Class Lecture #12 - 9/28

1.) French physiocrats were one of two groups of people who opposed the Mercantilists in terms of their views of what makes a country wealthy. The physiocrats believed that the source of wealth was agriculture because everyone needs food to survive. For the physiocrats....Production = Wealth. The other group that opposed mercantilists were the Scottish Moral Philosophers, who said that good economics was about more than just discretion.

2.) Mercantilist sources of wealth include the amount of gold in the treasury, the king's finances, and the positive balance of trade. Mercantilists did not institute free trade. In other words, they did not want gold and silver to leave the country because they thought it made that country richer and England poorer. The King controls trade and they believed that money exclusively was the only sign of wealth.

3.) Hume....specie-flow mechanism. Prices fluctuate on their own when money enters and leaves a country = Law of One Price.

4.) Trade does 3 things:
         - Competition
         - Learning and innovation
         - Division of labor
All three contribute to the progression and improvement of the economy.

Class Lecture #11 - 9/26

1.) England really didn't have any resources or characteristics unique to them, so.... Why England?
         - no single cause but rather lots of side and spontaneous changes
         - "decay of religious mysticism" people just as interested in life today than life after death
         - harder to colonize England b/c it's an island
         - institutions --> Adam Smith, single most important determinant of wealth
         - society that allowed for individual freedom and tolerance

2.) Mercantilism: one single person, the King, regulated all economic activity
         - heavy restraints on all individuals
         - import/export regulations
         - restrictions on movement
         - price control, etc.

3.) Decline of mercantilism..... French Physiocrats (Quesnay) searched for laws that could govern social aspects of life similar to scientific laws. They came up with circular flow which explains the flow of money between firms and individuals (inc: factors, goods and services, etc.)..... income = expenditures (money made is money spent)


                                                                                                                                              Rizzo

EWOT Goggles #3 - 9/24

Today's music industry allows us to listen to our favorite artists and songs whenever we want. Any type of song you could ever imagine is ready always ready for download. One of my favorite artists right now is Mac Miller who has gained a lot of fame over the past couple of years in a way different than most rappers. He has rose to stardom without the release of an official album. All of his songs are downloadable for free through websites that have mixtape downloads. It is a very impressive feat without a doubt and even in today's industry, it seems surprising that someone just out of high school can be so famous even though he doesn't make money from music sales. How does the economy play into this? Well, Mac Miller does make money from concerts but those concerts are only possible because of the release and widespread popularity of his mixtapes. Maybe he's just so unbelievably talented that everyone loves his songs. Coming from a big fan, his talent level is not that high. I guess the only way it could be possible is through word of mouth and marketing. But even then, product sales would have to be through the roof and word would have to spread unbelievably quickly. In any case, the reasons for Mac Miller's stardom are either unexplainable or just too complicated for someone in the first month of his first Intro to Economics class.  

Reading Analysis - "What Social Science Does And Doesn't Know"

A.) I thought the specific example about the domestic violence repeat calls was a very good representation of experimenation in social science and why it's so hard. One early experiement showed that when given three options (mandatory arrest, provide advice, or send the assailant away for eight hours), the cops who used the first method when handling domestic violence issues saw the biggest decline in repeat calls. This would make sense because the strongest punishment would intuitively seem to yield the strongest reinforcement. However, unlike science, the problem is not solved... Six more of these same RFTs were conducted in cities across the country: three of the experiements showed similar results to the first experiment but three showed the opposite was true. The repeat call rate was higher when officers institued the mandatory-arrest option. The reason for this had to do with the communities that the perpetrators lived in: communities who were stable and had higher incomes had people who were shamed by the arrest and thus were not likely to reoffend. But in less stable communities, perpetrators cared less about their reputation and instead just got angry. So all these extra issues that the experiment failed to control ended up producing completely different results than expected. In Social Science this is often the case and it is called causal density when numerous other factors that can't be controlled for skew the experimental results. Social Science is a lot different than natural science in that it's a lot harder to conduct experiments. However, researchers are starting to get a grasp on ways to overcome this (see business method).

B.) What about nuisance abatement made it so that results from different experiemtns were remarkably consistent every time?

Would it be possible to get consistent results for almost any issue if a representative sample was used every time?

How do quicker, cheaper experiments get around the causal density issue?

C.) This reading was assigned to demonstrate that social science is very different from natural science because of experimentation and the experimental method. Social science deals with unforeseeable human nuances that can't possibly be controlled for and thus providing governing rules for social science is very difficult. But, going along the theme that the world is improving, people are beginning to discover alternative methods (see Capital One example) to achieve good results and they seem to be working...

Class Lecture #10 - 9/23

1.) The issue of the environment is actually a non-issue. The environment has actually improved over the last _ years. There's more forest area, more food (from less farmland), cleaner bodies of water/air, and more resources to go around. So as counterintuitive as it may seem, as our lives have improved, so has the environment.

2.) "The Great Stagnation" shows us that the growth in income levels has been declining the last 35-40 years. This fact is somewhat exaggerated though because the developing world (China, India) has seen unprecedented rates up towards 50% for the last 5 years. We've experienced so many technological advances that have bettered our lives in so many ways that it's kind of hard to argue that we haven't been improving during this period.

3.) The Commercial Revolution.....Demographic Revolution.... Why we have kids is a telling fact as to why the revolution occured. Before we had kids so we could use up our increased productivity with more people --> Classical Theory. Now we have kids for other reasons because knowledge, human capital and improvements in technology have allowed productivity to exceed population growth.

Class Lecture #9

1.) We spend half as much of our income (percentage-wise) today than we did 100 years ago. In 1900, 72% of our money went into buying the absolute basic necessities while today, only 36% is reserved for that. Therefore, we can say that we are twice as rich today as we were 100 years ago. All this freed-up wealth allows us to spend money on other things (ex: defense, education, health spending).

2.) The actual extent and magnitude of economic growth is actually understated. Total income does not present the whole picture and every year, economic growth is underestimated by about 1.4%.

3.) Even though today's money can buy a little extra if we were sent back 20-30 years, consider the fact that at that time consumer goods that we recognize today as being very widespread (due to product proliferation) were very primitive back then. Since there were fewer of these products in circulation then, the prices were higher. Not to mention, back then only 4% of families made $100K a year while today, more than 20% make $100K a year.

Class Lecture #8

1.) Public health is better today than it was years ago, but nutrition has also increased and there's a higher rate of obesity and diabetes as a result. Also as a result of increased calories/nutrition, the average stature of an adult male in Western Europe has grown by 1 foot since 1864.

2.) Personal income directly correlates with life expectancy

3.) With the exception of a few products, it requires a lot less effort to make enough money to buy goods than it did in 1900. Not to mention the products that we have to work less for are exponentially better today than they were 100 years ago.

EWOT Goggles #2

This week, my mom sent me a watch that was about 3 months overdue: it was supposed to be a birthday present and my birthday's in June. I wanted a watch that had some bling. You know, a gold encrusted rim, a silver strap, diamonds everywhere. Obviously, this was not reasonable and so my mom bought me a watch that had a little less wow factor but still functioned the same. But think about it. Both watches are roughly the same size and perform the same function equally well, yet one watch costs hundreds of thousands of dollars and the other one costs 75 bucks. I know diamonds are very valuable, but I've seen watches that should be sold for 50 grand that are sold for 50 bucks on certain websites. My question is why is there a such a range of prices for a such a small and simple device? Why do we put so much more value on a watch that was made by a "classic Swiss watchmaker" versus one that is factory-produced? How do all these extra nuances in watchmaking correlate to the right amount of money that is added on in the price? Maybe one day I'll be able to buy a watch with a lot of bling. But I should be asking myself is it really worth it if all watches look relatively similar and perform the same function equally.

Class Lecture #7

1.) The reason that we have all these great resources and spectacles today is that noblemen in the highest tier of the economic hierarchy would collect money from the poor. So, even though the world was being enriched, no one was getting any richer.

2.) Health care and overall health is much higher today than it was 100 years ago. Before, 84% of veterans suffered from a serious digestive disease. Today, only 18% do. Life expectancy is a lot higher today as well.

3.) The lives of the most well-off families in the 19th century contain some horrors that even the poorest Americans today don't even know.

Reading Analysis - Economic Revolution

A.) While reading this excerpt, I kept trying to think back to the reason for the Economic Revolution. I felt like I had read it somewhere, but only until I finished reading did I realize that there was no one reason for the Economic Revolution. To trace it back to its origins and study how it came about would very hard if at all possible. The Economic Revolution came about spontaneously. I find this piece of information to be rather ironic considering the principles that guide economics today (see I, Pencil). The market system can only succeed if everyone takes advantage of their practice and works together spontaneously. There is no mastermind, but rather an Invisible Hand that puts everything where its supposed to be. Spontaneity is needed for the economy to flourish and the fact that the Economic Revolution was a result of this spontaneity is very interesting.

B.) 1. How did a free market system ever come into being considering the great lengths that people took to prevent a revolution?
      2. Did people really want a change? If not, why did this change occur?
      3. Which group of people took the most advantage of the free market system?

C.) I think that we were asked to read this article because it explains the reasons why we even have an economy and economists today. Without the Economic Revolution, our life would clearly be a lot different from today. And I think that the point needed to be made that the Economic Revolution came in "agony": people (at least at first) did not want change, yet it happened anyway.

Class Lecture #6

1.) There were two major events in economic history that produced spikes in the world income and GDP. One was the Agricultural Revolution when people stopped hunting and started to settle into more steady lives. The other was the Industrial Revolution during the 17th century where people started to work in factories producing textiles and other goods to make money.

2.) The difference between the poorest countries and the richest countries is much higher today than it was even 200 or so years ago. Today, we are 75 times richer than the world's poorest countries.

3.) Over the last 40 years, we have seen an 80% reduction in the world's poverty which is fantastic. The absolute worst off people today have it better than middle-class people one hundred or so years ago.

4.) In general, we are better off today than we were thousands, hundreds, even 10 years ago. The world economy is growing at unprecedented rates and according to the rule of 72, the world income will double in 15 years (if absolutely everything goes right).

(Rizzo)

Class Lecture #5

1.) I, Pencil.... The main points were:
        - Impersonality = don't know any of the people involved in the making of your pencil
        - Self-interest
        - Cognitive issue = no one can make a pencil themselves. Even if they could, they couldn't do it for the price its sold for
        - No one mastermind
              (Rizzo)

2.) Central planning for the creation of almost any product will not work and is a terrible idea (see centralization of Venezuelan coffee (Rizzo))

3.) Price system..... guides the economy and is the basis for the exchange of money and product. It's the perfect signal of scarcity, today's term of exchange, and as it is governed by the "Invisible Hand" no one person sets the prices (Rizzo).

4.) Our Economic Evolution...... We're in a day and age where we can come to expect great improvements in our livelihoods which is "astonishing" (Rizzo) when you look at the world thousands of years ago. In fact, 15 years from now, we should expect to be twice as rich as we are now (Rizzo).

EWOT Goggles #1

The NFL season officially began this Thursday night in Green Bay when the Packers played the Saints at Lambeau Field. But most people consider the season open come NFL Sunday. And this year, the first NFL Sunday happens to be on September 11. It also happens to be the 10-year anniversary of the 9/11 attacks on the World Trade Centers in New York City. This Thursday night's game featured the national anthem and a sight to behold from the fans in the stadium:http://www.youtube.com/watch?v=E_5rETXK1KU. This got me thinking about national pride and how our country has responded since that day 10 years ago. This led me to think about how the economy has responded as well. I've provided a link that talks about various things from the price of gas to the number of airline employees. As a general consensus, the economy has suffered since 9/11 but as you can see our spirit has just gotten stronger.

http://finance.yahoo.com/family-home/article/113473/us-economy-since-september-

Reading Analysis: I, Pencil

A.) I really enjoyed reading about how the production of such a simple product as a pencil not only requires multiple disciplines, but also spans the entire world: the trees which reside in N. Califronia and Oregon, the graphite for the "lead" which is mined in Ceylon, Sri Lanka, the clay mixed with graphite from Mississippi, the "factice" (a rubber-like product used in the eraser) which comes from the Dutch East Indies, the vulcanizing agent pumice which comes from Italy, etc. It opened my eyes to the fact that America really isn't as isolated as I may have thought. We would not be where we are today without the various ingredients/products from places all around the world. And what I found to be intuitive yet still surprising is the fact that not a SINGLE person knows how to make a pencil from scratch. Mastermind be damned. No one can make a pencil by themselves.

B.) 1. It seems as if  this article is challenging the involvement of the government in the creation of various products. Why then are we still able to easily make pencils and ipods and the such at extremely high rates and in high quantities?
      2. Can we become self-sufficient and use only our own materials to make pencils?
      3. How are we able to mass produce all these products when we are using so many different materials/ingredients from all over the place?

 C.) This reading was chosen for two reasons: to show that there is not a higher power that controls everything and to show that the economy can flourish if everyone assumes their role and does their part the right way.

Class Lecture #4

1.) Economists exist because they know how things work when they're working well and for this reason we need economists.

2.) Economic intentions almost never equal results. Ex: Endangered Species Act was passed in order to protect endangered wildlife. But people are clear-cutting their property as a way to avoid contact with the protected animals. So it could be argued that the ESA has actually done more harm than good to endangered species.

3.) The economy/country is way better off today than it was many years ago.

4.) Invisible Hand..... In the creation of some sort of product, there is no higher power or mastermind that guides everyone. Only the collective efforts of thousands of people and divisions can ensure the proper creation of the product. The economy is at its best when all groups of people spontaneously do their jobs. Then, everything falls into place.

Class Lecture #3

1.) Study of scarcity (cont.)..... There's not enough stuff to go around so everytime we make a decision, we usually have to make some sort of trade-off. Going into every decision, we usually consider expected benefits and expected costs. We (should at least) think rationally. In this way we economize. And finally, the natural state of man is poverty, not wealth.

2.) The definition of economics is: the study of the emergence of order and wealth creation and the consequences of the choices made as part of the extended order of human cooperation. This definition addresses not only our response to scarcity but the unintended consequences of our decisions and how they affect other social and economic norms. Economics involves prudence as well as temperance.

3.) Micro vs. Macro Economics..... Micro is the study of price theory, why we do the things we do and everything that drives our decisions. Macro is the study of the consequences of our decisions as well as disequilibrium theory, how everything fluctuates in response to the decision.

Class Lecture #2

1.) Even though we are technically "supposed" to run out of oil in roughly 40 years, we will NEVER run out of oil for this reason: As oil becomes more scarce, it will become harder to findthe oil and eventually it will become so hard that we will essentailly stop looking. In other words, it gets expensive even though it's always free.

2.) Economics is a social science. The collaboration between economists and all people is essential for the prosperity of everyone and to ensure proper decisions are made.

3.) Economics is a study of scarcity. Man acts purposefully (continued in next class).

Class Lecture #1

1.) Role of Incentives..... As seen with the money experiment, people tend to respond more purposefully, I guess, when more money is involved. People will do more for more money. They respond to incentives and this is the basis for many of our decisions. And the Economic Way of Thinking (EWOT) has a lot to do with these incentives and why they cause us to make the decisions we make.

2.) Economics is not just a study of money and the economy. There are also subtle nuances like aesthetic and culural values that contribute to economics and they are in many ways just as important in our decision processes as our money incentives.

3.) Many of our economic decisions have unintended consequences that were not foreseen at the time the decision was made. This separates the good economists from the bad. The good ones take into account short AND long term results of their decisions (Hazlitt).