Adam Smith: On Reasons for Wider Income Gap

Adam Smith: On Reasons for Wider Income Gap

People's Choice Award: A Mother’s Hand, Alain Mafart Renodier, France

Photographer A. M. Renodier was on a wintertime visit to Japan’s Jigokudani Snow Monkey Park when he took this poignant photograph of a sleeping baby Japanese macaque, its mother’s hand protectively covering its head.

The Natural History Museum in the UK has shortlisted its nominees for the 2016 People’s Choice Award for wildlife photography.

From playful polar cubs to the horrified last gaze of a wildebeest calf, these images are guaranteed to astound.

Voting for this year’s competition ends on January 10, 2017. 

You can cast your vote for best wildlife photographer here, and be sure to share your favorite with @NHM_WPY on Twitter using the hashtag #MyWPY.

People's Choice Award: A Mother’s Hand, Alain Mafart Renodier, France

Photographer A. M. Renodier was on a wintertime visit to Japan’s Jigokudani Snow Monkey Park when he took this poignant photograph of a sleeping baby Japanese macaque, its mother’s hand protectively covering its head.

The Natural History Museum in the UK has shortlisted its nominees for the 2016 People’s Choice Award for wildlife photography.

From playful polar cubs to the horrified last gaze of a wildebeest calf, these images are guaranteed to astound.

Voting for this year’s competition ends on January 10, 2017. 

You can cast your vote for best wildlife photographer here, and be sure to share your favorite with @NHM_WPY on Twitter using the hashtag #MyWPY.

Adam Smith: Government Comprises a Large Part of the Organized Injustice in any Society

Adam Smith: Government Comprises a Large Part of the Organized Injustice in any Society

Here is How King Salman is Diversifying Saudi Economy Beyond Oil

Saudi Arabia’s King Salman underlined the kingdom’s intention to invest heavily in speeding up is diversification away from oil exports with the inauguration on Tuesday of a $35bn mining and minerals processing complex.

Riyadh has tried to reduce the economy’s reliance on oil for decades, but the challenge has become particularly urgent in the past couple of years as low prices have pushed state finances deep into deficit and growth has slowed sharply.

King Salman and his top ministers visited the complex at Ras al-Khair on Saudi Arabia’s eastern coast, where energy minister Khalid al-Falih said the government would invest in all available resources to develop strategic industries.

The vast complex showcases the government’s ability to use its oil wealth to push big industrial projects, but also shows how dependent the economy remains on state spending in the absence of a dynamic private sector. Most of the $35bn invested so far was arranged by the government.

Projects include a $5.6bn phosphate complex which produces fertiliser and chemicals and is operated by Saudi Arabian Mining Co (Ma’aden) in partnership with petrochemical giant Saudi Basic Industries Corp (SABIC) ; both companies are majority state-owned.

A $10.8bn aluminium facility is operated by Ma’aden and U.S. firm Alcoa, while the complex also features a 1,400 kilometre (875 mile) railway link, a port, and desalination and power plants.

Economic reform plans announced earlier this year aim to expand the mining sector’s contribution to gross domestic product to SAR240bn ($64bn) by 2030 from SAR64bn at present.

“Jubail was where the Saudi petrochemicals industry started with SABIC – Ras al-Khair is becoming just that for the mining industry,” said Fadl al-Bouainain, a prominent Saudi economist.

With its spending constrained by low oil prices, however, the government concedes it will have to rely more in future on private sector investment by local and foreign firms, and it has not yet fully made clear how it hopes to attract that money.

“The key question Saudi Arabia will need to answer is how quickly they want to develop the mining sector, how much they want foreign investors to participate, and the risks and rewards they would offer to investors and retain for the government,” said Paul Robinson, director at mining consultancy CRU Group.

One of the next big projects planned for Ras al-Khair is the construction of a huge ship repair and shipbuilding complex costing over SAR20bn; construction is to start in 2018 and commercial operations in 2022.

State oil giant Saudi Aramco is leading the project, which is to provide engineering, manufacturing and repair services for offshore rigs and commercial vessels – work that until now has largely been done outside the kingdom.

The project may face heavy competition from existing shipbuilding centres in South Korea and elsewhere, but Aramco estimates that it will create 80,000 jobs directly and indirectly while allowing Saudi Arabia to reduce its imports by $12bn annually.

Source: Gulf Business

Here is How King Salman is Diversifying Saudi Economy Beyond Oil

Saudi Arabia’s King Salman underlined the kingdom’s intention to invest heavily in speeding up is diversification away from oil exports with the inauguration on Tuesday of a $35bn mining and minerals processing complex.

Riyadh has tried to reduce the economy’s reliance on oil for decades, but the challenge has become particularly urgent in the past couple of years as low prices have pushed state finances deep into deficit and growth has slowed sharply.

King Salman and his top ministers visited the complex at Ras al-Khair on Saudi Arabia’s eastern coast, where energy minister Khalid al-Falih said the government would invest in all available resources to develop strategic industries.

The vast complex showcases the government’s ability to use its oil wealth to push big industrial projects, but also shows how dependent the economy remains on state spending in the absence of a dynamic private sector. Most of the $35bn invested so far was arranged by the government.

Projects include a $5.6bn phosphate complex which produces fertiliser and chemicals and is operated by Saudi Arabian Mining Co (Ma’aden) in partnership with petrochemical giant Saudi Basic Industries Corp (SABIC) ; both companies are majority state-owned.

A $10.8bn aluminium facility is operated by Ma’aden and U.S. firm Alcoa, while the complex also features a 1,400 kilometre (875 mile) railway link, a port, and desalination and power plants.

Economic reform plans announced earlier this year aim to expand the mining sector’s contribution to gross domestic product to SAR240bn ($64bn) by 2030 from SAR64bn at present.

“Jubail was where the Saudi petrochemicals industry started with SABIC – Ras al-Khair is becoming just that for the mining industry,” said Fadl al-Bouainain, a prominent Saudi economist.

With its spending constrained by low oil prices, however, the government concedes it will have to rely more in future on private sector investment by local and foreign firms, and it has not yet fully made clear how it hopes to attract that money.

“The key question Saudi Arabia will need to answer is how quickly they want to develop the mining sector, how much they want foreign investors to participate, and the risks and rewards they would offer to investors and retain for the government,” said Paul Robinson, director at mining consultancy CRU Group.

One of the next big projects planned for Ras al-Khair is the construction of a huge ship repair and shipbuilding complex costing over SAR20bn; construction is to start in 2018 and commercial operations in 2022.

State oil giant Saudi Aramco is leading the project, which is to provide engineering, manufacturing and repair services for offshore rigs and commercial vessels – work that until now has largely been done outside the kingdom.

The project may face heavy competition from existing shipbuilding centres in South Korea and elsewhere, but Aramco estimates that it will create 80,000 jobs directly and indirectly while allowing Saudi Arabia to reduce its imports by $12bn annually.

Source: Gulf Business

Iraq Ready to Cut Oil Production to Help OPEC Push Crude Prices - Iraqi Prime Minister

Iraq’s prime minister says his country will agree to cut its own oil production as part of a plan by OPEC to push crude prices higher, reported AFP.

Prime Minister Haider al-Abadi told The Associated Press that current prices are not sustainable for oil-producing countries.

Al-Abadi’s comments could be critical because Iraq - along with Iran - has been reluctant to go along with cuts, creating an obstacle for an OPEC deal, according to published reports.

Al-Abadi said he understands that OPEC members will agree to reduce production by between 900,000 and 1.2 million barrels per day - that would be a cut of between 2.7 percent and 3.6 percent from October levels. He said it would be enough to push prices up.

Source: Alarabiya

Here is What Vidya Balan Has to Say on Women's Post-Marriage Careers

Actress Vidya Balan has said that women's careers do not stop after they get married or have children and it should not be any different for female actors.

"[W]hen... changes are happening in society it's bound to be seen on screen... The kind of roles that [female actors] are getting have also really changed. 

The horizon has widened," added Vidya.

Vidya Balan, born 1 January 1978, is an Indian actress. She has established a career in Bollywood and is the recipient of several awards, including a National Film Award, five Filmfare Awards, and five Screen Awards, and was awarded the Padma Shri by the Government of India in 2014. 

She is known for portraying strong female protagonists and has been acknowledged in the media for pioneering a change in the concept of a Hindi film heroine.

People's Choice Award: Hitching a Ride, Daisy Gilardini, Switzerland

This female polar bear was resting with its two young cubs in Wapusk National Park, Manitoba, Canada, when it suddenly got up and rushed downhill through the deep snow. One of the cubs jumped on to her, holding onto her furry backside with a firm—and unexpected—bite.

The Natural History Museum in the UK has shortlisted its nominees for the 2016 People’s Choice Award for wildlife photography.

From playful polar cubs to the horrified last gaze of a wildebeest calf, these images are guaranteed to astound.

Voting for this year’s competition ends on January 10, 2017. 

You can cast your vote for best wildlife photographer here, and be sure to share your favorite with @NHM_WPY on Twitter using the hashtag #MyWPY.

People's Choice Award: The Stare of Death, Johan Kloppers, South Africa

The photographer saw this wildebeest calf shortly after it was born in the Kgalagadi Transfrontier Park, South Africa. Little did he know that he would witness its death later that same day; the small herd of wildebeest walked right past a pride of lions and the calf was caught by a lioness and then taken by this male lion.

The Natural History Museum in the UK has shortlisted its nominees for the 2016 People’s Choice Award for wildlife photography.

From playful polar cubs to the horrified last gaze of a wildebeest calf, these images are guaranteed to astound.

Voting for this year’s competition ends on January 10, 2017. 

You can cast your vote for best wildlife photographer here, and be sure to share your favorite with @NHM_WPY on Twitter using the hashtag #MyWPY.

People's Choice Award: Opportunistic Croc, Bence Máté, Hungary

After taking this stunning photo, Bence Máté recalls how chilling it was to see the frightening, killing eyes of this 13 foot-long (4 meters) Nile crocodile. This croc was baited with natural carcasses on an island in the Zimanga Private Game Reserve, South Africa.

The Natural History Museum in the UK has shortlisted its nominees for the 2016 People’s Choice Award for wildlife photography.

From playful polar cubs to the horrified last gaze of a wildebeest calf, these images are guaranteed to astound.

Voting for this year’s competition ends on January 10, 2017. 

You can cast your vote for best wildlife photographer here, and be sure to share your favorite with @NHM_WPY on Twitter using the hashtag #MyWPY.

A Bank Mistakenly Puts Rs 98 Billion in a Taxi Driver's Account

A taxi driver from Punjab State of India, Mr Balwinder Singh's Jan Dhan account was mistakenly credited with almost Rs 98 billion by the State Bank of Patiala earlier this month, reported Hindustan Times.

It is reported that Mr Balwinder Singh's account was credited with Rs 98,05,95,12,231 on November 4 by mistake while passing a credit entry of Rs 200, as a banker wrongly inserted the bank’s 11-digit internal general ledger account number in the amount column. 

However, the amount was debited from Singh’s account on November 5. 

Adam Smith: Most Governments are Formed by the Rich for the Rich

Adam Smith: Governments Often Stand in Defence of the Rich against the Poor

Adam Smith: The Real Tragedy of the Poor is the Poverty of their Aspirations

Barcelona to Give Pigeons Contraceptive Pills

Pigeons in Barcelona will be given contraceptive pills to reduce their numbers, as authorities are abandoning the practice of culling.

Culling refers to killing animals to reduce their population.

From April next year, 40 dispensers containing contraceptive food are said to be installed across Spain’s second largest city.

The move means that culling of the feathered creatures will be stopped completely so the pill results can be properly analysed.

A council spokesman said: “We will be using nicarbazin which acts first on the younger birds.

“It’s predicted there will be a reduction of 20 per cent in the pigeon population in the first year and between 70 and 80 per cent in four or five years.”

Samsung Galaxy Note 5 Users in South Korea to Get Note 7 Features

Samsung killed its flagship Galaxy Note 7 smartphone due to battery explosion. Battery explosions were reported from many countries. 

Now, it is reported that Samsung has started rolling out most of the prominent features of Galaxy Note 7 on its earlier version Galaxy Note 5. 

But, it is reported that the features are given only to Galaxy Note 5 users in South Korea. 

The features include game tools, blue light filter, smart manager, wide selfie, and a power saving mode.

Here is How US Politicians Reacted to the Death of Cuban Political Leader Fidel Castro

Cuban revolutionary leader Fidel Castro has passed away at the age of 90 on Friday, Cuban state TV announced.

The lawyer-turned-guerrilla overthrew the US-backed dictator Batista's government and established a communist state in 1959. 

He later went on to repel a US-backed attack and survived countless assassination attempts during nearly half a century in power.

Here is how some of the US Politicians reacted to the death of Fidel Castro.

Vice President-elect Mike Pence:

'The tyrant #Castro is dead. New hope dawns. We will stand with the oppressed Cuban people for a free and democratic Cuba. Viva Cuba Libre!'

Texas Senator Ted Cruz: 

'Fidel Castro's death cannot bring back his thousands of victims, nor can it bring comfort to their families,' wrote in a Facebook post.

'Today we remember them and honor the brave souls who fought the lonely fight against the brutal Communist dictatorship he imposed on Cuba.'

Former President Jimmy Carter: 'Rosalynn and I share our sympathies with the Castro family and the Cuban people on the death of Fidel Castro,' Carter said in a statement.

'We remember fondly our visits with him in Cuba and his love of his country. We wish the Cuban citizens peace and prosperity in the years ahead.'

Secretary of State John Kerry: 

'As our two countries continue to move forward on the process of normalization - restoring the economic, diplomatic and cultural ties severed by a troubled past - we do so in a spirit of friendship and with an earnest desire not to ignore history but to write a new and better future for our two peoples.'

Republican Ed Royce, the chairman of the House of Representatives' Foreign Affairs Committee:

'For more than half a century, the Cuban people have suffered under the brutal dictatorship of the Castro clan. No one should rule anywhere near as long as Fidel Castro did. His legacy is one of repression at home, and support for terrorism abroad. Sadly, Raul Castro is no better for Cubans who yearn for freedom.'

Congresswoman Ileana Ros-Lehtinen: 

'A tyrant is dead and a new beginning can dawn on the last remaining communist bastion of the Western hemisphere. We must seize the moment and help write a new chapter in the history of Cuba; that of a Cuba that is free, democratic, and prosperous.'

Florida Senator Marco Rubio: 

'Fidel Castro seized power promising to bring freedom and prosperity to Cuba, but his communist regime turned it into an impoverished island prison.

'Over six decades, millions of Cubans were forced to flee their own country, and those accused of opposing the regime were routinely jailed and even killed. Sadly, Fidel Castro's death does not mean freedom for the Cuban people or justice for the democratic activists, religious leaders, and political opponents he and his brother have jailed and persecuted.

'The dictator has died, but the dictatorship has not. And one thing is clear, history will not absolve Fidel Castro; it will remember him as an evil, murderous dictator who inflicted misery and suffering on his own people.

'The future of Cuba ultimately remains in the hands of the Cuban people, and now more than ever Congress and the new administration must stand with them against their brutal rulers and support their struggle for freedom and basic human rights.'

Arkansas Senator Tom Cotton: 

'Fidel Castro created hell on earth for the Cuban people. He will now become intimately familiar with what he wrought.'

U.S. Senate Majority Leader Mitch McConnell: 

'While Fidel Castro is gone, sadly the oppression that was the hallmark of his era is not. It is my hope that the Cuban regime will use this opportunity to turn the page for the good of the Cuban people and for all those living in the Americas. Freedom and democracy are long overdue in Cuba.'

Former Florida Gov. Jeb Bush: 

'While Fidel Castro is gone, sadly the oppression that was the hallmark of his era is not. It is my hope that the Cuban regime will use this opportunity to turn the page for the good of the Cuban people and for all those living in the Americas. Freedom and democracy are long overdue in Cuba.'

House Speaker Paul Ryan: 

'Now that Fidel Castro is dead, the cruelty and oppression of his regime should die with him. Sadly, much work remains to secure the freedom of the Cuban people, and the United States must be fully committed to that work. Today let us reflect on the memory and sacrifices of all those who have suffered under the Castros.'

President-Elect Donald Trump:

'Today, the world marks the passing of a brutal dictator who oppressed his own people for nearly six decades. 

Fidel Castro's legacy is one of firing squads, theft, unimaginable suffering, poverty and the denial of fundamental human rights.

While Cuba remains a totalitarian island, it is my hope that today marks a move away from the horrors endured for too long, and toward a future in which the wonderful Cuban people finally live in the freedom they so richly deserve.

Though the tragedies, deaths and pain caused by Fidel Castro cannot be erased, our administration will do all it can to ensure the Cuban people can finally begin their journey toward prosperity and liberty. 

I join the many Cuban Americans who supported me so greatly in the presidential campaign, including the Brigade 2506 Veterans Association that endorsed me, with the hope of one day soon seeing a free Cuba.'

President Barack Obama:

At this time of Fidel Castro's passing, we extend a hand of friendship to the Cuban people. We know that this moment fills Cubans - in Cuba and in the United States - with powerful emotions, recalling the countless ways in which Fidel Castro altered the course of individual lives, families, and of the Cuban nation. 

History will record and judge the enormous impact of this singular figure on the people and world around him.

For nearly six decades, the relationship between the United States and Cuba was marked by discord and profound political disagreements. 

During my presidency, we have worked hard to put the past behind us, pursuing a future in which the relationship between our two countries is defined not by our differences but by the many things that we share as neighbors and friends - bonds of family, culture, commerce, and common humanity. 

This engagement includes the contributions of Cuban Americans, who have done so much for our country and who care deeply about their loved ones in Cuba.

Today, we offer condolences to Fidel Castro's family, and our thoughts and prayers are with the Cuban people. In the days ahead, they will recall the past and also look to the future. 

As they do, the Cuban people must know that they have a friend and partner in the United States of America.'

Candy Vs Gun: Armed Robbers Flee as Shop Attendant Threw Candies at Them

A shocking YouTube video is making rounds as it shows an armed robber and his accomplice fleeing in a car after the shop attendant threw candies at the robbers. 

It is seen that two robbers drive to a shop, in Australia, and one armed robber tries to enter the shop. The reason is not yet known. 

When the armed robber headed to enter the shop, the shop attendant is seen throwing candies at the robber and the robber was seen fleeing away.

Timeline of Cuban Political Leader Fidel Castro's Life

August 13, 1926 - Fidel Castro Ruz born in eastern Cuban hamlet of Biran, son of a well-off Spanish-born landowner.

July 26, 1953 - Castro leads armed uprising against military dictator Fulgencio Batista, captured in failed attack on Moncada Barracks in Santiago de Cuba.

May, 1955 - Castro, who stated "History will absolve me" at his trial, is given amnesty and leaves prison for Mexico.

December 2, 1956 - Castro and 81 other would-be revolutionaries land in Cuba on the yacht "Granma.". Most are routed, but 12 survivors -- including Castro, his brother Raul Castro and Argentine Ernesto "Che" Guevara -- regroup in Sierra Maestra mountains where they launch a guerrilla war.

January 1, 1959 - Batista flees to Dominican Republic.

January 8, 1959 - Castro enters Havana after triumphal journey across Cuba. As supreme "Comandante" of the armed forces, he begins the political, economic and social transformation of Cuba, launching agrarian reform and nationalizing most foreign and local businesses.

Feb 13, 1959 - Castro named prime minister.

January 3, 1961 - U.S. breaks diplomatic ties with Havana.

April 16, 1961 - Castro declares his revolution socialist.

April 19, 1961 - Castro directs troops in defeat of invasion attempt by U.S.-backed Cuban exiles at Bay of Pigs.

February 7, 1962 - United States imposes full economic embargo.

October 1962 - Missile Crisis. Presence of Soviet warheads in Cuba provokes standoff between Moscow and Washington. Many fear nuclear war, but Soviet Union decides to withdraw missiles after President John F. Kennedy imposes naval blockade.

October 1965 - Castro founds new Cuban Communist Party and is named First Secretary.

1971-80 - Castro visits Chile, Panama and Nicaragua to support left-wing governments there.

1975 - Castro sends troops to Angola to help left-wing government fight South-African backed rebels.

1976 - Castro becomes president, ratified by newly-created National Assembly.

Summer, 1980 - Mariel boat-lift. Cuba allows exodus of 125,000 Cubans to United States, mostly via Mariel port.

1991 - Soviet Union's collapse plunges Cuba into economic crisis.

August 14, 1993 - Castro government ends ban on use of U.S. dollars, one of a series of limited economic openings that government says are aimed at saving revolution.

August 5, 1994 - Hundreds of Havana residents riot in biggest anti-Castro disturbance since revolution.

August-September 1994 - More than 35,000 people leave Cuba in flimsy rafts and boats during summer crisis, prompting a migration agreement with the United States to allow a minimum of 20,000 legal entry visas to Cubans annually.

February 24, 1996 - Cuban MiG fighters shoot down two small U.S. planes in the Florida Straits belonging to Cuban exile group Brothers to the Rescue. Four crew members killed.

January 21-25, 1998 - Castro welcomes Pope John Paul in first visit by a pontiff to Cuba.

November 25, 1999-June 28, 2000 - Elian Gonzalez custody saga. Castro launches mass anti-U.S. campaign for the return of six-year-old Cuban boy rescued at sea off U.S. coast after surviving a shipwreck that kills his mother. Elian eventually returns to Cuba.

June 23, 2001 - Two hours into speech at public rally, Castro suffers brief fainting fit due to exhaustion and sun.

June 12, 2002 - Castro leads march by one million Cubans along Havana waterfront in campaign to defend socialist system in face of growing dissent and U.S. pressures.

June 26, 2002 - Cuba declares socialism "irrevocable" in constitutional amendment passed by National Assembly.

March 18, 2003 - Castro launches crackdown on dissidents: 75 pro-democracy activists and independent journalists jailed, prompting international criticism.

Oct 20, 2004 - Castro smashes left knee in fall after speech on steps of Che Guevara mausoleum in Santa Clara.

July 31, 2006 - Castro forced to hand over the reins of power to his brother Raul after undergoing emergency surgery to stop intestinal bleeding caused by undisclosed illness.

March 29, 2007 - Castro takes to writing prolific flow of articles on world issues, mainly attacks on the U.S. government.

Dec 17, 2007 - Castro hints he will not cling to power or block rise of younger leaders in message read on television.

Feb 19, 2008 - Almost 19 months since he last appeared in public, Castro said he would not return as head of state and government.

March 22, 2011: Fidel Castro confirms he no longer holds any official title. Pens a series of columns over the following years.

December 17, 2014: Fidel Castro remains out of sight as Raul Castro and US President Barack Obama announce the normalization of relations.

July 20, 2015: United States and Cuba reopen embassies in each other's capitals.

November 25, 2016: Fidel Castro dies aged 90, Raul Castro announces.

Finland to Ban Coal Energy Before Coal Runs Out

Of all the fossil-fuel sources, coal is the least expensive for its energy content and is a major factor in the cost of electricity in the United States and many other countries. However, burning coal in electric power plants is a major source of carbon dioxide (CO2) emissions, and its use has other repercussions as well.

Coal is a combustible black or brownish-black sedimentary rock usually occurring in rock strata in layers or veins called coal beds or coal seams. The harder forms, such as anthracite coal, can be regarded as metamorphic rock because of later exposure to elevated temperature and pressure.

Coal is composed primarily of carbon, along with variable quantities of other elements, chiefly hydrogen, sulfur, oxygen, and nitrogen. A fossil fuel, coal forms when dead plant matter is converted into peat, which in turn is converted into lignite, then sub-bituminous coal, after that bituminous coal, and lastly anthracite. This involves biological and geological processes that take place over time.

---

Finland on Friday announced a new energy and climate strategy, under which the government will consider banning the use of coal as an energy source by 2030.

The use of coal in Finland has been steadily declining since 2011, with investment increasing in renewable energy sector in 2012. 

Notably, energy prices in Scandinavian countries have been dropping since 2010.

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Pros and Cons of Using Coal Energy

Advantages: 
- It's easily transported to many areas in the world
- Inexpensive to buy on open market due to large reserves and easy access ability
- Coal is the least expensive fossil fuel because it is rather simple to mine
- Coal powered generation scales well, which makes it possible to build a variety of sizes of generation plants
-Since coal is a fossil fuel, it can be used to build power stations almost anywhere as long as there are
large amounts of it

Disadvantages:
- Coal must be mined and strip mining ruins habitats
- Underground coal mining is dangerous because cave-ins and explosions are common which in turn, costs many miners their lives
- Non-renewable and fast depleting
- Leaves behind harmful remains which harm the environment upon combustion
- Mining of coal creates unstoppable damage to the environment
- Coal will eventually run out

Rogue One: A Star Wars Story Trailer #3 Out

A new trailer for 'Rogue One: A Star Wars Story', the first stand-alone film from the 'Star Wars Anthology' series, has been released on 24th November.

It is set ahead of the 1977 film 'Star Wars: Episode IV– A New Hope'. 

Starring Felicity Jones, Diego Luna and Ben Mendelsohn, the film is scheduled to release on December 16.

A significant part of the movie was played in Laamu Atoll, Maldives.

Airbus's Largest A350 Jet Carries Out Its Maiden Flight

Airbus' largest A350 jet, A350-1000, flew on its maiden flight on Thursday, reports said.

The A350-1000 is also Europe's largest twin-engine passenger jet with a seating capacity of 40 more than existing A350s which have around 320 seats. 

The 366-seater is reportedly designed to compete with Boeing in the mini-jumbo segment, typically involving large twin-engine jets carrying 350 people.

Adam Smith: It is Self Interest that Encourage the Sellers

Adam Smith: Inclusive Societies alone are Flourishing and Happy

Demonetization in Maldives, India and Europe

Demonetization is the act of stripping a currency unit of its status as legal tender.

Demonetization is necessary whenever there is a change of national currency. The old unit of currency must be retired and replaced with a new currency unit.

Maldives replaced its old currency notes this year. According to a press release by MMA dated 26 January 2016, the Maldives Monetary Authority has introduced its new family of polymer banknotes. 

Existing notes circulated in parallel until 1 June 2016, and can be exchanged for new notes for a period of five years.

Neighboring India has demonetized its ₹500 and ₹1000 banknotes on 8 November 2016, ceasing the usage of all ₹500 and ₹1000 banknotes of the Mahatma Gandhi Series as a form of legal tender in India from 9 November 2016.

Indian New Banknotes (Rs 500 and 2000)

The announcement was made by the Prime Minister of India Narendra Modi in an unscheduled live televised address to the nation at 20:15 Indian Standard Time (IST) the same day. 

In the announcement, Modi declared circulation of all ₹500 and ₹1000 banknotes of the Mahatma Gandhi Series as invalid and announced the issuance of new ₹500 and ₹2000 banknotes of the Mahatma Gandhi New Series in exchange for the old banknotes.

The banknote denominations of ₹100, ₹50, ₹20, ₹10 and ₹5 of the Mahatma Gandhi Series continued to remain as legal tender and were unaffected by the policy. The demonetization was done in an effort to stop counterfeiting of the current banknotes allegedly used for funding terrorism, as well as a crack down on black money in the country. The move is also aimed at reducing corruption, drug menace and smuggling.

Another example of demonetization occurred when the nations of the European Monetary Union adopted the euro. In order to switch to the euro, authorities first fixed exchange rates for the varied national currencies into euros. When the euro was introduced, the old national currencies were demonetized. However, the old currencies remained convertible into euros for a while so that a smooth transition through demonetization would be assured.

Pros and Cons of Joining EU

Turkey's President Recep Tayyip Erdogan said Turkey did not need to join the European Union "at all costs" and could instead become part of Shanghai Cooperation Organisation (SCO).

Turkey has been unsuccessfully negotiating its bid to enter the EU for 11 years. 

European leaders are reportedly skeptical of the membership due to Turkey's record on democratic freedoms and human rights.

The EU came into existence on 1st January 1958 with the Treaty of Rome signed by six countries. Now there are 28 member countries, including; France, Italy, Germany, the Netherlands, Belgium, Luxembourg, Spain, Greece, Portugal, the UK, Denmark, Ireland, Austria, Finland and Sweden. 

Aims of the European Union 

• To remove trade restrictions and to encourage free trade among the member countries 
• To apply Common External Tariff and a common commercial policy in their trade with non-member countries 
• To allow free movement of factors of production between member countries 
• To pursue common policies on agriculture and transport 
• To allow member countries to compete freely 
• To create European Economic and Monetary Union (EMU) including the creation of Euro 
• To increase trade and development of member countries 
• To develop a common foreign, security and defense policy 

Advantages of EU Membership 

1. It enables countries to enjoy the benefits of a ‘larger home market’ for their products 
2. A larger home market enables countries to specialize according to Comparative Advantage 
3. Countries enjoy economies of scale due to specialization 
4. Member countries can enjoy the advantages of competition in the form of better quality and lower prices 
5. It facilitates increased exports due to competition and large scale production 
6. It assists poor regions within the bloc 
7. It promotes friendship and cooperation among the member countries 
8. Member countries can restrict import from non-member countries 

Disadvantages of EU Membership 

1. Member countries have to use EU produced expensive foods while it could have obtained from other countries at a very lower price 
2. Member countries loose sovereignty as most of the important economic decisions are taken by the headquarters and not by the respective countries

More than 102 Million Trees Dead due to California Drought. Time to Plant Trees?

With the death of 36 million trees since May, the death toll due to drought conditions in California has risen to over 102 million, reports the Guardian. 

The US state continues to face a severe drought since five years, marked by low mountain snowpack and warm temperature. 

The drought-stricken forests have increased the risk of catastrophic wildfires in the US state.

Drought has now become common everywhere. It is not only the natural calamities that cause drought but also human actions such as deforestation. 

We often forget that the economic benefits obtained from deforestation are directly or indirectly inviting us for devastation and destruction of human race on our own planet earth. 

To save the human race, we must take immediate actions to save mother earth. Everyone can do it. Planting trees can be something that each of us can do. 

Here’s how trees make a difference:

• Trees improve air quality by producing oxygen. They also store carbon, offsetting harmful byproducts of fossil-fuel burning.
• They moderate the effects of sun and wind, and they clean the air by trapping dust, pollen and other pollutants.
• Planted in the right places around buildings, trees can significantly reduce air-conditioning costs. This means less Freon, an inflammable and odorless chemical emitted from air conditioners. It is considered to have damaging effects to the ozone layer.
• Trees increase property value.
• Trees generate jobs and contribute raw materials for buildings, newspapers, books, etc. They are renewable, biodegradable and recyclable.
• They provide shelter and food for wildlife such as birds, squirrels and bugs.
• Trees make people feel good. Workers are more productive when they see trees along their commute routes and from their office windows.
• Landscapes that include trees help relax us, lower heart rates and reduce stress.

Eliminating Modern Slavery is a Collective Responsibility

Unlike our forefathers, no one from the present generation has tasted the bitterness of conventional human slavery, thanks to improved education, social integration and international agreements. 

As people are advancing with time, the old police states were replaced by city states across the globe, leading to present day urbanization.

Urbanization took place rapidly in and around capital cities due to the fact that those cities were controlling the decision making power over the resources of the whole country. Irrespective of the location of the resources across the country, the waves of nationalization brought all resources under the control of the political elites in the capital.

It was particularly true for small states like the Maldives where capital Male alone is the sole decision maker.

The profit motive of the capitalists and the landlords of the capital city are the major powers of any government established in Male. Their #power over the state #authorities have systematically established administrative and bureaucratic mechanisms for the control of the islanders in socio-economic and political grounds.

The socio-economic and political control have deprived the islanders from their decision making power on the utilization of their resources. It is the capital Male that decides everything.

Human beings are greedy by nature. It is particularly true for those in the capital Male with both Authority and Power.

Power corrupts and absolute power corrupts absolutely.

As a result, the low income residents of the capital Male together with most of the non-Male residents are enslaved.

The political elites and the landlords call it business. We call it Modern Slavery. 

Raise your voice against it. Eliminating modern slavery is a collective responsibility. 

It is Not Deficit Budget But Priorities that Matter

Basic Keynesian analysis suggests that a deficit budget during a slowdown is a good thing.

In the present slowdown in the economy due to external shocks, private sector spending is observed to be falling, and individual saving is on the rise – leading to unused resources.

Government borrowing is a way of utilizing these unused savings and ‘#kickstarting’ the economy.

The #deficit spending, especially on #regional infrastructure, can help promote higher growth, which will enable higher tax revenues and the deficit will fall over time.

If you try to balance the budget in a slowdown, it will worsen the situation.

But, one need to understand that Projects aimed at Population Concentration result in (unfair) #Redistribution and hence will not help create any extra value.

Therefore, it is not the Deficit Budget but #Priorities that #Matter.

Child Mortality has Significantly Decreased in the Last Decades

Child mortality, also known as under-5 mortality or child death, refers to the death of infants and children under the age of five or between the age of one month to four years depending on the definition. A child's death is emotionally and physically hard on the parents.

According to WHO:

• 5.9 million children under the age of 5 years died in 2015.
• More than half of these early child deaths are due to conditions that could be prevented or treated with access to simple, affordable interventions.
• Leading causes of death in children under 5 years are preterm birth complications, pneumonia, birth asphyxia, diarrhea and malaria. About 45% of all child deaths are linked to malnutrition.
• Children in sub-Saharan Africa are more than 14 times more likely to die before the age of 5 than children in developed regions.

Be Aware of Deceptive Recruitment, Coercion and Forced Labour

Forced labour can take many different forms.

Victims are often tricked into jobs where they are paid little or nothing and then cannot leave because they have been manipulated into debt or had their identity documents confiscated. 

Poverty, illiteracy, discrimination and migration are some of the factors that make workers more vulnerable to forced labour.

A man, looking of a job, accepts a "good" offer from a recruiter.
Once at the destination, the reality is different: https://t.co/qtzu47RxT9 pic.twitter.com/FHEavw6kD1

— ILO (@ilo) November 20, 2016

Explore the ILO's InfoStory to discover how someone looking for work can become trapped in forced labour.

Top 10 Reasons for the Growth of Online Shopping

The young and energetic youth of the country have less time for Conventional Shopping and the emergence of Online Shopping is helping them buy anything from any corner of the globe.

There are several reasons for the growth of Online Shopping.

1. Easy and convenient to access online shop
2. Try or buy products
3. Original products
4. Measure variety or quality
5. Nominal cost
6. Integrated payment gateways
7. No crowd
8. Door step connection
9. Several delivery options
10. Convenient to return

Objectives and Functions of the World Trade Organization (WTO)

World Trade Organization (WTO), international organization established to supervise and liberalize world trade. The WTO is the successor to the General Agreement on Tariffs and Trade (GATT), which was created in 1947 in the expectation that it would soon be replaced by a specialized agency of the United Nations (UN) to be called the International Trade Organization (ITO).

Although the ITO never materialized, the GATT proved remarkably successful in liberalizing world trade over the next five decades. By the late 1980s there were calls for a stronger multilateral organization to monitor trade and resolve trade disputes. Following the completion of the Uruguay Round (1986–94) of multilateral trade negotiations, the WTO began operations on January 1, 1995.

Objectives:
The WTO has six key objectives:
(1) to set and enforce rules for international trade,
(2) to provide a forum for negotiating and monitoring further trade liberalization,
(3) to resolve trade disputes,
(4) to increase the transparency of decision-making processes,
(5) to cooperate with other major international economic institutions involved in global economic management, and
(6) to help developing countries benefit fully from the global trading system.

Functions:
The main functions of WTO are discussed below:
1. To implement rules and provisions related to trade policy review mechanism.
2. To provide a platform to member countries to decide future strategies related to trade and tariff.
3. To provide facilities for implementation, administration and operation of multilateral and bilateral agreements of the world trade.
4. To administer the rules and processes related to dispute settlement.
5. To ensure the optimum use of world resources.
6. To assist international organizations such as, IMF and IBRD for establishing coherence in Universal Economic Policy determination.

Indian Central Bank Proposes "Islamic (Banking) Window" in Conventional Banks

The central bank of India has proposed opening of "Islamic Window" in Indian conventional banks in an effort to gradually introduce Islamic Sharia-compliant (or interest-free) banking in the country.

The Reserve Bank of India (India's central bank) and Indian government are said to be exploring the possibility of introducing Islamic Banking for long to ensure financial inclusion of those sections of the society that remain excluded partly due to religious reasons.

Islamic banking is a banking system that is based on the principles of Islamic law, also referred to as Shariah law, and guided by Islamic economics.

Two basic principles behind Islamic banking are the sharing of both profit and loss and, significantly, the prohibition of the collection and payment of interest by lenders and investors. Collecting interest or "Riba" is not permitted under Islamic law.

The origin of Islamic banking dates back to the very beginning of Islam in the seventh century. The Prophet Muhammad's first wife, Khadija, was a merchant, and he acted as an agent for her business, using many of the same principles used in contemporary Islamic banking.

In the Middle Ages, trade and business activity in the Muslim world relied on Islamic banking principles, and these ideas spread throughout Spain, the Mediterranean and the Baltic States, arguably providing some of the basis for western banking principles. In the 1960s to the 1970s, Islamic banking resurfaced in the modern world.

Retaliation in International Trade

Retaliation refers to action taken by a country whose exports are adversely affected by the raising of tariff or other trade-restricting measures by another country. Also called retorsion.

GATT (now WTC) permitted imposition of restraints on imports from a country that has raised tariffs (or has introduced other trade restrictions) by the aggrieved country (called the adversely affected contracting party) up to the approximate value of the lost trade.

In many cases, countries responded to retaliation by further closing their markets—surely the opposite of what crowbar theorists intend. Consequently, the history of trade retaliation looks like a bad investment portfolio: small gains dwarfed by huge losses.

The crowbar theory has backfired so many times that a study of it, like the study of warfare, inevitably becomes a study of failure. Trade retaliation has failed to produce significant market openings for five principal reasons.

First, retaliation tends to inspire nationalism and xenophobia in the target country. “The theory of economic sanctions is that they will cause a split within the leadership and the masses of people,” says political scientist Robert Gilpin of Princeton University. “But in almost all cases, it’s been the opposite. What you have is really a rally-around-the-flag response in these countries.”

Second, retaliation forces a country to reorient its economy toward alternative suppliers and markets. Sometimes that means expanding business with previously unimportant trading partners. The target country may develop brand-new trading partners. It may raise crops or produce goods that other countries want so much that they will disregard retaliatory sanctions. The target country may pay premiums for its imports. One way or another, it is almost sure to get along.

Third, retaliation commonly expands the role of government in the target country, much as warfare does. The target government may increase its use of price controls, import quotas, exchange controls, “administrative guidance,” and other restrictions, which become very hard to get rid of because they are defended by local lobbyists. That is why, in more than one case, retaliation has had the presumably unintended consequence of promoting fascism. Thus, retaliation may indeed hurt the people in the target country without helping the country that imposed the sanctions.

Fourth, the “tougher” the sanctions, the more they harm people in the retaliating country. Import restrictions trigger shortages and higher prices for consumers, and export restrictions wipe out business for exporters. Sanctions probably inflict as much harm at home as they do on the target country. That is why tough sanctions are seldom adopted, despite continuing objectionable practices in a target country. When such measures are adopted, they lead to losses, black markets, and corruption.

Fifth, retaliation cannot do anything about the worst cases, nations whose economies are already closed. Since there is little trade with such countries, threats to cut off trade are meaningless.

To be sure, retaliation may inflict considerable harm on a target country with whom a lot of trade is taking place, but such retaliation rarely causes the target country to change its policies. In many cases, people have patriotically endured hardship rather than do the bidding of a hostile foreign government. If Washington prevented American consumers from buying any Japanese products, Japanese companies as well as American consumers would lose, but past experience suggests that it is unlikely that the Japanese government would respond with a significant market opening.

What is a Customs Union?

A Customs Union is formed by an agreement between two or more (usually neighboring) countries to remove trade barriers, and reduce or eliminate customs duty on mutual trade. A customs union (unlike a free trade area) generally imposes a common external-tariff (CTF) on imports from non-member countries and (unlike a common market) generally does not allow free movement of capital and labor among member countries.

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Definition and Theoretical Concepts
A customs union is a political structure entered into between two or more countries to establish a free trade market for member countries and create a common trade policy regarding nonmember countries including establishment of common trade barriers.

A customs union attempts to create a common market for free trade between member countries while using a common strategy regarding trade policy with nonmembers. The member countries can agree to limit imports of some goods and services by use of a trade quota. A member country may want this limited protection to help its infant industries, for example.

Advantages
A customs union provides three advantages to members of the union.

Custom unions promote trade among members by the elimination or severe reduction of tariffs. The reduction makes exporting more profitable and easier to accomplish because it makes the cost of the goods more competitive with domestic products.

They provide protection for the domestic industries of members conducting business in protected trade areas from nonmembers. Protection is available because all members create a common trade policy, including such matters as quotas and tariffs that protect member industries from outsiders.
The members agree to revenue sharing regarding funds generated from common tariffs imposed upon outsiders. This may provide additional income to a country that might not otherwise generate such income because of low trade activity.

Disadvantages
A customs union is not with out some disadvantages for its members. Member countries give up some degree of sovereignty, the power to control their own actions, upon entering a customs union. For example, members have to give up some control over fiscal policy (spending and taxing) such as unilateral decisions on tariffs, duties and sales taxes. While custom unions can protect domestic industries, they will not always protect domestic member industries, because their member neighbors can compete against them uninhibited by normal trade barriers such as tariffs.

What is Bilateral Trade?

Bilateral Trade refers to the exchange of goods between two countries that facilitates trade and investment by reducing or eliminating tariffs, import quotas, export restraints and other trade barriers.

Bilateral Trade refers to the cross border transactions that occur between two countries.

A number of nations have set up bilateral trade agreements with a major trading partner in order to facilitate trade and economic stability between their respective countries.

Such agreements often substantially reduce barriers to trade such as duties, customs procedures and quotas.

What is Income Terms of Trade?

A refinement in the concept of net barter terms of trade was made by G.S. Dorrance by introducing the concept of income terms of trade. Dorrance defined income terms of trade as the index of the value of exports divided by the price index for imports. Thus:
Where, T stands for the income terms of trade,
P denotes prices, and
Q denotes quantity,
x denotes exports, and
m denotes imports.

The "income terms of trade" are also referred to as country's "capacity to import", for p determines Qm. Hence, it may be regarded as a superior concept to net barter terms of trade for the less developed countries' purposes.

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Dorrance has improved upon the concept of the net barter terms of trade by formulating the concept of the income terms of trade. This index takes into account the volume of exports of a country and its export and import prices (the net barter terms of trade). It shows a country’s changing import capacity in relation to changes in its exports.

Thus, the income terms of trade is the net barter terms of trade of a country multiplied by its export volume index. It can be expressed as

Ty = Tc.Qx = Px.Qx/Pm = Index of Export Prices x Export Quantity/Index of Import Prices

Where Ту is the income terms of trade, Tc the commodity terms of trade and Qx the export volume index.

A.H. Imlah calculates this index by dividing the index of the value of exports by an index of the price of imports. He calls it the “Export Gain from Trade Index.”

Taking 1971 as the base year, if

Px = 140, Pm = 70 and Qx = 80 in 1981, then

Py = 140 x 80/70 = 160

It implies that there is improvement in the income terms of trade by 60 per cent in 1981 as compared with 1971.

If in 1981, Pi = 80, Pm =160 and Qx =120, then

Py = 80 x 120 / 120 = 60

It implies that the income terms of trade have deteriorated by 40 per cent in 1981 as compared with 1971.

A rise in the index of income terms of trade implies that a country can import more goods in exchange for its exports. A country’s income terms of trade may improve but its commodity terms of trade may deteriorate. Taking the import prices to be constant, if export prices fall, there will be an increase in the sales and value of exports. Thus while the income terms of trade might have improved, the commodity terms of trade might have deteriorated.

The income terms of trade is called the capacity to import. In the long-run, the total value of exports of a country must equal to its total value of imports, i.e., Px.Qx = Pm.Qm or Px.Qx/Pm = Qm. Thus Px.Qx/ Pm determines Qm which is the total volume that a country can import. The capacity to import of a country may increase if other things remain the same (i) the price of exports (Px) rises, or (if) the price of imports {Pm) falls, or (Hi) the volume of its exports (Qx) rises. Thus the concept of the income terms of trade is of much practical value for developing countries having low capacity to import.

It’s Criticisms:
The concept of income terms of trade has been criticised on the following counts:

1. Fails to Measure Gain or Loss from Trade:
The index of income terms of trade fails to measure precisely the gain or loss from international trade. When the capacity to import of a country increases, it simply means that it is also exporting more than before. In fact, exports include the real resources of a country which can be used domestically to improve the living standard of its people.

2. Not Related to Total Capacity to Import:
The income terms of trade index is related to the export based capacity to import and not to the total capacity to import of a country which also includes its foreign exchange receipts. For example, if the income terms of trade index of a country have deteriorated but its foreign exchange receipts have risen, its capacity to import has actually increased, even though the index shows deterioration.

3. Inferior to Commodity Terms of Trade:
Since the index of income terms of trade is based on commodity terms of trade and leads to contradictory results, the concept of the commodity terms of trade is usually used in preference to the income terms of trade concept for measuring the gain from international trade.

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Single Factoral Terms of Trade (SFTT):
The concept of commodity terms of trade does not take account of productivity changes in export industries. Prof. Viner had developed the concept of single factoral terms of trade which allows changes in the domestic export sector. It is calculated by multiplying the commodity terms of trade index by an index of productivity changes in domestic export industries. It can be expressed as:

Ts = Tc.Fx = Px.Fx/Pm

Where Ts is the single factoral terms of trade, Tc is the commodity terms of trade, and Fx is the productivity index of export industries.

It shows that a country’s factoral terms of trade improve as productivity improves in its export industries. If the productivity of a country’s exports industries increases, its factoral terms of trade may improve even
though its commodity terms of trade may deteriorate. For example, the prices of its exports may fall relatively to its import prices as a result of increase in the productivity of the export industries of a country. The commodity terms of trade will deteriorate but its factoral terms of trade will show an improvement.

Its Limitations:
This index is not free from certain limitations. It is difficult to obtain the necessary data to compute a productivity index. Further, the single factoral terms of trade do not take into account the potential domestic cost of production of imports industries in the other country. To overcome this weakness, Viner formulated the double factoral terms of trade.

Double Factoral Terms of Trade (DFTT):
The double factoral terms of trade take into account productivity changes both in the domestic export sector and the foreign export sector producing the country’s imports. The index measuring the double factoral terms of trade can be expressed as

Td = Tc. Fx/Fm = Px/Fm . Fx/Fm

Where Td is the double factoral terms of trade, Px/Pm is the commodity terms of trade, Fx is the export productivity index, and Fm is the import productivity index.

It helps in measuring the change in the rate of exchange of a country as a result of the change in the productive efficiency of domestic factors manufacturing exports and that of foreign factors manufacturing imports for that country. A rise in the index of double factoral terms of trade of a country means that the productive efficiency of the factors producing exports has increased relatively to the factors producing imports in the other country.

Its Criticisms:
1. Not Possible to Construct a Double Factoral Terms of Trade Index:
In practice, however, it is not possible to calculate an index of double factoral terms of trade of a country. Prof. Devons made some calculations of changes in the single factoral terms of trade of England between 1948-53. But it has not been possible to construct a double factoral terms of trade index of any country because it involves measuring and comparing productivity changes in the import industries of the other country with that of the domestic export industries.

2. Required Quantity of Productive Factors not Important:
Moreover, the important thing is the quantity of commodities that can be imported with a given quantity of exports rather than the quantity of productive factors required in a foreign country to produce its imports.

3. No Difference between the Double Factoral Terms of Trade and the Commodity Terms of Trade:
Again, if there are constant returns to scale in manufacturing and no transport costs are involved, there is no difference between the double factoral terms of trade and the commodity terms of trade of a country.

4. Single Factoral Terms of Trade is more Relevant Concept:
According to Kindleberger, “The single factoral terms of trade is a much more relevant concept than the double factoral. We are interested in what our factor can earn in goods, not what factor services can command in the services of foreign factors. Related to productivity abroad moreover, is a question of the quality of the goods imported.”

What is Optimum Tariff?

The level of a tariff that maximizes a country's welfare. In a nondistorted small open economy, the optimal tariff is zero. In a large country it is positive, due to its effect on the terms of trade.

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Normally, when a tariff is imposed, the terms of trade improve and gain accrues to the imposing country. But the tariff rate should be within a limit. If excessive tariff is imposed total gain resulting from improved terms of trade will not be large enough due to decline in the volume of trade. Hence, the question arises as to what should be the ideal rate of tariff? In this regard economists have devised the concept of 'optimum tariff.' The optimum tariff is one which maximises imposing country's gain or welfare from trade.

In technical jargon, however, optimum tariff implies that rate of tariff which intersects the opposite country's offer curve at a point which is tangent to the imposing country's highest community indifference curve.

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In the absence of retaliation, a country should be able to levy a tariff on imports which yields some optimal terms of trade and hence an optimal level of community welfare.

Beginning at the free trade position (or any tariff- distorted trade position) as a country raises its tariff unilaterally, the terms of trade improve and the volume of trade declines.

The improvement in the terms of trade initially, tends to more than offset the accompanying reduction in the volume of trade and hence a higher trade indifference curve is reached and community welfare is enhanced. Beyond some point, however, it is likely that the detrimental effect of successive reductions in trade volume will begin to outweigh the positive effect of further improvements in the terms of trade so that community welfare begins to fall. Somewhere in between there must be a tariff which will optimize a country’s welfare level under these conditions.

The following figure explains the existence of some optimum tariff level. (R) is free trade equilibrium. At that point the volume of trade is og of A-good and oc of the B-good, and the terms of trade are given by the slope of line TP. The home country (II) now wishes to impose a tariff that will maximize its community welfare, i.e. place it on the highest possible trade indifference curve assuming no retaliation on the part of the foreign, country. Under free trade conditions at (R) country (H) attains the trade indifference level (h1) which crosses the foreign offer curve (OF) at (R) and at some other point (T).

Any tariff which distorts the home country’s offer curve in such a way that it crosses the foreign country’s offer curve between points (T) and (R) will lead to a higher trade indifference level. If the new tariff distorted point is at (T), of course, the trade indifference level will be unchanged.

The highest possible trade indifference curve that the home country can reach is one that is tangent to the foreign offer curve. This is trade indifference curve (h2) tangent to foreign offer curve OF at point (s). Hence, if the home country can impose a tariff of such magnitude that the tariff distorted offer curve (OHt) touches the foreign offer curve (OF) at point (s); this is the optimum tariff (sd).

Given the foreign country’s offer curve, the optimum tariff, in terms of A-good is quantity (Sa) or in terms of B-good, quantity (Sd). This is the optimum tariff. Given the foreign country’s offer curve OF, there is no tariff the home country can impose that will yield a higher level of community welfare.

The magnitude of optimum tariff depends upon the elasticity of foreign offer curve. If the foreign offer curve is perfectly elastic, no tariff will yield the home country improved terms of trade. Hence it cannot possibly advance to a higher trade indifference level. The less elastic the foreign offer curve, the higher will be the optimum tariff. Where the foreign offer curve has elasticity of one and thus is horizontal, the optimum tariff will be infinity.

In actuality the probability is that the foreign country will retaliate against the home country’s imposition of an optimum tariff since it is thereby placed on a lower trade indifference curve. Hence, the foreign country may itself levy an optimum tariff that crosses the home country’s tariff distorted offer curve at point which yields the foreign nation a maximum trade indifference level. Then the home country may counter retaliate with another optimum tariff and the tariff war process takes its usual course.