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ECON4346_7_OCT
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- 2. Introductions ◦ 3* 5 Cards Name “Callsign/Nickname” for grading purposes E-mail ◦ Who you are ◦ Home town ◦ Where you work ◦ Why you are taking this course Syllabus Review
- 3. What is“Economics”? Influential Economists Math/Graphing Introduction Conclusion Note: 10 minute breaks at the top of the hour
- 4. Keep upwith the reading Interact Ask questions/seek help
- 6. Mankiw: “Economycomes from Greek word Oikonomos, which means ‘one who manages a household’” How does one manage a household? ◦ By making decisions! Economics is the “science of scarcity”….a DISMAL SCIENCE!
- 7. If Economicsis a social science….. (And it’s dismal)…… Why study it? What’s in it for me?
- 8. Markets havemade SOCIETY much better off In the 20th Century: ◦ US life expectancy rose from 47 years to 77 ◦ Infant mortality declined by 93% ◦ Numerous diseases eradicated: Polio, Tuberculosis, Typhoid, etc Markets/Free Market Economy are responsible “Economy is the art of making the most of life. Economics is the study of How we do that!”….Gary Becker (Nobel Prize 1992)
- 9. #1. Individualswill act to make themselves as well off as possible ◦ Utility Maximizing utility is synonymous with acting selfishly? No Trade-Offs Every decision we make involves some sort of trade-off We may trade off utility now against utility in the future The cost of something is what you must give up in order to get it
- 10. #2. Firms(the guy selling used watches on eBay or Microsoft) attempt to maximize their profits ◦ A profitable firm is like a chef who can buy $30 worth of groceries and turn it into a $100 meal ◦ Firms have decisions: What to produce How much to produce What price to sell
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- 12. Price ◦ Pricesettles the point where the number of items for sale exactly matches the number of that good consumers want to buy
- 13. The Marketis amoral ◦ It rewards scarcity ◦ It does not provide the goods we need, but it does provide the goods we want to buy Prices are used to allocate scarce resources ◦ Who gets Superbowl Tickets? Markets are self-correcting Fixed prices lead to other forms of competition Every market transaction makes us better off
- 14. Good system,but imperfect Free Market System is much like our system of Individual Liberties ◦ US Democracy ◦ System that forces us to choose vaccines over doggie birthday cakes is oppressive ◦ Communism (command economy) failed Controlled the lives of its citizens
- 15. 1. People facetrade-offs 2. Cost of something is what you give up to get it 3. Rational people think at the margin 4. People respond to incentives 5. Trade can make everyone better off 6. Markets are usually a good way to organize economic activity 7. Governments can sometimes improve market outcomes 8. A country’s standard of living depends on its ability to produce goods and services 9. Prices rise when the government prints too much money 10. Society faces a short-run trade-off between inflation and unemployment
- 17. “Virtue is moreto be feared than vice, because its excesses are not subject to the regulation of conscience.” Father of Economics ◦ Logic Professor An Inquiry Into the Nature and Causes of the Wealth of Nations ◦ Self Interest ◦ Division of Labor ◦ Function of Markets ◦ Laissez-Faire Economy Died: 1790 Gave a lot of money to charity http://www.lucidcafe.com/library/96jun/smith.html
- 18. I happened toread for amusement Malthus on Population, and being well prepared to appreciate the struggle for existence which everywhere goes on (Charles Darwin) Ordained Minister in the Church of England Had a lot of time to spend debating with his father Essay on Population (1798) ◦ Population growth would outstrip agricultural resources ◦ Everyone would starve Gloom and Doom Became full time professor of History and Political Economy ◦ England’s first Academic Economist http://www.ucmp.berkeley.edu/history/malthus.html
- 19. "Gold and silver,like all other commodities, are valuable only in proportion to the quantity of labour necessary to produce them and bring them to market” Born of Portugese –Jewish heritage Fled to England Began working in London Stock Exchange at age 14 Astute thinker Elected to Parliament in 1819 Read Wealth of Nations by chance Went toe-to-toe with Malthus Best known for “Comparative Advantage” ◦ Specialization should occur in the area where one nation (or entity) holds a cost advantage http://homepage.newschool.edu/het//profiles/ricardo.htm
- 20. Italian Aristocrat Economist/Engineer Mechanical equilibrium from Engineering led to conclusions in Economic theory Challenged concept of Utility Advanced theory of Preferences and therefore Micro Economics Pareto Principle ◦ 80% of problems arise from 20% of the defects
- 21. Born tomiddle class family in Germany Studied law, then moved into journalism Moved to France and became enthralled with utopian society of cooperative production Published Das Kapital ◦ Deported from France and England Proponent of Revolution
- 22. Studied workplace throughouthis life Ultimate goal: create efficient environment Father of Scientific Management Workers incapable of understanding tasks; they had to be supervised Harvard based MBA program on his principles
- 23. Born inEngland Lived through depression Made and lost fortunes speculating ◦ Foundation of learning the hard way Challenged economic thought during the period—output is determined by demand Advocated government intervention Theories behind FDR/New Deal ecoonomics containedhttp://wwwlhttp://popd22301
- 24. Founder of“Chicago School” Challenged Keynesian economics Social responsibility of business is to increase its profits Nobel Prize in 1976 Ideas led to Federal Reserve’s power in monetary policy
- 25. Musician—played Clarinet StudiedEconomics at Columbia, went on to Graduate with PhD from NYU PhD dissertation (which was pulled) focused on housing bubble Served as Chairman of Federal Reserve from 1987-2006
- 26. PhD fromMIT Current Chairman of Federal Reserve (on second term) Student of Great Depression Professor of Economics at Princeton University since 1985
- 27. Author ofyour textbook PhD from MIT “New Keynesian” Critics include Paul Krugman 2003-2005 Served as Chairman, Council of Economic Advisers to George Bush Has been a vigorous critic of stimulus package http://gregmankiw.blogspot.com/
- 28. PhD fromMIT Widely cited and published Considered #6 out of 100 top intellectuals Theory of New Trade ◦ Advocates protectionist measures Nobel Prize 2008 “Great Unraveling” ◦ Bush policies led to economic turmoil http://krugman.blogs.nytimes.com/
- 29. PhD fromMIT Professor at University of Chicago Author of Freakonomics Controversial studies ◦ Crime ◦ Society ◦ Abortion http://freakonomics.blogs.nytimes.com/
Editor's Notes
- #6 Economics is a social science. A social science is the study of human society and relationships within that society. Many other subject matter (in the inner rings), as seen on this slide, derive their precepts from the four fundamental pillars—Economics, Sociology, Political Science, and Anthropology.