intro chap 1

rich poor ratio

ratio of the heights of the front and bars as one measure of inequality 

90/10 ratio

ratio of income of an individual in the 90th percentile upon the ratio of income of an individual in the 10th percentile

most common statistic used to meaure income

gdp PER CAPITA

gdp def 

total value of goods and services produced in a country in a given time period for example a year

adjustments to gdp

1upon population to get gdp per capital

2 adjust for inflation to get real gdp per capital also known as constant prices 

3 measured in a commonly used unit ie dollars 

4 adjusted through PPP to accurately compare what can be bought by adjusting the multiple countries and their currencies 

constant prices 

prices adjusted for inflation and deflalation so that the unit of currency can show the same buying power over different time periods 

WHY is real gdp per capita a good method

the 4 adjustments

and that staticians have been using the same rules for multiple countries for long periods of time '

can use historical data to compare data over centuries 

growth rate in gdp formula

gdp t- gdp t-1/ gdp t-1

how can we know if a countries economy has been growing faster or slower than usual 

compound growth rate 

compare annual growth rate with average annual growth rate 

cagr

compounded annual growth rate

cagr is taken over what time period

decades

cagr formula

[(GDP 2011/GDP1950)^1/61 -1] into 100 

write down on paper to actual remember

rule of 70

how long would it take for real gdp per capita to double 

70/ annual growth rate percentage 

ratio scale 

measures how fast 

in ratio scale if straight line / if steeper line

straight line constant growth

steeper line faster growth 

economci system 

way economics manage their production, consumption and distribution 

adam smith main teachings

everyone cooperates unknowlingly and happens to promote the conomy 

they do this through their self interest- invisible hand  

specialisation promotes expansion as it increases productivity 

although this is throough extent of the market 

• but with forign trade and more expansion is more than the extent of the market 

failings of the market - monopolies 

agrres govt is good to provide justice etc

technology

a process that requires a set of materials such as labour of people and capital. such as machines to create output 

industrial revolution 

interelated succesion of technological developments 

new ideas, machines , discoveries 

technological progress could only be facillitated by 

capital goods 

institutions

are set of laws and social norms regarding theproduction and sdistribution of goods and services 

capitalism institutions

private property

markets 

firms - not only waged work but also unpaid work for themselves 

market feautures

voluntary

reciprocated

most are competitive 

what are not considered as firms 

These organizations are productive (and important), but are not firms: businesses in which most or all of the people who do the work are unpaid family members, non-profits, employee-owned cooperatives, and government-owned entities (in some countries, the railways, power or water companies are owned by the government).

why can we do better when we focus on limited activities

learning by doing

differemce in ability

capitalism combines centralization and decentralization

Capitalism is an economic system that can combine centralization with decentralization. On the one hand, it concentrates power in the hands of owners and managers of firms who are then able to secure the cooperation of large numbers of employees in the production process. On the other, it limits the power of those owners and other individuals, because they face competition to buy and sell in markets

joseph schumpeter

creative destruction

said this decentralized process created continuous growth and productivity therefore it is virtuous 

capitalism and accumpulating capital 

with new technologies, as well as for those who financed and built the factories and machines embodying it. In this respect, capitalism differed not only in its dynamism, but also in the security of its property rights, so that those investing in the new capital goods could be confident that their property could not be confiscated either by the government or by others.

developmental state 

a govt that takes a promotionary stance by in promoting economic development by public investments , eductaion, subsiding certain industries , public policies 

conditions for capitalisoc dynamism

economic

private property must be protected

firms should be in competition 

firms should be owned and managed by people who are not there due to birthright or priviledge 

political 

• Private incentives for cost-reducing innovation: These are derived from market competition and secure private property.

• Public policy supporting these conditions: Governments enforce laws and provide regulation.

• Public policy that supplies essential goods and services: These may not be provided in sufficient quantities by private firms, and include education and basic research.

democracy

political system

that gives equal rights to all 

choses representative through electionx 

unsustainablity 

Similarly, the environment may be unsustainable if the damage we are doing to it is not offset by its own capacity to restore itself, aided by policies to support environmental recovery.

why democracy and environment is a complex problem 

• National costs and global benefits: Democracy is a form of government of a nation, and while the citizens of a nation may adopt policies to protect the environment of that particular nation—its lakes and streams, its green spaces—they may have little incentive to protect the global environment, particularly if they will bear the costs and a great many others share in the benefits.

• Effect on future generations: Democratic citizens today are making decisions affecting people who may not be born for hundreds of years. These future generations do not have a vote.