 Welcome to everybody. Thank you for braving the storm, risking your life to get here. We have an exciting day planned, the undergraduate economics club debate. I want to introduce the president of the undergraduate economics club, Anastasia Wilson. I want to thank Anastasia for all the great work that she's done all year long planning the undergraduate economics club events and for helping out organizing this debate. Thank you very much, Anastasia. Anastasia is going to introduce the debaters and our judges and she's going to keep the clock and keep everything running on time. So, welcome Anastasia. So this year our debaters will be discussing big business. Is it good for social welfare? Over here on the yes it is side, we have Laura Molino. She is a junior economics major. Thomas Peek, who is also a junior economics major. Angela Lee, she is a senior and also an econ major. And Daniel Schwartz, who is a senior and an econ major. On the no it's not, we like small businesses side. We have Daniel Brock, who is a junior econ major. Luke Sieberg, who is a sophomore, steppic and economics major. And Ryan King, who is a sophomore, polysci econ major. So, each team will be going. We've decided that the big or the small business team will be going first. So, welcome them to the podium. Oh, yeah, judges. Sorry. We have Peter Scott, who is a professor here at UMass. Bill Troy, who is one of the founding members of the economics alumni association and a professor at UNH. And Gilberto Lima, who is a visiting scholar from University of San Paolo. And those are our judges. So, start. All right. We're going to present an argument that explains why we believe small business is better for social welfare as opposed to big business. Before I begin, I'd like to define social welfare, small business, and then I'll give a quick outline of our major argument. Our perspective on social welfare goes beyond just basic economic indicators such as average wages, employee benefits, job creation, production and so on. We want to consider things such as overall happiness, overall well-being and health. Open information, democratic processes are not hampered by the operating firms and the firms behave in environmentally friendly ways. We define small business as firms who employ 500 or fewer employees. Firms of this size make up 50% of the private non-farm share of GDP. Currently, there exist 23 million small business firms across America. They exist in virtually every neighborhood. According to a recent Gallup poll, 66% of Americans say they have a great deal of confidence in small businesses. Small businesses have generated 64% of net new jobs over the past 15 years. And because small businesses are embedded in their communities, they have a strong economic interest to serve their communities and their customer base in ways that benefit overall happiness, the environment and well-being. The last point on small business is that they make up 97% of all exporters and they produce 29% of all export value. I'll quickly outline our major points of argument. We'll be going over Disconomies of Scale, the impact of a large firm collapse, benefits of small business clusters, small business contribution to economic development and finally corporate welfare. I'll begin with Disconomies of Scale. We're going to argue that Disconomies of Scale exist and they originate due to the organizational form or organizing infrastructure that a firm takes on. Not only will these Disconomies of Scale create inefficiencies and costs to the firm, they'll limit the firm's growth and size, as well as have direct negative effects on social welfare. The first Disconomies of Scale that I'll go over are atmospheric consequences and these arise during firm growth. As firms increase in size, the layers of hierarchy within the firm also grow. The jobs among these various layers of hierarchy become much more specialized and workers among these various layers begin to feel alienated because of the job specialization. Workers have a hard time understanding their role within the company, how their job fits into the overall firm and how their part adds to attaining the goal of the firm. Workers who feel alienated within their work tend to lack motivation and do not perform efficiently. More managers are needed to oversee these workers, which adds to growing costs to the firm. The second Disconomies of Scale that I'll go over is bureaucratic insularity. Again, as firms grow, the layers of hierarchy within the firm also grow. Senior managers will eventually become insulated by these layers of hierarchy and they'll begin to pursue their own self-interest rather than the goals of the firm or the principal owner. This could lead to principal-agent problems as well as moral hazard for the firm. When senior managers begin to focus on their own goals, they tend to focus on the short term goals of the firm to maximize their own gains, which could in turn compromise the health of the firm in the long term. The last Disconomies of Scale that I'll go over is distorted communication. As communication moves within the layers of hierarchy and especially across the layers of hierarchy, it becomes distorted. When information reaches senior managers, it has become fully distorted and senior managers are not able to make decisions that will respond to the market quickly or correctly, adding further to the efficiencies of the firm. The last argument that I'll go over are the effects of a firm failure. Within the past decade, we've been plagued by uncertainty. There's been numerous natural disasters as well as the financial crisis, the housing bubble. So I found it would be more interesting to look at what happens when a firm fails to look at the destructive side of social welfare economics instead of the creative side of social welfare economics. I use the American auto industry as an example. If GM were to fail, we would see a net loss of roughly 900,000 jobs. If the Big Three within Detroit failed, we would see a net loss of roughly 3.3 million jobs. Now, if we use the largest small business firm of 500 employees, we would see roughly a net job loss of 8,500 jobs. Relating this back to social welfare, the larger the corporation, the larger the stakes are for the community that relies on that corporation for jobs as well as social welfare. Going back to Detroit and the Big Three, in its prime, Detroit had a population of 1.8 million, and its population currently sits at roughly 700,000. Over time, the Big Three invested in new means of production to stay competitive with Asian automakers, decreasing the demand for labor power within Detroit. This had an increase in unemployment rates as well as poverty rates. 33% of Detroiters live below the federal poverty line as of 2007, making Detroit the poorest of the nation's big cities. Their per capita income of 2009 was estimated at 15,000 compared to the national rate of 27,000. Finally, as you can see, big business changing means of production and relocating jobs has a negative effect on the local community as well as social welfare. And I'll hand it over to Luke. I'm going to focus on the possibilities and realities of small businesses taking advantage of economies of scale and of agglomeration through clustering as well as the role small businesses play in economic development. Clustering refers to localized groups of people, infrastructure, and finance that in some can generate a successful and competitive industry capability. The key phrase in that definition is in some, as clusters create the same conditions that foster economies of scale and lead to efficiency and reduction of transaction costs, but do so without many of the negative externalities that are usually associated with large businesses. The close relationships fostered by clusters generate economic and social value creation, leading to locals being committed to, excuse me, to affirms or district's future. When people see that they are being helped by clustered businesses, they reciprocate. This is less likely with large businesses as people do not feel the same community connection and may even be hostile towards large businesses as a result of the large businesses' negative reputations. The close relationships fostered by clusters generate economic and social value creation, excuse me. Business clusters provide a range of local suppliers which can respond to their customers' needs for specialized inputs and services in a quick, efficient, and technologically proficient manner which enhances their international competitiveness. For many of these suppliers, they are in industries where knowledge is not easily codified. This leads to knowledge being generated informally through daily personal contact while workers move among firms with greater freedom than large businesses. As a result of this knowledge sharing, the entire industry benefits as opposed to one company, and resulting technological advancement is for the benefit of society as opposed to a single company's shareholders. In businesses such as the high-tech industry, knowledge sharing leads to a competitive advantage of a firm such as Microsoft, which actually left Silicon Valley in order to avoid sharing information with other companies. This leads to what I've called innovation stagnation as companies like Microsoft continue to lag behind the innovation curve set by its main rival, Apple. As you can see, distant rivalries between large firms don't quite compare to the productive competition found in clusters made up of small firms. Turning to transaction costs, clusters allow businesses to minimize transaction costs while taking full advantage of economies of agglomeration. Clustered firms can act as a group to support mutually beneficial objectives so the risks they take are smaller and more calculable. Consequently, clustered firms are able to make more risky investments and engage in joint ventures which have in which they have the flexibility to reorganize their relationships and responsibilities over the course of the business transaction. Relatedly, clusters are able to maintain and create a systematic internal equilibrium which is the result of a high interaction intensity among the business's employees. Employees of small businesses get to know one another and, as we all know, discussion between people who know one another and have worked together is much more productive than discussion between strangers. Clustered firms engage in what is known as collaborative commerce, a soft network in which firms openly enter into a relationship in pursuit of benefits or advantages that they believe will accrue to their business, which allows firms to eliminate one of the largest costs of doing business, which is owning the means of production in order to access their benefits. In clusters, as long as one firm owns the hardware or software needed for a production process, the other firms don't have to waste their own capital buying that means of production as well.