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5 // The Market Coordination : Boundaries and Flaws<pre>
Question 1) What is the way of working of the imperfectly competitive markets ?</pre>
1) Markets are actually very distant from the Perfect competition
The pattern of the competitive market built by the economists is rarely present in the usual reality. It is not a very particular case, since most of markets have a different supply and demand structure : for instance, the monopoly (only one supplier on the market) or even the oligopoly ( a few suppliers ). The History of modern Capitalism shows that some monopoly early appeared in certain lines of business. It's in the current case, the Atomistic condition of the perfect competition which is not completed.
2) Companies implement strategies to strengthen their power on the market
Sellers implement strategies to strengthen their power of market: constant research to improve their products (innovation), the differentiation of the product by advertising campaigns, agreements as cartel, price war … The market thus becomes a strategic place for the company. The company always looks for the distinction, by gratifying its product beside the competition : the homogeneity aspect isn't upheld anymore.
3) The regulation of the competition is necessary so as to prevent the competition
To fight against the trend of companies to gather up, publics authorities have to intervene in order to compel to respect the perfect competition rules and allow the market to keep up working : antitrust law in the United States, competition policy providing by the European Commission. Thus, specific cartel arrangements were discovered (telephone operators), cartels at issue (vitamins) in the pharmaceutic industry), or even concentration operations were refused (petroleum or computing).<pre>
Question 2) What are the main failures of the market</pre>
1) A whole piece of information is needed for the proper functioning of the market
The market is sometimes unable to do what it is supposed to do (it is to say, to put a price and allow exchanges) : Thus, we talk about the market failures. At first, it is the result of an incomplete piece of information or an information asymmetry, which lead to a disturbance of the market, or even to its near-impossibility. The moral hazard is also present : the fairness of information provide by the economic agents on a market isn't guaranteed and their behaviour can progress depending on their own interests. The insurance market is particularly exposed to this moral hazard.
1) The output and spread of information are regulated
It is also tough to make available for the consumer, a piece of information of quality able to insure the transparency. The public authorities have to intervene in many different ways in order to regulate and to check information, and to insure the reliability and the relevance. Initiatives, outside the public regulation can also be implemented : creation of Code of Conducts, labelling of a product in order to guarantee its quality, and extra-information for the consumer (newspapers, assocations, comparative tests etc.). The purpose of this mechanism is to restore a minimum of transparency on the market
1) The market is defective in the collective goods field and facing externalities
The market can hardly take into account collective goods and externalities. A collective good isn't divisible, and its cost of production cannot be assigned to an individual. Whereas, the social need exists, none of the economic agents would like to assume the funding of such goods or services, or necessary measures to fight against the negatives externalities. It's the « Stowaway » sense, which consists of benefiting from an action without participating to its implmentation. A solution gets through an intervention of the collectivity : regulation in the case of externalities, funding by the tax for collective goods.
6 // Currency and the financing of the economy<pre>
Question 1) What's using money for ?</pre>
1) Functions of money
Currency fillfuls three enconomic functions : it is a means of payment, it is used as a standard of value and can form a store of value. It also fillfuls socials and politics functions. It is an instrument of the social relationship provided that there is confidence in her by the different individuals of the society and that it is historically related to power.
2) The evolution ot the forms of money
Money has taken so many forms during the past centuries and so forth. Thus, first there was the « commodity money », then, there were « coins » and « paper money », and eventually, the « book money », nowadays dominant. Thus, we attend a dematerialisation of money.
3) The dematerialisation of payment systems
Book money needs means of payment in order to circulate, such as checks, Blue cards... These means of payment that have developed thanks to the dematerialisation of money, less used in paper forms and more and more computerized.<pre>
Question 2) How is the economic activity financed</pre>
1) The economics agents and financing systems
When economics agents want to finance their projects, a lot of solutions exist. Thus, they can opt for the self-financing. It is about an inner-financing.
Agents can also resort to an extern financing. They have then two possibilities. They can call banks : we talk about indirect financing or intermediate ; or choosing a direct financing, or disintermediated by looking for necessary funds on the capital market.
2) The indirect financing
When economic agents resort to extern and indirect financing, they finance themselves by the bank credit. It exists two types of indirect financing : the indirect financing with creation of money or without monetary creation. The indirect financing depends on the level of the interest rate. The interest rate consists of the remuneration of the money lender and the recognition cost for the borrower. It depends of the type of the subscribed loan, with a variable or stable interest rate but also the length of the credit and of the creditworthiness of economics agents.
3) The increasing rôle of the direct financing
In France, since the early 1980's, the market economy, has increasingly replaced the indebtedness. Suppliers don't invests anymore in the form of deposits : they purchase titles like shares and bonds.<pre>
Question 3) Who create the money ?</pre>
1) The monetary creation
Money is created by commercial banks and the central bank. There is a creation of money, i the case of there is money stock. It is to say, the quantity of money which circulate in the inner part of an economy increases. As the money stock is essentially composed of book money, second-tier dealers are those who create it by agreeing credits to economic agents. Thus, credits are deposits.
2) The essential role of central banks
The rôle of the central bank consists of managing the quantity of money circulating in the economy. It delivers coins and banknotes, as well as the central bank money, necessary for the second-tier banks to make interbanks payments, to face the need of liquidity of their customers and then, form their compulsory stocks. The aim of the central bank is to insure the steadiness of prices and of the purchasing power of money without avoiding an economic increase. It also have to ensure that the stability of financing channels by guaranteeing a sufficient liquidity, by playing the rôle of the lender of last resort so as to feed with central money, the capital market as well as making payments.
13 // Sources and Forms of the Political Order<pre>
Question 1) Why a Political Order</pre>
1) The specificities of the Political Order
Whether it is a « chiefdom » or a « State », the political power was born from the need of maintain the social cohesion, and to contain conflicts. In the modern and complex societies where the different social groups get often divergent interests, it's the state's authority that imposed itself after a long process in its becoming institution. Thus, we talk about the sovereignty of the State.
2) The slow and tough constitution of the State
In France, the modern State slowly build up, since the XIIIth century to succeed the feudal system. Originally, this transition was in the constitution of a dual and fiscal monopoly and millitary, on the one hand, and in the separation of political and religious order, on the other hand. Political and administrative institutions thereafter extend and diversify from now on.
3)State and nation
The State isn't universal at all : it is about an political organisation form located and dated. In France, the State played a central role in the constitution of the nation until coinciding with it in order to form a nation state. Thus, there is a belonging feeling of to the nation thanks to institutions like schools, army and symbols.<pre>
Question 2) What are the institutional forms of the Political Order</pre>
1) State forms are divers
To assert its authority, the State is the only organisation that can rightfully use violence. The problem is that it may sometimes be tempted to abuse of that right. Also, to limit these abuses, the Rule of Law always seeks to submit the State to the right, guaranteeing there, individual rights and liberties. Furthermore, to ensure this purpose, a separation of powers is often instituted by the Constitutions. Eventually, the Rule of law building, can, as it is the case in France, be accompanied by a predominant and centralized state ( Unitary State ), or, conversely, prioritize, as in Germany or in Belgium, the federal form
2)Representative democracy and participatory democracy
The democracy is based on the popular sovereingty. Nowadays, it is the form of government the most spread in the world. However, modern democracies aren't direct but representatives : the people delegate to repesentative people, chosen the elaboration and enforcement of laws. The legitimity of representatives is so, based on the participation of citizens, requested, when the elections take place with the vote. Nowadays, there are jurisdiction, as participatory forums... It's the participatory democracy.
3) The political participation isn't just voting
We can observe, for, nearly the past thirty years, that the sharp in no voting has increased. This phenomenon is informative. It is not a depoliticisation, but it is more about a change in the forms of political participation. If the conventional political participation (vote, subscription for instance) blunts, the non-conventional political participation (which gathers protester activities as fill in a petition or demonstrate).