ECON 1000 Lecture Notes - Lecture 2: Natural Resource, Ceteris Paribus, Opportunity Cost

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ECON 1000 Lecture Notes - Lecture 1: Opportunity Cost, George Bernard Shaw, Human Capital

ECON 1000 Lecture Notes - Lecture 2: Natural Resource, Ceteris Paribus, Opportunity Cost

ECON 1000 Lecture 3: Chapter 2 - The Economic Problem

Document Summary

Topic: what is economics and the economic problem. You make choices that are in your self-interest choices that you think are best for you. Choices that are best for society as a whole are said to be in the social interest. An outcome is in the social interest if it uses resources efficiently and distributes goods and services fairly. Answer: most of the times, economic agents acting purely out of their own self interest also promote social interest. It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. adam smith: the wealth of nations. Sometimes, a conflict/tension may occur between self interest and social interest. Some examples that illustrate tension between self-interest and social interest are. Economists answer by emphasizing the role of institutions in creating incentives that compel individuals to behave in the social interest.

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In his famous book "The Wealth of Nations" Adam Smith stated: ï¿½It is not from the benevolence of the butcher, the brewer, or the baker that we expect out dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.ï¿½ What do you think Adam Smith meant in this statement? You must use and connect all the following concepts covered in the Chapter correctly in your response: specialization, self-interest, competition, mutual gains from trade, market coordination, and the price mechanism.

Considered by many to be the founder of modern economics, Adam Smith published his masterpiece The Wealth of Nations in 1776. Smith wrote in support of market economies as feudalism in Europe was unravelling. Hence, many of his insights clashed with the ideas of his contemporaries whom continued to be drawn to less modern notions of markets as governed by duties owed, hierarchy, master and servant, and paternalism. In Smithâs view, markets are guided by the self-interests of market participants, not by obligations imposed, moral or otherwise, by religious authorities, aristocracy, and crown.

Consider the following quote taken from The Wealth of Nations:

It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages. Nobody but a beggar chooses to depend chiefly upon the benevolence of his fellow-citizensâ¦.Every individualâ¦neither intends to promote the public interest, nor knows how much he is promoting itâ¦.He intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part in it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.

Now suppose that Jim enters the market to purchase a gallon of milk from a local dairy. Jill enters the market to contribute $100 to a charitable cause. Based on Smithâs analysis, which transaction is guided solely by self-interest? How could either transaction contribute to the public interest? Is one superior to the other in that the first transaction confers mutual economic gains to both parties while the other confers a gain to only a single party? Are two gains superior to one? Briefly discuss.

Rules: Limit your thoughts to no more than two pages total, using Microsoft Word, 12 point type in Times New Roman font. Double spaced with one inch margins throughout. Do not worry about being right or wrong, the purpose of this exercise is for you to stretch your mind and to think critically

1.What do so many politicians, and journalist tells us what fair means?

2. After fifty years of poverty fair programs in the US, what are the results?

3.What was an early definition of social justice?

4.What is the current definition of social justice?

5.What are the many ways the US Federal Government taxes us?

6.What is our government's only source of revenues, no matter how our politicians word it?

7.What proportion of income taxes in the US is paid by the top 50%, 10%, and 1% of income earners?

8.Why are payroll taxes regressive?

9. It is true that nearly half the household in the US pays no income tax at all?

10. Do the poor actually lose various welfare benefits if they are trying to climb out of welfare, and their income increases?

11.Who actually pays corporate income taxes?

12.What is the definition of Economics?

13.Is there any form of government or economic system that can prevent a country from facing scarce resources?

14. How are resource allocation decisions made in a centrally planned economy and a free market system?

15.Is political self-interest somehow better than economic self-interest?

16.Is it possible for a small group of people in Washington D.C. to know the massive amounts of information required to get the right amount of milk on the local grocery stores' shelves?

17.What does voluntary exchange driven by self-interest require that each party to the exchange do?

18.What is the purpose of prices in a free market system?

19.What is crony capitalism, and why is it detrimental?

20.Why is issue emotionalism a shaky foundation upon which to make policy decisions?

21.We do not need to care what the stated intentions of politicians are regarding their proposed regulations. Instead, what should our concerns focus upon?

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ECON 1000 Lecture Notes - Lecture 2: Natural Resource, Ceteris Paribus, Opportunity Cost

ECON 1000 Lecture Notes - Lecture 1: Opportunity Cost, George Bernard Shaw, Human Capital

ECON 1000 Lecture Notes - Lecture 2: Natural Resource, Ceteris Paribus, Opportunity Cost

ECON 1000 Lecture 3: Chapter 2 - The Economic Problem

Document Summary

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