy  Hung describe EDI and electronic marketplaces as cost-cutting transaction mechanisms, allowing for frequent and rapid exchanges of information (81-84).  As perfect competition is based on perfect information, and firms must reduce costs to increase efficiency and revenues, these are vital features of these transaction mechanisms, as explained by Ruy  Hung with the support of various published articles.  Because electronic business is dependent on the viability of the information systems in place, the advantages of building electronic data interchanges to suit environmental needs are also discussed (Ruy  Hung, 84).  If, for example, the economy is unstable in one place and strong in another, and EDI involves a buyer for an international business dealing with both places at the same time, the demand for perfect information requires EDI to be perfectly appropriate to face this form of environmental diversity (Ruy  Hung, 84).  Likewise, both EDI and e-marketplaces  despite the fact that they allow for quick relay of information between buyers and suppliers  need to be perfected in a time of technological uncertainty, when product features or technologies are rapidly evolving (Ruy  Hung, 84). 
     Ruy  Hung note that the present-day EDI and e-marketplaces are not equipped to handle technological uncertainty (Ruy  Hung, 84).  Furthermore, when there are many suppliers, buyers are not likely to opt for electronic transaction mechanisms, seeing that the implementation procedures for EDI and e-marketplaces are both expensive and complicated (Ruy  Hung, 84-85).  Sutton, Khazanchi, Hampton,  Arnold (2008) write that B2B elements must be in place and integration with external and internal applications and feasible with available financial and technological resources (154).  The buyers and suppliers organizations must choose suitable information systems, hire highly skilled staff, and do much more to ensure that B2B linkages are flawless (Sutton et. al., 154).  Additionally, the use of electronic transaction mechanisms depends on the suppliers and buyers beliefs about their ability to successfully conduct electronic business (Ruy  Hung, 85).  So, although complex product features render EDI and e-marketplaces attractive as these electronic transaction mechanisms make it cost-effective, speedy and efficient to exchange important facts about the product, participants in an electronic business relationship must be sufficiently comfortable about their use of information technology (Ruy  Hung, 85).  Ruppel, Underwood-Queen,  Harrington (2003) add that users of electronic systems for business must also trust these transaction mechanisms as secure (30-31).
     Ruy  Hung further describe trust as an essential factor influencing the use of electronic transaction mechanisms (86-86).  Ruppel et. al. in addition to various other scholars have written about trust in electronic business relationships, including relations between electronic banks and their customers (Ruppel et. al., 29-30 Shu  Han, 2000, 248 Kim  Prabhakar, 540-541).  Moreover, although Kim  Prabhakar have extensively described risks related to electronic transaction mechanisms, Ruy  Hungs approach in this context may be referred to as risk mitigation as their article appears focused on the pros of electronic business transactions.  According to Ruy  Hung, electronic business relations reduce the risk of opportunism as perfect information is relayed between suppliers and buyers (86-87).  In addition, the authors note that EDI allows for long-term relations to be developed between buyers and suppliers, even if e-marketplaces do not promise this (Ruy  Hung, 87).  Of course, relationships are explored in almost every scholarly article on e-commerce, including studies on internet banking (Nakayama, 195 Lang  Colgate, 2003).  But, even though all of the above research findings condensed by Ruy  Hung have been related before, by putting them together to help managers choose between paper and electronic transaction mechanisms, the authors have done a great service, not only to private business organizations but also the public sector already involved with e-governance.  The authors should also have mentioned that electronic transaction mechanisms help organizations gain a competitive edge by allowing suppliers and buyers to swiftly exchange information to develop new products based on changing tastes and demands.  
     Ruy  Hungs conclusions are derived from the various studies with which they conducted a qualitative meta-analysis.  The authors recommend a strategic approach to decision-making when it comes to choosing transaction mechanisms.  After all, electronic transaction mechanisms involve uncertainties that information systems may or may not be equipped to handle at any given time.  Because the choice of transaction mechanism affects the firms performance as well as costs and revenues, the decision-making process must necessarily involve a consideration of the organizations short-term goals versus its long-term strategic plan (Ruy  Hung, 87-88).
     These recommendations are perfectly reasonable.  What is more, they are consonant with Ruy  Hungs positive approach to the subject.  In other words, they encourage managers to feel comfortable with the use of EDI and e-marketplaces, and work to develop electronic transaction mechanisms that would eventually handle many types of technological uncertainties as well.  Although Ruy  Hungs article is research-based, the fact that it is a qualitative meta-analysis allows the reader to doubt its objectivity in the academic sense.  Regardless of this methodological problem, the authors conclusions and recommendations may be expected to inspire private and public enterprises to reduce costs whilst increasing effectiveness, efficiency, and productivity by joining the electronic herd, as Thomas Friedman would put it.

I am a college student pursuing a degree in Economics. After this, I plan to take up a Doctoral degree in Economics at XXX University. I wanted to focus in the field of economics because I want to explore how a particular economy works and how it affects the lives of people. This interest was ignited when I went to Ghana, West Africa. For 2 months, I was a volunteer for the local orphanage. It was in this place that I witness first hand how deprivation to basic necessities such as food, water and shelter can significantly affect the way of living of many people. Because of the pervasive poverty in Ghana, I was further motivated to study the complexities of economics in order to come up with solutions that can eradicate poverty.
Moreover, I am particularly interested in studying world economy and the distribution of wealth. Because of this, I plan to become a research-oriented economist wherein I will concentrate on public finance, public policy, labor economics and political economy. Also, I want to contribute in building a more efficient and productive public policy for the equal distribution of wealth across the globe and to study public spending of the government.
In order to achieve this goal, I have taken up courses on Public Finance, Labor Economics, Advanced Mathematics and Advanced Statistics while I was in college. Also, I worked on Econometrics, Matrix Algebra, and Advanced Calculus. Through this, I was able to understand the flexibility and efficiency of public finance. To further enhance my knowledge and training in this field of study, I have joined in the Michigan Economics Society and Undergraduate Mathematics Club. I even served as a tutor in these prestigious academic organizations for a year to teach other students about microeconomics and macroeconomics. Aside from this, I also attended several informative seminars and presentations that have expanded my knowledge in economics and mathematics. With my incessant dedication in learning about economics and mathematics, I was included twice in the Deans list t at Pennsylvania State University in 2007.
Furthermore, my internship at KIEP (Korea Institute for International Economic Policy) helped me to discover how to perceive the real world through an economic perspective. I have worked alongside many prominent and experienced economists in South Korea in tackling the issue of FTA (Free Trade Agreement) with China. More so, I have also participated in several researches including The Strategy and Properties of Chinese Market (2008) and The Analysis of China-South Korea FTA Policy (2008). My main task in these two studies was collecting and organizing data. Overall, this internship facilitated my growth as an individual and as a professional. It also broadened my understanding of the processes involved in economics.
Through my hard work and commitment to learn, I was awarded as the Outstanding Mid-classman in Economics for the academic year 2007 to 2009. This achievement have further inspired me to improve the economies of nations particularly the underdeveloped and developing countries by reducing negative externalities and practicing an appropriate social insurance and tax system. In connection with this, I am very much looking forward in studying advanced public economics and conducting studies that are aimed in improving the tax system, providing efficient welfare programs and social insurances for various countries.
I believe that the faculty of the Department of Economics at XXX University is very experienced and research-oriented who can train me in becoming a knowledgeable and proficient economist. I chose this particular academic institution because it offers graduate programs in economics that are ranked in the top ten all over the United States. Given the opportunity to attend in this university, I would like to work under the tutelage Dr. Laura, Dr. Rhodes, Dr. Yoon and Dr. Poss so that I can learn from the best. Moreover, I believe that am prepared and well-equipped to take on the challenges of taking a doctorate degree and succeeding in the field of Public Finance. If I will be given the chance to take up the Doctoral program at XXX University starting this Fall 2010, it would be a great opportunity for me to prove my competencies and express my passion .

Oligopoly basically means a market that is directed by a small number of independent suppliers, which enables them to jointly exercise control over market prices, supply, and other market factors (Business Dictionary, 2009). These players provide predominantly comparable products that are mainly separated by promotional expenditure and heavy advertising. Because of their limited number, suppliers indispensably anticipate the impact of each others marketing strategies in order not to lose their market shares. Some of the good examples of oligopolies include petroleum, banking, automotive, and airline markets. In these markets, only a few big businesses dominate the market, thus making competition exceptionally complex for the new players in the industry. Accordingly, the participants in oligopoly markets can effectively create a sellers market.
I. Oligopolies Help Consumers
    In some cases, oligopolies benefit consumers in view of the fact that the product produced by this select group of independent suppliers are generally almost the same and, as a result, these suppliers, which are contending for market position, are mutually dependent with each other (Investopedia, 2009). Therefore, unlike monopolies, oligopolies sometimes trigger price wars between the suppliers. To illustrate, if a particular economy requires no more than 200 cars, and Company A produces 100 cars and a competitor, Company B, produces the other 100, then the price of cars of the two companies will likely be interdependent and, as such, will be somewhat similar. As a result, if Company A starts to sell its cars at a lower price, then it will expectedly get a greater market share thus, such situation will force Company B to likewise lower its car prices in order to maintain its market share. In this case, the consumers will benefit the most out of the price war seeing that low priced products are made available to them.
II. Oligopolies Help Income Distribution
    In an oligopoly market, only a few numbers of large independent suppliers compete among themselves. This handful of participants accounts for a moderately large market share. Oligopolies, therefore, help income distribution in view of the fact that selection of products is comparably limited, or the products and design offered by this type of market comes from an extremely limited group. In addition, independent suppliers of an oligopoly market indispensably take into consideration the reactions of their competitors to any change in output, product price, or types of non-price competition. Accordingly, because of this interdependency, the services and products of the independent suppliers are generally identical, which will likely result to equal market share and equal distribution of income. Moreover, it may also be possible that in order for the income to be somewhat equally distributed, the few suppliers may decide to undertake cartels or price fixing agreements. In view of the agreement, players can perform as if the market is nothing short of monopoly, capitalize on joint profits, and prevent revenue and price instability in the industry.

Adam Smith is one of the founding fathers of economics and he has contributed greatly to this field. The Wealth of Nations is one of his books that contributed largely in the field of todays economics. This book was published in the year 1776 and its contents are still highly valued today by economists. During the era when this book was published, competitions and free trade as means of gaining progress and encouraging innovation were not understood. The governments of that time used to give subsidies and also grant monopolies as a means of protecting merchants, manufacturers and farmers from their own countries so as to safeguard them from unfair competitions. Local cartels in that time were being operated by the gilds whereby artisans from one region or town were prohibited from going to other locations in search for work. The national and local laws also forbade the innovation and even use of machineries that were thought to be labor saving. As a result, poverty levels were high and accepted as the natural, inevitable and common to most individuals. This drove Adam Smith to come up and write his book The Wealth of Nations (Blatt, 2003).
Adam Smith, The Wealth of Nations
     Adam Smith felt that the restrictive nature of the government towards trade and economics or the mercantilist system were hindering economic development, moral and social improvement of individuals and enhancing poverty in the country. Adam argued that principles of competition and free trade could have changed this situation spurring economic growth and development, reducing poverty and even improving humankinds moral and social stance. To make his arguments vivid, Smith collected evidence from various places including China and Golconda mines where free trade had encouraged competition, leading to creation of wealth. The concepts brought up by Adam Smith laid the intellectual foundation of economic expansion brought about by free trade in the 19th century (Wiersema, 2009).
    Adam Smith measured the nations wealth by money, although money to him did not constitute or make up the wealth. He argued that this wealth was produced by the fixed assets but again those fixed assets did not make up part of the wealth. Lastly, Smith stated that fixed assets should be able to generate consumables that are subsistence enough to maintain resources and human capital. However, Smith did not include resources or consumables while measuring a nations wealth (Butler, 2001).
    To create wealth, Adam advocated for institution of superior markets mechanisms. He argued that by making the markets mechanisms superior, this would encourage free trade as well as competition thus improving innovation and contributing to the progress of a business as well as the total economy. Adam also argued that individuals aim is to maximize their profits and to do so, a person employs his capital in ways he feels are valuable. He argued that despite the limitations and imperfections of human beings, person gains expertise of his business as well as the economic needs and this expertise must be superior to that of other outsiders so as to make profit. This concept advocated for innovation and creativity as a means of creating differentiation and competitive advantage. The third argument of Adam was that government interference and restrain on both foreign and domestic commerce were foolish and dangerous. He argued that businessmen were better placed to judge the market situation than lawgiver or statesmen. Adam was also against mercantilist policies (Blatt, 2003).
Evidence of Adam Smiths principles in todays economy
    The principles of free trade developed by Adam Smith back in the 18th century are highly evident in the American economy today. American markets operate in a free market for most products where the forces of demand and supply determine the prices of commodities and services. As Adam argued, this has helped in increasing competitions in the market leading to high levels of innovation in businesses as they try to outdo competition. Competition has been essential for driving growth in most American industries leading to economic growth in the country and business development (Kilcullen, 1996).
    Adam Smith also advocated that government should not impose trade barriers to both foreign and local trade to encourage economic development and wealth creation. America today has decreased the number of trade tariffs imposed on both local and foreign traders and this has encouraged many companies to go global (emergence of multinational companies). America has entered into many trade agreements with various countries which have led to trade liberalization in the country. This is a principle contained in Adam Smiths The Wealth of Nations, although various modifications have been done on it (Wiersema, 2009).
    American economy is also characterized by private ownership of companies and businesses unlike the traditional mercantilist system criticized by Adam. As Smith argued, allowing private ownership of businesses would drive up competition and enhance development of human beings both morally and socially. This is highly evident in American economy. Individuals from all states and outside the country are allowed to freely interact and conduct business as long as such endeavors do not violate the business laws. This has encouraged exchange of ideas, innovation and healthy competition in American economy that has helped reduce the poverty level.
    To a large extent, Adam Smith seems to have favored the right of workers as he highly criticized landlords who were charging high rents for their buildings to businesses. Adam viewed labor as crucial to economic development of a country. Today, labor is also highly valued as a means of improving the overall performance of an entity (Butler, 2001).

The psychology of economic analysis is basically based on the Mathematical-Metaphorical (M-M) argument think about activities that are legal when done for free but become illegal when done for money retrieved from the freakonomics The New York Times Blog by Eric A. Morris, in reference to the taxi medallion practices when the taxi drives the passengers around it is a crime when it is done for money, but legal when not done for money ( HYPERLINK httpfreakonomics.blogs.nytimes.comhttpfreakonomics.blogs.nytimes.com) The article analyzes the argument using the Four-Part-Framework to determine the validity of this argument for better classification I will refer to the pro-medallion for the argument and the anti-medallion against the argument in the analysis of the argument. I have used the FPF to bring the understanding of how the M-M works. This is an effort to make the dynamics and nature of unemployment to be clearer. I therefore use the Mathematical-Metaphorical model surrounding the unemployment. The Shapiro and Stiglitzs Mathematical-Metaphorical Model is used in this analysis to find out the validity of the argument (Davy 22)
My argument will be opposing the blog argument, it is not a crime driving the passengers around in a taxi for the purpose of cash. the general comments in response to the blog argument were as follows its unfair to the cab operators, we must decongest the city, the cost on government regulation is higher than the benefits the cabs generate, it should be an enterprise run by the government like in Dubai, common strategies are better solved by the government institutions, it feels safe and secure when driving in a licensed taxi, its too late to reverse everything among others.
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Maxe (V(e, . )) V(e, . )  VN
E(e, . ), VS E(e, . )
subject to e  0,), w  0,)

The model solution report
(For e  0, )), e  is expected to be at a positive point where e   0 if and only if 
The solution above can be interpreted on two levels
According to its own I.F terms
And according to the I.F primary subject terms
(For e  0, )), e at some point will be positive e   0 only if
The statement can be classified TRUE- it does not go against the model set-up and the mathematics relevant rules (Ravenhill 45-46).
The truth is dependent and has NOTHING in common with the mentioned phenomenon in the phase delimiting.
Here are the acrual mathematical implications of the model
When w is higher it will lead to
increase in the value of wage e,
increase in the value of Vu,
decrease in the value of shirking q,
increase in the value of r,
Increase in the value of b.
This interpretation have a direct link to the rate of unemployment, the 5th equation has numerous impacts. If the company pays enough or high wages then it means the employees will not shirk. When the critical wage (w) is on the higher side then
1)  The higher is the effort required (e)
2)  The higher is the utility expected in relation to unemployment Vu.
3)  The higher is the effort required (e)
4)  Lower is the shirking probability (q)
5)  The higher is the interest rates
6)  The higher is the exogenous rate of quitting (b)   
Lets now compare the solution to the two interpretations
    It is to double standards because we are forced by the metaphor to look at the model in 2 different perspectives and secondly because the models I.F projection on primary subject is the metaphor essence. The statement is therefore threefold it is mathematical and we can therefore only use the relevant mathematical rule, it also either be wrong or true and finally the interpretation incorporates mathematical implications. It is evident that when the catalog correspondence is actually natural then implications too are natural. On the other hand CC is an assertion that is metaphorical, therefore the interpretation can only come out plainly true ONLY to the level that we are willing to accept that CC is plainly valid.
Interpretation and hypothesis testing (Ravenhill 60)
My claim (Null Hypothesis) the higher the level of work target, the higher the wages
Hypothesis 1 the higher the level of work target, the lower or the wages remain constant (meaning that if we dont experience the hypothesis one above we reject this hypothesis and its theory). On the other side if we experience the relationship mentioned in hypothesis one then we accept the theory.
    In this hypothesis Data is collected from the feakonomics web blog. Decisions which are obtained concerning the behaviors that can be observed counts as a case of theoretical concept are in most cases arbitrary. Two problems exist here data and theory disconnect and observed situation questionable re-organization. A regression is test is done to find the hypothesis on the two problems. If we get a negative result the hypothesis is definitely rejected or claim that the tees was not done properly, there must have been some faults during the test.  In case the test gives positive results, we conclude that maybe the theory of or the hypothesis is correct. Positive results may also be because of bad data collection or bad reorganization or non sensual reorganization.
Another example of interpretation and hypothesis testing on the omenssigns study (the ancient Roman Augury)
Hypothesis 1 Emperor will not die until 5 years from now.
Hypothesis 2 The opposite.
At the end of the five years, he dies (real outcome after five years expire) the big question here is how do we interpret the outcome Compare this kind of phenomenon to political science situation on the regime longevity prediction. Using economic data and demographics to analyze this will give a prediction with survival chance of 95.
    Lets take the Augurs theory, Gods governs the world, omens reveals his state of minds and actions. According to the theory of political scientists, politics is actually a mathematical order.. Assuming that all these theories were 90 right for the last 10 years, interpreting testing results that are perceived to be good as the goodness theory evidence, need a belief in the CC goodness. On interpreting this phenomenon, Epistemology and Ontology issues come in.
    This is to basically cover the actual argument question, adequate justification and how one can actually needed justification. The ontology subject is the taxi medallion argument, people try to justify whether the government should live alone this sector of the economy for it to continue operating on its own without regulations, others argue for government regulations on the taxi industry through the medallion system of the government. The question or rather the economic facts behind this argument are basically the economic impacts of non-regulation and the economic impacts of government regulation which one holds more water This is the fundamental argument and analysis behind the essay. The analysis use the methods listed above to determine which of the two arguments according to the individuals perceptions or the feelings in their minds on the issue.
    The elements of science in the initial analysis on discourse possibility would be basically based on difference in disputes levels and the loss magnitudes in each case that is for pro-medallion argument and the anti-medallion argument. The government will be the structured pursuit in the science element, the actual facts on the ground, and how justification can be met in both stances. It should come out clear at this point that the argument is a perception on illegality of the government regulation on the taxis, one can feel that it is legal while the other will suggest that it is legal and should therefore be regulated.
The Pro-Medallions Claim
    The anti-medallion argues that lack of control on these taxi systems would mean congestion in the cities. Congestions have direct negative impact on a countrys production and ultimately the economy. There is also an argument that the government would charge a lot on licensing, taxation among others making it very expensive for the taxi operators (Robert 200).
The pro-medallion ontology   
    The facts listed below are the facts on the ground on the argument for controlled government regulation. They give the right characterization of the argument in the actual field rather than the arguments sampled from the blog.
It is actually a fact that the city is being congested by too much taxi operating in the city center.
The city congestion have direct negative impact on the economy slow movement into and outside the city which slows down the rate of transportation of goods and services in the stores, slow down in general economic production level of labor among others
the government cannot live some sensitive sectors of the economy like transport to under the control of the private sector or for the free market systems
The tourists dependence on taxi transport is not a long term economic benefit in the long run it becomes bureaucratic. Decongesting the city streets would actually improve an economys GDP drastically.
Truly we cannot argue for city congestions by the taxis to add any economic value.
    It is justifiable that the government is the only genuine source of convention in sensitive matters than any other institution. To find the government as necessary we should refer to the government legislation laws, rules and regulations and above all the constitution putting all the sensitive matters like security to the government intervention (Robert 305).
    On the analysis derived from the above, it is clear that epistemology and methodology are driven by ontology. The fact that the government is the controller of all sensitive matter relating to the country means that the taxi issue can only be solved by the government. Therefore to find a better solution to this, we must look to the government for intervention, the constitution, laws and regulations must be referred to give appropriate way forward ( Todd 43, 99-102).
The Anti-Medallion Claim   
    The pro-medallions claims that the current world fully or partly depends on the taxi systems, for transport especially by the tourist visiting country and they are not budgeting to buy their own cars for transportation in the foreign country due to saving on costs. This group of people has to be negatively impacted if the taxi sector is rather wiped out. The backbone thought of the anti-medallion argument was basically on sympathy, or sympathetic arguments for the agenda that it is simply unfair to the taxi operators who put a lot of efforts in their work.
    The anti-medallion ontology is rather not the actual picture existing in the field out there. The argument or feeling of sympathy controls everything that the anti-medallion will use to put all his arguments for war (Patricia 334). The tourists are currently not 100 dependent on the taxi system of transportation, they have organized their transportation with the various tourists agents that manages almost all of other affairs including efficient and effective transportation, and this renders the tourists argument redundant. Furthermore there seem to be a bundle in the Epistemology and the Methodology, the government regulation in fact does not exist here, it is more a methodology than it is to ontology.
Anti-medallion Epistemology and methodology
    What is considered knowledge here is the justification by sympathy on the taxi people operators and to a low extant the free market, there is no government intervention in this argument. The source of knowledge here is weak the law of demand and supply should be given a chance to take control of the situation which is already a problem to the economy. The methodology of pro-medallion argument is a free market which is basically a natural science. The theory of free market generates a hypothesis which is falsifiable and compares hypothesis predictions in a graph or chart analysis (Matsuda 55).
The Anti-Medallion Ontology
    The actual facts on the ground that is we cannot predict the outcomes in the end of everything, that is to say there are two positions congestions in the cities are actually not a problem, the system of impacts of free markets application on the taxi system may or may not be economical in the long run. There is actually agnostic limitation on perception in the anti-medallion that all the economical aspects must be driven by the law of supply and demand, a free market economy.
    The significant part of the above analyses lies in the comparison of the two elements, the pro-medallion and the anti-medallion argument as in figure 1 below.
    At this stage of the analysis it is vital to raise the questions like should regulation of the taxis exist or not, are there special and unique occurrences in the economy at some times Is the government intervention definitive are there other ways of intervention better than the government What is the importance of analyzing empirical sources of evidence And lastly what factors can we consider in classifying an argument as convincing
    in this discussion discourse is possible in ontology level for example it not contradicting in real sense when I espouse that the government say is final on all issues concerning the economy. But it is a no on the Methodology and Epistemology because there is no authoritative answer to the argument because illegality is a formation of the mind furthermore we dont have a way to adjudicate the differences.
    This brings us to the analysis and understanding of ontology, Epistemology and Methodology in the context of Rationalism Versus Empiricism and finally Induction and Deduction analysis tools. The guiding factor in our belief here is the scientific approach of economics stud are earlier beliefs about the epistemology and ontology for example trust in the government Empiricism versus Rationalism.
    according to Francis Bacon, on Empires approach, the mind cannot be set free from the daily influences from the experiences and that it is not possible to abstract from all the daily experiences, we should therefore innovate ways for appropriately using experience. We should therefore use experience in situations like the taxi medallion issue to investigate the situations involved and get a proper understanding of the situation (Northoff 33). we can therefore allocate the resources of the government in regulating the taxi industry, and economics is the right subject that does such scientifically studies, they have used the right experiences, principles in generating and governance of the experience, and it is obviously in a perfectible competitive market. In the experiments we can see that government regulations are directly correlated to the performance of the economy in the sectors, we can therefore reach the principle through induction  all government regulations on poorly performing sectors increases production and therefore numerous spillover effects (Freedman 56-90). We can also test the principle since when we encounter a GDP reduction.
    The big question or rather the puzzle is how to make sense of such a difficult phenomenon, we should in some way categorize the involved elements and come up with relationships or dynamics, we can therefore talk about the science of sympathy. Sympathy and incomprehension are associated thoughts, is there science of determining sympathy and incomprehension, and is it necessary. Rationalization can only be characterized as in outside, rational reconstruction and positive. How do we quantify sympathy then, through analysis (statistical), stories according to the experiences we have In the rationalist approach we interpret observations properly through life principles and rearranging into relationships and categories in our principles. On the other hand the empiricist approach came up with a theory from our life experiences, formulate the hypothesis and finally test it. the empiricist explanation is the identification of viable correlation occurring between the phenomenon ontology (phenomenon specification and the epistemology, methodology- relationship test and specification. according to the empiricist explanation sympathy could be on the category of the rich and the poor, the rich would not sympathize with the taxi drivers but would rather be comprehensive while the poor class would have sympathy on them (Westwood 66-67).