IB 200 UW Madison Final Exam Review - Sachin Tuli
can a public action in a foreign nation legally violate property rights you have established in that nation?
yes - eminent domain - they can take assets
foreign exchange information
$5.7 TRILLION IS TRADED A *DAY*!! - for trade, investments, speculation, risk management, tourism London a hotspot for forex both because historical importance (cap of 1st major industrialized nation) and geography
transportation: air
-34% of *value* of products shipped this way intlly -highly predictable
INTERNAL modes of entry - international joint ventures
-firms owned jointly by 2+ indep firms -1 parent firms are non resident in the host market -foreign participation varies from majority owned to 50% owned to minority owned
info on tariffs
-oldest form of protection -good for government and producers -bad for consumers -lead to inefficiency -importer of record pays the tariff, but ultimately is really paid by the consumer!
what is the size of the US economy (GDP)?
19 TRILLION
Expats (Global Human Resource Management)
Increased globalization = increased demand for expat assignments. thing is, in the future they will look different and not as long term of positions. this is because: -*larger in country talent pools* -*more varied overseas assignments* - but not full time positions overseas
how should an international business respond to national trade policies?
SHORT TERM - *diversify* to manage risks and opportunities - concentrate on innovations that protect from international competition -lobby LONG TERM - *the case for freer trade is strong* and biz should support regional trade pacts and multilateral organizations like WTO
what's better in short term: surplus or deficit ?
SURPLUS better in short term but can create inflation in a surplus, you earn money through wages and consumption rises (this exporting country's economic prospects increase). relative to other countries, their currency strengthens (ex - so if you sell something to the US, you get USD, and you invest it)
what technological innovations in hardware enabled the pursuit of new markets during globalization 2.0?
Steamships, railroads, telephones computers
regional economic integration: what is it? levels of it?
agreements among nations to reduce / remove tariff and non tariff barriers to free flows of goods, services, and factors of production. it is an *economic enhancement of member states*, making countries more attractive for FDI and free trade. it also creates interdependencies that reduce the potential for conflict/instability between countries and gives countries more political clout CONS of R.E.I - painful adjustments in certain segments of the economy + potential threat to national soverignity
First mover advantage
can get closer w government and establish high switching costs for the consumers to establish loyalty and recognition
tricky currencies
japan - yen china - yuan/renminbi s. korea - won turkey - new lira sweden - krona other "hard" currencies = EU, GBP, JPY
*Public* actions that violate property rights?
legal mechanisms and illegal mechanisms (corruption)
why is long term surplus or deficit not sustainable?
long term effects of either imbalance on interest rates, interest payments, inflation, consumption, and exchange rates
what is the foreign corrupt practices act?
makes it unlawful for entities to pay foreign government officials what it DOES allow: One-time bribery after winning a contract what it DOES NOT allow: Bribery; can not pay to win or renew a contract
import quota
direct restriction on the quantity of a good that can be imported into a country forces consumers to purchase domestic items once supply of foreign goes down. also by limiting supply, price goes up of foreign good, making consumers pay higher prices
SUCCESS PREDICTORS of expatriates
self orientation others-orientation perceptual ability cultural toughness language ability + family situation
what is "dumping"?
selling goods into a foreign market below production cost, or selling "below fair market value"
what is the size of the world economy (GDP)?
80 TRILLION
long term factors influencing currency value
(all else equal, these will) INCREASES DEMAND for currency = acquiring overseas assets *curr account surplus*, low inflation rates, and high interest rates (all else equal, these will) DECREASES DEMAND for currency = selling overseas assets *current account deficit*, high inflation, lower interest rates
external or "arms length" modes of entry: Franchising
**is similar to licensing but instead of licensing a name/knowledge, but a SYSTEM* -franchiser grants franchisee use of intangibles under strict rules of operations. mode of operation is part of the brand image and value. major forms: -manufacturer retailer (car dealership) -manufacturer-wholesaler (soft drinks) -service-firm retailer (lodging, fast food) BENEFITS -can ease burden of financing international expansion -good for franchisee is that it's a proven model available support, training + systems ISSUES -possible use of master franchiser in markets where that could work well -could dilute ownership w franchiser retaining ownership in a certain # or % of foreign units
know three phases of globalization, what marked them, who drove what phases !
**know globalization is not linear and it is not a constant process!!
What are SDR's?
*Artificial basket of currency. Is unit of count at IMF* - has 5 currencies in it Reasons it was designed: -keep values stable to avoid fear + contagion in market place -help prevent overreliance on USD and help to globalize other US currencies (USD was central to world econ post WWII and the US couldn't print more dollars than were backed with gold so the "world was running out of money!"). US is also not immune from natural calamities or strife, so giving protection from this.
bid and ask spreads
*B*id = *B*uyer Ask = Seller
Legal systems: Common law, Civil law, Theocratic law
*Common* = USA has this; *law is based on precedent*, judge's job is to *interpret* the law *Civil* = Spain, South America, Russia, etc. Set of rules and laws and decide from there what to punish/sanction. *role of judge is to enforce, not interpret law* *Theocratic* = religious doctrine is the law!
what is *economic* risk in forex?
*ECONOMIC/STRUCTURAL = FUTURE* extent to which a firm's future earning power or costs will be affected by changes in exchange rates ex - nestle has 98% sales outside of switz, BMW 83% outside of germany
economic systems: market, command, mixed
*Market* - productive activities are privately owned, supply and demand focused *Command* - goods and services as well as their prices are controlled by government *Mixed* - combo -reflective of most. Government takes some control if/as needed. --> US is mixed; healthcare/emergency services are not privatized, we are technically free market still with governmental elements like public university institutions!
what is *transaction* risk in forex?
*TRANSACTION = CURRENT, OPEN* the effect to which income from *individual transactions* are affected by fluctuations in forex this is why companies like their trade terms to be 120 days or less; to lower this risk
what is *translation* risk in forex?
*TRANSLATION = PAST* effect on consolidated results and balance sheets made by exchange rate fluctuations
barrier to importer example w Argentina
*consular invoice* is required to accept an import! this is required to certify these products were made where they say they are coming from also often need to present insurance
short term factors influencing currency value
*economic factors* balance of payments interest rates inflation monetary / fiscal policy international competititveness monetary reserves government controls and incentives importance of currency in the world *political factors* political party / leader philosophies proximity of elections change in leadership *expectation factors* expectations forward exchange market prices
start at administrative trade policies **
*legal and procedural barriers* designed to make it difficult for imports to enter a country. unfair advantage to a local market and harder for foreigners don't have to be open to the public knowledge / able to formally check!
timing of entry - *dis*advantages of being a first mover
*pioneering costs* -time spent to learn the ins and outs may benefit from competitors who can learn from the first mover -first mover who starts a new industry builds the infrastruture -first mover "trains" customers for followers (ex - mobile phones has the phenomenon of "churn") -breaks through host country's adjustment to "foreignness" issues [reg may change due to first mover's entry, followers benfit from first mover's efforts / cost
International marketing mix - *place/distribution*
*place/distribution*- most locally responsive element of marketing mix b/c distribution channels vary dramatically across countries. [long channel = price escalation + less agile!] -example: *Cargill + feed!* had to completley change the way they operate (go into smaller amount for purchase) to op in Vietnam
FDI forms: GREENFIELD (*new investment*)
- meant to be "open space" and you're assessing market opps in a country; example of implementing sushi to myanmar because thats not an existing market rn -no local entity exists or is available for sale -no inherited problems -long lead times to generation of sales/desired outcome
issues with the bill of payments?
- not all countries have the infrastructure to keep track of all financial activities -*intangibles not accounted for on BOP* (iPhone's worth is much greater than sum of it's parts, example) -Black market -small and casual exchanges (tourists taking funds overseas) -accuracy of data collection: way trade is tracked is flawed and counts full value of shipments as exports while sometimes omitting the value of intangibles / software that aren't shipped physically between nations. -time lags / calendar year approach
external or "arms length" modes of entry: Turnkey project (**arms length is not FDI!!)
-*exporting*is also a type !! -*turnkey projects*: a firm sets up production plant facilities (usually for infrastructure projects) then local firm takes over [exporting firm builds factory overseas, starts it, then hands over to host country, then leaves] --> common examples are oil firms, construction firms and mfgs --> minimal risk but minimal potential for future related profits
ways to "pay off" a trade deficit?
-*financing* - taking out loans/borrowing money -*use your savings* -*sell your assets* (for a country, selling parking meters, selling factories)
INTERNAL modes of entry - forward FDI (greenfield + acquisitions)
-*forward FDI - this is greenfield and acquisitions* -wholly owned subsidiaries -firms owned 100% by a company in a foreign country *greenfield* + develop ground up "your way" - costs, risks, length of time needed *acquisitions* + buying something that already works, potential for synergies, gain val know how and cost reduction -getting a fair price, still risk
international marketing mix: promotion
-*push strategies* - personal selling emphasis, short dist channels, few print/electronic media outlets. [industrial products, complex new to consumer products] -*pull strategies* -consumer goods -long dist channels -marketing message may be carried via print / electronic media -these examples are supported by disc on getting new rural banking customers in india
FDI forms: JOINT VENTURE
-10% and up -with a local partner
China update lecture
-China approaches world with *soft power* approach like the *one belt one road* - they do lots of development projects whereas country like US uses military forces around the world for stronger power -China as top: population, foreign reserves, manufacturer, energy consumer, carbon emitter, net savings rate, cinema market, etc -Fifth year plan 2017-2022- want to *bring cities to the rural people* to stem the rapid immigration in their own country from rural --> nonrural -*politicians are paid WAY FREAKING MORE than US politicians* - society isn't really fair -theyre trying to buy more global brands to increase outward FDI -1 in 5 Chinese billionaires want to emigrate
pros and cons of FDI
-PROS -circumvents potential future trade barriers and transportation costs -keep up w competition -be closer to customers; you can be considered a domestic company -lobby for local subsidies / incentives -control -potential profits CONS -is expensive! risky in comparison to exporting or licesnsing!
how do foreign currency traders operate?
-based on news cycle -take a short term position on a currency -make a small profit off a movement
external or "arms length" modes of entry: alliances
-coop agreements between competitors from diff countries (ex - airline industry Star Alliance and SkyTeam)
transportation: rail
-currently not ideal for intl trade -public and private ownership/investment issues -diff gauges -slow and hard to reroute -is not international! Our exports = higher price bc inefficient to load and unload, and we also pay higher prices for imports because our ports aren't easy to "comply" with
timing of entry - advantages of being a first mover
-establish strong brand name -create switching costs (tie customers to first movers' products, like a loyalty program or critical mass of users creating a "de facto" standard) -- example w switching software vendors -establish social ties ahead of following foreign competitors
export compliance - "all the hoops"
-exporters must know whether a licesnse is needed, what is being exported, to where, who will receive, and for what purpose. -must check against several lists (denied persons, unverified, etc) -compliance with automated export system -packaging (heat treating wood for sanitation) *to cover this, many countries post compliance measures on their packaging* - "these commodities licensed by the US for ultimate (country destination). Diversion contrary to US law is prohibited"
KFC
-first to enter market -focused on small to midsize cities so didn't have to penetrate bigger cities -cultural context in branding: McD's focused on children and family + since china was on one child policy, this was good for KFC -
external or "arms length" modes of entry: Licensing
-licensor grants licensee rights to intangible property like patents, inventions, trademarks, copyrights for *specified period of time and compensation*. In return, licensee gives licensor *quality assurance rights, strategic brand control* --> (example: UW athletic wear and insignia items) BENEFITS -limited capital and financial requirements ISSUES -control and security, esp for licensed tech, can be hard to coord strategic moves across countries
effects if NAFTA (in the US)
-lot of VOLUME increase of trade-net effects have been largely involving the creation of vertical supply relationships, esp in the case of US and Mexico-shift in some (production) jobs to Mexico-significant increase in US FDI in Mex + Canada-small positive effect on overall US jobs: like more "in office" jobs
Issues w/ Expatriates
-pay issues: - base pay, COLA (cost of living adjustments), allowances, foreign service/hardship premium, home leave, medical benefits, double taxation! -overall costs 2.5 times to accommodate all the considerations, even when most places they send people to are cheaper for living in the US !! also: -insurance issues -relationships/ networks - how are they established? -credit rating
FDI forms: MERGERS + ACQUISITIONS
-quick entry -local market know how -local financing may be poss -eliminate competitor -inherit/buy problems
what are the 4 rights an owner of property typically enjoys?
-right to copyright / patent -right to sell -right to ignore, not use, or destroy it -right to occupy / use it
What two things are needed for a joint venture?
-shared vision for the future -complementary skill set (each partners is bringing capabilities set that the other doesn't have)
steps in the stages of adjustment 'W' curve that failure occurs for expat assignments?
1. *disintegration stage* - this is after the honeymoon stage and the follow up orientation. when you start to get frustrated w host country 2. *honeymoon stage 2.0* - this is after preparation to return home. This is because people don't come home/they stay abroad/they switch to move to a new assignment with a diff company (often a competitor!)
THREE vectors of FDI:
1. *horizontal* - FDI is in the same industry as the firm operates at home; you replicate overseas what your value chain is domestically (ex - IKEA moving their production process to india for cheap wood pulp, this is still a vital value chain activity but just moved it somewhere else) 2. *backwards vertical*- going overseas to do another value chain activitiy in regards to *inputs for a firm's domestic processes*. Firms realize they have the innovation and go backwards in prod processes so other competitors can't replicate [*ex - german auto manufacturers establishing land ownership in italy to raise cows for scratch free leather*] 3. *forwards vertical* - Going overseas to do anothe value chain activity involving an industry abroad sells the outputs of the firms domestic production. [ex - BMW assembles cars in germany but you want a peruvian market, so you create an investment in peru to make a new DC to get the items out to customers] 3.
what are 4 components to measure GDP on a consumption basis?
1. government expenditure 2. net trade 3. business investment 4. private consumption
Product components to be tailored for international distribution ?
1. product attributes 2. distribution strategy 3. advertising + promo strategy 4. pricing strategy examples for how this is carried out: Change the packaging Design features Services Name Functional features
what does a contract specify?
1. rights/obligations of parties 2. conditions under which an exchange will happen
what TWO things are needed for a joint venture?
1. shared vision for the future 2. complementary skill set (each partners is bringing capabilities set that the other doesn't have)
spot deals settlement times
2 biz days for most currencies, 1 business day for USA with Canada or Mexico
segments of the harmonized tariff schedule?
A - *column 1 special* = better than WTO rates, it's ones we have regional econ integ with (example with NAFTA countries) B - middle ground - *column 1 general*, WTO countries. (normal trade relations) C - *Column 2* rate - not in WTO, we don't have normal trade relations w them
what is a dispute settlement forum?
A company can sue the offending government under WTO rules - like a "backbone" of the enforcement of WTO! (this is what GATT lacked). disputes under GATT were solved by consensus (which often led nowhere) - rulings are binding These are created to keep examples with the TPP (tobacco + uruguay) in check
fast track trade promotion authority
Allows the president to have trade legislation be drafted by his administration, and then is presented to congress. Once it's presented to congress, they cant change it or mark it up! They can only vote yes or no - *no mark ups* Issue of trumps renegotiation of NAFTA - the US draft exists, and it will be presented to congress. He has power to interfere w trade when there's national security issues - as in not need to be passed through congress!! Dumping in the case of national security issue is not dealt through anything but the administration! (trump's)
what is the balance of payments?
BOP is an accounting convention that tracks an economy's international transactions over the course of a year BOP is a *statement of financial flows*, NOT a country's balance sheet of total assets/liabilities !!
CISG is ??
Contract on International Sale of Goods for parties with their relevant places of business in different contracting states, where their contracts falls within the scope of CISG, the contract is automatically governed by this.
cost insurance freight - step in international trade - significance?
Cost Insurance Freight occurs when the ship gets to the new country's dock ! ( the country the item is being imported to) -- this means *the tipping point that both countries feel comfy splitting the transaction costs at*. Sometimes in an industry, most of your sales go to a single customer! (like apple, they import certain parts from a certain place and just that part only). This means variance in this process and you cover more of the "steps"
Two reasons us ports are considered uncompetitive?
Don't have naturally deep ports + with increasing size of freight we can't accommodate! Not highly advanced tech - many US ports are old and use old tech Us has more imports than exports - shipping companies lose money in transporting empty containers to other ports when they're in storage(#1 export is air) Lack of automation
what's included/non included in incoterms?
INCLUDED: -determine at what point do responsibilities pass from seller to buyer (pay for freight/insurance) -how costs risks and responsibilities are divided NOT INCLUDED: -specify when ownership of title is transferred -only deal with tangible goods -is NOT a contract!
indirect versus direct subsidies
INDIRECT tax breaks, loans, public/private partnership, insurance, *efforts to keep currency low* DIRECT payments to reduce costs -a benefit given to an individual, business or institution, usually by the government. The subsidy is typically given to remove some type of burden, and it is often considered to be in the overall interest of the public
import export issues
ISSUES -exporting from home country = expensive due to transport costs and tariffs. -terms of sale det who is taking responsibility of diff facets of transaction - *can be confusion when this isn't outlined* -trust - why payments and documentation are so important -issues w agents and distributors -LOTS of specialized paperwork and knowledge! *caveat - most businesses start with exporting as an entry strategy* but then shift once established connection because *exporting involve price escalation!*
3 factors leading to price escalation for exporters (examples)
Licensing Tariffs/shipping costs Packaging (to avoid damage during transport) Insurance Security (export/import compliances) Transport (depends on from where to where) Use of intermediaries (exports, agents, wholesalers, distributors)
is there a universally accepted global property protection ?
NO! you have to go out to each and every country you wish to protect your property in and protect it there
is all incoming cargo inspected?
No - all is screened using RFID technology, but only a small % is inspected
Global Logistics issues
PRO/CON of JIT pros -reduce holding and warehousing costs -better manage transport costs as demand can be used to inform shipment locations and levels -reduce depreciation of products with short life cycles issues -rests on management of uncertainty (ex UPS and FedEx - UPS saved $50 mill in one year just from cutting down left turns) -reverse logistics has increased importance (and complications) -*jit works until bad things happen*
Malcom McLean
Patented changes in container ship movements - putting things in metal boxes that could go on a truck or train bed then lifted on a ship then kept secure the whole time! **changed transportation; made globalization possible pretty much!!** Made shipping more efficient and safer - "pirates" used to be representative of how dangerous this profession was!
location economies
Refers to the ideal place of *putting a firm's value chain activities in strategic locations* to optimize value chain activities. they can lower costs of value creation to 1) enable low cost strategy and/or 2) help in differentiation of products from competitors (**doesn't mean it's in the lowest cost area**) *Why do they arise?* - differences in factor costs, endowments or specialized skills
local content requirements
Require some specific fraction of a good to be produced domestically in exchange of lowering or eliminating other trade barriers. can be percent of component parts or percent of good's value. initially used by developing countries to help shift from assembly to production of goods; developed countries (US) now beginning to implement Usually done in combo w tarrifs. If you sell fully made cars in japan to the US, there are tarrifs and quotas. This concept says that *we'll (US) will cut down tarrif rate/get rid of quota if we can do some of the assembly/value add on our soil*, like having japan unassembled cars and we 'make' it in the US, appeasing us.
what summit did the WTO come from?
URUGUAY -was a move away from positive consensus -multilateral trade and dispute resolution -national treatment (once goods enter the market they must be treated the same as domestically produced products) -anti dumping provisions
the US enjoys fairly free market trading and we don't require licenses to export goods. *What DO you need to export from the US*?
You have to document that no license was needed for that shipment! You need to document where it's going to, who's the final recipient, and what the item actually is What purpose the importer is intending to use this product for
example with indians and getting them to use banking systems
a lot of indians are illiterate, make few money, a lot of them don't have enough education to understand how a bank works. Also most indians don't trust/understand institution! India recently implemented something similar to a SSN and also have a malleable peception of what a bank can do.
What is the predominant mode of international shipping?
container ships
transportation: ocean freight
costs low because of standardization, better logistics, tech, growing ship size, fewer crew members cheaper by a factor of 15 *if shipping were a country, cargo ships would be the 6th biggest CO2 emitter!* world seaborn trade has increased 400% since 1975
facets of monetary systems
currency exchange controls/convertibility exchange rate regime reserve asset (gold, USD or hard currency, SDRs)
Product components: core, packaging and support services
examples from lec - -Indians bought more of Abbott's PediaSure after it localized flavors to include saffron and almond -ikea took out pork/beef meatballs in their new india store + have unique localized components of the whole mix all over the world
EXIM bank of the US
for smaller biz transactions for US companies for US products - fed owned gov corp average transaction size is 50k - 100k (one conatiner of prod for small to med biz)
what is FDI?
foreign investment with at least 10% ownership for at least one year with intent to control or influence if there is *no managerial involvement* with the investment and it is a short term holding (<year) it is *foreign portfoilo investment*, NOT FDI !!
what is unique about NAFTA dispute resolution process?
in *NAFTA, you file a dispute directly in the NAFTA tribunal * against a gov (claiming lost profits) in *WTO*, investor would have to get it's own government to file a dispute against the other government
what are letters of credit? (import/export financing)
goes along w the issues of trust. "how do you know that someone's going to get it to you when they say they will?!" L.O.C = *bank guarantee of payment to exporter "bought" by the corresponding importer.*. draft or bill of exchange - instructions to bank to pay at a certain time based on certain documentation. Provides receipt, contract + document of title to the exporter. Imp/exp usually split the costs - is around 6%! [higher than a 5% margin which is common - this is pricey!] ASSURES: -exporter of payment -importer of product how it works - importer goes to bank and asks for a letter of credit. The exporter needs to trust the rep of the bank (customer becomes bank; rely on your idea that the bank is trustworthy as the bank is now the trust intermediary!). So many transactions this way use a multinational firm. The bank goes to the importer is a client of to see their credit history/credit line of the importer. *in this model, exporter gets paid by the bank + bank switches over title to importer, completing transaction*
currency exchange controls
gov controls that *limit the legal uses of the currency in intl transactions* -- the only countries without these are rich industrial countries -Currencies are restricted in convertibility - restrict the conversion of LOCAL currency into FOREIGN(/stronger) currencies ! Method to control = *managing official exchange rates*. to manage convertibility, you can set the exchange rate artificially low so you boost exports, make imports more expensive, de-incentivize people to convert their currency to thus purchase these expensive imports)
"buy local" legislation
government purchases or government influenced bodies must give preferences to domestically made goods or services *ex - fly america act*
law of one price
in competitive markets free of transportation costs and trade barriers, identical products sold in diff countries should sell for the same price in respective currencies. *THIS IS OFTEN FLAWED* and doesn't take into account cultural differences! thus, insert the purchasing power parity model (law of many prices)
purchasing power parity (law of many prices)
in relatively efficient markets (few impediments to trade and investment) comparison of a roughly equivalent 'basket of goods' between diff nations should be the approx. 'real' or PPP exchange rate. *use this in the long term*
INCOTERMS
international commercial terms ; world standard *defines obligations of each party, reduces risk of legal complications.* THEY DO: -divide costs, risks, and responsibilites -useful shorthand -checklist of sorts for buyer/seller -reduce potential for misunderstanding DO NOT: -convey title!! - sales contract must stipulate this -eliminate all problems or serve as a contract -does not specify currency, when payment is due, etc
who are the primary "players" in the foreign exchange market?
investment firms, banks, central banks, trading institutions are the primary users of the forex market!
International marketing mix - *pricing*
options: 1. *cost plus* - price according to the cost of serving individual markets (diff in transport costs + tarrifs + intermediaries etc) [*demand in just that market determines price* and you maintain *same margin in all markets*] *multipoint pricing* - pricing in one market has impact in another. subsidizing low pricing in one market from profits in another. [ex - pharmaceuticals] [pay attention moreso to overall firm strategy; *forgo profits/margin in one country to pursue profits in another; NOT maintaining same margins across markets*] *global pricing* - premium pricing to take advantage of global elites / position brand as premium [based off of consumer willingness to pay] [often luxury goods for image, or B2B goods for uniform price in negotiations] *OVERALL - CONSUMERS DON'T LIKE PRICE CHANGES!!*
Current account
positive transactions = receiving money from foreigners (exports) negative transactions = payment to foreigners (imports)
voluntary export restraints
quota on trade *imposed by the EXPORTING country* at the request of the importing country Often, when a country complains about what you're exporting, they want to do the route of least formal (legal) so they self police.Japan did a lot of this in 1980 w fully made exporting cars - US was giving upset, so japan self policed and sent less. Never had to put quota in place. benefit of these is that they're the *more "informal" version of a quota* - this avoids them having to lobby and go through legal process if it were a quota and anything were to change
why aren't devalued currencies boosting economic growth as much as they used to?
reduced currency value means higher costs for imports for that nation; this is *inflation!* (production is also dist more and more all over the world so many different countries have a "hand" in the production for it)
three types of tariffs?
specific - fixed charge per unit ad valorem - charge is proportional to the good's value based on *wholesale* price compound - mix of the two
*Private* actions that violate property rights?
stealing vandalizing using without permission
how is corruption tracked across countries?
transparency international high corruption rates reduce FDI and reduce rate of econ growth
