Econ extemponelesson

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  • Econ extemponelesson

    1. 1. Economics in One Lesson Basic Economics for Extemp Gregory F. Rehmke Economic Thinking / Foundation for Economic Educationwww.EconomicThinking.org/extemp / fee.org/homeschool
    2. 2. A few principles...Economics is built upon a few principles.“Economics is an easy subject to teach,but a hard one to take.” Paul HeyneThe teaching of economics suffers fromtrying to teach far too many techniques,graphs and formulas.Examples better explain key principles...
    3. 3. Economics Origins
    4. 4. Economics OriginsAdam Smith’s Inquiry into the Natureand Causes of the Wealth of Nations.
    5. 5. Economics OriginsAdam Smith’s Inquiry into the Natureand Causes of the Wealth of Nations.From the Scottish Enlightenment toquestions of Development Economics.
    6. 6. Economics OriginsAdam Smith’s Inquiry into the Natureand Causes of the Wealth of Nations.From the Scottish Enlightenment toquestions of Development Economics.From History to Political Economy, toPolitical Science and Economics, toMicro, Macro, and Malarky economics.
    7. 7. The Economic Way of Thinking Economics is a way of thinking about the world. All societies face the problems of scarcity. Tribal, command, and market societies. Scarcity, Choice, Opportunity Cost. The Laws of Supply and Demand
    8. 8. From Mankiw to Hazlitt Henry Hazlitt suggests just one principle... (opportunity cost) The Broken Window Fallacy The principle applied... (i.e. whose cash... for clunkers?) America’s founders embedded these insights into the Constitution but it was broken by the New Deal).
    9. 9. From the Founder’s Factions...
    10. 10. From the Founder’s Factions...✦ America’s Founders spoke of factions.
    11. 11. From the Founder’s Factions...✦ America’s Founders spoke of factions.✦ Government interventions in the economy would excite factions which would corrupt politics in the fight for power and subsidies.
    12. 12. From the Founder’s Factions...✦ America’s Founders spoke of factions.✦ Government interventions in the economy would excite factions which would corrupt politics in the fight for power and subsidies.✦ A long train of abuses (and a long abuse of trains as well as canals, roads, airports, and light rail...)
    13. 13. From the Founder’s Factions...✦ America’s Founders spoke of factions.✦ Government interventions in the economy would excite factions which would corrupt politics in the fight for power and subsidies.✦ A long train of abuses (and a long abuse of trains as well as canals, roads, airports, and light rail...)✦ And special interests today corrupt most of politics and drive the ever increasing size and scope of state and federal government power.
    14. 14. Economics and Government❖ Economics is the study of human action in response to scarcity (Mises, Human Action).❖ Study of incentives and information problems.❖ Government officials and agencies respond to incentives, much as people and companies do. But with different results.❖ Open up any newspaper or magazine. How do the stories get there? Every “crisis” awakens special interests clamoring to create or expand funding for their industries and associations.
    15. 15. The nature of the State
    16. 16. The nature of the State❖ Government is not reason, it is not eloquence, it is force. Like fire, it is a dangerous servant and a fearful master. - George Washington
    17. 17. The nature of the State❖ Government is not reason, it is not eloquence, it is force. Like fire, it is a dangerous servant and a fearful master. - George Washington❖ Origin of a State: compact or conquest?
    18. 18. The nature of the State❖ Government is not reason, it is not eloquence, it is force. Like fire, it is a dangerous servant and a fearful master. - George Washington❖ Origin of a State: compact or conquest?❖ The Predatory State: from roving bandits to stationary bandits.
    19. 19. The nature of the State❖ Government is not reason, it is not eloquence, it is force. Like fire, it is a dangerous servant and a fearful master. - George Washington❖ Origin of a State: compact or conquest?❖ The Predatory State: from roving bandits to stationary bandits.❖ Open societies depend upon voluntary institutions and are more just, productive, and prosperous.
    20. 20. So... what is the USA?❖ What kind of society and economy is the USA? Market? Socialist? Collectivist? Oligopolistic?❖ U.S. has a mixed economy and a mixed political system (part republic and part democracy).❖ When crisis hits (such as the recent financial crisis). Socialist blame the market and market-advocates blame big government regulation and socialism.❖ Ten Thousand Commandments CEI, 2009.
    21. 21. Regulatory Costs❖ Estimates show U.S. regulatory compliance costs hit $1.172 trillion in 2008.❖ CBO now projects 2009 federal spending to hit $4.004 trillion and the deficit to soar to $1.845 trillion.❖ Regulatory costs are equivalent to 65 percent of 2006 corporate pretax profits of $1.8 trillion. Regulatory costs rival estimated 2008 individual income taxes of $1.2 trillion.❖ Combining regulatory costs with federal FY 2008 outlays of $2.978 trillion implies that the federal government’s share of the economy now reaches 29 percent.❖ The Weidenbaum Center & Mercatus Center estimate agencies spent $49.1 billion to administer and police the 2008 regulatory enterprise. Adding the $1.172 trillion in off-budget compliance costs brings the total regulatory burden to $1.221 trillion. http://cei.org/issue-analysis/2009/05/28/ten-thousand-commandments
    22. 22. James Madison, Federalist Papers• The sober people of America are weary of... sudden changes and legislative interferences [that]... become jobs in the hands of enter- prising and influential speculators, and snares to the more-industrious and less-informed [in] the community.• They have seen, too, that one legislative interference is but the first link in a long chain of [interventions each produced by effects of the preceding]. --James Madison, Federalist #44, pp. 289-297
    23. 23. The Lesson Applied• Broken Windows across the American political landscape. Local, state and federal policies.• Policy roundup: Health care, endangered species, pollution, education, energy, auto, space, transportation, medical research, foreign policy...• Incentive problems, information problems, special interests, asymmetric reporting.• Good reporting and quality policy studies require expertise and funding.• Always ask: Who benefits? and, Who funded?

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