ECON 463 Chapter 1-1: ECONOMICS3

Are you a Classical or Keynesian economist? Pick a perspective and defend. I will admit that I am a bit of a Classical economist that believes the Keynesian model has a place as well. I do not believe that I can commit to one side fully, over the other, but if I must I would side with the Keynesian model. It seems to me they both have a place in the understanding of economics, one more in the short run and the other in the long run. The Keynesian economists believe that the economy is not always at full employment and can be either below or above its potential, this is a big point of emphasis in my opinion. Seeing first hand some of the impacts of the recession in 2008 helped me to understand this perspective and side with Keynesian over the Classical. I believe that while the Classical model gauges the economy correctly in the long run, with its assessment that the economy will sort itself out without government interference in a recession for example, but it does not account for situations in the short run. It may be true that eventually the economy will return to normal following a recession, but often I believe citizens do not have the ability or resources to wait for the self-correction of the economy and need immediate assistance. After reading this post, do you agree or disagree? why?

My response " I agree that the government should only be involved when it is absolutely needed or when there is more on a state's plate than they can handle. The thing that I keep in mind is that the states that make up the United States are free states and that matters concerning the states such as economic growth belong to the state. There are times such as recently the Great Recession and even further back in history, the Great Depression placed more on the states than they could handle. As a result, the government should have, just as it did, step in and do what they can do. Although recovery from the Great Recession is slow going it is still happening. As far as the Great Depression if it had not been for the government then we may still be trying to get over that."

Instructors question "I (we?) am unclear on your claim, "There are times such as recently the Great Recession and even further back in history, the Great Depression placed more on the states than they could handle." Just what were "the states" supposed to do that you believe they did not do or were incapable of doing to prevent the Great Recession? Also Calvin, the reference notation you listed did not have matching citations. Where then would you place them? "

Please help me with the response to the instructor's question.

Economics is nothing more than the study of scarcity and choice. It's called the Economizing Problem.

Economics is also the study of human action---why people make the choices they do.

We have finite (limited) resources and infinite (unlimited) demand for goods and services. We must, therefore, use rational decisions as to how to allocate these resources so that we can produce the goods and services that satisfy as many needs and wants as possible.

Needs are those things that make life possible---food, clothing, shelter, etc. Wants are the things that make life easier---glass in windows, carpet on the floor, a refrigerator to keep your beer cold, etc.

The resources we are trying to use wisely are not confined to money. We are talking about talent, ability, drive, ambition, etc. We can't all be brain surgeons. Nor would most of us want to be. We have different needs and wants that drive our ambitions. I have 5 grandchildren. The oldest two are twins---a boy and a girl. My granddaughter graduated from Idaho University with a bachelor's and a master's degree in accounting in 5 years. She passed the CPA exam on the first try. She now lives in Panama and works for BMW. She speaks, reads, and writes 4 languages, including English. Her brother finally graduated from the University of Arkansas in May 2016 after 8 years! Why did it happen this way?? They were raised the same way by the same parents. Why was my granddaughter drove to succeed and my grandson so listless?

Then there is subjective valuation and opportunity cost. Opportunity cost is nothing more than what you have to give up to do something else. Some of you might have to roll out of the bar or the party a little before you wanted to leave just to be able to attend my class. You might also have to give up some precious sleep. In any event, you had to give up something to attend my class. That's the opportunity cost. Remember, everything you do has a price (opportunity cost) that must be paid according to Harry Browne who wrote, How I Found Freedom in an Unfree World.) To do one thing you must give up the opportunity to do something else.

When people decide to buy a product or service they must decide if it will satisfy a need or want at a price they are willing to pay. The number one reason that people buy the products or services they do is called Personal Tastes or Preferences (Subjective valuation). Everyone has a different price they are willing to pay for the same product or service. Something is only worth what someone is willing to pay for it. That's a subjective valuation. Each of us has a different intensity of demand for the same products. Things you want I may not care for at all, and the opposite may also be true. This is why there is such a variety of goods and services offered on the market.

Subjective valuation is also fluid. As your income goes either up or down it changes your valuation of products and services. Have you ever wanted something so bad you would do almost anything to get it---an i phone or I pad?---but once you get the money you think, "do I really want this?' and you don't buy it. This is common. If it were not for a subjective valuation we would all be wearing the same style and color clothes and living in similar houses, etc. Wouldn't that be a wonderful world! I'd find the tallest building in downtown Orlando and see if I could fly! It is not the similarity in people that interests me. It's the differences. It's my desire not to be like everyone else that has driven my life. Don't strive to be someone else. Strive to find and be yourself. God save me from a terminal case of conventional wisdom!

There are 5 embedded questions.

Give me an example of subjective valuation.