ECO 316 Lecture Notes - Lecture 1: Precious Metal, Austria-Hungary, Berlin Wall
ECO 316
• What preceded the use of money and markets?
o Bartering – Relatively inefficient, Transaction costs were substantially higher than
a market system, time spent learning information about different products was too
high.
o Economies evolved over time, information needed to make transactions dropped
to just prices instead of exchange rates.
• Operate at all parts of day in known institutional context – Arena of human activity
o Institution:
▪ People doing something –
▪ Set of rules that guide behavior – boundaries guiding actions
▪
• Markets are institutions (formal rules and informal rules) – understanding through
participation
• Barter Transaction:
o Good exchanged directly for good
o Private property exists – legal right to ownership to exchange goods
o Finite/Closed – transaction is complete, ownership is exchanged
o Individual Gain – justification for behavior, operation in self interest
• Market Transaction:
o Money & markets are utilized – Money is exchanged for goods between buyers
and sellers
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o Private property exists – legal right to ownership to exchange goods
o Finite/Closed – transaction is complete, ownership is exchanged (One time
transaction)
o Individual Gain – justification for behavior, operation in self interest
• Radford – Origins of Bartering, known institutional contexts can be learned and
overlapped, bartering predates money and markets,
• Chectaw Indians – 1540 AD, Europeans encountered native American groups, their
economy was embedded in society, economic relationships were inseparable from social
relationships, Alabama/Mississippi.
Sample Exam question 1: It is said that premarket economies are embedded in society,
discuss what it means and use specific example in essay.
1. Chectaw society was broken down into different but overlapping groups
a. Clan System – 5 major clans: Bear, Deer, etc.
b. Each clan had status level in society (1. Bear, 2. Deer, etc.)
c. All individuals of clan were blood relatives related through common ancestor
2. Town Power Structure – Town was largest significant unit, 200-500 people, 3 levels of
voice and decision making, females did agricultural and housework,
a. Chief – Highest level of significance in town power structure
b. Elders – Council members,
c. Warriors/Braves – Only men,
3. Marriage Taboo
4. Redistributive – collected in central location, flow of goods in both directions,
o Distribution down the town power structure.
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o No scope for individual gain.
• “The defining characteristic of premarket premonitory economies were embedded
in society.”
o Redistributive economy pre-1540 amongst Chectaw
• Religion -> Economy
o Reforming the character of formal mainstream religion.
o John Calvin –
• Monte Casino – Greek -> Latin -> English
• Darwin, Copernicus, Anaximander, Aristarchus
• *English first to go through Industrial Revolution – Why England? *
o Early Revolution: Middle Class revolution (1640-1689), forces of the crown and
parliament, inner civil war.
o Nobility wanted no part in business activity everywhere besides England, very willing
to provide money to entrepreneurs, partnerships created England, labor forces can be
afforded.
o Family owned businesses stayed on the mainland, financing became difficult without
outside involvement, not solely to generate profits.
o Geographic advantages: Island, Iron located close to the coastline for moving onto
ships to transport.
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Document Summary
Holland: railroads began spreading the industrialization, access to larger markets, financial innovations: joint stock investment banks started in germany. If x=m, then gold flow is equal, imbalance of trade is necessary to make money off of trade, x>m = net gold inflow = increase in the money supply = Wwi, reduced german territory and population by 10%, reduces german army to under. Input output frame: table the includes every industry and firm producing in the economy, A =amount steel needed to satisfy the needs of auto industry. B = how much wheat must be produced to satisfy vodka industry. C = steel needed to satisfy the vodka industry. Rent control instituted: keep rents affordable to working class, not fixed price, relationship between rent and amount available = higher the rent the lower the available, shortage of rent occurs with rent control laws,
