ECON 1900 Notes

Economics Fundamentals

Economics is the study of exchange, cooperation, production, and consumption of goods and services.

Exchange Relationships

Cooperative Exchange

• Voluntary
• Persuasion-based (not force)
• Equality for all parties (free to leave)
• Win-win, positive outcome

Competitive Exchange

• Opposite of cooperative
• May involve force
• Parties may be entirely independent
• Competition for limited goods/services

Gift Exchange

• One party gives goods/services
• No expected reciprocity

Justice

Focus on three dimensions of basic justice as articulated in paragraphs numbered 69-71 of "Economic Justice for All."

Commutative Justice

Fairness in agreements and exchanges between individuals or private social groups.

Distributive Justice

Allocation of goods/services to ensure everyone's basic needs are met.

Social Justice

Guaranteeing the right to live freely without threats based on social status or appearance.

• Obligation for individuals to be active/productive in society.
• Society's duty to enable participation.

The Great Enrichment and Social Justice

Key Historical Fact

Humans have rapidly become wealthier recently (The Great Enrichment).

• Income increase by a factor of 30.
• Began approximately 200 years ago; before, everyone was poor.

Explanations for Enrichment

Positive Factors

• Development of science and technology.
• Inclusive environment promoting cooperation.
• Right political/economic institutions (freedom).
• Shifts in beliefs and moral norms (Deirdre McCloskey).

Factors That Do NOT Explain It

• Exploitation of natural resources
• Enslavement
• Exploitation
• Colonial plunder
• Geography
• Genetic luck
• (These only apply to a select few)

"I, Pencil" by Leonard Read

Key Points

• Derived from "The Knowledge Problem".
• Illustrates the vast collaboration required to produce something as simple as a pencil.
• Users don't consider the complex production process.

The Economic Problem

• Not just production quantity/allocation.
• The problem is no single person possesses enough knowledge to execute the entire production plan.
• Knowledge is decentralized.
• Market mechanisms aggregate information.
• Prices solve the knowledge problem.

Economic Problems

• No central plan.
• Potential accumulation of power.

Resolution

• Prices and competition.
• Prices mitigate power, but monopolies can arise.

"It’s a Wonderful Loaf" by Russell Roberts

The Puzzle

Abundance of bread despite the need, potentially leading to scarcity of other resources.

Explanation

• Supply and demand within a free market system.
• High demand for bread leads to increased production and competition.

Spontaneous Order (Emergent Order)

Definition

Product of human action, but not human design or a formal plan. Consult Elaine Sternberg for more information.

Three Basic Types of Orders

• Spontaneous Order
• Natural Order
• Artificial Order

Spontaneous Order (or Emergent Order)

• Components are human actions.
• Not constructed.
• No structural kind of order
• Arises when items fall within themselves or arranged by any external agent
• Arises from self-interest of individuals.
• Emerge without central direction
• Self-reinforcing.
• Side effect, not goal of individual human action (which is pursuing individual goals)

Key Features of Spontaneous Order

• Rules govern emergence.
  • Formal laws
  • Conventions (informal rules)
• Feedback mechanisms (loops) sustain them.
  • Convey information for decisions/adjustments.

Feedback Rules

• Prices
• Profits and losses
  • Reflect success/failure in the market.
  • Can be perverse (negative).
    • Social violence (riots, mobs)
    • Negative thoughts
    • Discrimination (racism, misogyny, ageism, etc.)

Examples of Beneficial (Positive) Spontaneous Order

• Language
• Common law
• The market
  • Economic perspective: beneficial.
  • Rules stem from commutative justice.
  • Great Enrichment
  • Freedom to pursue individual goals

Natural Order

• Order and its items are independent of human action
• pets

Artificial Order

• Man-made order
• Constructed with intent, often to achieve a goal
• Sonnet, skyscrapers, parts to assemble a car

Capitalism vs. Socialism

Capitalism (IMF Definition)

• Economic system where private actions control and own property.
• Demand and supply markets freely set prices.
• Similar to spontaneous order.

Socialism (National Geographic Definition)

• Economic system where property is owned by the common or public, typically by the government or a state
• Property owned by public leads to a more equal society.
• Similar to centralized planning.

Teacher's Notes

Capitalism

• Property is privately owned.
• People can own it however they like it

Socialism

• Property is publicly owned and the authority controls these goods and services

Decisions - Human Behavior (Landsburg's Chapter 1)

Key Points

Incentives

• Economics in four words: "People respond to incentives."
• Incentives matter.
• Policies may have unintended consequences.
  • Gas prices increased = less gas bought.
  • Seat belts introduced = more accidents, less driver fatalities.

Caution

• People advising caution may not be so themselves.
  • "Baby on Board" signs.

Econometrics

Designed to measure the power of incentives.

• Isaac Ehrlich's Research on Death Penalty Effects (1960s):
  • Each execution prevented 8 murders.
• Edward Leamer used Ehrlich's test:
  • Executions cause as many as 3 additional murders.

Scope of Economics

Economics studies financial decisions, plus broader social situations.

• Effects of seat belts.
• Effects of the death penalty in terms of incentives.

Unintended Consequences of Well-Intentioned Policy (Whitman Article)

Reasons

Bad Assumptions of Fixed Behavior

Policies expect certain behaviours.

• Insurance companies raised prices, worsening the effects of those that are already uninsured.
• Riding a bicycle with a helmet results in safer drive, incentivizing them to drive more recklessly.

Switching Effects

Softening consequences may create other risks (moral hazard).

Wrong Audience

Punishments or rewards targeted incorrectly.

• Vipers
• Teachers and standardized testing

Complexity

Economic aspects are more complex than people think due to many choice margins.

Decisions - Human Behavior (Landsburg's Chapter 2)

Key Points

Rationality

• The assumption that all human behavior is rational is not true
• People may not want rich audiences, but fanatic ones
• When things get cheap, we should expect people to do more of them
• When things get expensive, we should expect people to do less of them
• Behaviours that seems inefficient may not be as it seems
  • If it seems irrational, you may not understand their situation
  • Things are the way they are for reasons
• If you stick to the notion that people are rational, you are wrong

Decisions – Cost-Benefit Analysis (Landsburg chapter 10)

Principles of Cost-Benefit Analysis

Five Principles:

*Increase in tax revenues are not a net benefit, and a reduction in tax revenues is not a net cost

• A cost is a cost, no matter who bears it

  • Fails to cost

• A good is a good, no matter who owns it

  • When someone owns a good, it maintains the same value no mater how they got it (e.g. theft, transferring ownership, etc.)

• Voluntary consumption is a good thing

• Don’t double count

Super Principles

• Only individuals matter

• All individuals matter equally

Opportunity Cost vs Sunk Cost

Opportunity Cost

Something you have to give up to get something.

Sunk Cost

Making a choice based on whether or not it’s worth the investment being made to go to waste or not

• Cost is forever lost after it was paid

Difference

Opportunity cost is where the best outcome is desired whereas sunk cost does not necessarily focus on that but more on the best outcome based on your previous choice.

Thinking on the Margin

Comparing the benefit of the next decision to its cost.

Utilitarian

Cost-benefit analysis is utilitarian: Actions are right if useful and beneficial to the majority.

Vampire Problem

If you could choose to live forever, would you?

• Impossible to truly analyze the costs and benefits since they’ll be different once you are a vampire

Should we reduce pollution?

From an economic perspective, maybe not. There are benefits from having pollution since what produces pollution is us living and the cost of reducing pollution is all of us being killed.

Marginal costs tend to increase.

Where do prices come from?

Prices come from the process of exchange relationships between the seller and buyer

Demand Curve

A demand curve is how much of a good people are willing to buy at different prices

Supply Curve

A supply curve is how many sellers are willing to produce and sell at different prices

Equilibrium Price and Quantity

The equilibrium quantity is the price where the quantity demanded is equal to the quantity supplied.

• The equilibrium price is where the price supplied is equal to the price demanded.
• Denoted on a graph with Q^/P^

Competition in Markets

Buyers don’t compete against sellers but the buyers compete against other buyers and the sellers compete with other sellers

• Buyers compete with each to bid the higher price to get the good that they want
• Sellers compete with each other by offering goods at lower prices

Price Higher Than Equilibrium

There is a surplus

• Quantity supplied > quantity demanded

Price Lower Than Equilibrium

There is a shortage

• Quantity demanded > quantity supplied

Equilibrium Buyers and Sellers

The buyers with the highest price buys and the sellers with the lowest price sells.

Demand Curve Shift Causes

Income

Normal Goods:

As income increases, demand increases

Inferior Goods:

As income increases, demand decreases

Population

As population changes, the number of potential buyers also changes

Tastes

Changes/trends change all the time and thus impacts demand

Related Goods

Substitute goods:

Two goods that are interchangeable

• Ex: Hotdogs and hamburgers
• Increase in price of one good = increase in demand for the other good

Complements:

Two goods that are often used together and make each other more valuable

• Ex: increase in hamburger prices = decrease in demand for hamburger buns
• Increase in price for one good = decrease in demand for the other good

Expectations

Expectations of market prices/market events

• Ex: Video Game consoles
• Projections of game prices will be cheaper in a few month and so demand will be down now but will increase in the future
• Consumers adjust current spending to anticipate the lowest prices in future months

Supply Curve Shift Causes

Technological innovations

Lowers cost and increases supply

Input prices

Increase in the price of an input decreases quantity of the supply

Taxes and subsidies

Taxes:

Increase in cost, decrease in supply

Subsidy:

Decrease in cost, increase in supply

Expectation

Expectation for a higher price of a good in the future increases the cost of supplying and decreases the quantity supplied now (and vice versa)

Entry or exit of Producers

As producers enter and exit the market, the # of sellers of a particular good changes, directly influencing supply

• Entry implies more sellers in the market, increasing supply
• Exit implies fewer sellers in the market, decreasing supply

Changes in Opportunity costs

• Imports used in production have opportunity costs, and sellers will choose to employ these inputs in the production of the highest-priced final goods
• Higher opportunity costs reduces supply and increases price and vice versa

Consumer Surplus

Consumer surplus: the consumer’s gain from exchange

• difference between the max price a consumer is willing to pay for a given quantity and the market price

Total consumer surplus: the sum of consumer surplus of all buyers

• Graphically, total consumer surplus is measured by the area below the demand curve and above the price

Producer Surplus

Producer surplus: the producer’s gain from exchange

• The difference between the market price and the min price at which producers would be willing to sell at a given quantity

Total producer surplus: the sum of the producer surplus of each seller

• Graphically, total producer surplus is measured by the area above the supply curve and below the price

Gains from Trade

The difference between a value creates and its cost

Value to buyers minus cost to sellers

Gains from Trade in a Free Market

At the equilibrium quantity, every trade that can generate value does so until they reach the last trade where it reaches equilibrium

• In a free market, there are no unexploited gains from trade, and there are no wasteful trades
• Aligns pursuit of self-interest w/ social interest

"Invisible Hand" and "Survival of the Fittest"

Landsburg

They are NOT equivalent.

• Nothing in biological theory provides the most efficient outcome in a competitive market
• Competition may seem much like “survival of the fittest

Efficient Outcomes

Factors

• Competition
• Individual rationality
• Prices

First Fundamental Theorem of Welfare Economics

A modern name for the invisible hand theorem

• Competitive markets allocate resources efficiently
• Market allocation maximizes gains from trade

Central Planning

In principle, it’s easy to centrally plan an efficient outcome in a market. All you have to do is:

Allocate production until all the marginal costs are equal across all producers

Keep updating different information across different environments e.g. weather,

In practice, it’s nearly impossible to centrally plan an efficient outcome in a market because you have to really be able to make sure you can produce at a price that is less than what you can sell for

Inefficiency

The world abounds with inefficiency because there Different markets that are missing.

• Goods that are not priced

Elephants vs Cows

African elephants are headed to extinction, but cows are not. This is because people own cows, but not elephants. People’s demand for beef is higher than demand for ivory

• If you own something, you get the rights to the incentives

Market Failure

Causes

• Market power
• Incomplete property rights
• Asymmetric information
  • Moral hazard
  • Adverse selection
    • Ex: getting a used car for $500 and it has lots of problems with the car where it is actually worth $100

Elasticity of Demand

The change in the quantity demanded when price changes

Formula for Computing Elasticity of Demand

Elasticity of Supply

Formula for computing Elasticity of Supply

Gun Buyback Programs

Tabbarok oped: Gun buyback programs

Slave Redemption

Does paying slave holders to release slaves work?

• When supply is elastic, it works, but not when it’s inelastic.

Taxes

A tax in a market is like a shock. If the tax is imposed on sellers, the supply curve will shift. If a tax is imposed on buyers, the demand curve will shift

Taxes Effects on Equilibrium

The equilibrium quantity would go down and the price that buyers pay would increase and since the sellers have to pay taxes to the government, the amount that the seller receives would decrease

Tax on Buyers Effects on Equilibrium

The equilibrium quantity would go down and the price received by the seller would decrease. The amount that the buyers pay in total would increase due to them paying the tax.

Tax Burden

The burden of a tax is always shared. sellers end up “receiving” less for a sale than they did before the tax, and buyers end up “paying” more for a purchase than they did before the tax.

Demand Inelastic and Tax Imposed

Buyers pay a bigger share of the tax than sellers

Supply Inelastic and Tax Imposed:

Sellers pay a bigger share of the tax than buyers

Tax and Decline of Gains from Trade

When a tax is imposed, the gains from trade decline. That decline is called “deadweight loss."

Subsidy

A subsidy is the opposite of a tax

Taxes and Subsidies Reasons

We still have them because the prices jack up and so although the gov’t may not get all the taxes and subsides, they still get some of it and so the burdens of a tax and the benefits of a subsidy are shared.

• If the taxes and subsidies are inefficient means it is more elastic

Objectives of Tax from an Economic Perspective

Philosophical Issue Among Economists About Tax Policy

Progressive Tax System

A “regressive” tax system is the opposite.

"Trickle-Down Economics"

Horwitz Main Claim(s)

No economist uses the term “Trickle-down Economics” to describe their beliefs

• No economic argument claims that policies that will only benefit the rich will somehow trickle down to the poor
• Transferring wealth to the rich or tax cuts won’t benefit the poor
  Hel wants to reduce taxes and a relatively free market

Allowing people to pursue in the marketplace with lots of freedom (minimal taxation and regulation) creates generalized prosperity

• Letting people keep more value through exchange means that there’s more incentive for them to create a value through the first place whether it’s through the ownership of capital or finding new ones through labor

Modern Westerners live so much better today than before (True part of Trickle-Down Economics)

• Combining labor with more and better capital drove up wages and lowered cost of goods and services
• It’s not the ownership that necessarily benefits others but the ability to distribute capital in ways to create value for consumers
• Reducing the tax and regulatory burdens can help people develop new ways to create value

Wealth has to be created first

• Wealth can be innovated when people do have have strong restrictions

What “tax myth” is discussed?

The tax myth being discussed is the idea that cutting taxes grows the economy.

• People believe that cutting taxes would benefit the economy, but revenues can hemorrhage that

Acemoglu’s Main Claims(s)?

Labor has always been more taxed than capital in the U.S.

• Capital taxes such as equipment and software have always gradually declined while labor taxes have not changed
  Marginal taxes from rich households have gone down and business have found ways to be exempt from corporate income taxes by applying to be S-corporations

Acemoglu is advocating for a tax code that does not heavily cause a disadvantage towards labor compared to capital and trying to levy the favorable treatment towards capital taxes

• Tax them roughly equally

Price Controls

A price control is a government restriction on price. i.e., if there is a price control, prices are restricted by law and not free to adjust to a free market equilibrium. Our beloved P^*does not prevail. Instead, the government’s mandated price (price range, actually) prevails.

Price Ceiling

A price ceiling causes a shortage. Depict this graphically.

Price Floor

A price floor causes a surplus. Depict this graphically.

Quality Impact From Price Ceiling

What is the impact of a price ceiling on quality? Explain.

• Price ceilings cause lines and search costs. Explain why and articulate why these effects are costly.
• Price ceilings cause deadweight loss. Depict this graphically.
• Price ceilings cause a “misallocation of resources.” What does this mean?

Quality Impact From Price Floor

What is the impact of a price floor on quality? Explain.

• Price floors cause deadweight loss. Depict this graphically.
• Price floors cause a misallocation of resources. What does this mean?

Why do governments sometimes set maximum or minimum prices?

There may be buyers who may not be able to afford certain things and so something is done to not set minimum prices too high

There’s also sellers who may not be able to make as much money selling something and so the maximum prices can be driven to have it not be too low

Minimum Wage

A minimum wage increase, businesses might accept the profit loss, unless it’s too bad and so otherwise, they would have to shut down

In practice, Seattle businesses responded by:

• Raising prices (only in restaurants)
• Economizing on labor:
  • Increasing labor productivity
  • Getting by with less workers
    • Cutting back hours, not cutting staff
    • Sending employees home early if they get their work done or if business was slow

Low Wage Workers Affected by Minimum Wage:

In principle, it depended on their experience i. High-experienced workers (most likely adults) would have more hours and thus a higher income then less-experienced workers (teenagers) who would have less hours and less paychecks

In practice, the same happened with low wage workers in Seattle.

Rent Control

Rent control is a limit imposed upon rent to prevent landlords to exponentially increase rent (price ceiling)

Market Effects With Rent Control Laws

When there are rent control laws, I don’t think it’ll hurt the owners as much since they can still some profit, but it could decrease the cost of housing by a bit even though it may still remain expensive.

• If limit is too low, it could discourage landlords from constructing new property

Alternatives of Rent Control

Using zoning deregulation and land taxes. It could also discourage landlords from constructing new property

Rent-Control Revolution

Not really, because their profits won’t be too crippled from it

Gross Domestic Product (GDP)

GDP (Gross Domestic Product): the market value of all finished goods and services produced within a country in a year.

• Capital good: product used to produce something else.
• Intermediate goods: products that isn’t counted towards the GDP value because it isn’t final or finished goods. It ends up being double-counted if it does count toward GDP value

Key Limit of GDP

If a good isn’t bought or sold in a market, then it doesn’t count towards the GDP value

• Volunteering work, underground market, illegal market

Nominal GDP and Real GDP

Nominal GDP: the value in GDP without an adjustment in inflation and changes in price level

• Current Q * Current P

Real GDP: the value in GDP that is adjusted for inflation

• Current Q * Constant P (price from that year)

GDP Importance

It tells us if the prices of goods and services hadn’t changed, how much would it increase/decrease

Broken Window Fallacy

Broken window fallacy: a notion that an event that causes damage (e.g. war, broken things) actually helps the economy. It is a fallacy because it’s production that creates prosperity and not destruction

• People may think that war and other things help with more employment.

Nominal GDP For U.S.

Nominal GDP: nearly 28 trillion

Average Growth Rate of Real GDP

Average growth rate of real GDP: 7

Why are some countries rich?

• Workers are very productive

• Well organized Factors of production

Factors of Production

physical capital

advanced tools (e.g. buildings, roads, cell phones, tractors, shovels, etc.)

human capital

the tools in the mind that helps make them productive (education, apprenticeship, learning on the job, etc.)

Technological knowledge

knowledge about how the world works

Organization

the thing that brings all of the other factors of production together

Incentives Whenever there is a collective, there is less of an incentive for their effort.

Some countries have good incentives because they have good institutions Property rights Honest governments Dependable legal system Political stability Competitive and open markets Why countries have good institutions Ideas Geography Culture Luck

Why countries are poor:

They may not have great incentives, institutions, or factors of production

Short Answer:

Some countries are richer than others because they’re more productive. They have also accumulated more of the factors of production (human capital, organization, and technological knowledge) and were able to utilize them more efficiently. They also have the institutions and rules that provide incentives for people to accumulate the factors of production efficiently (property rights, honest governments, dependable legal system, political stability, competitive and open markets).

Unemployment

Unemployment: an adult who is without a job, but is actively seeking work.

Unemployment Rate Computed

Unemployment rate = (Unemployed/Labor force)*100

• Labor force = employed + unemployed

Unemployment Rate Importance

It can be an indicator of as to how well a country’s labor market is performing. It’s really had a negative effect on people personally

Source of Data Computing the Unemployment Rate

It comes from a nationwide monthly survey of about 60,000 households, or 110,000 people conducted by the U.S. Bureau of Labor Statistics (BLS).

Is unemployment undercounted?

Because there are different alternatives definitions of unemployment even when derived from the official definition some people that are officially retired could still look for work

The BLS measures 6 different unemployment rates based on the definition: U1-U6

• U3: uses official unemployment rate
• U1 and U2 are more stringent
  • U1 counts someone as unemployed if they have been out of a job for at least 15 weeks
  • Gives a lower unemployment rate than the official
• U4, U5, and U6 are less stringent
  • U4 counts discouraged workers ex: someone who hasn’t looked for a job in 4 weeks but has in the past year)
  • Gives a higher unemployment rate than the official

Types of Unemployment

• Frictional Unemployment
• Structural Unemployment
• Cyclical Unemployment

Frictional Unemployment

Description

Short-term unemployment that is caused by natural difficulties in finding work

Causes

• Natural difficulties of connecting employer to employee

• Moving to a different place

• Recently coming out of graduation

Structural Unemployment

Description

Persistent and long-term unemployment

Causes

• Shocks

Examples

• 1970s oil shocks

• Rapid rise of internet

• Less flexible labor markets after a shock (mainly in Europe)

  • Labor regulations

    • Workers in Europe can’t easily be fired, but that makes it hard for people to be hired

Cyclical Unemployment

Description

Unemployment correlated with the ups and downs of the business cycle

Causes

• Lower growth with higher unemployment

  • Slower growth leads to higher unemployment

  • Fewer workers are producing goods and services

• Wages are sticky

• Reduces the incentives of hiring more workers and slows adjustment process

• Gets sticky downward

• Workers are afraid of taking a “low-quality” job

• Natural unemployment = fractional + structural unemployment

Recession

A significant, widespread downturn in economic activity

• Negative growth rate in GDP

U.S. Unemployment Rate

Recent unemployment rate (March ‘24): 3.8%
Avg. rate post WW2: 5.7%

Lump of Labor Fallacy

Lump of labor fallacy: the false assumption that there is a fixed amount of work to be done

Examples

Automation/machines replacing human workers Economic Pie Circular flow model

Economic perspective refutes the lump of labor fallacy. The economic pie is not fixed and it is dynamic and expands over time, thus increasing the chances that job opportunities and standards of living will increase over time. Job losses in one industry help support job growth in other industries

Impact of AI and Strain's Responses

AI doesn’t reduce unemployment, but it actually can help create new jobs (e.g. systems analyst, circuit layout designer, fiber scientist, etc.)

AI can strengthen education with its advances Example: AI applications acting as private tutors for students

AI does not pose an existential threat as it can actually be used to make the world better Drug development. Helping scientists with volcano activity

However, generative AI can disrupt labor markets and it will take time for media and political leaders to learn how to shut down deepfakes

Policy Recommendations

Regulations on generative AI Strain concludes that the changes in generative AI over time will eventually improve human welfare

Inflation

Inflation: an increase in the average prices. Inflation rate: percentage change in the index over a period of time.

Formula for computing:

Inflation rate = (price index in year 2 - price index in year 1)/price index in year 1 * 100

Data used to Compute CPI & Inflation

It comes from the Consumer Expenditure (CE) survey which collects data on “out-of-pocket expenses spent to acquire goods and services

U.S. Inflation Rate

Most recent inflation rate (2023): about 4.12%
Average inflation rate post WWII: about 3.54%

According to the Quantity Theory of Money, what causes inflation?

Quantity Theory of Money = M (money supply) x V (velocity of money - the number of times a dollar is used in a year) = P (price) x Y( Real GDP) Y and V are relatively stable

Cause of inflation: An increase in the supply of money When more money chases a good or service, the price rises up Evidence is consistent with the theory Money supply in Peru had the same rate as the inflation rate in the country (6000%). Same with other countries

Federal Reserve

The central banking system of the U.S.
FOMC: the Federal Reserve’s central bank committee that sets rates and directs monetary policy Made up of 12 members: 7 members of the Board of Governors
President of the Federal Reserve Bank of New York. 4 Federal Reserve Bank presidents that serve in rotating terms of one year.

Target Inflation Rate

It hopes to have inflation that averages 2% over time

Policymakers View on Contributing Inflation

They think that the unstable and volatile food and energy prices were causing inflation, which is why they tend to exclude them from the core inflation rate

By the end of 2021, they think that what caused inflation to remain high was the different supply and demand factors during the pandemic

• Shortages caused by a disruption in global supply chains

• Increasing demand due to reduced opportunities to spend

Federal Response When Inflation Exceeds

Tightened monetary policy. Reduced demand for goods, services, and labor

Peaceful Human Social Cooperation and Horwitz reading

I recognize the concepts of human and physical capital and it being compared to the vines and fig trees The concept of dealing with nations and how they are rich or poor Economics being the study of exchange Value is subjective and exchange is mutually beneficial

• Comparative advantage: doing things at the least relative cost

• Free markets

• Minimum wage

• Having the right rules of the game to be successful/rich (institutions)

• Learned about the influence of Economics from the Bible

• Catallaxy: network of mutually beneficial mutual interdependencies

• Argues for economics being the study of peaceful human social cooperation

  • The lessons of economics is not competition

  • Focuses on diversity, tolerance, and innovation

Economics Overview/Summary - Semester review

• Economics: the study of exchange

• Supply and demand

• Equilibrium

• GDP (