12/12

Interest isn't the price of money, interest is the price of paying for something today that you don't have the money for today.

Economic profits are different than accounting profits. A profit or loss (a PRICE) tells us about where resources are going.

Losses are a VIRTUE of the system. Losses tells you that you are failing at what you're doing, you're inefficient at doing what you're doing.

If you don't have prices you get massive resource misallocation because you don't know how to be efficient, there are no cues to what the right way to allocate costs is.

12/9

You WANT people to make money doing things. This is a motivation to do things we as a society and as a civilization like.

How can it be right for a person to be clothed, but not for the person who makes clothes to be paid.

You can be angry about the market not working properly - companies collaborating to gouge, for example - but getting angry about profit motive? Not the answer

The cause of poverty is an inability to produce something of value for others. (There can be a lot of reasons for this, and you can argue that a market makes this harder for an individual)

Homework for 12/2

This article was an easy way to get into the discussion of why market controls can be seriously broken. Any time artificial controls are put in place, it's a lot of fun to read the way that people circumvent them. The human race might be great at coming up with new inventions to fix serious problems, but we're just as good at finding out how to get to our favorite golf course. It's all about marginal value.

1 Is golf the kind of sport that would naturally develop approaches to breaking rules more than any others? (think: how much richer is the average golfer than most of us? Does that change anything?)
2 What happens to people who aren't breaking the rules when market controls are put in place
3 If this many people want to pay this much to golf, why aren't there more golf courses?

This article perfectly illustrates the point that if you want to take something away the right thing to do is not to eliminate a market. Prices might not be a perfectly fair way to distribute a product, but they just might be the fairest there is. The second you remove markets and eliminate a price system, you make it easier for those who already have an unfair advantage to scam the system even more.

EWOT 12/2

I recently bought a piece of audio equipment marked down to $150 from $650. It was only marked down due to a small dent. I was amazed that the marginal value of the equipment had moved so sharply because of a non-functional flaw in the product. For whatever reason, this culture and this economy deems the appearance or the concept of a "mint condition" so important. I ended up just wondering if the seller had seriously overadjusted the price to entice buyers, or if people really are that afraid of a dent and the price had to be that incredibly low to attract a reasonable amount of buyers.

12/2

Minimum wage is just another form of price control, and if we move from equilibrium vie price control other things have to move, e.g. worker treatment, benefits.

When we have price control our equilbrium that should be $800, and is controlled to $400 *becomes $1200* This sucks.

Scarcity and rarity: the same thing? Nope. Scarcity is about enough to go around, rarity is absolute

11/30

Rent (what we pay to have something temporarily) is not the same as Rent (What you get that you haven't earner)
A binding ceiling is one which is below the equilibrium, only at this point does it have a real effect on the market
Rent control actually hurts the buyers more than the sellers (the price is lower, so fewer people will be willing to rent, fewer places for people to live)

11/28

Where supply and demand meet on a chart isn't everything, and modifications can be made
Chicago school - all about efficiency of markets, but to a fault
Direct financial support in terms of foreign aid isn't where it's at

11/21

Money lowers the cost of transaction. Bartering puts you in shitty suit/toaster world.

Equilibrium is all about what happens AT A PRICE

At too low a price, buyers will actually bid up the price. At too high a price, sellers have to lower to compete with each other for the limited market.

11/16

Judging based on merit instead production is actually a hard argument to make and it's kind of depressing

Competition will always exist, so how do we handle that in a reasonable way? (As I see it how can we turn human greed into a constructive force) The answer is prices.

11/09

Elasticity: %change in demand/%change in whatever you're producing
Elasticity is how much a change in price effects our change in demand
As you move down a demand curve the demand becomes less elastic...BUT DON'T MEMORIZE THISt

TIME
BUDGET
SUBSTITUTES
influence elasticity

11/07

You can combine demand curves

GDP's pretty ridiculous when you think about it

When you combine two curves they move out

POW reading

This was a very interesting read about the nature of currency and exchange in an environment devoid of classical economic regulations. It interested me that in some ways, the cigarette currency is a much better example of a backed currency than a gold standard. However useful you might consider gold to be, cigarettes were obviously more useful, especially in this camp environment. 

1) What is the difference between the BMk and cigarette as a form of currency

2) How does consuming a product affect the worth of another product in a bartering market

3) How does the constant influx of free products effect the market. Does it at all?

I think the importance of reading this is in understanding the point of currency and seeing how easy it is for a currency, even one backed by hard goods, to fail. I think that this also provides an example of a localized economy. There was a limited amount of incoming goods, a limited amount of labor and a limited amount of buyers/sellers. 

EWOT 11/04

It strikes me that the internet markets of craigslist and ebay are an interesting market effect of the information age, and a creative interpretation of the middle man. In this day and age where it is possible for anyone with basic network connection to be in contact with anyone else in the same boat, we have opened up global markets not on a corporate scale, but on an individual scale (granted, craigslist's intent is to strengthen local communities, not act as a global market, but it still performs this roll across the whole world) These services have eliminated the more literal middleman. Their job is to bring these people together, and they do it mostly for free (entirely so in the case of craigslist). It's just interesting to see the middleman bringing people together without collecting a profit via markup.

11/04

1) Households and factors are inverse to each other in supply an demand
2) Prices, kind of a big deal
3) These concepts we've been learning about for trade don't just apply to a hard goods market, they apply to all market type scenarios.

11/2

Chinese should EAT. OUR. MONEY.
Balance of international trade is always maintained
Rizzo hates black people and the Chinese..or was that "over-regulation of trade"

EWOT for 10/28

I was recently looking for handlebar tape for my bicycle and found it for 5 cents with free shipping from mainland china. I bought it just to see what it was all about, but the whole idea of a product from china being sold to me the consumer for 5 cents seems crazy. For there to be any profit that 5 cents has to cover production, development and shipping and then have some left over. Seems unlikely. So, if that's not the case, either this tape has to cost almost nothing to produce, weigh just about 0 ounces, and take up about no space. And even then, the profit is just hovering around 3 cents. So, maybe there's something else wrong, maybe it'a s stolen product, or maybe it just won't ever ship. I figured 5 cents was worth it just to find out.

Krugman (Homework for 10/28)

I think that these krugman articles formed a solid foundation for the concept that free trade is the best possible ensure a solid market economy and better the most people. They also cement the idea that it really is just that simple.

1) To what extent is it difficult to accept Ricardo's proposition because it is just so simple?
2) Is it really the betterment of another society that makes free trade the ethically correct choice? Is it still exploitation if they are bettering themselves but in poor conditions?
3) Could a non-free trade environment ever be more beneficial overall than the opposite?

I think the importance of these pieces lie in what is essentially a structured retelling of what Rizzo has been saying in class. What Rizzo has told us in stories about trade, Krugman provides in more of a structured, argument-type manner.

Property Rights

I thought it was very interesting that this reading was much more about the philosophy of what property rights are, where they stem from and what they entail. The ideas surrounding who gets property and what "owning" something means are a nice side-step from what we've been looking at so far in Econ

1) How useful is property if you aren't allowed to transfer ownership?
2) Is does the right to future property fit into this picture?
3) If the government is a collection of people acting together, and the government owns something, what is the role of any individual citizen in that ownership? Do they have any property rights at all?

It's pretty clear that we read this to understand the sheer strength and significance of personal property rights to a secure market economy

10/21

Everyone benefits from trade!

Value is what we give to something, not inherent. 

Technologies have cool ways of shifting and pivoting PPT curves

10/19

It's still hard to make full, accurate judgements on what the best action is in any given situation.

Trade & Specialization:
3 factors of production
1) Land
-ANYTHING physically here irrespective of human action.
2) Labor
-Hunks of flesh. Stock of human beings available. No learned skills/talents included.
3) Capital
-Something that must first be produced before another thing can be produced. (ore is land, iron is capital)
--Two kinds, physical and human.

10/17

Doing something good for yourself, exercising, quitting smoking, whatever, is societally regarded as good. Running a profit seeking company for your own profit is regarded as bad. Why are those bad/different?

Unconnectedly giving someone money when they've given you a kidney makes you a good person, but actually paying someone for a kidney is horrible. But to an economist, at some level every interaction is a reciprocal altruistic act.

Don't live by the golden rule, it's just too hard. It's actually improbably difficult. Try instead to live by the silver rule: Do not do to others what you would consider unfair or unjust if they did it to you.

accumulated profits of exxon since 1980s?

Case for Contamination

1) How does globalization effect the lower classes of peoples around the world?
2) Is culture more important than wealth?
3) What is the biggest threat to cultural variance?

I think that what we should get out of this piece is that the globalization of the world is not only inevitable but essential to progress. And not only that, but that it is totally possible for culture to survive and flourish in a globalized world.

EWOT

It used to be that airlines had very attractive stewardesses, that was par for the course. But today, they're no different from workers in any non-tip-based service industry. This probably ha a little to do with the fact that ideas of gender roles have changed over time, but it probably also has something to do with government regulations. Airlines used to have regulated prices. When the government controlled prices, the airlines had to find other ways to compete. One of the things they ended up competing on was the attractiveness of the service staff, namely stewardesses. Eventually government mandated pricing ended, and flight attendants became what they are now, with more gender equity and less objectivity. One more case where government regulation was the wrong answer.

Marx doesn't really make sense: property isn't important. Everyone needs equal property...huh?
Efficiency - what you want at least cost
You can't eat money

8/12

• Unintended consequences!
• Trade is not zero-sum
• "Pie fallacy" -- there is a fixed amount of weath
•  Zero-sum situations can be exciting! Space race!

10/7

The more you release something the lower its relative value.
Total value of water exceeds total value of diamonds. But lack of scarcity of water drives its price down.
What if it's "water" and "diamonds"
You aren't really buying the physical good (objective reality) you're buying human perspective.

People still respond to incentives.

10/5

Broken Window fallacy
Money gets spend contrary to consumer preference
The individual is worse off because all they've done is kept themselves in a stagnant position by spending money.

Money in pocket + roof VS no money + a roof

Breaking something doesn't actually cause economic growth

Scarcity and other underlying concepts from this part of the course are necessary to get everything out of the rest of the class (supply/demand curves etc)

Equity often comes at the cost of efficiency and vice versa

Opportunity cost, what you must give up to get something else, is the most important thing to consider.

Debate About Happiness

The significance of this debate to me isn't about either side of the argument. I think that both have clear arguments and huge amount of both statistical and anecdotal evidence. This debate in and of itself isn't a place to be able to make a formal decision about the topic. However, both would agree that if you live in a society where most people make $100 a year, and you make $1000 a year, you will be both better off and happier in relation to your own society and at least happier than most of the world. 

1.  The McMansion example where a small house in Aspen would be the last desirable thing and therefore less expensive is obviously wrong, but it could be for more than one reason. What is one that is more in line with Bob's reasoning than Justin's?

2. If money leads to happiness, why do so many wealthy people go to therapists?

3. Would giving a million dollars to a middle-class family from Sierra Leone, or giving a million to a lower class American family be better? Why?

9/30

Economics begin when we stop producing for ourselves

Competition - If you don't have competition, nothing gets better, no pressures
Imitation, Learning - When you see something else making a product, you can make it yourself and make it better
Division of Labor - Know more and more about less and less.

Need these:
Government to protect with police and courts.
National defense
Public goods

And these:
Right to property (contracts are binding, you can't have personal property taken from you)
Division of labor
Exchange is PEACEFUL
NO special privileges!

EWOT

http://news.blogs.cnn.com/2011/09/26/jesus-or-jail-alabama-town-offers-options-for-serving-time/

The long story short here is that in one county in Alabama Judges will offer a new punishment for misdemeanor crimes. Criminals may choose to spend time in jail, pay a fine or attend church every Sunday for a year. While there are obvious constitutional issues under the first and 14th amendments, it's also funny on closer inspection. Since church time is a lot easier to handle than jail time or a fine, people may find crimes more worthwhile to commit. Either way, those who commit crimes will almost certainly take the church time, causing the quality of churches to drop, as criminals from around the county begin to attend. In short, forcing criminals to go to church is a crapshoot when it comes to reforming criminals, but it's 100% likely to fill your churches with criminals.

9/26

Population Theories
Classical - More wealth -> larger family
Need children for labor and support if you're poor (and most of world is poor)

Modren
There's actually a set amount of children they want
 - More wealth -> higher quality kids

The industrial revolution could have come about for a number of reasons. Some of it has to do with luck, some of it has to do with tradition, some of it has to do with location, some of it has to do with the enlightenment. In the end, a lot of it just seems like luck anyway.

Social Science Reading

This article seemed fairly focused on the concept that the social sciences are confronted with serious hurdles in being able to produce any important information. I feel like this refutes numerous real-world social experimental results that have borne out fairly well over the course of decades. However, it does make good points about causal densities.

Is it necessary to have fully controlled experiments to determine any useful information? What is the extent to which statistical information is good enough?

What is another reason there may have been fewer re-arrests after the first in the case of the domestic abuse experiments?

Are the social sciences essentially futile?

I feel like it was important to read this because it gives us a perspective on how fickle our economical axioms are. The article's point is that the social sciences produce often unreliable results. This is how two economists with views totally opposite of each other can both win the nobel prize one after the other.

9/21

• If anything violates the trends that we've been talking about, it's probably for some particular reason that has a story behind it.

•  Bureaucrats, bombs, and bailouts. Couldn't spend that much money years ago because we didn't have it.

•   Cell phones are changing the world.

Class 8

• The current world is significantly better than the past in measureable ways
• Health is clearly better than it was in the past (if not as good for women)
• He's not making it up. Seriously Facts. World is better. 

Heilbroner Reading

As much as it was a good read, the Heilbroner chapter seems to gloss over a lot of important aspects of historical nuance. It isn't to say that it's wrong in how it interprets economic trends, however, its stark categorization of eras into how strictly they are command economies, or how how opposed to the free market they are ignores the detailed realities of the free market and the aspects in which it effects human economics without the intent of humans.

At the onset of the reading Heilbroner posits that if our "Railroad men became bookkeepers" or vice versa, that there could be catastrophic problems, and the market manages these through forces mediated by supply and demand. But how disastrous would it really be if a large number of bookkeepers decided to change jobs? Are there other forces that would compensate?

What role does the concept of money itself play in the economic development of the industrial revolution? How does the ide of a transferrable token of wealth encourage the capitalistic motion of the revolution?

Does the article describe any ways in which the modern era is actually worse than the past?

This paper provided a very large scale review of the methods in which a capitalist free market allowed for a relatively short term transition from a poor agrarian society to what we see today. It pounded home the point with a multitude of evidence and references to make the argument clear.

Class 7

Today's class was all about how we got to where we are today.

It took a lot of time and work and for a long LONG part of human history there was no expectation that your children would do any better than yourself.

At this point we are doing so well that even the best-off people of, say, 1800 would be worse off than any one of us today.

Class 6

Growth is very rapid today compared to the rest of history. The speed at which wealth and technology increase is faster than it has ever been, and by a large margin. 

This most recent growth looks exponential, and as far as Rizzo's concerned we can sustain it for a long long time.

It's not really possible for the rich to get richer by exploiting the poor in a growth scenario like this. 

EWOT 2

I'd bought tickets to a concert that cost $25 and I planned to go on Thursday night. But I started receiving emails from my boss asking for a large series of changes to their website over the course of the next day. By the time it was Thursday night when I was supposed to be going to the concert, I still hadn't finished the work and I decided I had to give my tickets to a friend because I had to keep working. I only make $75 a week for this job, and the $25 I lost wasn't worth the time I was working for the company developing their website. I still decided to do the work even though the time I was working didn't make up for the money I lost because keeping a good relation with my employers provided a different kind of benefit that outweighed the loss of $25.

Beautifully displayed statistical data

http://www.gapminder.org/world/

Motivation isn't always as simple as money

http://www.ted.com/talks/dan_pink_on_motivation.html

Class 5

Impersonal - Any individual in the system doesn't have to treat other parts of the system as real human individuals
Self-interested -  Every person involved in the process is primarily acting to forward their own goals and interests
Cognitive problems - No individual is capable of doing every part of a process
No direction - There is no centralized direction in the system, it is a decentralized process.

EWOT

I went to a restaurant that seemed to be trying to put on a fairly classy appearance. The inside of the restaurant was very nice, the doors looked good. But above all of this are two cheesy looking neon signs that instantly ruined my perception of what the restaurant was supposed to be. It seems like sort of a bad idea to me, but if appearance of the restaurant wasn't effective to get the right clientele, or it wasn't able to get enough, a shift of marketing style makes sense. "Hey, look over here, there's food!" will catch anyones attention. And from there the customer can make a decision. But without seeing the business first, there aren't going to be customers in the first place. So even if the signs ruin a certain amount of the appearance and make 10% of potential customers reject them, this doesn't matter if they attract 100% more customers.

I, Pencil

I feel that I, Pencil does a great job explaining the interconnectedness of markets and the necessity of certain freedoms for the market to be most effective. But the aspect of I, Pencil that was most interesting to me wasn't that every aspect of the product counts on innumerable other products and labors, but that all of those works depend on a series of technological developments that can be traced back to a point when man had nothing but himself and his environment without tools or skills. You can't cut down a tree without a saw, you can't make a saw without metal, you can't make metal tools without knowledge of smelting, you can't smelt without knowledge of fire and a hundred subsidiary steps along the line. Man's accumulation of knowledge is for me the most amazing lesson from I, Pencil. 

Questions:

I, Pencil accuses a centralized post system of being an attack on free people. Saying that people assume because they lack individual knowledge of the entire task, they see it as the domain of a higher power such as a government. But how is this any different from an individual looking at a corporation and saying the same thing? What if the individual sees 2 companies, or 10? Is there a point at which a number of post carriers is great enough that individuals begin to believe they could undertake the task, or part of the task, themselves? Or is the accusation that if the market is open that people will naturally fall into the places needed to create a service that is in demand?

Is it fair to say that oil costs less to ship from the persian gulf to the US than it costs to send a letter? Is this really true, and if so, is it due to poor cost management of the postal service, or an inherent difference between shipping oil in a tanker at low speeds versus moving a letter across a country rapidly?

Can we really leave everything to the “Invisible Hand” of the markets? Over time, the market has proven itself unreliable at dealing with the human rights and environmental issues, as well as being at risk to monopolies which create unfree situations. 

Conclusion:

I, Pencil illustrates the interconnectedness of a globalized economy. At this point in human development our products all depend on a vast network of people and an enormous history of technological development. We have to realize that in this setup small choices can have far-reaching effects. 

Day 3

Why study economics, what is it?

Man acts with purpose. We don't do things randomly.

There is scarcity in the world. That is, there is a finite amount of stuff for an infinite amount of desires. So how de we handle that?

Second Class

Rizzo told a story about a room full of pistachios to explain opportunity cost. The idea of opportunity cost is that any time you are doing one thing, you cannot do another. So even though in a room with 1 pistachio and 1000000 pistachio shells might sound like an OK way to get a free pistachio, the time and effort put into getting that last nut could be used elsewhere. You lost the opportunity to do something else with that time that could be more beneficial to you. This is the same reasoning behind why we will never run out of oil. Eventually it will become too difficult to get out of the ground profitably when you could be doing something else to get energy more easily.

First Day of Class

Rizzo threw money to the class to illustrate how incentives motivate people. More incentive leads to more action. A penny, for example, is not enough to incentive a person to action.

Side-note: http://www.youtube.com/watch?v=77C47XYm_3c