Student answer(1) The article suggests that the decrease in gl.docx

Student answer
(1) The article suggests that the decrease in global productivity
growth could be the result from different factors such as
societies reaching a comfort level where there is no more drive
to work harder to reach a better life style, as well as a decrease
of investments. Technological innovations could also be a time
management obstacle. However, Olson would suggest that the
decrease in productivity growth stems from an increase of
interest-group organizations, for which different outcomes are
present among nations, the ones with the relative highest
productivity growth correspond to those with the least presence
of interest-group organizations.
(a) The Fed could magnify the redistribution by creating
policies that favor interest-groups that in time elect leaders that
complete a cycle of inequality on societies.
(b) One clear example to explain the decrease in global
productivity growth is Sweden. Public spending is directed to
more bureaucracy instead of education and welfare. As it has
proven in Sweden, the outcome is an increase in taxation,
decrease in incentive to work, and in turn, lower productivity
growth.
(c) More control of government over economies have resulted in
inequalities among societies that benefit "the one percent",
whom are in control of economies. The decrease in real wage
means and increase in benefits for special interest groups that
are favored by government policies such as the recent bail outs
to the banking system ant stock market.
(d) The need for more government organized groups can be
minimized, public spending can be directed to welfare and
education more than bureaucracy, creating a higher level of
education and productivity. If the existence of interest groups is
relatively low, so is the preassure over monetary policy.
(e) It is true that coordinated capitalist economies tend to be

smaller, however, the productivity growth is based on the
distribution of public spending. In favor of walfare and
education can increase the productivity growth, or create the
opposite reaction as seen in Sweden when is concentrated in
government centralization. The level of central coordination is
more likely to create an increase in productivity growth, only
when public spending is minimized or distributed in favor of
welfare and education, which in turn creates more productive
workers. However, Olson suggest the opposite, less
coordination leads to a greater productivy growth. I believe
policy making in favor of iqueality among societies is the key to
productivity growth which leads to greater economic growth.
Student answer
1) The article gives an explanation about why productivity has
slowed saying declines in productivity could be seen as a
consequence of developed societies hitting their comfort zones,
with workers no longer having the desperate drive to work their
ways out of poverty, as can often be seen in countries
developing their economies, with huge potential for growth.
Olson would argue that organizations struggle over distributions
of income/ wealth and not production. Encompassing
organizations have some incentive to make the society in which
they operate more prosperous. These organizations will often
consider increasing society’s production, as long as the burden
does not exceed the expected reward, and are encouraged to
bargain with other substantial groups in an effort to increase the
productivity of society.
2A) The Feds can build rules for collective action to overcome
conflict of interest to magnify the redistributive process.
2B) By banks printing money and distributing it to the banking
system it cheapens the dollar slowing down the productivity
growth rates.
2C) According to your blog, "How Limousine Liberals Support
the Rich," "The way that interest rates are kept low is by the
Fed's and the banking system's increasing the amount of money.

The increasing amount of money leads to higher prices
(inflation). Higher prices mean the average American becomes
poorer. Thus, the inflation adjusted wages of workers are
reduced while stock prices are increased and the wealthy
become wealthier." If this continues it shows how it will result
in a declining standard of living over my lifetime.
2D) The larger the number of groups, the smaller the individual
gains. The share of gains are minute in larger groups. Large
groups that are made up of rational individuals, will not act in
their group interest in this case affecting the country's control
over their money supply.
2E) Members of small groups have disproportionate
organizational power for collective action, and this
disproportion diminishes but does not disappear over time in
stable societies, ex) small groups thrive quickly, but weaken
over time or through stability.
Student answer
(a) http://www.worldfinance.com/strategy/corporate-
governance-strategy/a-global-productivity-slump
(b) http://www.mitchell-langbert.blogspot.com/2013/11/the-
problem-is-government-not-income.html
(c) http://mitchell-langbert.blogspot.com/2011/06/review-of-
ron-pauls-end-fed.html
(d) http://mitchell-langbert.blogspot.com/2010/02/how-
limousine-liberals-support-rich.html
(1)According to the first article, (a), productivity growth rates
have slowed to historically low levels around the world.
Compare the explanations offered by the reporters to those that
William Lewis give and those that Mancur Olson would give.
a. The reporters offer an explanation that economic comfort,
as well as technological advances have created the slower
productivity rates. Olson, however, would probably argue that
the rise of big labor—and governments’ compliance with big
labor’s demands—have allowed workers to get away with doing

less for more money.
(2)According to my blogs, (b), (c), and (d), the Federal Reserve
Bank and other monetary authorities serve as redistribution
vehicles by which freshly printed money is diverted to special
interests, resulting in lower real hourly wages to workers
excluded from the recipient group, special interests that bankers
favor.
a.How might the Fed magnify the redistributive processes that
Olson describes?
i. The Fed has
created another avenue for government policy to divert more
public money toward special interests, even (or especially)
when such redirection is detrimental to the larger economy.
b.Since World War II, central banks have been given increasing
power to allocate credit (print money) and distribute it to
interests deemed acceptable to the banking system. This has
been true in countries around the world. How might this
explain the slowdown in world productivity growth rates?
i. In general,
giving more money to interests is a way of discouraging
productivity in the members of that interest group. Because this
is now happening around the world, this would explain the
global slowdown in productivity.
c.All sustainable real-wage increases depend on productivity
growth. If productivity doesn't grow, no wealth is available to
raise real wages. (Real wages are wages adjusted for inflation.
They have not grown in the US since 1970, although they grew
from 1800 to 1970.) How might the interaction of special
interest lobbying and central banks' creation of credit and
money magnify the effects that Olson describes, reducing real
wage growth over time and resulting in a stagnant or possibly
declining standard of living over your lifetime?
d.How might country size modify the way that monetary policy
interacts with special interest pressure?
i. In smaller countries, it would become more difficult for
monetary policy to bend to special interest pressure, because it

will have a more measurable effect on citizens not part of the
interest group. In a larger country, like the United States, it is
easy for policy tailored for special interest to slip under
people’s radar.
e.After controlling for size (since successful coordinated
capitalist economies tend to be smaller), do these effects depend
on whether an economic system has a greater degree of central
coordination (Sweden and Japan) or a greater degree of
decentralization (the US and Britain)?
ii. These effects would depend on a large degree of
decentralization because such decentralization is necessary to
keep such tailored policy quiet. In a centralized system, more
people are affected by a policy, and are more likely to know
about it (and have objections to special interests).
Student answer
1)
a) This article explains the decrease in productivity growth
and how the urgency to work as hard before to leave the state of
poverty. Workers feel as if they are no longer working to make
a better life for themselves or their families, they have reached
a comfort zone that slowed down production. Also, their jobs
have been made easier to handle due to the technological
advances. However Olson would argue that since the
government always complied with workers demands for more
benefits, more pay, they feel as if they don’t have to work hard
for their earnings anymore. Since you have to work for your
incentive, the workers already received their earnings from
already just working not working hard.
2) a) The feds can magnify the redistributive process
by setting guidelines that focus on special interest groups to
balance the inequalities in the society.
b) By allowing banks to print money with such ease it
lowers the value of money. Money is valuable when it is rare

and it is not easily accessible to print. By printing out money
and distributing it to banks on a regular basis it results to
decrease in productivity growth.
c) The interaction of special interest lobbying, and central
banks creation with wealth and money reduces the value of
wages and the worth of money. Once the value of money is
reduced the prices of living becomes harder to obtain. This is
why accessibility to conveniently printing money and credit and
distributing it is crucial to ones living condition. Once real
wages are harder to obtain, workers see a reason to work
crucially harder for it which would lead to wage growth.
d) Country size plays a major impact on the way monetary
policy interacts with special interest pressure depending on the
size of the country. When a country is large it is easier for
monetary policy not to be noticed and may be able to be ignored
or looked past from. However, if the size of the country is fairly
small every little thing gets inspected such as monetary policy
and special interest pressure is more likely to enforce since the
concentration (the country size) is so small.
e) These effects would only depend on smaller groups where
collective action fails as well as central coordination. It would
only be successful for larger formed groups where the stability
is easier to obtain. Smaller groups would eventually lead to a
weaker, imbalanced economy.
Maple Hill Dairy Farm
Maple Hill Dairy Farm is a small, family-owned business that
started its operations in 1996 with the goal of using all natural
processes to create high quality dairy products. The company
produces several different products sold in health food markets
and some of the larger supermarkets in the area as well as in the
Maple Hill Country Store, a small retail store located next to
the farm. Maple Hills’ products are well-known for their
quality and have gained a strong brand-loyalty throughout the

region in which Maple Hill operates. A key competitive factor
for Maple Hill is that is uses only glass bottles in the packaging
of its products, which appeals to many of its targeted customers.
Maple Hill’s sales have grown rapidly in recent years, but
production is currently limited by the number and size of the
facilities on site that can only accommodate 300 animals (of
which 130 cows are part of the milking herd). As a result,
Maple Hill is considering expanding its operations to allow it to
meet the increasing demand for its products. In order to
expand, Maple Hill would have to buy additional land, build
more barns and enlarge the milking facility. Maple Hill’s
manager, Laura Ashley, is concerned about the potentially large
financial outlays that Maple Hill would incur with expansion
and she feels that she should examine whether or not current
operations are efficient and cost effective before expanding.
Laura is also considering the possibility of packaging the farm’s
product in plastic and paper containers instead of glass bottles.
She expects that this would attract new customers, and in
addition, it would reduce costs significantly. The direct cost
of packaging the product (now $.75 per bottle) would be about
one-third the current cost, and the cost of the bottling
equipment for filling the plastic or paper containers would fall
to one-half the cost of the current equipment within 6 months
time. All other costs would remain the same. Also, Laura
thinks the sales of the farm’s products would grow even faster
with the broadened product line – the brand reputation of the
farm’s products could be leveraged to bring in new customers,
and the use of plastic or paper containers would enable the farm
to attract new supermarkets and other retailers that do not
presently handle bottles. Laura thinks that the supermarket
customers would be willing to pay at least $.40 per quart more
for Maple Hill products relative to other store brands.

Laura subscribes to the relevant trade journals in dairy farming,
and has excerpted the following information from a recent issue
of one of her journals. It shows the buying criteria of a sample
of supermarket customers who were purchasing milk in plastic
and paper containers (1 = most important, and 5 = least
important). The current supermarket prices for these products
in Maple Hill’s area are $1.25 per quart for each product except
eggnog which sells for $1.80. Supermarkets mark up the price
of milk by about 40% from dairy cost, so the price received by
the dairy is somewhat less.
Attribute Importance Ranking, by Product
Whole
Low-Fat
Skim
Chocolate
Buying Criteria
Milk
Milk
Milk
Milk
Eggnog
Freshness
3
3
2
4
4
Packaging
4
5
4
5

3
Taste
2
2
3
1
1
Color and Texture
5
4
5
3
2
Price
1
1
1
2
5
Background about Maple Hill’s Operations
The main processes involved in milk production are as follows:
1. Milking: An employee begins by sanitizing the cows. Once
this is done, the employee attaches the cows to an electronic
milking machine. The machine automatically provides
information on the number of gallons produced by each cow and
pumps the milk into a holding tank before the next process
begins. This is a very time-consuming and labor-intensive
process because the milking pen currently accommodates 12
cows at a time. The rest of the cows are kept in the milking
barn until it is their turn to be milked. Milking the entire
milking herd takes between three and four hours per day.
2. Separating: In this process, a machine sorts the cream from
the milk. The cream is then stored in a vat until it is made into

butter or is added back to the milk to create either low-fat,
chocolate, or whole milk or eggnog.
3. Pasteurizing: Pasteurizing is the process by which any
bacteria in the milk is killed. Milk runs through hot plates,
bringing it to a temperature of 175 F degrees. Then, the milk is
run through cold plates to bring it to the optimal storage
temperature of 38 F degrees.
4. Homogenizing: After pasteurization, the milk is
homogenized by breaking up fat molecules in the milk by
running the milk through a high pressure system. This process
is done for cosmetic purposes to create a rich, creamy finished
product. This step is the last step in the production process for
whole milk, skim milk, and low-fat milk. These three types of
milk are then stored in separate holding tanks until the bottling
process begins.
5. Mixing: This process is only completed for chocolate milk
and eggnog. In this process, sugar and other ingredients are
added and mixed into the milk to create the finished product.
6. Bottling: Bottling is a very costly process for Maple Hill.
Maple Hill uses glass bottles to package its milk products,
which requires more filling time than paper or plastic
containers. Before the bottles can be filled, employees must
sterilize and sanitize the glass bottles. The clean bottles are
then placed on a conveyer belt to be filled. The filling of the
bottles is completed by a machine that fills each bottle and also
places plastic caps on the bottles. An employee removes the
filled bottles from the conveyor belt and places them into
crates.
7. Warehousing: When the crates are filled, an employee moves
them to the refrigeration room in the warehouse. They are
stored in the room until they are shipped. In addition to the

refrigeration room, the warehouse also holds new and returned
glass bottles as well as ingredients like sugar that are added to
the milk in the mixing process.
The products produced by Maple Hill and current prices
received by Maple Hill are as follows:
· Whole Milk, $1.90 per quart
· Low-Fat Milk, $1.90
· Skim Milk, $1.90
· Chocolate Milk, $1.90
· Eggnog, $2.25
Bottles are produced in one size – quarts. Selected data for
the most recent year are as follows:
Whole Milk
Low-Fat Milk
Skim Milk
Chocolate Milk
Eggnog
145
500
333
455
525
Number of Invoices
292,000
730,000
511,000
219,000

187,000
Number of Bottles Produced
373
933
653
290
270
Number of Purchase Orders
48
66
85
71
43
Number of Customers
166
304
236
144
135
Labor Hours, Warehousing
2
2
3
3
4
Number of Quality Checks per Order
87
422
345
132
112
Machine Hours, Separating
0
0
0
385

355
Machine Hours, Mixing
199
433
312
187
177
Machine Hours, Bottling
98
312
177
88
122
Labor Hours, Clean and Repair
Maple Hill’s Accounting System
Maple Hill has a conventional accounting system which keeps
track of overhead costs in four categories: bottling equipment,
facilities, processing, and general and administrative. There
are sub-accounts in each of these accounts except for bottling
equipment. The accounts, sub-accounts and costs for the most
recent operating year are shown in Table 1. These costs are
often called resource costs, and are labeled as such in the OROS
software system.
Maple Hill grows on site most of the feed needed at the dairy
farm. The cost of producing the feed and some additional feed
purchased during the year is included under labor and materials
for other processing costs.
Table 1: Overhead (Resource) Costs for Maple Hill Dairy
Farm
ACCOUNTS
SUB ACCOUNTS
ACTUAL COSTS
Bottling Equipment

$1,528,620
Other Facilities Costs
Utilities
72,395
Depreciation
22,976
Property Tax
10,014
Total Other Facilities Cost
$105,385
Other Processing Costs
Labor and materials
428,800
Supplies
4,278
Equipment repairs and maintenance
21,565
Depreciation
13,688
Total Other Processing Cost
$ 468,331
General and Administrative
Administration
105,522
Interest Expense
23,471
Total General and Administrative
$ 128,993

Total
$ 2,231,329
In addition to the overhead costs, Maple Hill has direct costs for
bottles and other materials. These materials are purchased
from a variety of suppliers. Each glass bottle costs Maple Hill
$.75, including both purchase and recycling cost. Other
ingredients include cocoa, sugar, and spices. Cocoa, used in
the production of chocolate milk, costs $.05 per bottle. Sugar,
used in both chocolate milk and eggnog, costs $.05 per bottle.
Spices, used to make eggnog, cost $.08 per bottle. In total,
65,700 ounces of sugar and cocoa were used in the production
of chocolate milk, and 76,650 ounces of sugar and spice were
used in the production of eggnog.
Laura has heard from a local vendor that information from an
activity-based costing would be helpful to Laura in improving
Maple Hill’s operations. With some guidance from a cost
consultant recommended by the vendor, the following
production activities were identified
Milking
Separating, pasteurizing, and homogenizing
Mixing
Bottling
Warehousing

General and Administrative (G&A)
Receiving and Inspecting
Cleaning and Repairs
Overhead (Resource)-consumption Cost Drivers
Laura has further analyzed the cost structure, to determine how
the overhead (resource) costs could be allocated to the eight
activities identified above. On the advice of the cost
consultant, she determined that all costs in the general and
administrative account could be allocated to the general and
administrative activity. Moreover, most (90%) of the costs in
the bottling machine account could be allocated to the bottling
activity, and the remainder to the receiving and inspecting
activity. Determining how the other processing costs could be
related to the activities is not as simple, but after some careful
study the following estimates were made for the other
processing costs account:
% Usage of Other
Activities Using Other Processing Costs
Processing Costs
Milking
30%
Separating/Pasteurizing/Homogenizing
15%
Mixing
15%
Bottling
25%

Warehousing
10%
G&A
0%
Receiving and Inspecting Ingredients
0%
5%
Total
100%
The other facilities cost account includes the costs of
maintaining the warehouse and milking barn, and is allocated to
the activities on the basis of square feet. Square feet is
therefore the resource-consumption cost driver for the other
facilities cost account, which is one of Maple Hill’s overhead
(resource) accounts.
Activities
Square Ft
Milking
10,000
2,000
Mixing
1,000
Bottling
1,500
Warehousing
12,500
G&A
2,000
1,000
Total
30,000
Activity-consumption Cost Drivers

After some additional study, it was decided that the best way to
allocate the costs of each activity to the products was to use the
following activity-consumption drivers:
Activities
Activity-consumption Cost Driver
Milking
Number of bottles produced
Machine Hours, Separating
Mixing
Machine Hours, Mixing
Bottling
Machine Hours, Bottling
Warehousing
Labor Hours, Warehousing
G&A
Number of Invoices
Receiving and Inspecting
Ounces
Labor Hours, Clean and Repair
Required
1. Assess the competitive environment of Maple Hill Dairy
Farm and determine what you think is or should be Maple Hill’s
competitive strategy, and explain why. Evaluate Laura’s plan
to move from glass bottles to plastic and paper containers.
2. Determine the unit costs for each of the five products given
the available information. How could you improve on these
calculations; what additional information would your request
and how would you use it? Use the Oros® Software to calculate
your solution. To use the Oros® software, follow the
instructions below:

a) Download and install the Oros Quick® ABC program. The
Oros Quick® software is in a self-extracting zipped file. Create
a directory on your computer (e.g., named “OROS Software”)
and download the file to that directory. Double-click on the file
and it will load in that directory. Then double click on the Setup
executable file to install the software (you can safely uninstall
it later).
b) Download the Oros® Short Tutorial and work through the
tutorial (this should take about one hour)
c) Create a folder on your computer labeled “Maple Hill.” Save
the ABC model you create within that folder.
d) Use the information in the case above and in the short
tutorial to complete an ABC costing application using Oros®
for Maple Hill Farm; determine the ABC-based unit costs for
Maple Hill’s products. How does this information help Laura
analyze her decision regarding the change in containers from
glass to plastic and paper?
Blocher,Stout,Cokins,Chen: Cost Management 4e 1
The McGraw Hill Companies, Inc, 2008
Student answer
1. The convergence theory is based on uniformity of
technological and market forces of industrial society. Through
different kinds of studies, we can conclude that the mix of
various employment patterns (low wage, HRM, Japanese-
oriented, and joint team-based) influences on the national
employment-related institutions.

The results of MIT project suggest 4 important trends in
employment relations:
a. "an increasing important locus for strategy and decision
making on employment relations"
b. "the decentralization of firm level structures"
c. increase of "the investment and training skills development"
d. "unions are experiencing major challenges in most countries
as a pace of restructuring intensifies".
The simple globalization theory states that through
globalization there are slight national differences in a pattern of
employment relations. For laws of national policy autonomy,
strategy of unions has to be flexible.
The institutionalist approach states that the differences in
national-level institutions are enduring and this will increase
divergence between national patterns of employment relations.
Ferner and Hyman write that the states posses a key role in re-
configuration of the relations between social regulation and
markets (including labour markets).
All these theories states about economical, social, and
technological environment. The changes in these environment
can influence on the collective bargaining, and this effects the
role of unions in society.
According to M. Olson, social incentives, influencing the labour
forces, organize large groups into small social interactive
subgroups.
We can conclude that globalization is going to cause the
difficulties in supporting the power of a special interest group.
2. The article "Sweden's Taxes - the Hidden Costs of the
Welfare State" states that Sweden taxes have been increasing in
order to expend the local bureaucracy. According to Oslon, a

stable society (as Sweden one) strengths a special interest group
and increases the complexity of regulation (of Sweden society).
The Sweden example of wasteful spending of society surplus
(collected from taxes) by the government is best explained by
Oslon's theory about special interest groups.
Student answer
a) Convergence suggests that technological and market forces
associated with industrialization, demand more uniform
employment relations across countries. Simple globalisation
refers to the result of preassure created by international
economic activity that leads to a more uniform national
economic activity, as well as employment relations, policies and
practices. Institutionalist however, argues that due to endurance
of national-level institutions, convergence is unlikely to occur
in national patterns of employment relations. Varieties of
capitalism (VoC). There are two main variances of capitalism
deriving from it; Liberal market economies (LMEs) which rely
on markets and hierarchies, and coordinated market economies
(CMEs) which use non-market mechanisms. The model suggests
that institutional arrangements are more likely to result from
international market demand. Olson's implication nine suggests
that distributional coallitions are a great deterrent for economic
growth. We read that the institutionalist model predicts an
endurance of national-level institutions which would increment
the power among groups of interest, which are favored by
government policies. Implication seven suggests that
distributional coalitions slow down the process to adapt to new
technologies in a society which could prevent convergence from
happening across countries.
(b) The extrordinary high leves of taxion taking place in
Sweden corroborates Olson's argument against special-interest
groups, collusions, and organizations which decrease the
rewards to productive work and in turn increase leisure,
resulting in lower levels of ecnomic growth.

Student answer
)Explain the following theories: convergence, simple
globalization, institutionalist, and varieties of capitalism
(VOC). Compare each with Olson’s theory.
· Convergence is the idea that employment relations across
countries, because of the effects of globalization, will tend to
move toward similar, more uniform practices.
· Simple globalization is the idea that the forces of
globalization on any given market are so strong that the
autonomy of any single country is essentially non-existent. This
would drive all markets to similar practices.
· VOC is the idea that different capital markets will
eventually shift toward one of two different structures (CMEs
and LMEs). Within these two structures, the policy decisions of
the individual governments will have a profound effect on
employment relations in that country.
The first two theories are largely incompatible with Olson’s
theory, in that they disregard the potential impact of
government decisions (and the relationship between government
and labor) on employment relations in a country.
The VOC theory, however, would not contradict Olson in the
sense that it still highlights how important a government’s labor
policies can be. Olson’s theory may also line up well with the
VOC idea that there are distinct types of capital markets, each
with its own unique structure.
(b)Read this article about taxes and government inefficiency in
Sweden: http://www.newgeography.com/content/00814-
swedens-taxes-the-hidden-costs-the-welfare-state Which
theory, convergence, simple globalization, institutionalist,
VOC or Olson, best explains the issues described in the
article? Due March 16.
· The problem outlined in the above article is clearly an
Olsonian problem of excessive government spending on
administrative/labor costs. The amount taxed and spent in
Sweden is not due to any form of global pressures (in fact,
global pressures would probably push the government the other

way): It is due to a poorly managed government that finds itself
beholden to its special interests.
Student answer
a) Explain the following theories: convergence, simple
Convergence - theory of collective behavior that suggest like-
minded people converge to collective behaviors that fit their
predispositions.
Simple globalization- through globalization there is a difference
of employment relations that has a goal to make the economy
more unified.
Institutionalist- Institutional theorists assert that the
institutional environment can strongly influence the
development of formal structures in an organization, often in a
more significant way than market pressures.
VOC is the theory that different capital markets will shift
towards one of two different structures. In the CME’s and
LME’s, the policy decisions of the individual governments will
have an apparent effect on the employment relations going on in
that particular country.
(b) Which theory, convergence, simple globalization,
institutionalist, VOC or Olson, best explains the issues
described in the article? Due March 16.
The problem taking place in Sweden substantiates Olson's
argument against excessive spending due to unecessary
government spending in ways that they see fit subsequently
resulting in a decrease of growth in the Swedish economy.
Student answer
A) Explanation of the following theories :
Convergence theories assume that there are common pressures
across societies to adopt a particular Employment Relation
system.
Simple globalization are economic pressures associated with

globalization that will result in a convergence of employment
relations policies and practices. Globalization is used to
distinguish changes in the international economy. It refers to
growing of the international economy coming together. It is
associated with growth in cross national trade, foreign direct
investment and growth in international financial transactions.
Institutionalist approach : diversity in national patterns of
Employment Relation will persist. Existing Employment
Relations institutions mediate and filter those pressures, and
will do so differently in different countries.
VOC : the two types of capitalism are Liberal market economy
(LME) and Coordinated market economy (CME). Each of these
forms of capitalism include a set of ‘complementary’
institutions that form the basis of a country’s economic
competitiveness and lead to good economic outcomes. In LME,
firms resolve coordination problems mainly through hierarchies
and markets ex) arm’s length relations and high levels of
competition. In CME, firms resolve coordination problems not
only through hierarchies and markets but also through non-
market institutions ex) strategic interaction.
Olson's theories state contributions without selective incentives
can occur if groups involved are small enough and if the cost-
benefit ratio of action in the common interest is favorable . ex)
they may work together to secure a “group optimal outcome.”
B) The article describes an Olson issue dealing with the social
services and taxes in Sweden. As in the case with the Swedish
government, Olson explains if special interest organizations
emerge, redistributing income, not creating it, it will contribute
to overall inefficiency.
Student answer
(a) Explain the following theories: convergence, simple
Convergence theories assume that there are common pressures

across societies to adopt the best employment relations system.
Simple globalization theory suggests that the economic
pressures associated with globalization will result in a
convergence of employment relations policies and practices.
Institutionalist theories suggest that despite common pressures
associated with globalization, diversity in national patterns of
employment relations will persist.
The varieties of capitalism (voc) theory suggests that there are
two ideal forms of capitalism (LMEs & CMEs), and each form
of capitalism includes a set of complementary institutions that
form the basis of a country's economic competitiveness and lead
to good economic outcomes.
Olson's theory states that there will be no countries that attain
symmetrical organization of all groups with a commom interest
and therefore attian optimal outcomes through comprehensive
bargaining. He believes that no society can achieve a rational or
efficient economy through bargaining amongst organized groups
because certain groups will be left out. So organized groups will
focus on their own gains and put the cost onto the unorganized
groups. The convergence and simple globalization theories do
not support Olson's theory, while the institutionalist and voc
theory does.
(b) Which theory, convergence, simple globalization,
institutionalist, VOC or Olson, best explains the issues
described in the article?
Olson's theory best supports the article. In chapter 2 of Olson's
book, he explains that when there is an insuffucient degree of
self interest in a government, the large groups, if composed of
rational individuals will not act in their group interest. Things
besides collective good must be provided by governments to
account for their existence, and if they only provide collective
goods, then the rational individuals have no reason to support
the government. Resulting in compulsury taxation. So because
of the way money is allocated in Sweden, "taxes discourage
work and encourage tax avoidance."

Student answer
(a) Explain the following theories: convergence, simple
Convergence theories are defined as how industrialization
forces and collectivism enhances the pressure to adapt to the
best employee relation. Simple Globalization theory explains
how globalization leads into pressure to reach employment
relation. Institutionalist theories distinguish that although theres
much pressure being focused with globalization, convergence
would fail into helping to form employee relations. Varieties of
capitalism is when the different capital markets shift towards
one of two different structures, coordinated market economies
and liberal market economies. In these two structures, the
policy decisions of the individual have different effects on the
employee relations happening in that specific country.
Olson’s theory is that workers work better and more efficiently
towards their goal when it involves incentive. He believes that
when a large group forms to achieve an efficient outcome within
the society, they tend to succeed. The convergence and simple
globalization theory does not agree with Olson’s theory while
institutionalism and voc does.
(b) Read this article about taxes and government
inefficiency in
Sweden: http://www.newgeography.com/content/00814-
swedens-taxes-the-hidden-costs-the-welfare-state Which
theory, convergence, simple globalization, institutionalist,
VOC or Olson, best explains the issues described in the
article? Due March 16.
Olson’s theory of special interest best explains the issues being
described in this article because the government focused their
self interest on labor costs. Sweden’s increased taxes was a sign
of expanding the economy, however it was being spent
wastefully. With this form of excessive spending it can only
result in the decrease of social services and taxes in Sweden.

Student answer(1) The article suggests that the decrease in gl.docx

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