10/31/11

• Global Trade
• More commodities can be made in different places
• Productivity is more efficient and faster
• Beneficial environmental impacts terms of land usage
• What makes trade beneficial
• Smithian notions
• Specialization results in less time spent learning and more time spent producing/resting
• Specialization involves more time devoted to the specific field
• Specialization allows an extended market
• Recardian notions
• Comparative advantage lowers production costs
• Transactions Costs
• definition: cost of negotiating costs and agreements
• 3 main costs
• Physical
• Insurance of Opportunity
• what is given up for what is chosen
• Interference 

week 10/24-28 reading

• Mike Rowe from Dirty Jobs on roadkill, castrating animals and how “ necessary” labor is belittled by our American attitudes. Keep this in mind when you hear claims that “everyone should go to college.”
•  not everyone is tailored for college
• specialization indicates that every career can be necessary
• Long Live Roquefort
• people value roquefort as much as (if not more than) the imposed 300% tariff
• the substantially sized tariff is a method that is akin to the old mercantalist methods of restricting free trade
• Who Wants Their Kid To Grow Up to Roll Cigars? 
• richness is subjective
• in some economies, a bad job is better than none

EWOT week 10/24 -10/28

I can make 8 free-throws in a row and 24 lay-ups in a row. A friend of mine can only make 3 free-throws in a row and 6 lay-ups in a row. In terms of basketball prowess, I can definitely make more free-throws and lay-ups than said friend.  However, from an economic standpoint, my friend has a comparative advantage in making free-throws over me as the data below shows.

• Price of 1 Lay-up
• Me: 1/3 free-throw
• My friend: 1/2 free-throw
• Price of 1 Free-throw
• Me: 3 lay-ups
• My friend: 2 lay-ups 

10/28/11

• Trade Surpluses do NOT create jobs
• Imports are paid for via exports

10/26/11

• Mechanization/outsourcing really only occurs with the inferior jobs
• Every month in the US, 4 million jobs are created countered by 4 million being destroyed
• Self-sufficiency is the road to poverty
• Trade doesn't cause jobs; it merely changes the type of jobs in the industry
• Trade Deficit = imports > exports
• Trade Deficit = exports > imports
• Myth: America doesn't make anything anymore
• jobs must complement capital
• labor and capital can't be substitutes
• machines can't do everything labor can do (unless the singularity happens)

10/24/11

• Price = what is traded off
• Who's "more efficient" at making each good?
• really means who incurs the smaller trade-off
• What is sacrificed?
• (10 wines 5 cameras) Rochester: Price of 1 camera = 2 wines  Price of 1 wine = 1/2 camera
• (3 wines 4 cameras) Cornell: Price of 1 camera = 3/4 wine  Price of 1 wine = 4/3 camera
• Therefore, Rochester has a "comparative advantage" in making wine over Cornell
• comparative advantage = ability to produce something giving up less resources than other producers
• No producer can have a comparative advantage in producing everything
• Cornell has a comparative advantage in making cameras over Rochester
•    You pay for your imports with your exports always
• What matters in trade is the relative price differences within a country
• Policies that restrict trade make people poor
• Two ways for states to get rich
• have almost everyone working
• improve the productivity of every worker in the state
• the better option
• Why are there less jobs today
• technology replaces workers
• many products need technological production
• low paying jobs fill up fast or get offshored 

10/21

• Trade
• creates wealth although nothing new is created
• non-technical form of production
• enables people to know what they value
• Efficiency
• utilization of your stock of resources to get more done faster
• Production Possibilities Frontier
• all possible combinations of goods that can be produced given the following: level of education, amount of resources, and access to technology
• Properties
• All points on/in the curve is achievable
• Absolute advantage: more efficient(larger number) on x-axis ,or y-axis, or both
• All points to the NE are NOT achievable
• Points on the PPF are "productively efficient"
• economically efficient is not just producing at lowest cost but also producing what the people want
• Slope
• captures trade-offs between amount of the good on x-axis and amount of the good on y-axis
• Change in Slope
• "Law of Diminishing Returns"(law of increasing opportunity costs)
• next produced good is more costly than the previous one
• ex: teachers taken from education field into medical field results in worse quality of doctors and each teacher that the education field loses was better than the last
• Economic Growth
• 3 factors
• Resources 
• Technology
• Trade
• Comparative Advantage
• ex: two groups that only make the same two products
• Rochester: 10 bottles wine/yr 5 cameras/yr
• Cornell: 5 bottles wine/yr 4 cameras/yr

week 7 10/17-10/21 EWOT

most people at the university don't steal from each other or fight each other because they generally coexist according to the silver rule

week 7 10/17-10/21 reading economics of property rights

For any society, the right to own private property is essential. Private property grants you control over how to use your resources, what to use them for, and right of exchange over your property. However, the barriers to everyone having private property exist due to scarcity. In addition, we can neither support ourselves entirely on just effort nor can we have the same goals for land as others do. Typically, property disputes are resolved with some form of negotiation or competition. The alternative,being violence, is too expensive to be a permanent resort. I think that although negotiation and competition do not always work their rate of success is far higher than that of violence. Besides, violence having a place in your affairs could conceivably set a dangerous precedent. Some would say that private property being taken care of via competition/trade is selfish. I'd argue that this accusation is false. There is but three main methods of getting what you want from someone: love, trade, or force. Love is too ideal to work for a sufficient amount of time and violence usually ends up finishing whoever is involved whether they were an aggressor or a victim. This leaves us with trade, a method with a sufficient success rate. I know that there will always be classes that are richer than the others but everyone as individuals deserve the chance of owning private property. This is derived from the enlightenment thinking of John Locke. This is opposed to communism which believes the state should own everything. A failed method this is as it strips much incentive away from the working population to work extremely efficient if their extra effort will be awarded the same as regular or sub-par. In our society, property rights are a form of human rights which are inseparable from property rights. For example, right to free speech is the property right to hire an assembly or own one. These rights, property rights, are a realization of the conditions needed to facilitate further existence as a human being

10/19/11

• Confidence is a pivotal asset in everyday trade and work.
• you don't undergo a trade-off with other people if you don't have at the very least some semblance of confidence that the trade-off will go well
• Feedback Loop
• competition serves as an incentive to corporations to keep up the good work or another business will take its place
• doesn't work if people become apathetic
• Trade and Exchange
• basic economic questions derived from scarcity
• what gets produced
• how does it get produced
• allocation of said thing produced
• inputs-----black box---------"stuff"
• process of creating more economic resources
• two pre-requirements
• self-sufficiency
• specialization and exchange
• Factors of Production (inputs)
• land
• any preexisting physical object
• labor
• number of bodies
• capital
• what must be first produced to produce something else
• two kinds
• physical
• human-anything done to augment natural abilities
• Economic Activity
• depends on PSST- Pattern of Sustaining Specialization and Trade
• order of sequence
• specialization
• exchange
• discovery
• less GDP is gathered when people do things for themselves
• an economic slump can be caused by rapid emergence of new technology 
• trade is "good"
• biggest economic consensus
• some disagree thinking
• nothing new is created
• some get exploited
• wealth is whatever people value
• real economic growth happens with increased production of wealth
• voluntary exchange only happens when the values differ
• people trade to get more of what they value

10/17/11

• Golden Rule
• the main ideal for any and all marketplaces
• does not work well in practice
• fails not due to selfishness but because not one of us is omniscient
• we don't know what other people want
• Most benefit is self-benefit
• even compromising fairly can be product of motivation for self gain
• Reciprocal Altruism
• selfless act to assist others in hopes of promoting a society that functions in the same manner
• Self-interest
• pursuing the project that interests you
• Silver Rule
• do not do to others what you would consider unfair or unjust if they did it to you
• for dealing with commercial strangers; responsible for garnering much products

EWOT week 6

Should I decide to go to a buffet, it's best not to overindulge to obtain my money's worth because either way it remains a sunk cost

10/14/11

• Worker's Wages
• roughly in direct correlation with worker's productivity
• $25/hr then the worker's wage should be about $25
• Price System
• promotes better outcomes for the economic market than it would have without utilizing the price system
• Markets Often Don't Work Well
• "Lack of Existence"
• markets don't exist in certain situations
• ex: you wouldn't pay someone a dollar to go away because he/she was being irritable
• Institutions 
• "Efficiency"
• delivering what people want
• at lowest possible cost
• all the formal and informal mechanisms that we use to live peacefully with each other
• formal- legislation
• informal- customs
• ex: good law firm, legal system, government
• rule of law
• laws cannot be arbitrary
• everyone treated equally
• good laws must be general not specific
• Markets work well when both sides (buyer and consumer) have many options to consider
• Inflation
• general increase in ALL prices including wages
• caused when too much money is in circulation 
• Ethics in Economics
• free societies work better when they're honest
• cooperation between people is generally positive sum
• better morally for people to work for interests of others
• taken from the Golden Rule 

10/12/11

• Unintended consequences
• identify parties who would respond
• changes incentives which results in push-back from all sides
• slave trader ex: british navy's attempt to stop this made the slave trade much more horrific such as drowning slaves or putting their heads on pikes in response
• simple rules trying to regulate society.. the problems
• limited info
• poor and mitigated incentives
• little feedback
• Trade is NOT Zero Sum "pie fallacy"
• pie fallacy- thinking that there is a fixed amount of wealth and someone is getting a bigger piece of the pie
• benefits both sides; if one's got more benefit than it's exploitation
•  notion that market is a necessary evil is false
• zero sum can stagnate economic growth
• wealth "stock" vs. income "flow measure"
• Recitation Sunk cost
• bidding game example: you should pay as much as you can because after you first bid you've incurred a sunk cost whether you bid more or not
• focus on marginal cost (increments) when making decisions 
• not sunk cost

week 6 reading "the case for contamination"

Change is inevitable, the way humans are designed to live. History is proof of this as civilizations have risen and fallen in almost direct correlation to the world modernizing and changing. You can't stop it or keep others away from its residual effects. They are entitled to their own opinion of adapting to change their way just as you are entitled to holding on to the traditions of the past. There exists a cycle in which cultures will gain new differences as they lose old ones. I agree with this because I think that mankind has a way of maintaining a proportional balance. Obviously, many differences are prevalent between today and 100 years ago. However, at the core the main issues such as wealth, power, class, and culture remain. What we use to determine and argue these differences are different but the issues that are prevalent have never left. Just as these issues remain so will cultures. Liberty and diversity are sometimes at odds. This is why there is no definite path to take. More like a compromise to be made between the preservationists and the globalizationists. It's almost inconceivable to completely abandon and forsake one's cultures and roots but it is also unwise to reject the modernization and benefits that global advances can bring. Since no one would give up either of these things understanding is needed. You don't have to agree in order to be individualistic and maintain your own culture. Global ethics has to maintain a balance between respect for individual freedom and respect for difference. The key is to not let one overtake the other.

10/7/11

• Use vs. Exchange
• teachers vs. athletes: the relative scarcity is different
• teachers are much more abundant than athletes are
• because of this abundance, we don't value the next teacher more than an athlete
• relative scarcity plays a huge role in determining prices and wages
• total use vs. marginal exchange is a same but different concept
• valuse at margin are very context dependent
• value arises from human interpretation
• Sunk Costs
• sunk cost- cost in which resources are non-recoverable when a decision is made
• not factored into decision
• Humans act with Purpose
• we tend to do things in life to ease off our burdens
• People respond to Incentives
• your behavior will (always) change when the benefits and costs change
• Law of Unintendded Consequences: because people respond to change, there always unseen consequences that reveal themselves some time after a decision is made
• example: seat-belts- changes the cost of getting an accident by lowering it, however, this raises the quantity of accidents making driving more dangerous 

Final Review for Midterm 1

• Specie-flow mechanism: thought that importing goods meant transferring your gold
• Problem with collectivist society
• no way central planners can know what everyone wants: no tacit knowledge
• no specialization which leads to an information problem
• Competition
• to get best employees, wages will eventually have to rise
• Hume's negative effects of restrictive trading policies
• loss of competition
• loss of innovation
• loss of division of labor
• Emergent Order
• everything is created from human action not human design
• 'spontaneous order'; no central planner
• Knowledge Issue
• no one person can know what people want or need
• Living Standards Better Today
• Big Variety of Goods in account to provide Substitutes
• Services are what matter not the goods obtaining them
• Quality of goods have increased
• Illumination example: candles about same cost but you can get a greater amount of light at a cheaper cost
• Feedback Loop
• businesses have an incentive to make consumers happy so they in turn will have an incentive to come back
• Who designed modern market system? 
• No One; there have never been any central planners
• Schumpeter and Marx's view of Capitalism's achievements
• more products available at a cheaper price
• Zero Sum
• your gain is my loss, your loss is my gain (a gain at someone's expense)
• Opportunity Cost
• net benefit of the next best thing that you forego for what you chose
• Broken Window Fallacy
• hurricanes can boost the economy through stimulating jobs
• these jobs are merely allocated to something that was already there rather than constructing something else
• Costs
• consumes resources
• genuine = marginal- changes after decision is made
• sunk- cannot be recovered

10/3-10/8 (week 5) EWOT

After attending two review sessions for the econ midterm, I underwent an opportunity cost of loss of time for either recreation or studying for other classes. The benefit of course is more econ knowledge, but the trade-off is the lost time which is a sunk cost

First Midterm Review

• Incentives
• motivation for doing something; not only money
• Values
• subjective
• products' value dependent on consumer interest
• Specialization
• what skills people specialize in
• without this there's an information problem
• driving force for division of labor- different activities needed to produce commodities 
• some fear specialization because(giving up self-sufficiency) because your specialization is dependent on a number of others
• Feedback loop
• give consumers an incentive to come back as a result of the consumers' business as an incentive
• Price System
• scarcity determines prices
• act as signals carrying information about the scarcity of an item
• Wealth
• no set wealth in the world
• direct relationship with prices
• Costs
• marginal cost- change in cost incurred by decision
• sunk cost- cost that cannot be recovered
• richer now so education and health care costs more
• cost- something that consumes resources
• Living Standards
• can only change through an increase/decrease of ability to produce/exchange
• when increased, there's more money to spend on things such as education

10/5/11

• Broken Window: 3 problems with the notion of the "stimulating" effect
• I didn't choose the roof (broken item to be repaired) in the first place
• people forced to lose $ on commodities that they already had
• we all become poorer by the $ amount needed for repair
• We lose the value of the Resources used to repair roof
• Forget $, Resources are essential
• All of the workers and tools used to repair roof  are taken from being useful elsewhere
• the tools and supplies and workers could've been needed elsewhere
• However: "..what if the roofer was unemployed?"
• Raising taxes leads to jobs being lost
• Resources have to be spent to create jobs
• Jobs are a Cost
• Benefit- paid income
• Cons
• Work in place of recreational time
• Resources used to create job
• World War II and the Broken Window Fallacy
• Consumption levels on average fell steadily for years
• Ability to consume resources fell
• Didn't improve consumer living standards
• Cost is Subjective
• worth of what is given up is different for each person
• cost given up to make a decision is unseen
• Marginal Analysis
• should i do x or y; should i do more of x or less of x
• water-diamond paradox
• something high in value and use has a low price
• something that's useless but has a high exchange value has a high price
• firms that make the best decisions think about margins
• 200 seat plane, total cost $100,000, average cost $500
• should they charge you less than $500 for tickets
• absolutely; they've spent $100,000 for the ride whether they have 100 or 200 passengers
• Marginal cost- the change in your cost from taking the action

10/3/11

• Basic Economic Principles
• How people make decisions(today's lesson)
• How people interact
• How "aggregates" work(i.e. the economy)
• People face trade-offs
• Any decision which involves cost
• Economic efficiency vs. economic equity
• Reveal what a person values and how much
• To be truly free
• to produce and consume without using resources 
• someone pays for it and/or something is done for it
• Is anything on earth free?
• Drug Lag
• many years to test drugs and their efficiency before it's sold
• many people who needed it are dead by the time it's on market
• Drug Loss
• $50 billion on medicinal research annually
• about 20 new medicine are produced annually
• testing is costly and means less opportunity for pharmacy
• Cost = anything that consumes resources
• question to ask: which resources used will disappear and/or were resources prevented to come into use
• taxes are not a cost; cuts and raises are forms of transfer
• Opportunity Costs
• opportunity cost = net value of what you lost from your next best opportunity 
• what you gave up to do something else
• buying a lemon instead of a lime; the cost is the missed pleasure of eating the lime
• Example problem: You win a Bruce Springsteen Concert ticket 
• can't be resold
• only other opportunity is Barry Manilow concert
• $40 ticket
• $50 worth of pleasure
• opportunity cost of going to see Bruce instead of Barry is $10
• Applications: Broken Window
• No new jobs are created
• People at large become poorer at the amount of the damage
• Marginal Analysis 
• application: subjection
• Sunk Costs
• People Respond to Incentives 

EWOT week 4

In society's structure, consumers and businesses are inevitably independent on each other, and the government comes into play by not controlling the market while on the same time keeping it in check

week 5 reading; should government support the arts

• Pros of subsidies to the arts
• broaden the soul of a nation
• focus less on materials and more on morals, customs, and manners
• heightens industry ex: France
• Cons of subsidies to the arts
• takes subsidies away from other institutions like museums and universities 
• would harm cycle of needs and desires alternate in terms of primary use
• Opposing subsidies for something does not mean you oppose said thing
• simply means they should generate their own money
• Where do subsidies go?
• (visible side) they go to the main workers and employees and employers
• Where could they have gone?
• (invisible side) aid taxpayers whose wallets the money came; beyond that is comjecture
• Public spending
• results in relocations not gains
• benefits one worker in place of another
• substitution for private spending
• adds nothing to the working class as a whole