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