Today in class, Rizzo started off by taking about Dave Humes. Humes was an economist who argued that mercantilist's ideas were harmful. They forgot the role that prices play on the economy. If a country has a lot of gold then the prices of products will be high. If a country has a low amount of gold, then prices for products will be low. Both competition and division of labor are very important for a country's growth.
Adam Smith who lived from 1723-1790 wrote the wealth of nations in 1776. This was his most famous book he ever wrote. He preached that the government doesn't need to control and regulate most economic affairs. Laissez faire is when people can associate with anyone else as long as they don't hurt anyone in the process. The government does need to supply a dew things for a country to be successful. These are
1. Police and courts
2. National defense for protection from bandits.
3. Public Works (things the government can do productively that private companies wont do on their own. Ex. build roads and bridges)
Things that we need as citizens are
1. Rights to property
2. Division of labor exists
3. Exchange has to be peaceful and mutually agreed upon
4. No special privilege
If all of these happen, it assembles capitalism and we get a source of wealth --> ability to produce and exchange.
The Tampa Bay Rays make us wealthy because they make us happy and we produce and exchange because of this.
People may choose farming as a profession because they enjoy feeding people, but it doesn't motivate people all the time to do work. People have moral obligations to do more than self interests. Need self interests to keep society up right. We don't want everybody poor because this wouldn't benefit us.
People adjust to changes in society to what they want to see. Smith said that people should be able to buy what they want when they want with who they want.
Spontaneous order is what smith was articulating when he argued that our national propensity to make our lives better, to ease the burden of "trucking, bartering and exchanging" ends up producing an orderly outcome. No one designed the "economic system" yet here it is and it's very successful. The result of human action but not of human design. The deeper point is that it is really hard to do better by explicit design.
First moral philosopher in Scottish tradition was Fergusson(1767). Lots of institutions we see today couldn't be designed explicitly.
Smith's ideas were that people have a tendency to ease burdens of doing things. By saying please, it is easier to get something. Certain laws of human behavior we can articulate. Biggest one is that we want to make our lives better. Smith thought the future prosperity of England would be destroyed by prejudices of the public. He was scared of two business men getting drunk in a pub together because it meant that they were plotting to screw us. Future wealth threatened by prejudices of public and government allowing special privileges.
Corn prices tripled in the 19th century. Enterprising merchants brought wheat from abroad. These merchants were Jews. Land lords made the corn laws because of this. They had sliding duties on the importation of grain. By 1813, there were a series of crop failures. Wheat prices rose to double the weekly salary. The anti corn law league was established. It took 2 years to repel corn laws. By 1860 50% of the world's goods were produced in England. By 1870 there was the fastest economic growth ever. This was in part due to mass global trade.
Marx saw capitalism as a mass production system. This took care of people who weren't elite. Capitalism delivers too many goods at the risk of the planet. The more capitalist a country is, the less capital it has.
Measure of inequality- health outcomes, access to political power, religious freedoms are most important.
Things can't be necessities today that weren't in the past. Easier to not die from food today compared to 1790.
25% of income in US is property income.
Proof of Progress is that we are freeing the masses and allowing normal people do what only the rich were allowed to do in the past.
Friday, September 30, 2011
Thursday, September 29, 2011
EWOT #4
Today I came past an interesting article talking about how many hispanics in America are listing themselves as white. A huge part of economics and making decisions is identifying possible negative consequences of decisions. By hispanics lying about their race, I see much more negative future effects on the hispanic community than good ones. One of the future negative consequences of this is that high populated hispanic areas will not have hispanic culture surrounding them. When people go to set up a business, they scope out many potential areas to build their business at. A big factor in this is the demographics of that area as well as age and ethnicity ratios. If a lot of hispanics in a certain town list themselves as white, hispanic businesses will not open up in their town because they will think that there is a low hispanic population around there. This hurts both the business owner and people of the town. It hurts the business owner because he misses out on a great place to set up his business where it will thrive. Him opening in a different location might cause his business to fail and put him and the people who worked for him into unemployment. It hurts the people of the town because they will miss out on a future job opportunity by working for this business owner as well as missing out on the services that the business owner would have provided to them.
Another unintended consequence is that many colleges and organizations have quotas of what ratio of different ethnicities that they need to have in their organization, school, or institution. If these hispanics list that they are white, they are more likely to get turned away because there are going to be a higher amount of whites that apply than hispanics making the chances of becoming accepted harder. I have a friend from home who is African American and applied to Cornell. He was a good high school student, but based on his test scores and grades, he was not qualified enough to be accepted into Cornell based on their average acceptance test scores and grades. Because his test scores and grades were high compared to other African Americans and they had to meet their quota of African Americans in the school, he was accepted into the school and is currently enrolled there. This kind of fortune will not happen to these hispanics if the continue to list themselves as white.
http://news.yahoo.com/census-hispanics-fuel-us-white-population-growth-173449405.html
Another unintended consequence is that many colleges and organizations have quotas of what ratio of different ethnicities that they need to have in their organization, school, or institution. If these hispanics list that they are white, they are more likely to get turned away because there are going to be a higher amount of whites that apply than hispanics making the chances of becoming accepted harder. I have a friend from home who is African American and applied to Cornell. He was a good high school student, but based on his test scores and grades, he was not qualified enough to be accepted into Cornell based on their average acceptance test scores and grades. Because his test scores and grades were high compared to other African Americans and they had to meet their quota of African Americans in the school, he was accepted into the school and is currently enrolled there. This kind of fortune will not happen to these hispanics if the continue to list themselves as white.
http://news.yahoo.com/census-hispanics-fuel-us-white-population-growth-173449405.html
Wednesday, September 28, 2011
HW #4 econ 108
a.
In the is income and happiness related video that we saw, one thing that really stood out to me was of how almost every stat leading to a better life style increased as income increased. I was shocked at the stupidity of the Eastland paradox. This states that economic development does nothing for the well being of people so we shouldn't do it. Some thing that was good about the U of Penn professor's study is that he based his trend on the proportion of increase rather than just the theoretical number increase. I also was appalled by the statement that after $15,000 extra money doesn't help happiness. $15,000 isn't a lot of money let alone enough for someone to live a good quality life off of. As income goes up, many problems that people face every day of bills to be paid and affording new luxuries go away. To say that happiness stops after $15,000 is ridiculous. The best global scenario is to be rich in a rich country. People in rich countries are happier, less depressed, more stressed, treated with more respect, eat better tasting food, smile and laugh more, want more days like yesterday, are more bored, less sad, more well rested, less physical pain, and love more. It was reassuring to know that politician's goals are to make people happier and have a better well being. This only brings hope for the future. The Cornell professor talked about how the life expectancy increases as income increases. He also talked about how we don't spend our money efficiently and how we can don't make money buy as much happiness as it should. Money buying happiness is more relative on a community level than a global scale. People tend to compare themselves to the people around them rather than people that they never associate with.
b.
1. The charts show that happiness keeps increasing through time and wealth. Do you think that there is a ceiling limit of happiness that will eventually be reached, or is there no ceiling and people will constantly become happier and happier as time and wealth increase?
2.
People in third world countries see things that we would consider outdated to be luxury for them. If these people moved to America and lived the life of a person in poverty, would they be content with this life or would they change their thinking to try and obtain as much wealth and luxury as possible?
c.
The main idea of this debate is that happiness most certainly does buy happiness. It has been shown through logarithmic stats which is the most accurate and logical way to convey this data. People are always trying to increase their wealth, and incentives that the economy offers to work harder are how we grow as an economy. Richer countries have happier people. Happiness is very similar to GDP. Money and happiness are correlated so close that with an economic recession also comes a happiness recession.
In the is income and happiness related video that we saw, one thing that really stood out to me was of how almost every stat leading to a better life style increased as income increased. I was shocked at the stupidity of the Eastland paradox. This states that economic development does nothing for the well being of people so we shouldn't do it. Some thing that was good about the U of Penn professor's study is that he based his trend on the proportion of increase rather than just the theoretical number increase. I also was appalled by the statement that after $15,000 extra money doesn't help happiness. $15,000 isn't a lot of money let alone enough for someone to live a good quality life off of. As income goes up, many problems that people face every day of bills to be paid and affording new luxuries go away. To say that happiness stops after $15,000 is ridiculous. The best global scenario is to be rich in a rich country. People in rich countries are happier, less depressed, more stressed, treated with more respect, eat better tasting food, smile and laugh more, want more days like yesterday, are more bored, less sad, more well rested, less physical pain, and love more. It was reassuring to know that politician's goals are to make people happier and have a better well being. This only brings hope for the future. The Cornell professor talked about how the life expectancy increases as income increases. He also talked about how we don't spend our money efficiently and how we can don't make money buy as much happiness as it should. Money buying happiness is more relative on a community level than a global scale. People tend to compare themselves to the people around them rather than people that they never associate with.
b.
1. The charts show that happiness keeps increasing through time and wealth. Do you think that there is a ceiling limit of happiness that will eventually be reached, or is there no ceiling and people will constantly become happier and happier as time and wealth increase?
2.
People in third world countries see things that we would consider outdated to be luxury for them. If these people moved to America and lived the life of a person in poverty, would they be content with this life or would they change their thinking to try and obtain as much wealth and luxury as possible?
c.
The main idea of this debate is that happiness most certainly does buy happiness. It has been shown through logarithmic stats which is the most accurate and logical way to convey this data. People are always trying to increase their wealth, and incentives that the economy offers to work harder are how we grow as an economy. Richer countries have happier people. Happiness is very similar to GDP. Money and happiness are correlated so close that with an economic recession also comes a happiness recession.
Class #12 9/28/11
Professor Rizzo started todays lecture by telling us that expenditures= (C-T) + I + G +NX. In this equation C= consumer goods(clothes ect.), I= Invest, T= Taxes, G= government purchases, and NX=your spending on certain products. He then said that we a re a crafts oriented society. We divide the economy into 2 groups. Individuals(people) and business. Business get factors from us. People send stuff to business and business will pay them for something. The flow of activity states that every dollar spent is income to someone else, but by us spending more, it doesn't guarantee that we are going to get paid more. If Rizzo spend more money on food, U of R will not increase his salary.
Some economists say that food is the basis of all wealth, but we can't get rich in a self sufficient world. In early America, all people of a family worked on the farm. This changed when there was a surplus of food. This freed kids to spend more time in crafts. Kids made their dad more productive by doing this. They developed farming tools to help their dad on the farm which ended up freeing another family member to help make crafts. Sharing of craft production is good. Physiocrats states that the first source of wealth is production. Mercantilists source of wealth- gold in treasury, wealth that king had, and positive balance of trade. This is equivalent today to how much money the treasury prints, how much the government makes in taxes, and how much is being bought and sold.
After physiocrats came the Scottish moral philosophers who believed that wealth is from aesthetics. Economics is more than prudence. To be proud, we need other stuff.
Hume who is a respected economist said that previous claims that the source of wealth is agriculture is not true. There is more to it than this. He said that commerce is the source of economic growth. Misuse of money and credit were the biggest threat to this.
The mercantilists believed that trade is zero sum (wealth fixed), money is wealth, gold was scarce (when you get gold, some one loses it. There is no free trade. They believed that the king should control trade to be on winning side of zero sum trade. Thought that the king was supposed to make trade balance positive. this means that he tried to restrict imports and promote exports.
We learned that private interest isn't in harmony with social interest. One thing that used to happen many years ago was that the banks would lend the king money to spend. As the king spent money, prices would go up. This is because there was more money going around. Gold and silver are the only things that are traded world wide. This raised prices in France and made prices fall in England (supply and demand).
The law of price states that prices should be the same around the world. Goods and services you can purchase are important. This doesn't happen because prices will adjust across boarders as you travel. 3 things that happen that help with growth are
1. Competition (sorts out weak and strong) lights fire under people to work harder.
2. learning and innovation- and example of this is Toyota giving workers input.
3. division of labor- people divide tasks when a lot has to be produced.
The economics of scale states that we make what is needed. Hume's essay's conclusion- are countries that we trade with more of a threat than countries we don't trade with.
Some economists say that food is the basis of all wealth, but we can't get rich in a self sufficient world. In early America, all people of a family worked on the farm. This changed when there was a surplus of food. This freed kids to spend more time in crafts. Kids made their dad more productive by doing this. They developed farming tools to help their dad on the farm which ended up freeing another family member to help make crafts. Sharing of craft production is good. Physiocrats states that the first source of wealth is production. Mercantilists source of wealth- gold in treasury, wealth that king had, and positive balance of trade. This is equivalent today to how much money the treasury prints, how much the government makes in taxes, and how much is being bought and sold.
After physiocrats came the Scottish moral philosophers who believed that wealth is from aesthetics. Economics is more than prudence. To be proud, we need other stuff.
Hume who is a respected economist said that previous claims that the source of wealth is agriculture is not true. There is more to it than this. He said that commerce is the source of economic growth. Misuse of money and credit were the biggest threat to this.
The mercantilists believed that trade is zero sum (wealth fixed), money is wealth, gold was scarce (when you get gold, some one loses it. There is no free trade. They believed that the king should control trade to be on winning side of zero sum trade. Thought that the king was supposed to make trade balance positive. this means that he tried to restrict imports and promote exports.
We learned that private interest isn't in harmony with social interest. One thing that used to happen many years ago was that the banks would lend the king money to spend. As the king spent money, prices would go up. This is because there was more money going around. Gold and silver are the only things that are traded world wide. This raised prices in France and made prices fall in England (supply and demand).
The law of price states that prices should be the same around the world. Goods and services you can purchase are important. This doesn't happen because prices will adjust across boarders as you travel. 3 things that happen that help with growth are
1. Competition (sorts out weak and strong) lights fire under people to work harder.
2. learning and innovation- and example of this is Toyota giving workers input.
3. division of labor- people divide tasks when a lot has to be produced.
The economics of scale states that we make what is needed. Hume's essay's conclusion- are countries that we trade with more of a threat than countries we don't trade with.
Class #11 9/26/11
Today in class professor Rizzo said that today's class is the first day that we start talking about what economics really is. Rizzo talked about technology and how important it is in our lives today. Each worker becomes more productive because of technology. This increases the number of sales from producers which ends up increasing wages as well. The chain of events that occur with technology are that 1. workers become more productive, 2. Wages rise because there are more sales. This motivates people who don't work to get into the production industry since wages are rising in that industry. This causes more products to be produced which in the end improves technology. Since wages rice, there is also a rise in living standards.
Rizzo next talked about the reasons that we were able to begin the Industrial Revolution. Some of these reasons are
1. The revolution occurred from a bunch of spontaneous changes over time rather than one particular event.
2. More people were encouraged to trade with and travel to other countries for goods.
3. There was a slow decay of religious mysticism. Religions began to preach of the importance of making the most of our lives while living rather than worrying about the afterlife.
4. scientific progresses as well as market systems becoming possible from material changes.
5. People stole ideas from each other and made new creations. This was one of the biggest factors leading to the IR.
6. Our defense system improved. this is important so that people could defend themselves and their inventions from outsiders.
7. Creativity increased leading to better ideas.
8. Adam Smith argues that institutions are the most important determinant of a person's wealth. This helps us get better social lives. Smith said that by respecting the rule of law, one would become a part of an institution.
9. England's government had more freedom than other coutries. This allowed for more innovation and creativity to be aloud. The IR started in England.
10. People attitudes changed on the Bourgeoise (middle class).
Next Rizzo talked about Mercantilism- a system that was present in the western world before the IR.
This existed until the mid 18th century. During then the kings oversaw and planned all economic activity. Mercantilism was known as a progressive corporation. Major aspects of Mercantilism were heavy restrains on citizens by the king, protectionism, existence of craft guilds, licenses, import/export regulation, the government granting monopolies like British East India Company, restriction on free movement of people, free movement was prohibited, there were limits on domestic production by kings, and wages were controlled (maximum wage limit, and people were arrested for paying people to much). The king could do this because resources and people were deemed to be property of the kings. The king owned 100% of the land and people. The king made decisions based solely on how he would benefit from it.
A reason why mercantilism declined was due to the French Physiocrats. These people thought you could define how people interacted with one another. Quesnay was the first guy ever to write the Circular Flows of Economic Activity. This consisted of two groups. Individualism and firms. There is always a constant flow of stuff between these groups because people rent their labor to firms. The firm then pay these people in money. These people then use their money to pay for goods that are made by the firms. The flow of money is circular- It goes from the individuals to the firms and then from the firms to the individuals and all over again. This constantly revolves. To sum this up, all income is used to buy things and all of this money becomes peoples income when they work. Income=Expenditures.
Rizzo next talked about the reasons that we were able to begin the Industrial Revolution. Some of these reasons are
1. The revolution occurred from a bunch of spontaneous changes over time rather than one particular event.
2. More people were encouraged to trade with and travel to other countries for goods.
3. There was a slow decay of religious mysticism. Religions began to preach of the importance of making the most of our lives while living rather than worrying about the afterlife.
4. scientific progresses as well as market systems becoming possible from material changes.
5. People stole ideas from each other and made new creations. This was one of the biggest factors leading to the IR.
6. Our defense system improved. this is important so that people could defend themselves and their inventions from outsiders.
7. Creativity increased leading to better ideas.
8. Adam Smith argues that institutions are the most important determinant of a person's wealth. This helps us get better social lives. Smith said that by respecting the rule of law, one would become a part of an institution.
9. England's government had more freedom than other coutries. This allowed for more innovation and creativity to be aloud. The IR started in England.
10. People attitudes changed on the Bourgeoise (middle class).
Next Rizzo talked about Mercantilism- a system that was present in the western world before the IR.
This existed until the mid 18th century. During then the kings oversaw and planned all economic activity. Mercantilism was known as a progressive corporation. Major aspects of Mercantilism were heavy restrains on citizens by the king, protectionism, existence of craft guilds, licenses, import/export regulation, the government granting monopolies like British East India Company, restriction on free movement of people, free movement was prohibited, there were limits on domestic production by kings, and wages were controlled (maximum wage limit, and people were arrested for paying people to much). The king could do this because resources and people were deemed to be property of the kings. The king owned 100% of the land and people. The king made decisions based solely on how he would benefit from it.
A reason why mercantilism declined was due to the French Physiocrats. These people thought you could define how people interacted with one another. Quesnay was the first guy ever to write the Circular Flows of Economic Activity. This consisted of two groups. Individualism and firms. There is always a constant flow of stuff between these groups because people rent their labor to firms. The firm then pay these people in money. These people then use their money to pay for goods that are made by the firms. The flow of money is circular- It goes from the individuals to the firms and then from the firms to the individuals and all over again. This constantly revolves. To sum this up, all income is used to buy things and all of this money becomes peoples income when they work. Income=Expenditures.
Saturday, September 24, 2011
Class #10 9/23/11
Today's class had similar ideas to previous classes that we are becoming better as a world economically. We are much better off than we were 10 years ago and before then. We started off class by learning that Moore's law expect processing states that the speed of computer chips will double every year. We have actually progressed faster than this. The last decade has been better for us as a country with war deaths. There are less war deaths right now than any previous war. This is due to better medical care for wounded soldiers as well as better protection and equipment.
We tripled the amount of food that we have grown in the last 50 years did it on the same amount of land as back then. This means that the density of food on farm land is 3x as great as 1960. Every resource is cheaper and more abundant than it was 15 years ago and earlier in time.
Though many scientists have the fear of us hurting the environment, The environment is better today than ever. This is due to us cleaning rivers and pacing bills such as the clean air act. Scientists have known about the green house affect for 200 years now and took a while to act on it.
Money does not buy happiness which is why Butan tries to increase their GDH(gross domestic happiness) Rizzo told us that social and political liberation is where happiness comes from. One thing that is bad about our technological advancements is that the world suicide has increased. This is partially due to better and faster techniques. There has been a recent slowdown in economic activity. The difference between our grandparents is much greater than us and our parents. When the depression hit in 1929, it made us similar to the conditions that we lived in in WW1. It forced people to live like their parents.Subsaharan Africa is currently going through the biggest increase in growth in the last 30 years for themselves.
Industrial commercial revolution can be though of as the transition from stagnation to accelerating growth. This didn't affect all of the world in the same way. We get richer as a population.
One unintended consequence of food increases is that fertility increases because of it. There are two theory's that go along with increase in population and food. The first is the classical theory stating that we use up our increased productivity with more people. There is also the modern theory which states that there is a continuous improvements in technology, human knowledge, and human capital allows productivity to out pace population. Before the industrial revolution, there were few property owners compared to today's amount. Poor children worked to help their out with paying bills. The rich kids did not need to work because their parents would give them money if they needed it.
The reason that people go to school is to get a better job. Poor countries don't do this because there are no businesses to work in that would need a high school or college degree.
The transfer of both love and money goes from the parents to the kids. There are falling fertility rates. The average country has a fertility rate of 2.1. It is said that the world will reach its maximum population in 2050. The reason that the industrial revolution happened was because of cooperation between many different groups and people.
We tripled the amount of food that we have grown in the last 50 years did it on the same amount of land as back then. This means that the density of food on farm land is 3x as great as 1960. Every resource is cheaper and more abundant than it was 15 years ago and earlier in time.
Though many scientists have the fear of us hurting the environment, The environment is better today than ever. This is due to us cleaning rivers and pacing bills such as the clean air act. Scientists have known about the green house affect for 200 years now and took a while to act on it.
Money does not buy happiness which is why Butan tries to increase their GDH(gross domestic happiness) Rizzo told us that social and political liberation is where happiness comes from. One thing that is bad about our technological advancements is that the world suicide has increased. This is partially due to better and faster techniques. There has been a recent slowdown in economic activity. The difference between our grandparents is much greater than us and our parents. When the depression hit in 1929, it made us similar to the conditions that we lived in in WW1. It forced people to live like their parents.Subsaharan Africa is currently going through the biggest increase in growth in the last 30 years for themselves.
Industrial commercial revolution can be though of as the transition from stagnation to accelerating growth. This didn't affect all of the world in the same way. We get richer as a population.
One unintended consequence of food increases is that fertility increases because of it. There are two theory's that go along with increase in population and food. The first is the classical theory stating that we use up our increased productivity with more people. There is also the modern theory which states that there is a continuous improvements in technology, human knowledge, and human capital allows productivity to out pace population. Before the industrial revolution, there were few property owners compared to today's amount. Poor children worked to help their out with paying bills. The rich kids did not need to work because their parents would give them money if they needed it.
The reason that people go to school is to get a better job. Poor countries don't do this because there are no businesses to work in that would need a high school or college degree.
The transfer of both love and money goes from the parents to the kids. There are falling fertility rates. The average country has a fertility rate of 2.1. It is said that the world will reach its maximum population in 2050. The reason that the industrial revolution happened was because of cooperation between many different groups and people.
Friday, September 23, 2011
HW #3 ECON 108
A.
In "What Social Science Does-and Doesn't Know" had some very interesting points about how economics is a very different form of science than math or biological. One of these differences is that sciences like math a chemistry have set rules and laws that are written in stone and do not change. 2+2 will always equal 4. With economics, similar problems can't always be solved with the same action. There are too many variables as well as outside/uncontrollable factors to know 100% if a particular plan is going to work and help the economy out without future consequences. Something that economists try to do is controlled experimentation. Though the experiments are better put into the economy.I personally had this idea in my head before that economics is much more complicated than some think it is. This was shown in the experiment of are people who are arrested for domestic violence more likely to commit crimes again compared to people who are not. It was found that the people who were arrested were less likely to commit future crimes than people who were just fined or let go for their illegal actions. When this was idea was implemented in other cities around the country, half of the cities had a lower crime rate because of the mandatory arrest. The other three had a increase in crime rate. This supports that though something may work in one environment does not mean that it will work in every environment. The reason why companies run tests is to find the best way of marketing their products. Every company runs thousands of experiments to find this.
B.
It says in the reading that programs that try to change incentives work much better than ones that try to change people. Why is it that people will change for incentives rather than change from learning what they are doing wrong and how to fix it?
Since it sometimes takes an extended period of time to see if a program helps the economy or hurts it, on what basis do economists base their ideas on since many times they do not know if what they implement into the economy will help or hurt us?
C.
The main idea of this article is that social sciences are way too complex to use experiments to try and figure out a solution to a problem. There are way too many factors that go into decisions for the implementer to know everything that will be affected by their new program and how it will be affected. The only way to know if a program will be good for the economy is to let it run its course and see the results that occur because of it. The three main points that can be taken from this article that the author says are that 'few programs can be shown to work in properly randomized and replicated trials'. This is due to many variables that can not be recreated in a replicated experiment. The second rule is that "within this universe of programs that are far more likely to fail than succeed, programs that try to change people are even more likely to fail than those that try to change incentives."This could be because people respond to incentives. There is more to change for when you get an incentive rather than changing because someone else wants you to act that way. The third rule is that "there is no magic. The rare programs that do work usually lead to improvements that are quite modest, compared with the size of the problems they are meant to address or the dreams of advocates." This is pretty self explanatory.
In "What Social Science Does-and Doesn't Know" had some very interesting points about how economics is a very different form of science than math or biological. One of these differences is that sciences like math a chemistry have set rules and laws that are written in stone and do not change. 2+2 will always equal 4. With economics, similar problems can't always be solved with the same action. There are too many variables as well as outside/uncontrollable factors to know 100% if a particular plan is going to work and help the economy out without future consequences. Something that economists try to do is controlled experimentation. Though the experiments are better put into the economy.I personally had this idea in my head before that economics is much more complicated than some think it is. This was shown in the experiment of are people who are arrested for domestic violence more likely to commit crimes again compared to people who are not. It was found that the people who were arrested were less likely to commit future crimes than people who were just fined or let go for their illegal actions. When this was idea was implemented in other cities around the country, half of the cities had a lower crime rate because of the mandatory arrest. The other three had a increase in crime rate. This supports that though something may work in one environment does not mean that it will work in every environment. The reason why companies run tests is to find the best way of marketing their products. Every company runs thousands of experiments to find this.
B.
It says in the reading that programs that try to change incentives work much better than ones that try to change people. Why is it that people will change for incentives rather than change from learning what they are doing wrong and how to fix it?
Since it sometimes takes an extended period of time to see if a program helps the economy or hurts it, on what basis do economists base their ideas on since many times they do not know if what they implement into the economy will help or hurt us?
C.
The main idea of this article is that social sciences are way too complex to use experiments to try and figure out a solution to a problem. There are way too many factors that go into decisions for the implementer to know everything that will be affected by their new program and how it will be affected. The only way to know if a program will be good for the economy is to let it run its course and see the results that occur because of it. The three main points that can be taken from this article that the author says are that 'few programs can be shown to work in properly randomized and replicated trials'. This is due to many variables that can not be recreated in a replicated experiment. The second rule is that "within this universe of programs that are far more likely to fail than succeed, programs that try to change people are even more likely to fail than those that try to change incentives."This could be because people respond to incentives. There is more to change for when you get an incentive rather than changing because someone else wants you to act that way. The third rule is that "there is no magic. The rare programs that do work usually lead to improvements that are quite modest, compared with the size of the problems they are meant to address or the dreams of advocates." This is pretty self explanatory.
Thursday, September 22, 2011
EWOT #2
My EWOT this week is about a topic that was discussed in class for a little bit, and it was "is Mexican immigration bad for the country?" this topic is also a debate that I had with a friend today. I argued that immigration is good for the country. One of the main things that people say is bad about immigrants is that "they take our jobs." I completely disagree with this because the jobs that many as well as the stereotypical immigrant have are jobs that American citizens would never apply for. Adam Richman who is the guy from Man vs. food, talked on Real Time with Bill Maher about how the jobs that Mexican immigrants have at his restaurants are jobs that American citizens do not strive to have Jobs like dishwashers and custodial services are jobs that most Americans (even if jobless or poor) will not "stoop" themselves down in the social ladder to have. Richman said that no American citizen comes into a restaurant and asks to be a dishwasher or custodian. Usually they come in wanting to be waiters or chefs. In this case, Mexican immigrants help our businesses run smoothly by taking on the jobs that most do not want to take on. The money that they make from their job will be spent and cycled through out the economy.
The second generation of immigrants help the USA as well because since they are American citizens, they care about the country. This caring motivates them to work hard in school so that they can get a good job and help to solve the countries as well as the businesses economic problems. Immigration does more harm than good which why I agree that it should be allowed.
Als
The second generation of immigrants help the USA as well because since they are American citizens, they care about the country. This caring motivates them to work hard in school so that they can get a good job and help to solve the countries as well as the businesses economic problems. Immigration does more harm than good which why I agree that it should be allowed.
Als
Class #9 9/21/11
Today in class we talked a lot about american society and how much we have progressed from earlier centuries. In 1790 a typical family spent 90% of their income on necessities. This number decreased to 72% in 1900 and in 2005 was as low as 36%. There was a income increase by a factor of 7 since 1900. We have twice as much money to spend on other things today than in 1900. There is also a better quality of food today that we get for a much cheaper price. If our food costs 75% of our income today, life would be completely different for every one. The only reason that we can spend 17% of our income on GDP is that we don't have to spend 50% on food. The goal of society is to have 99% of income spent on leisure activities.
The typical American family spends 9% of income on food. 7% of GDP is spent on education and 17.6% is on healthcare. Ever dollar that we get, we use by funding luxuries.
The government is the worlds largest employer. 1 in 20 people work for the government. The amount of money that we spend on the military would make us the 12th largest country in the world.
In 1900 banks needed a bail out and America wouldn't bail them out. in 1907, J.P. Morgan lent the government a few billion dollars. Federal spending as a share of the economy has increased 10x since 1900.
Malawi(poorest country) lives like we did in 1900 but today. 20% of the work effort of people today is collecting money. Basic tasks for Americans is much easier today than in previous generations. Peoples income understates the extent magnitude of economic growth that we have gone through in the last few decades. The ability to get goods is much easier today since everything is easier to make/grow/ship than before. Same amount of people have cell phones today than those that have access to clean toilets.
A fun statistic is that no kids die from poisoned candy on Halloween. Also homicide rates and the amount of accidental deaths are down from previous years. This is from better living conditions and a safer environment than the past. It is better to be a kid today than in the past.
The typical American family spends 9% of income on food. 7% of GDP is spent on education and 17.6% is on healthcare. Ever dollar that we get, we use by funding luxuries.
The government is the worlds largest employer. 1 in 20 people work for the government. The amount of money that we spend on the military would make us the 12th largest country in the world.
In 1900 banks needed a bail out and America wouldn't bail them out. in 1907, J.P. Morgan lent the government a few billion dollars. Federal spending as a share of the economy has increased 10x since 1900.
Malawi(poorest country) lives like we did in 1900 but today. 20% of the work effort of people today is collecting money. Basic tasks for Americans is much easier today than in previous generations. Peoples income understates the extent magnitude of economic growth that we have gone through in the last few decades. The ability to get goods is much easier today since everything is easier to make/grow/ship than before. Same amount of people have cell phones today than those that have access to clean toilets.
A fun statistic is that no kids die from poisoned candy on Halloween. Also homicide rates and the amount of accidental deaths are down from previous years. This is from better living conditions and a safer environment than the past. It is better to be a kid today than in the past.
Monday, September 19, 2011
Class #8 9/19/11
Many things in life are becoming better and easier to obtain today than in the past. One thing that has increased greatly is life expectancy. People are living much longer today than in the past. One plus to this is that because there is improved health care, when people die, it happens much quicker than before. There is no extended period of suffering in old age. One bad thing about this is that more people get diseases and cancer because they are living longer so it more likely to happen. Luckily there has been a 2% decrease in each of the last 10 years in cancer diagnoses. The amount of people with aids has also decreased in the last few years. The only health problem that has had a mentionable increase is diabetes and obesity. Both of these relate to bad diets.
A good thing that has happened is that the health gap between black and whites has decreased over the past several years. People have been eating more over the last few hundred years as well. The average person in 1700 at about 2,095 calories a day. In 1989 the average amount eaten was 3,149. Many tests have been done on humans over time. It has showed that as time progresses, our full physical statue has been increasing. The average height, bone density, muscle mass as well as other things have all increased. We've also been getting smarter over time.
We learned that the formula for standard deviation is when 2/3 of a group falls in a certain range. Health is factored into GDP. The increase of health care has come from new findings in medical research.
The richer we are, the higher the increase of value of improvements in health and life expectancy. The more money people have, the more it matters to them to be healthy. This is because they can afford the pricer foods that are healthy as well as having a gym membership. There is generally a higher life expectancy with people who have more money as well. The only country to decrease their life expectancy with raised income is Russia.
The recent recession is called the mancession. This is because most of the people who have lost their jobs are men.
The amount of people with cancer has increased over time. This is because people are living longer and cancer doesn't develop in most people until they are 65 or older. People did not live to 65 before to get cancer. The top 10 things that kill people today would not be in the top 10 things from 1900. This is because the rate that people die from these things would be really low compared to the rate that people died from various things in 1900. Every death is caused by the same thing. Lack of oxygen to the brain.
Education has increased over time as well. In 1900 the average education grade was 8th. Today it is 13th. Income has increased along with it. The average person made equivalent to $7,000 in 1900. Today it is $40,000.
Living standars is what it takes for people to get what they want. There is an amazing reduction in work effort to get goods and services that we want. This improvement doesn't factor that products this year are better than products form last year. We care about the cost of services. The cost of what it takes to get the services isn't important to the consumer. The standard living is 25x greater than it was in 1900. Rizzo thinks it's much greater than this. Technology makes us richer than this with more access to information. 1 hour of work with pay twice as great as the minimum wage will earn us reading light for one year. We are 43,000 x better today in regards to light. Not everything is considered cheaper today that it was in the past. Piper airplanes are much more expensive than they were in 1950.
People have more leisure time today than in the past. We have 3x more leisure time today than people did in 1880. Half the time at a full time job is spent not working. We could be much more productive if we were more focused on work rather than being distracted by things like ESPN and Facebook.
In 1790 75% of peoples income was spent on food. This is much less today in part due to a much cheaper cost of production with advancements in agriculture and cooking techniques.
A good thing that has happened is that the health gap between black and whites has decreased over the past several years. People have been eating more over the last few hundred years as well. The average person in 1700 at about 2,095 calories a day. In 1989 the average amount eaten was 3,149. Many tests have been done on humans over time. It has showed that as time progresses, our full physical statue has been increasing. The average height, bone density, muscle mass as well as other things have all increased. We've also been getting smarter over time.
We learned that the formula for standard deviation is when 2/3 of a group falls in a certain range. Health is factored into GDP. The increase of health care has come from new findings in medical research.
The richer we are, the higher the increase of value of improvements in health and life expectancy. The more money people have, the more it matters to them to be healthy. This is because they can afford the pricer foods that are healthy as well as having a gym membership. There is generally a higher life expectancy with people who have more money as well. The only country to decrease their life expectancy with raised income is Russia.
The recent recession is called the mancession. This is because most of the people who have lost their jobs are men.
The amount of people with cancer has increased over time. This is because people are living longer and cancer doesn't develop in most people until they are 65 or older. People did not live to 65 before to get cancer. The top 10 things that kill people today would not be in the top 10 things from 1900. This is because the rate that people die from these things would be really low compared to the rate that people died from various things in 1900. Every death is caused by the same thing. Lack of oxygen to the brain.
Education has increased over time as well. In 1900 the average education grade was 8th. Today it is 13th. Income has increased along with it. The average person made equivalent to $7,000 in 1900. Today it is $40,000.
Living standars is what it takes for people to get what they want. There is an amazing reduction in work effort to get goods and services that we want. This improvement doesn't factor that products this year are better than products form last year. We care about the cost of services. The cost of what it takes to get the services isn't important to the consumer. The standard living is 25x greater than it was in 1900. Rizzo thinks it's much greater than this. Technology makes us richer than this with more access to information. 1 hour of work with pay twice as great as the minimum wage will earn us reading light for one year. We are 43,000 x better today in regards to light. Not everything is considered cheaper today that it was in the past. Piper airplanes are much more expensive than they were in 1950.
People have more leisure time today than in the past. We have 3x more leisure time today than people did in 1880. Half the time at a full time job is spent not working. We could be much more productive if we were more focused on work rather than being distracted by things like ESPN and Facebook.
In 1790 75% of peoples income was spent on food. This is much less today in part due to a much cheaper cost of production with advancements in agriculture and cooking techniques.
Saturday, September 17, 2011
Class #7 9/16/11
An important thing that was said in the beginning of class was that the ability to command goods and services is what economists mean by being richer. Measured income is more than just income. It is a combination of multiple things that we care about. An example of this is that Rizzo loves buying earrings for his daughter. The reason isn't because he's saving money but that he enjoys picking out which earrings his daughter is going to wear that day. The pleasure that we get from being around things is what matters.
Materialism is very important to distribute wealth. The health of people has been correlated many times with income. We estimate peoples wealth in history by looking at the amount of agricultural workers and how much they produce. We then take the amount that they produce and give the prices of todays products on the. From this we have learned that the poorest country in the world today is similar to normal societies a few hundred years ago relating to income.
Not all resources that countries trade are natural resources in that country. At the dawn of the industrial revolution, wealth between each person didn’t increase, but there were more people born who had the same wealth. This meant that there was more capital and products going around the country. During the industrial evolution there were many white elephant projects that occurred. The money for this came from others.
One thing that is bad about living in the past is that health care was not as good then. Isaac Newton died of kidney stones, Motzart died of strep throat, and queen Anne of England had all of her 18 kids die before the age of 11 as well as dying from gout. These are all minor health problems that occur today and can be cured in a short amount of time. Without a security blanket like we have today, there are many things that can kill us in the world.
Something interesting to think about is how today everyone has millions of servants working for them. These servants work for other people too and trade their services for an incentive. Society today responds to the needs of other people.
People in poverty live on the edge of life. In Haiti the price is currently rising of a dirt cookie. The fact that this is even a product is sad to think about. Dirt is not meant to be eaten but in extreme conditions whern theres nothing else to eat, extreme decisions have to be made. People in the past used to clean their clothes in urine, they couldn' have a cold drink, and normal city horses produced approximately 22 pounds of waste a day. 1/3 of agriculture used to go to feeding horses. Many people were infected with diseases because of the lack of plumbing. What would happen is that a fly would land on a piece of poop (50% bacteria). This fly would then land on peoples food transmitting the disease or bacteria. After the person ate the infected food they too became infected with the disease.
In 1970 a parked car produced more pollution than a car today that drives 10,000 miles. The life expectancy has greatly increased in the past couple hundred years mainly from better diets and increased health care. Before the industrial revolution, the average life expectancy was under 30. Today it is about 80. Every year, a new born's life expectancy increases by 1/2 a year from a child born the year before.
Materialism is very important to distribute wealth. The health of people has been correlated many times with income. We estimate peoples wealth in history by looking at the amount of agricultural workers and how much they produce. We then take the amount that they produce and give the prices of todays products on the. From this we have learned that the poorest country in the world today is similar to normal societies a few hundred years ago relating to income.
Not all resources that countries trade are natural resources in that country. At the dawn of the industrial revolution, wealth between each person didn’t increase, but there were more people born who had the same wealth. This meant that there was more capital and products going around the country. During the industrial evolution there were many white elephant projects that occurred. The money for this came from others.
One thing that is bad about living in the past is that health care was not as good then. Isaac Newton died of kidney stones, Motzart died of strep throat, and queen Anne of England had all of her 18 kids die before the age of 11 as well as dying from gout. These are all minor health problems that occur today and can be cured in a short amount of time. Without a security blanket like we have today, there are many things that can kill us in the world.
Something interesting to think about is how today everyone has millions of servants working for them. These servants work for other people too and trade their services for an incentive. Society today responds to the needs of other people.
People in poverty live on the edge of life. In Haiti the price is currently rising of a dirt cookie. The fact that this is even a product is sad to think about. Dirt is not meant to be eaten but in extreme conditions whern theres nothing else to eat, extreme decisions have to be made. People in the past used to clean their clothes in urine, they couldn' have a cold drink, and normal city horses produced approximately 22 pounds of waste a day. 1/3 of agriculture used to go to feeding horses. Many people were infected with diseases because of the lack of plumbing. What would happen is that a fly would land on a piece of poop (50% bacteria). This fly would then land on peoples food transmitting the disease or bacteria. After the person ate the infected food they too became infected with the disease.
In 1970 a parked car produced more pollution than a car today that drives 10,000 miles. The life expectancy has greatly increased in the past couple hundred years mainly from better diets and increased health care. Before the industrial revolution, the average life expectancy was under 30. Today it is about 80. Every year, a new born's life expectancy increases by 1/2 a year from a child born the year before.
The US delivers more babies than any other country for having the most superior health system compared to other countries. as we age people are living more comfortably than before as well. The standard of living conditions on increases over time.
EWOT #2
This week in recitation we talked about why it is not clear to economists why destroying cars in the cash for clunkers program would be better for the economy. There are two possible reasons that I came up with to answer this. One answer is that by destroying cars and building new ones, you have to use energy. The production of this energy uses fuel which pollutes the environment. The amount of pollution produced to get these new cars made and old ones disposed of will most likely cause more harm to the environment than the amount of pollution reduced in car emissions of the new cars compared to the old ones. Also by destroying used cars, it decreases the amount of used cars on the market which will drive up the price of used cars. This relates to the supply and demand topic that professor Rizzo discussed in class. By destroying the supply of used cars, the cost for used cars will increase since there is less of them. This means that poor people will not be able to afford the pricier cars causing them to not put money into a newer car and reducing the amount of money being spent on cars which was the original reason for the cash for clunkers program. The decision to destroy the cars turns cash for clunkers from a good economic program to a bad one.
Class #6 9/14/11
Today in class we learned about how how amazing it is of the progress we have made as a global economy in the last 100 years compared to the thousands of years proceeding the 20th century. Though there were a lot of big technological improvements for the first couple of years of earth, the average income of people did not change.
The industrial revolution helped to jump start the progression of man in the 18th century. Before the revolution, there weren't social classes. Minus the political leaders, almost everyone had around the same amount of income. If the average income kept accelerating at the rate it did before the industrial revolution, the average american would make around $10,000 today. This wouldn't be as bad as it seems since products would be significantly cheaper than they are today to accommodate to what people can afford to pay for products. A great formula that we learned is the rule of 72. This when you take 72 over the amount of percent return that you expect to get. The answer is the amount of time it will take for your investment to double. Rizzo discussed how humans are growing faster than the population has both financially and economically. There use to be a thought amongst people that if people produce more things than it will take away from each other's profits. Realistically it will just help because people will trade for each others products. This was when products used to be produced at an extremely slow rate.
The two major events that sparked growth in the world were the agricultural revolution which happened 500 years ago and the industrial revolution. The agricultural revolution increased the rate of production of food. THis helped to replace the previous techniques for food of hunting and gathering. The biggest economic ump came from the industrial revolution. during this, the world income doubled every 30-40 years. It has increased even more today doubling every 15 years. by the year 2040, the worlds growth rate will increase 6% every year. 8% by 2042. Annual growth rate will increase by 500% after this where income will double every 2 weeks.
Although there are many people who live in poverty, only a few live in poverty conditions similar to pre industrial revolution. This is because so many things that would be considered a big expensive thing in earlier years is now almost a guaranteed for all living people.
The availability of products have made huge strides in the last 200 years as well. On any given day in New York City, an individual can find 10 billion products. One concern that goes along with the amount of products available is that the world will run out of room for people. This has been proven wrong several times and professor Rizzo believes that the world could support 1 trillion people if we wanted to. currently there are 685 billion people on earth. Many of the technological increases that we make go towards finding a way to feed more people.
In the last 200 years, the world GDP has increased by 65 times the amount from 1 trillion to 65 trillion. The greatest movement of people is currently happening. Everyone helps each other get richer. So in the end every one gets rich together. There are currently 500 million people living in the worlds poorest poverty category. This is an 80% reduction in the last 40 years. This is great news for the worlds economics because it means that more people have money to spend to stimulate the economy. Of these 500 million people, 152 million of them live on less than a dollar a day. This is an unbelievable stat to think about considering a person in America wouldn't last a month on less than a dollar a day.
Something amazing to think about is that singapore who has almost no natural resources to trade is richer than America today. Also, an average person today has more in common with Bill Gates, the richest man in the world than an average person from 100 years ago. This is because there are similar products that Bill Gates and we have, the only difference is the quality and the full service that they provide. Normal things taht we have today didn't exist 100 years ago.
Human progress always come along with enemies. We can't listen to these enemies while moving forward or else we won't move forward.
The industrial revolution helped to jump start the progression of man in the 18th century. Before the revolution, there weren't social classes. Minus the political leaders, almost everyone had around the same amount of income. If the average income kept accelerating at the rate it did before the industrial revolution, the average american would make around $10,000 today. This wouldn't be as bad as it seems since products would be significantly cheaper than they are today to accommodate to what people can afford to pay for products. A great formula that we learned is the rule of 72. This when you take 72 over the amount of percent return that you expect to get. The answer is the amount of time it will take for your investment to double. Rizzo discussed how humans are growing faster than the population has both financially and economically. There use to be a thought amongst people that if people produce more things than it will take away from each other's profits. Realistically it will just help because people will trade for each others products. This was when products used to be produced at an extremely slow rate.
The two major events that sparked growth in the world were the agricultural revolution which happened 500 years ago and the industrial revolution. The agricultural revolution increased the rate of production of food. THis helped to replace the previous techniques for food of hunting and gathering. The biggest economic ump came from the industrial revolution. during this, the world income doubled every 30-40 years. It has increased even more today doubling every 15 years. by the year 2040, the worlds growth rate will increase 6% every year. 8% by 2042. Annual growth rate will increase by 500% after this where income will double every 2 weeks.
Although there are many people who live in poverty, only a few live in poverty conditions similar to pre industrial revolution. This is because so many things that would be considered a big expensive thing in earlier years is now almost a guaranteed for all living people.
The availability of products have made huge strides in the last 200 years as well. On any given day in New York City, an individual can find 10 billion products. One concern that goes along with the amount of products available is that the world will run out of room for people. This has been proven wrong several times and professor Rizzo believes that the world could support 1 trillion people if we wanted to. currently there are 685 billion people on earth. Many of the technological increases that we make go towards finding a way to feed more people.
In the last 200 years, the world GDP has increased by 65 times the amount from 1 trillion to 65 trillion. The greatest movement of people is currently happening. Everyone helps each other get richer. So in the end every one gets rich together. There are currently 500 million people living in the worlds poorest poverty category. This is an 80% reduction in the last 40 years. This is great news for the worlds economics because it means that more people have money to spend to stimulate the economy. Of these 500 million people, 152 million of them live on less than a dollar a day. This is an unbelievable stat to think about considering a person in America wouldn't last a month on less than a dollar a day.
Something amazing to think about is that singapore who has almost no natural resources to trade is richer than America today. Also, an average person today has more in common with Bill Gates, the richest man in the world than an average person from 100 years ago. This is because there are similar products that Bill Gates and we have, the only difference is the quality and the full service that they provide. Normal things taht we have today didn't exist 100 years ago.
Human progress always come along with enemies. We can't listen to these enemies while moving forward or else we won't move forward.
Wednesday, September 14, 2011
ECON 108 HW#2 Economic Revolution
A.
In the piece titled The Economic Revolution by Robert Heilbroner, he talked about the world and the changes that it has gone through over time in values, struggles, economics, as well as other things. Something that I found very interesting in this piece was the amount of progression that happens in such a short amount of time through out the world. Humans have been on earth for about 200,000 years, and in just a few hundred years, the whole wiring of the human mind has changed. In Shakespeare’s living era that was just 400-450 years ago, the goal of mankind wasn’t to raise his/her social and financial status, but to maintain the one that they were born into. Money was not any type of incentive to work harder. It was noted in the 17th century by Sir William petty that people who aren’t money driven would not increase their work output if wages were raised to do so. It was said in the reading that the idea of gain wasn’t around until recently. Rather than increasing income to buy things, people would trade for products that they needed. Exchanging products with another has been around for as long as man has lived. I also like the idea that was presented that everyday the possibility of breakdown is an issue with every community caused the human unpredictability. This is an interesting thought that most people don’t think about. Usually people take it for granted that most people relations work well and that mass chaos doesn’t break out. At the same time, know one knows what is going to happen on any given day. An event could occur that drives all of man kid into chaos causing their community to break down. Something that seemed counter intuitive to me was that in medieval times, most people didn’t sell their land. It was passed down from generation to generation. I did not know this before reading this excerpt form the book. This is because thousands of property tradeoffs occur every day in the US. I had always assumed that trading land has been a tradition for a long time.
B.
The world’s general decisions and regulations for thousands of years had been a result of tradition and command. Why do you think that such simple reasoning took control of economic decisions for such a long period of time?
Adam Smith is the first recognized economist in mankind. What do you feel were the reasons that kingdoms did not have economists in them before to help improve quality of living and help to make them economically superior to rival kingdoms?
C.
The main point of this piece is to describe the progress man has made throughout the economic revolution. For thousands of years the average income of earthlings was almost the same. It wasn’t until Adam Smith and other economists came around that the GDP of the world began to rapidly increase and technological developments came into play. Values of humans have changed as well. In the 18th century, gold was considered to give someone power. Though gold is valuable today too, the amount that someone has will not determine who has the power. Plenty of poor people like Abe Lincoln and Herbert Hoover did not have a lot of money but still obtained the most powerful position that can be held in the United States.
Monday, September 12, 2011
Class#5 9/12/2011
Today in class we learned that the reason why economics is considered hard is that people look for explicit design in economics but there is none. We then went into a discussion about I, Pencil and the four main points that it posed. These points were Impersonality. This is because none of the hundreds of workers that go into making a pencil know each other’s name. We were told that almost everything we do is impersonal. The second point is self-interest. Of all the people working to help produce a pencil, almost none of them know each other or care about them. The main motive of all of the workers is too make money so that the can support themselves and their families. The third issue is cognitive issues. This is related to the phenomenon that it costs so much to get a pencil made, but it only costs about 10 cents for a pencil. The final point to I, Pencil is who gave the orders. The companies that sell the pencils don’t know how many pencils they are going to sell on a given day, but they still have them produced assuming that they will be sold. All of these people cooperate together to get a product sold. This illustrates what Adam Smith talked about with the invisible hand. The invisible hand is the possibility for people to cooperate with out cohesion. People come together with people giving orders. Adam Smith also said talked about tacit knowledge and how everyone has one thing that they know how to do better than anyone else in the world. This could be a personal thing or global.
Central planned economics don’t work. There is too much to plan/know for the central government or controller to do. These always end up with shortages because the planner doesn’t know how much of a product or supply to add/take away with shortages since they don’t specialize in what they are doing. The world changes too fast for these central planners to know how to respond to the changes. There are millions of decisions made on a daily basis that the central planners can’t understand/
In market economies, shortages make prices higher. Good decisions make money and bad decisions use money. An example of this is that Venezuela imports coffee even though they are globally known to produce the world’s best coffee. This is one of the bad decisions that happen in a market economy.
An important thing that we were told today was that price system makes people act in a market economy. Prices tell you how much you have to give to get. This provides incentives to us to do make the right decisions. No one sets prices in a market economy unless the government steps in and sets them.
To be successful, one has to tie theory and history together. By following trends, we expect to be better off in a 10 yr period than we are now. At the beginning of mankind, there was almost no progress with how they lived for a few thousand years. This is astounding based on the pace that we progress today. We live in a world of staggering inequality. We are 15x richer than the average poor country and 50x richer than the poorest countries. This statistic is an understatement. Sustained growth is the norm now; this wasn’t the case during the industrial revolution.
The GDP tries to add up the value of everything produced in the economy. Not everything that is valuable gets produced and not everything that is produced is valuable. If everyone spent more time with their families, the GDP would show them as poorer. This is amazing since they are doing better things economically by increasing the happiness of people in their family. If professor Rizzo’s kid were a cow instead of a child, the GDP would rise since a cow has a higher value than a child. The GDP has a lot of shortcomings. It constantly increases though. We get twice as rich every 15 years. We are 65% richer today than we were 10 years ago as an economy.
Friday, September 9, 2011
Class 4 9/9/2011
In today's class, Professor Rizzo started off by restating the difference between micro and macroeconomics. Microeconomics is analyzing individual choices. Macroeconomics is the study of the unintended consequences. Micro also analyses people who want the product. An example of macro relating back to the kidney story from last class would be the shortages caused by people not being able to sell their kidneys. It was said that the president has no control over what happens in the economy. No matter how great of a decision is made, unintended consequences always happen.
McDonalds is a consumer desire that tends to cause many Americans to be overweight by over indulging in this healthy food. The biggest difference between foods today and foods in the 1950’s before fast food was around was price. Food is much cheaper today causing people to eat more of it. This also leads to obesity. Due to better health care systems, the cost of being unhealthy today is lower than it was 50 years ago. It also doesn’t help that recent evidence has shown that being a little over weight is better than being a little under weight. New York has tried to ban soda from the city thinking that this will decrease the obesity of people in the city. The elimination of soda will only reduce obesity by 1% only. Economists study everything in life. Economics are good in society because they know how processes work when working well. This is good because when things are going bad, economists can identify causes of why they don’t work well. Their job is to keep order. There is so much order in humanity that when disorder occurs, it seems chaotic.
We study economics because mankind has a sense of wonder about stuff. We are awed by the world around us. Studying facts and concepts are important. Appreciating miracles is an interest to us because it brings hope about what the future contains. It’s amazing to think about the amount of different inventions to occur on order to get music onto the computer. Trade offs occur everywhere. It is said that the road to hell is paid with good intentions. Intensions do not equal results.
The discussion of the endangered species act came up in class. The act was made to keep people from killing endangered species, but the act only hurt these species rather than help them. Animals like an endangered wood pecker cause homeowners in North Carolina to clear land so that the wood pecker can not reside in their yard. If one does make a nest in someone’s yard, it is likely that that person will move the nest elsewhere so that they don’t have to deal with the regulations that come with the bird. Nixon was the one who wrote the act.
Right now we are many times richer than we were in 1900. If we grew at China’s rate of growth, right now the average person would make 22,000,000 a month. Education is something that is discussed as needing more funding towards it in America. Right now the US spends between 200-250 billion on our education systems k-12. We need an anchor for economics. If we boiled water at 3500 degrees farenheit, this would be extremely inefficient because much more expensive equipment would have to be purchased in order to boil water. Only 2.3% of workers in the US earn minimum wage. This is much higher than it was a few years ago. A stat that goes along with this is that only half of Americans are in the labor force. If minimum wage were a good economic policy, it wouldn’t help the people earning it, just the employers.
Economic systems are complex. The reason that no one wants to hear supply and demand and scarcity is that it is not an exciting topic to talk about. People have a hard time appreciating unplanned order. Also there are two categories in economics. Type consequences uses the scientific part of the brain. This raises questions of “what happened.” The motives uses the emotional part of the brain where the person is thinking who did it.
I met with my TA in recitation for the first time today. His name is Michael Dymond and his email is Mdymond@u.rochester.edu
EWOT #1
The economic topic that I came across this week that I wanted to talk about was something that happened to me in Douglas dining court. I ordered an omelette at the omelette station for breakfast. I waited for 5 minutes while the lady made me and 4 other people their breakfast. After this time had passed and my omelette was finished, she handed me the wrong one. I took it back to my seat, saw that it wasn't the egg that I had ordered, and then took it back to show the lady who made it. She took the egg, threw it out and then told me to go to the front of the line and she would make me another one. This relates to when Professor Rizzo proposed the question on the first day of class of why orange juice left on the desk for him to clean up was bad economically. The answer to this was that besides it showing that the person who left the mess didn't care for the people after him who came into the room and had to use that same desk, but he took time away from Professor Rizzo teaching the class so that he could clean up the mess. The egg situation is similar because I had to wait another 5 minutes for my omelette to be made. This took time I had before my first class that I could have used to get a better seat which would optimize my learning potential. It also took 5 minutes away from everyone else who was behind me in line who had to wait so that I could get my omelette. These people may have been in a rush and had to go late to class or a meeting so that I could get my omelette remade in front of them. None of this would have happened if the lady who was making the omelettes cared enough to make sure she gave people the omelette that they ordered rather than handing them out randomly. Her faulty decision may have affected mine and the people behind me's day.
Thursday, September 8, 2011
Econ 108 HW#1 I,Pencil
A. I, Pencil I thought was a brilliant story written by Leonard Read. I loved how he took something so simple, that is produced so easily and taken for granted by 99.9% of users and turned it into something as complex as making a car. Of the three pieces that I have read so far for class, I, Pencil gets me to have an EWOT the best. It’s impossible to not stop and think of how important the production of a pencil is to the global economy from both a using it and making it stand point. People are employed all over the world to make the globally used writing utensil. The story seems counterintuitive first, because one has to think that something that seems as simple as a pencil could be made from scratch from a wide variety of people, but when you start to think about it and where the resources come from to produce a pencil, it starts to become more intuitive that there may not be a person who knows how to make a pencil from scratch. This story makes you realize that not everything is as easy as it seems and sometimes it takes the efforts of numerous people to solve a simple task or make a simple thing that can change the lives of many.
B. I, Pencil talks about how there is $4,000,000 in machinery in the factory to help make pencils, do you think that it would be better economically for both the company and society if the company did not have this machinery and instead hired workers to put the pencils together by hand with minimal help from machinery?
What do you think the reasoning is that not a single person knows, or took the time to learn how to make a pencil without outside sources or help?
C. I, Pencil has a simple message in it that is two heads are better than one. It talks about how many people and skills are needed to produce something so simple like a pencil. Without all of the different people’s help, a pencil will not be able to be made because no one man on earth knows how to make a pencil from scratch without the help and resources of others. The story coveys the idea that this is how people should make important decisions. Get the opinions from others so that different ideas can be formulated together to make the best economical event occur.
Class 3 9/7/2011
In today’s class, Professor Rizzo talked about how man acts with purpose. Humans not being able to have everything that they want cause this action. Part of the reason that we can’t have everything that we want is because we live in a world of scarcity. There aren’t enough resources to go around to everyone who needs them. One excellent example of scarcity is oil. This is because there is such an abundance of it in the ground that it won’t run out for over 1,000 years but still we want more of it than what is available. Rather than focusing on how to get more oil than we need, I think that we should focus more on producing better forms of energy that we can make an easy transition to so that we have something to use after all of the oil does eventually run out, and so we can pardon the ozone from absorbing mass amounts of pollution.
Economists are considered a recent occupation. In ancient Greece and before that, no one looked like an economist. It wasn’t until the 18th century when Adam Smith came around that he was the first documented person to look like an economist.
It wasn’t until recently that man has made big strides in straying from what is our natural state. This natural state is poverty. For most of humanity we could only hunt and gather. This was a very basic way of living that consisted of no luxuries.
Economics would not do well in either heaven or hell. In hell there is no growth so the goal of economics would be wiped out. In heaven everything is perfect, so there is no need for economist to make things better, because they can’t get better. Professor Rizzo gave us an official definition for economics. He defined it as “The study of the consequence of the choices made as part of the extended order of human cooperation.” He felt that this was a much better definition than those of other economists so I will stick by this one as well. Most people believe that economics is the study of prudence but it is not. Economics is the study of temperance, but we need prudence and temperance for economics to work properly. EWOT drills down to actual problem rather than “we have a health care problem.” Today, 311,000,000 people could afford 1970’s life care with 1970’s prices. With today’s prices, the number is realistically a lot lower since the cost of life care is much higher than it was in previous years.
Though there are times when the country goes into a recession, over a long period of time we constantly move in a forward direction. Today only 2% of people work in agriculture. This number is a lot lower than in previous years. A big reason for this is that the cost to produce food is much lower than in the past. New technology has lessened the amount of people needed to work.
There are two divisions in economics. One is microeconomics. The other is macroeconomics. Micro is the study of price theory. An example of this would be global unemployment. Macroeconomics deals with disequilibrium theory. An example of this would be a supply and demand trend. Through macroeconomics is where we realize that every decision has a consequence. Though inequalities happen, no one has an intention of causing them when a decision that they make causes inequalities. One example of how microeconomics plays a role in everyday life is the law against selling one’s kidneys. Without being able to sell them, one doesn’t have an incentive to giving their kidneys away. Because of this, there are fewer kidneys on the market so less people will get the replacement kidney that they need to stay alive. This lost hope of survival will drive them to have bad eating habits and will impose greater health risks than they already had.
There was a lot covered in this class on different topics that are important to economics.
Saturday, September 3, 2011
Class 2 9/2/2011
The second day of class in economics 108 had some interesting topics that we discussed. One topic is “will the natural resources the earth has like oil ever run out.” Research showed in 1970 that there was only 32.2 years of oil left in the ground meaning that in 2002 we should have ran out of oil. Fortunately the study was redone in later years at it was found that there are thousands of years of oil left in the ground. Professor Rizzo gave a great analogy for this to help the class understand it. He said that if a person was given a room full of pistachios for free but had to leave the shell in the room after he finished eating the pistachio, after a while it would become harder and to find a uneaten pistachio in the mess of shells and the person will quit looking for it. This is what the world is going to do with oil when it becomes very scarce. This is part of the reason that the world will never run out of oil. Thinking like this is part of the reason that t we’ve never ran out of a resource in the history of humanity. An interesting fact that was presented to the class is that oil is cheaper today even with recent soaring gas prices than when oil was first used as a fuel. Another reason that the earth will never run out of oil is that oil is organic, and the sun can make an infinite amount of fuel and oil. As the price of oil per barrel increases, oil companies purchase more oil so that they can make a bigger profit off of people buying it.
Some people become to crazed over potential incentives. Professor Rizzo told the class that Exxon wants to drill the North Pole for oil after the ice caps in that region melt. This could take hundreds of years to occur, but oil companies think about it anyway based on the big time profit that they can make off of it. One incentive that people go crazy about is saving money. This is why many Americans keep their house colder in the winter months so that they can save on the heating bill since they will need less oil to heat the house. Better energy saving techniques has slowed down the per capita in the US by 20% since 1970. This is very economically productive in the sense that not only does it save money, but it also saves up resources and energy that is put into each house to heat it.
Other interesting things that I learned in Professor Rizzo’s class today was that economics is the study of scarcity, as well as that economics is a social science that helps you get the most out of life. Multiple beings being on earth has kept our species going. We’d all die without each other. But we are trying to become better self sufficient in large part due to recent technology booms that limit the amount of face-to-face communication that used to occur so often amongst people in the past. I’m starting to understand a little better what the whole meaning of economics is. Professor Rizzo is very energetic in class, which I like because it keeps me focused, and into learning what he is teaching.
We were assigned to read I, Pencil which is a great story written by Leonard Read. It talks about how error begins when one tosses humility aside. It has a great meaning that one person can't solve everyone problems, but a bunch of people working together doing the things that they are specialize in so that the best ideas can happen. No one person knows everything which relates to the saying the two heads are better than one. It's like a puzzle. You need all the pieces to complete it. You need all of the knowledge you can from various sources to make the best economic decisions.
We were assigned to read I, Pencil which is a great story written by Leonard Read. It talks about how error begins when one tosses humility aside. It has a great meaning that one person can't solve everyone problems, but a bunch of people working together doing the things that they are specialize in so that the best ideas can happen. No one person knows everything which relates to the saying the two heads are better than one. It's like a puzzle. You need all the pieces to complete it. You need all of the knowledge you can from various sources to make the best economic decisions.
Thursday, September 1, 2011
Class 1 8/31/2011
Today was my first day in economics 108 for the Fall semester as well as my first day in an economics class in my life. I came to class with an open mind to learning what economics is all about. The class started with Professor Rizzo posing a question to the class about why orange juice left spilled on a desk was bad for economics. He also posed many questions to the class to get them to trigger a EWOT (economic way of thinking). A few of the questions that he posed were, "why is it embarrassing to say your not worth it or, my wife will kill me if I spend this." These are both statements that a person will say multiple times in their life, but the person never thinks of why they have to think like that and how those decisions affect the economy. After a few questions Professor Rizzo started the class off with an experimental exercise of placing various money amounts throughout the room and seeing how the class responded to each amount. At first he threw pocket change around the room and no one made the slightest effort to get the change until at least a quarter was thrown out. At this point no one jumped out of their chairs but the one kid just reached out effortlessly and picked it up while staying in his seat. When the bills started to be thrown around is when people started to react. A kid got out of his seat to pick up a dollar bill, but once the money had grow to 5 and 10 dollars, people were racing out of their seats to pick up the money before it even left Professor Rizzo's hand. The lesson that was taught by doing this was that people respond to incentives and profit opportunities motivate people. This could be proved if Professor Rizzo did the same exercise everyday. Students would start changing where they sit so that they could have the best opportunity to get to the money before any one else in the class.
Next Professor Rizzo talked about unintended consequences and how many economic decisions have unintended consequences that are attached to them in the future. He defined economics as the way people behave and the ways people react to those behaviors. he also said that beliefs and ethical principles are guides to economics. Though it seems like economics may be as simple as common sense and reasoning skills, it's a lot more complicated than it seems. Ben Stein's father was once quoted saying "economists know very little, and non economists know even less." This means that though some people can be better than others in coming up with ideas to help the economy, no one knows how the decisions will pan out in the future and if unintended consequences will come along with the changes that economists make.
Professor Rizzo later talked about how he is nervous about teaching Economics 108 because he doesn't want to change the way that we as students think since it could change decisions we make for the rest of our lives, He just wants to present concepts to us so that we can make more intelligent decisions. Though it was only the first day of class, I enjoyed it very much and am looking forward to the rest of the year in Econ 108.
We were assigned to read the first chapter of the hazlitt book and Hayek's introduction to Bastiat's Selected Essays. Hazlitt talked mostly about how fallacies affect government, and how not looking at long term affects of decisions hurts the economics of this country. Haykek's introduction to Bastiat's selected essays talks about how Bastiat "treated freedom of choice as a moral principle that must never be sacrificed to considerations of expediency." These are interesting points because many important decision making people in our country base their decisions on fallacies, and it turns out to hurt us. If they thought more about the total affect of their decision in both the present and future rather than just the present. This country could be in a better place economically today than it is now.
Next Professor Rizzo talked about unintended consequences and how many economic decisions have unintended consequences that are attached to them in the future. He defined economics as the way people behave and the ways people react to those behaviors. he also said that beliefs and ethical principles are guides to economics. Though it seems like economics may be as simple as common sense and reasoning skills, it's a lot more complicated than it seems. Ben Stein's father was once quoted saying "economists know very little, and non economists know even less." This means that though some people can be better than others in coming up with ideas to help the economy, no one knows how the decisions will pan out in the future and if unintended consequences will come along with the changes that economists make.
Professor Rizzo later talked about how he is nervous about teaching Economics 108 because he doesn't want to change the way that we as students think since it could change decisions we make for the rest of our lives, He just wants to present concepts to us so that we can make more intelligent decisions. Though it was only the first day of class, I enjoyed it very much and am looking forward to the rest of the year in Econ 108.
We were assigned to read the first chapter of the hazlitt book and Hayek's introduction to Bastiat's Selected Essays. Hazlitt talked mostly about how fallacies affect government, and how not looking at long term affects of decisions hurts the economics of this country. Haykek's introduction to Bastiat's selected essays talks about how Bastiat "treated freedom of choice as a moral principle that must never be sacrificed to considerations of expediency." These are interesting points because many important decision making people in our country base their decisions on fallacies, and it turns out to hurt us. If they thought more about the total affect of their decision in both the present and future rather than just the present. This country could be in a better place economically today than it is now.
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