1/3 Political Economy

Friedrich List (German) View of economics

• free trade will bring development where countries are successful in what they make NOT what they buy

• State must be concerned with the process and where money is spent (people are not best)

• concerned with welfare. policies are good or bad by what they do for the nation’s economic interests

• trade is negative sum where nations must be strategic

• all about strong or weak (no morality)

Anglo-American view of economics

• trade is unpredictable

• trade is based on how the game is played (not who wins or loses)

• if you take care of the individual, the economy and nation will take care of themselves

• positive sum

• in true American fashion, if a country does not follow/believe in these rules they are cheaters. (Japan’s protectionist policies made them cheaters to US)

vent for surplus

•  International trade overcomes the narrowness of home markets and provides an outlet for surplus

• underdeveloped countries often have a surplus of labor or natural resources that can be exported with trade

productivity theory and specialization

• specialization makes an economy more productive over time

• the value or income of production factors (labor/capital) is determined by the extra output they generate

• trade is a dynamic process that increases productivity and promotes long-term growth through specialization (skill development and tech innovations)

comparative costs view of specialization

Only reallocates resources or labor already had by a country. Increased exports can only happen when you decrease imports

mercantilism

government controls the economy through the establishment of government corporations. it is a tool of the state

christian corporate ethics

it is unseemly to make profit (too much) because greed is a sin

individualism

each individualism contributes to society as they’re able to

hedonism

burning through money for fun. just spending it on whatever

value of use

ability to satisfy human needs or wants (medicine is high because it heals you)

value of exchange

ratio in which one commodity can be traded for another. Money only has this use

comparative advantage

you sell more than other countries by your quality or because your cost is better than other countries (have lower opportunity cost than others) compared to another country you have an advantage

absolute advantage

using the same resources and being able to create more than another country

invisible hand

a force that drives the prices of goods towards the most efficient price, while individuals practice their own selfish interests

general plenty

division of labor creates more goods

universal opulence

widespread prosperity. even the poorest members of society enjoy abundant goods and comforts due to increased productivity

economic liberalism

interested in personal freedom and social order. free markets, no monopolies, competition, and government’s role is to protect end enforce