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Lecture 5
Macroeconomics
Quiz
1. What is the Rule of Law?
2. If I grow potatoes behind my house in Idaho
and eat a fourth of them, give away one fourth,
trade one fourth for carrots, and sell one fourth,
how many of my potatoes are recorded in
GDP?
Quiz
1. What is wealth?
2. What is growth?
3. What is capital?
4. What is an idea?
5. What is an invention?
6. What is an innovation?
7. What is cultural capital?
8. What is physical capital?
9. What is human capital?
10. What is intellectual capital?
11. What is financial capital?
12. Are all inventors also entrepreneurs?
13. What is the value of a free market?
Cultural Capital
Human Beings
The Human Innovation Framework
Ideas
Physical Human Intellectual Financial
Inventions
Entrepreneurs Free Markets
Innovations
Cultural Capital
Human Beings
The Human Innovation Framework
Cultutal Capital
How people treat
each other
Culture is
determined by the
worldview of its
leaders
Worldview
Truth
Good
Beautiful
Rule of Law
Property Rights
Cultural Capital
Human Beings
The Human Innovation Framework
Ideas
Idea
A thought about a
new way to potentially
create value
Cultural Capital
Human Beings
The Human Innovation Framework
Ideas
Physical
Physical Capital
atoms and energy
natural resources
time
buildings
equipment
things than make things
Cultural Capital
Human Beings
The Human Innovation Framework
Ideas
Physical Human
Human Capital
trust
health
trust
skills
knowledge
personality
relationships
Trust
Integrity
Competence
I look for three things in
hiring people.
The first is personal
integrity, the second is
intelligence, and the third
is a high energy level.
But if you don’t have the
first, the other two will
kill you
Warren Buffett,
Cheating on an
Exam
Lying about
your
Competence
Cultural Capital
Human Beings
The Human Innovation Framework
Ideas
Physical Human Intellectual
Intellectual Capital
knowledge
technology
methods
patents
over
10,000,000
today
Cultural Capital
Human Beings
The Human Innovation Framework
Ideas
Physical Human Intellectual Financial
Financial Capital
money and risk
savers and borrowers
time is money
(1+r)n
insurance  
limited liability corporations
double entry accounting
Cultural Capital
Human Beings
The Human Innovation Framework
Ideas
Physical Human Intellectual Financial
Inventions
Invention
Proof of an Idea
Thought to reality
Cultural Capital
Human Beings
The Human Innovation Framework
Ideas
Physical Human Intellectual Financial
Inventions
Entrepreneurs
Entrepreneurs
Risk Takers
Value
Inventions to Innovations
Freedom to Discover
Learning
Failure
Inventor
Entrepreneur
Thomas Edison
Inventor and
Entrepreneur
Very Rare
Cultural Capital
Human Beings
The Human Innovation Framework
Ideas
Physical Human Intellectual Financial
Inventions
Entrepreneurs Free Markets
Free Markets are where
value is discovered
Buyers and Sellers can
enter and exit
Prices Move up and
down
Markets Solve
Each Other’s
Problems
Markets Solve
Problems with the
Price System
Price System
Information System
Incentive System
Spontaneous
Cultural Capital
Human Beings
The Human Innovation Framework
Ideas
Physical Human Intellectual Financial
Inventions
Entrepreneurs Free Markets
Innovations
Innovation
Market-Successful
Invention
Cultural Capital
Human Beings
The Human Innovation Framework
Ideas
Physical Human Intellectual Financial
Inventions
Entrepreneurs Free Markets
Innovations
We create and
discover value by
continuously
innovating our
capitals
Intelligence
Thinking
Reasoning
Inspiring
Ideas
Creating
Organizing, Arranging,
Imagining, Designing,
Engineering, Building,
Developing, Shaping,
Forming Devising,
Fabricating
Body
Creative Instrument
Image
Judgment
Reason and Speech
Logos
Creating
Acting with an
intelligent purpose
Creativity adds value
Creativity is an act of intelligence
Intelligence is infinite
Infinite
Creativity
Human Freedom
is the most important
innovating capital
Quiz
1. What is wealth?
2. What is growth?
3. What is capital?
4. What is an idea?
5. What is an invention?
6. What is an innovation?
7. What is cultural capital?
8. What is physical capital?
9. What is human capital?
10. What is intellectual capital?
11. What is financial capital?
12. Are all inventors also entrepreneurs?
13. What is the value of a free market?

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Macro 5