The Wall Street Journal had a great headline: “In China, Air cheow-DAN Cries Foul.”
Saying, “I felt the need to protect my name, my identity, and the Chinese consumer,” Michael Jordan is suing the Chinese firm Qiaodan for using his name as its trademark. Pronounced cheow-DAN in Mandarin, the firm sells basketball shoes and jerseys in its 5700+ outlets.
Michael Jordan is not alone. Apple for the iPad, Hermes, and General Motors saying the Chinese name Chery Automobile was like Chevy, have also battled the Chinese to preserve their trademark rights. Soon Jeremy Lin might have the same problem. A Chinese firm paid $708 for the rights to his name from a Chinese trademark office (not Lin).
An economist would say that we have a classic free rider problem. Firms copying trademarks are benefiting from the real owner’s designs, time, quality control and reputation.
We should add that all WTO (World Trade Organization) members are required to observe trademark recognition rules in TRIPS (Agreement on Trade-Related aspects of Intellectual Property). China is a WTO member.
Sources and Resources: This FT blog has best summary of the trademark battles in China while you might find this textbook excerpt ideal for some trademark background. For more specifics on the Michael Jordan suit, this WSJ article and this Quartz article provide the details. Meanwhile, in “Sole Rights,” econlife looked at a trademark battle in the US.
The Big Mac Index is out again and not much has changed. Norway’s Big Macs are expensive and Chinese Big Macs are cheap.
What do Big Mac prices tell us about purchasing power? Starting with an average U.S. price of $4.37, we can determine whether other currencies are overvalued or undervalued in comparison to the dollar. So, when we see that Norway’s Big Mac is $7.84 and a euro zone Big Mac will cost $4.88, we know the kroner and the euro are overvalued. By contrast, Mexico’s Big Mac is very inexpensive at $2.90 and predictably, at $2.57, yes, a Big Mac reflects China’s undervalued currency.
Next, I wondered whether a low price would be inexpensive domestically and discovered that we can use McWages. In 2011, a US McDonald’s employee buying a Big Mac would have needed 27 minutes of work while a person in China doing the same job needed 85 minutes. You can see, below, that a McDonald’s Indian employee needed close to 200 minutes to buy what he or she was making.
Finally, as economists, we should note that the Big Mac Index takes us to purchasing power parity (PPP). This 2 page St Louis Fed paper, though dated, provides the perfect discussion of PPP and the Big Mac.
Sources and Resources: I definitely recommend going to The Economist to see all Big Mac prices and to use their interactive graphic on current and past purchasing power parity. More academic but fascinating, the Ashenfelter paper on McWage purchasing power is here while a good summary of the paper and the source of my graph is at WSJ.com.
Note: This post has been minimally edited since it appeared.
Posted by: adminEcon
Tags: Big Mac Index, China, exports, imports, McWages, Mexico, Norway, Orley Ashenfelter, overvalued, purchasing power, purchasing power parity, St. Louis Fed, The Economist, undervalued
Does being an only child matter?
Our answer starts with a sunflower seed story.
There once was a poor Chinese farmer who believed he could excel at nothing but sunflower seeds. Traditionally sold in bulk with other types of nuts, sunflower seeds had been nothing unusual. But then calling them Idiot’s Seeds, the farmer, Mr. Nian, stir-fried, salted, and packaged them. Soon, during the 1980s, millions of people in China were munching Idiot’s Seeds as they watched TV or played cards.
This takes us to China’s economic growth. According to an M.I.T. scholar, entrepreneurs like Mr. Nian fueled growth during the 1980s but then, after 1990, were constrained by the spread of SOEs (state owned enterprises). Now, a new study suggests another way that the Chinese government might be diminishing entrepreneurial initiative. Comparing Chinese children born before and after the one-child policy began during 1979, Australian researchers have concluded that being an only child in China could make you less willing to take risks, compete, trust people and be trustworthy.
So yes, with their GDP second only to the US, China’s economic growth has been meteoric. And their population growth has slowed (see below). However, their male biased one-child policy might have unintended economic consequences.
The UN line reflects current policy while the second line indicates the results of universal implementation.
Sources and Resources: This marketplace.org series of reports is a superb summary of China’s one-child policy. An excellent complement, the Australian research on the impact of single child is described in this Science Magazine podcast and transcript. (The study is gated.) Also this Bloomberg article and BBC article discuss the research and here is The Economist link for the above graph. Finally, for more on the Chinese economy, you can download the first chapter of Capitalism With Chinese Characteristics and also go to econlife here (where I first told the sunflower seed story), here and here.
Yesterday, the UN published a preview of its world economic outlook. While projections are always debatable, their graphs provide a snapshot of key economic issues.
These projections and comments from a Société Générale Report also are helpful. Most enlightening, perhaps, is the potential drag on the world economy from the euro zone.
Sources and Resources: Société Générale data is from Business Insider while the preview of the UN Report is here. For a summary, this NY Times article discusses its dismal outlook.
Posted by: adminEcon
Tags: austerity, Australia, Businessinsider, China, developed economies, developing economies, euro zone, fiscal cliff, GDP growth, grain prices, oil prices, Societe Generale, US