Class #20 10/19/11

Today in class Rizzo talked about how we rely on rules because we details of strangers to make smart decisions(not enough information known).  A feedback loop ensures performance at a place like Fedex. These feedbacks only work well when people care. More satisfied in situations that work well. Public works, politics, education, and health care are the things that people are least satisfied with in America. Economics always involves the exchange of property. Trade is also an exchange of property.  Three things that are important to economcs are

1.     What should get produced.

2.     How do we decide how to produce it

3.     How do we gegt it from producers to consumers

Inputs are factors of production. The 3 main factors are

1.     Land

2.     Labor

3.     Capital

An economic resource doesn’t become this until there’s a valuable use for it. One thing that we learned is that oil is not a resource. Not until we learn how to use it productively that it becomes a resource. Labor means the number of bodies. Capital can be either physical or human capital. First must be produced for the purpose of producing something else. Human capital is augmentation that we do to natural abilities to help us become better in the term of economics. An addiction to our stock of skills.

There are two ways to engage in the production process

1.     be self sufficient

2.     Specialize and exchange

Always make tradeoffs in consumption today vs. consumption tomorrow. The only time we have economic activity is when we decide we’re going to specialize. Rizzo said that economic activity can be defined as PSST (paterns of sustainable specializtions and trade)

1.     Specialization

2.     Exchange

3.     Discovery

Economic activity- Get other people to do things for you. By doing work by yourself rather than having others do it reduces specialization and trade. The transition from hoarse to car needs new patterns to be found. We can have undiscovery too (eg. China closing its ports and being isolated) The depression caused by massive changes in technology. Technology replaces workers. Slumps can occur because discovery takes time. Trade is good-most important economic point. We used to thing that nothing new was created from trade. We viewed trade as exploitive. People produce to acquire wealth. Wealth is subjective. Wealth is whatever people value. Budah wanted nirvana. Wealth=material things. Growth happen when society has more of the things it wants. When inputs and stuff become more further apart.

 Arisotle only thought that a dollar for a dollar was a good trade. Exchange only happens when peoples value differ trade to get more of what each person values. Trade is older than government by 20,000 years. Merchants were looked down upon then. Rizzo tan went over a trade off example that is in my notebook about how he gained more than his friend money wise in a trade but they both gained from the trade so it was a good trade.

Trade itself wil always be unequal with the total value in money.