Reading Analysis of 3 Paul Krugman Pieces

What did you find interesting or uninteresting about the piece? Was there something that seemed intuitive or counterintuitive? Explain.
Paul Krugman asserts that free trade is hotly debated as contentious topics surrounding religion. It's interesting that something as concrete as the belief in the benefits of trade and specialization could spark backlash comparable to declarations about evolution. This situation returns to the idea that it's more permissible to question social scientists as opposed to doubting "hard" scientists' findings. Perhaps it is due to the amount of incorrect economic information the public is forced to guzzle from frequent newscasts. In "Ricardo's Difficult Idea", Kruger writes, "Modern intellectuals are supposed to be daring innovators, not respecters of tradition." The daring quality of these thinkers often skews the economic reality.

One such incorrect depiction is that the strides made in first world countries hinder third world nations. In his second article concerning improvements on third world countries, Kruger states that "jobs with bad wages are better than no jobs at all". Not surprisingly, many people had a problem with his point of view, regardless of the amount of fact it contained. In the same article, Kruger informs the reader that aid from developed nations has done almost nothing for improvement in living standards in third world countries. This is a surprising realization for many. Most people cater to the belief that charity really does stop the hemorrhage when in actuality it simply slaps a band-aid on the entire situation. Wage and job improvements in the developing nations are positive unintended consequences of first-world enhancements.

Not everything in the first-world is perfect, as demonstrated by the final article entitled "A Raspberry for Free Trade". There are clearly double-standards about certain American policies. Kruger writes, "When the U.S. consumer is offered cheaper shirts from abroad, the United States loses the same number of shirt-making jobs regardless of whether the shirts were produced by workers making 30 cents an hour or $30 an hour." It really doesn't matter how underpaid, fairly paid, or overpaid the worker was when the American consumer is incentivized to buy the cheapest shirt he or she can find. I'm not saying that wage doesn't matter, but job loss is inevitable in almost all employment sectors.


Discussions Questions
Why are comparative advantage, and even trade in general regarded as controversial topics seemingly on the level of religious debates? Are there differences between the discussions on trade and the disputes on creationism vs. evolution?

Why is it that people believe so strongly in the zero-sum theorem? Is it truly that difficult to believe that the first world can become richer without further impoverishing the third world, but in fact raising the standards of living for the citizens of the latter? Explain.

How did globalization attain such a negative connotation?

Annotation
The purpose of the series of three Krugman articles was to further enforce ideas about the pros of free trade and globalization in the marketplace. He wrote about real-world examples concerning specialization and exchange, and established that standards of living improve on a global scale as international production increases. If production is increasing, then technology innovation is also increasing. This means that the number of jobs in a job sector with a fair amount of technological advancement is decreasing. The job churn, however, ensures that new jobs will always be created as old ones are eradicated.

EWOT Goggles #8

http://dontevenreply.com/

Linked above is probably one of the funniest websites on the internet. The man behind the whole scheme replies to Craigslist ads in the most awful, rude, and inconsiderate ways possible. (I highly recommend the read.) Most of the time he doesn't even accurately address the desire of the Craigslist post-ee. All jokes aside, Emails from an Asshole perfectly illustrates the impossibility of altruism and/or the Golden Rule in market systems. Trade becomes a zero-sum situation whenever altruism is present in an exchange. Selflessness is a necessary component of altruism. Self-sacrifice cannot be present in trade because then it's no longer a fair exchange, but rather borderline thievery by the gaining party. If one person "wins" and one "loses" then it's no longer a trade.

Rizzo suggested that a comparable moral code does indeed exist in markets, creatively coined the Silver Rule. Under this principle, one must deal with others how they would want to be dealt with in market transactions. The creator of Emails from an Asshole clearly doesn't abide by this policy, and neither do a myriad of Craigslist, Ebay, and other users of similar websites. People are constantly getting ripped off on online trading websites because interaction are impersonal. It's much easier to deceive someone you can't or will never see than it is to purposefully trick someone you're looking in the eye. Ebay removes the humanity from trade even more so than Craigslist. Online bartering sites are a breeding ground for dishonesty. What does this say about morality within the market? Even further, what does this suggest about the moral compasses of the participants of said market?

Class Summary 10/28/11

Trade and Jobs (continued)


Absolute advantage and comparative advantage determine whether or not jobs are shipped overseas. This equation helps asses the situation:

                Wages                        
Marginal Product of Labor

For example:  China- $8/hour                America- $30/hour
                                   4 units                                 20 units

China can produce something for $2/unit, and the United States can produce the same something for $1.50/unit. America has a comparative advantage at producing that particular unit over China. The United States also has the absolute advantage at producing this specific unit over China. Obviously the jobs should remain in America, right? Not necessarily because we don't know the opportunity cost of those American employees working those jobs as opposed to the opportunity cost of the Chinese workers. Perhaps the American workers currently employed in that manufacturing job could be curing cancer if they didn't spend the majority of their time in a factory. The opportunity costs might be higher than the production costs.

China can often produce something much more cheaply than America can. Some people advocate for tariffs being established on Chinese goods. Raising tariffs on Chinese products would hurt American manufacturing rather than help it. This is because imports from China are usually inputs into other American products that are already produced in a America.

Trade surpluses don't create jobs, and trade deficits don't take jobs away. People who say they do ignore:

1. We pay for our imports with our exports.
2. Specialization makes us wealthier because, on net, employment increases.

Trade deficits do, however, affect capital account balance. For example, Prof. Rizzo buys $10 worth of toys from China, and a Chinese person buys $5 worth of classes from him. If that Chinese person doesn't spend that $5 in America, it makes us wealthier. This is because reducing the number of bills in circulation raises the value of existing American currency.

Class Summary 10/26/11

Trade and Jobs


Today's technology caters to the higher educated, higher skilled people. People have to keep changing their specialties in order to keep up with technological innovation. Trade improves such technology. Some would argue that the "cost" of trade is jobs, however, jobs are constantly lost and new ones are consistently created. Every year, about four million jobs are lost and four million jobs are created. Despite trade, the number of jobs eradicated and gained reach an equilibrium. Trade doesn't cost us jobs, but rather creates new and different ones.

The logic behind the job churn/turnover is that those who lose their jobs were the first to benefit from trade in the first place. Trade doesn't kill jobs. Technology actually kills jobs by a factor of forty over trade. New jobs are dependent on technological innovation. Capital and labor are compliments to improvements.

Trade Surplus:  less imports, more exports
Trade Deficit: more imports, less exports

People that assert that "America doesn't make things anymore" are full of shit. US manufacturing produces more than they ever have before. Not only that, but more things are produced with less employees. There has been almost no innovation within the healthcare and higher education sectors. Those jobs are generally "safe". Society will always need medicine and training for new skills. Employees in the two aforementioned job categories are paid less than employees in more at-risk job markets. This is because salary is directly correlated with job safety.

Class Summary 10/24/11

Comparative Advantage


The ability to produce something with less of a societal cost as compared to the next guy.


Another hypothetical situation: Rochester and Cornell students can create wine and cameras. Rochester students are able to create 10 bottles of wine per year and 5 cameras per year, while Cornell students can only create 3 bottles of wine per year and 4 cameras.

+Rochester students have an absolute advantage in making wine over Cornell students.
+Rochester students have an absolute advantage in making cameras over Cornell students.

Two questions arise:

1. Who is more efficient?
2. What is sacrificed?

Rochester                                                                                  Cornell

Cameras: 5 cameras "cost" 10 wines                                          4 cameras "cost" 3 wines

               1 camera = 2 wines                                                     1 camera = 3/4 wine

Wine:     10 wines "cost" 5 cameras                                           3 wines "cost" 4 cameras

              1 wine = .5 cameras                                                     1 wine = 4/3 cameras

+Rochester has a comparative advantage in producing wine over Cornell.

BUT no producer can have comparative advantage at producing everything.

+Cornell has a comparative advantage in producing cameras over Rochester.

Suppose Rochester ONLY produced wine, and Cornell ONLY produced cameras:

Initially Rochester has 10 wines and 0 cameras, and Cornell has 0 wines and 4 cameras. If Rochester trades Cornell 3 wines for 3 cameras, it has 7 wines and 3 cameras in the end. Cornell has 3 wines and 1 camera. Both parties increased their PPF slope, and are therefore richer as the result of the trade.

If you decide to specialize and trade, it makes us richer. This is because it uses less of the earth's resources, and you get more outputs for the same amount of inputs. Each party pays for their imports with their exports.

1. Self-sufficiency is the road to poverty.
2. What a country ends up producing is what it's relatively better at.
3. Policies that restrict trade make people poorer.

Reading Analysis of 'Individualism and Altruism'

What did you find interesting or uninteresting about the piece? Was there something that seemed intuitive or counterintuitive? Explain.
The concepts of individualism and altruism are interesting to me because they both address the existence of some sort of sense of duty that human beings possess. It is true that humans are relational by nature, and there is no possible way for us to survive an isolated lifestyle. We need human interaction. Though this may be true, where does this urge to help others stem from? An individualist would argue that we assist others to ensure help or have a better chance of being helped in the future. Perhaps by spotting my friend five dollars when he doesn't have enough to pay for his dinner I effectively secure a future loan when I'm also lacking in funds. The altruist would assert that I should willingly hand over my money because the happiness of my friend should be above my own--I should act selflessly. In his notes, Rizzo states that altruism isn't a livable lifestyle. I would safely agree because it goes against human tendencies. I believe the sense of duty we feel to help others is due to a karma-centric thought process--if we do good to others, good will come back to us. We don't self-sacrifice without the thought of a future gain in the back of our minds. This doesn't make us selfish, it just makes us human.


Discussion Questions
Why do you think 'individualism' has such a negative connotation in today's society? If your actions truly make a difference in helping someone else, why should it matter if it was done in your own self-interest? Does this really make us selfish?

Similarly, we have been taught to be wary of altruistic acts wherein the benefactor receives no personal gain from an exchange. Why do ulterior motives seem to travel with altruistic actions? Do people who exhibit altruism have a hidden agenda with bad intentions?

Annotation
Altruism cannot function in a market economy. This is because no person can possibly know the values of others. Producing for the sake of the people instead of for profit ensures failure. The goal of attaining profit motivates the producer much more than the thought of the joy his or her product will bring to consumers. Individualism isn't synonymous with selfishness, but rather the driving force behind production.

Class Summary 10/21/11

Trade (continued)


Trade creates wealth, and is a non-technical form of production.

Production Possibilities Frontier

Properties of PPFs:

1. All points in/on the PPF are achievable
2. If someone can produce guns or butter better than another person, then we say that the former person has an absolute advantage in producing either product over the latter person.
3. All points to the Northeast are not achievable.
4. Points on the PPF are productively efficient.
5. The slope captures the concept of scarcity--the only way to get more butter is to sacrifice guns.
6. The change in slope illustrates the Law of Diminishing Returns (aka increasing opportunity costs). This deals with drawing away lower quality inputs. The trade-offs become worse over time.
7. Economic growth occurs when you get more resources, better technology, to trade.

• Affects the curve: less guns more butter, less butter more guns, or overall production increases for both products.

Class Summary 10/19/11

Trade and Exchange


Feedback loops exist to ensure performance. They work exceptionally well when people feel guilty if they do a poor job.

1. What should get produced?
2. How do we decide how to produce it?
3. How do we get it from producers to consumers?

Once these questions have been answered we turn to this model:

Inputs: factors of production that fall into one of three categories-

1. Land - things are only resources if we have the technology to deal with them efficiently. For example, oil is not a resource.
2. Labor - number of bodies
3. Capital - exists in two forms: physical (produced for the purpose of producing something else) and human (anything we do to augment our natural abilities)

The black box is either self-sufficiency or specialization and exchange. Being self-sufficient doesn't generate any economic activity because economic activity is generated by spending money. 

More self-sufficiency = less economic activity = less GDP

We need Patterns of Sustainable Specialization and Trade. According to PSST, discovery--the ability to use resources efficiently--is imperative to economic success. It is possible to un-discover things, which causes economic funks. Rapid changes in technology often insinuate un-discovery because adaptation takes time. We need to redeploy inputs to get what we want.

Although the overwhelming consensus is that trade is good, it has a negative connotation sometimes. This is because nothing new is created, and it is often seen as exploitive. Addressing the latter point, voluntary exchange isn't trade of equal value, but rather only works when people have different values. Wealth is whatever it is people value, and economic growth occurs when the production of wealth increases.

Class Summary 10/17/11

Economic Virtues and Ethics


Free societies function best when people are honest. Humans act in self-interest, generally in a way that enriches us. Though this may be the case, no one has the ability or morality to be critical about the market. Essentially, there must be a substitute for the golden rule in commercial society because no one is omniscient.

It's worse for society as a whole when people follow the golden rule, and produce for other people instead of a profit. For example, thousands of people starved to death in Ukraine when the farmers were told to produce food for the satisfaction of others. This relates to the concept of tacit knowledge--no one knows the entire process, and no one knows what each individual wants.

Altruism in other parts of our lives is celebrated, but the second it's attributed to business it has a negative connotation. Pursuing a self-interest such as jogging is commended, but a company producing efficiently and matching market values exceptionally is considered a thief. Market transactions are reciprocal altruism. 

Commercial societies must operate on something along the lines of a silver rule. You should not do unto others what you would consider unjust or unfair if they did it to you.

Four rules:

1. It's okay to be charitable with your own money, but not with someone else's money.
2. There's no such thing as 'enough' profit.
3. Running a profitable business requires soft values.
4. If you run a business like a family you'll destroy it, and if you run a family like a business you'll destroy it.

• Relying on strangers beats relying on friends for commercial actions. This is because the stranger has an incentive to make a profit, while your friend does things for you out of moral regard.

EWOT Goggles #7

Although the legal drinking age is technically determined at the state level, the federal government managed to establish a 21-year-old minimum throughout the country with what was one of the best uses of incentives of all time. Washington told each of the fifty states that they had autonomy over the age requirement for drinking, but that they would use federal highway funding if the drinking age wasn't 21 in their state. This was absolutely brilliant. Of course all the states quickly fell in line to institute the suggested drinking age. The cost of losing highway funding was just too great.

As with most plans, even the great ones, there were several unintended consequences. Because teenagers have to wait longer to legally drink, they often put themselves in dangerous situations in order to consume alcohol. Alcohol accounts for almost 1/3 of all driving deaths among teenagers (http://www.sadd.org/stats.htm). While the highways might be better maintained, the amount of teenagers dying on them  has increased substantially.

Perhaps a more relatable situation is the one involving the all-too-common overprotective parents. Teens who's parents tended to be on the stricter side about alcohol consumption (likely because the death rate among teenagers is high due to the age limit) have a much harder time adjusting to the freedoms of college. If a few of my former classmates are any indication, a night of binge drinking gone wrong is a massive unintended consequence of restrictive parenting. Overprotective parents are also an unintended consequence of the higher drinking age. Every decision comes with negative and/or positive repercussions and implications.

EWOT Goggles #6

The English-style auction we experienced dealt with a lot of economic concepts we've covered in class. That particular kind of auction often causes people to bid more than what a product is worth. Our example with the dollar illustrated this point well. A few people even overbid by another dollar. Your bid in an English-style auction automatically becomes a sunk cost because you have to pay regardless of whether or not you win. Some participants became too consumed in the idea of winning that they continued to bid to "make up" for the money they had already lost. They made poor economic decisions because they considered the sunk costs. The marginal value of winning was higher than the value of the dollar on the auction block. Each time they bid above the monetary value of the dollar, it altered the value of that dollar at the margin.

The rule of law also played a role in our recitation auction. A price ceiling of $2 was introduced during the final round. This bid limit wasn't present in the first two rounds, which violates the rule of law. Every round didn't have the same regulations. The market suddenly had price restrictions in the last round, which goes against a Laissez-Faire economy. Along with the price constraints was another rule that dictated that auction participants could only bid in increments of five cents to deter bidding up by only one cent at a time. Auction participants no longer had equal fairness in the market. This was a painful situation, as illustrated by Marisa choosing to end the auction by bidding the maximum amount allowed by the price ceiling.

Class Summary 10/14/11

Wrap-up of Economic Principles


Markets often don't work well for two reasons: 1) they don't truly exist and 2) failure of institutions. They do work well when both producers and consumers have options. Also, the outcomes of the markets should be efficient.

Efficiency: delivering what people want at the lowest "possible" cost

Institutions: formal and informal social mechanisms that humans develop in order to sustain peace (i.e. good legal system, good government, etc.)

The rule of law is also necessary for market functionality as well. Under the Rule of Law, everyone is treated equally, the laws cannot be arbitrary, and all good laws are general.

Inflation: the general increase in all prices in an economy --> caused when there's too much money floating around

Reading Analysis of 'The Case for Contamination'

What did you find interesting or uninteresting about the piece? Was there something that seemed intuitive or counterintuitive? Explain.
To me, the most interesting part of this piece was that people who believe isolation preserves diversity exist. Globalization is part of the benefit of today's myriad of technological advances. Worldwide communication allows us to share ideas and culture like never before. When various backgrounds come into contact with one another, one isn't negated by the other. As with the trade of tangible goods, cultural exchange also isn't a zero-sum situation. Instead, two cultures coming together promotes the development of a whole new lifestyle. This occurs if and only if the exchange is fair. Instances of colonization and take over don't foster cultural growth. They inhibit progress just as unfair trading in the market hinders innovation. If some force was to prohibit the trade of cultural traditions and values, our world would become stagnant, monotonous, and boring. The nay-sayers addressed in the article argued that the Western influence was overpowering, and would overtake all other cultures in its path. Canada, America, England, Japan, and all other developed countries fall under the Western culture umbrella, and yet are all vastly different. Even regions within the aforementioned nations are widely dissimilar. The idea that less contact fosters culture is just extraordinarily invalid.

Discussion Questions
Can you foresee any unintended consequences that could arise if government or some other force mandated isolationism to preserve culture?

How are the people who would advocate for the type of situation posed above similar to the Mercantilist fallacies we previously studied?

Annotation
If the laws of a fair market are correctly followed, trade within any market isn't zero-sum. One side does not effectively become poorer than the other within the concept of exchange. Collaboration makes both sides wealthier. The riches aren't always monetary, but intangible wealth is just as valuable. Innovation is fostered by globalization, not hindered by it.

Class Summary 10/12/11

Law of Unintended Consequences


Humans act with purpose, and generally in ways that make their lives easier. Because people respond to incentives, your behavior with change when the benefits and costs to you change. The law of unintended consequences follows axiomatically. Unforeseen issues arise when a few people attempt to regulate a complex system. Collective decisions are flawed because of limited knowledge, small timeframes, poor feedback, and inconsistence incentives. Regulation pushes against incentives, and incentives push back.

Two common instances where the law of unintended consequences had a big (negative) effect:

1. Mandatory seatbelt laws - though this law was intended to make drivers, and thus our roads, safer has actually increased reckless driving.
2. The disability act - this act was passed with the intent of hindering discrimination against disabled people in the workplace. Instead, companies are fearful of being sued for unfair termination of employment of a disable person that they simply don't hire people with disabilities at all.

Reading Analysis of 'What is Seen and What is Not Seen'

What did you find interesting or uninteresting about the piece? Was there something that seemed intuitive or counterintuitive? Explain.
Bastiat has an interesting opinion surrounding the controversy of whether or not to subsidize the fine arts. Personally, I have no strong attachment to theatre, etc. I wouldn't notice very much if museums of plays and paintings suddenly disappeared because my values don't include the arts. Other people, however, might argue that the arts are inherently valuable, and necessary to the refinement of the people. Values are subjective. I do agree with Bastiat's point about allowing the masses to control what thrives as opposed to the government assigning values to us in the form of subsidies. Having a government that is supposedly controlled by the people, but allocating taxpayers' money towards something that the citizens wouldn't necessarily sustain seems a bit counterintuitive. While it's important to preserve some things, the government shouldn't choose what non-essential items our tax dollars support.


Discussion Questions
Bastiat writes, "Our adversaries believe that an activity that is neither subsidized nor regulated is abolished. We believe the contrary. Their faith is in the legislator, not in mankind. Ours is in mankind, not in the legislator." What about in worser economic times? People cut back on non-essential items in order to preserve their savings. Items such as play tickets fall under this category of non-necessities. Do we continue to let the arts fend for themselves then?

Annotation
This piece addresses the point that values are subjective, as well as reiterating that there's no such thing as a free lunch. Although not everyone values fine arts, the decision to subsidize them affects every tax-paying person. Money that could have been used to increase education standards or improve roadways is reallocated to sustaining theatre and other fine art forms. Similar to the Broken Window Fallacy, the portions of the pie that suffer because the money is used for something else are unseen. We don't see what could have been. The resources have to come from somewhere.

EWOT Goggles #5

As a freshman in college, I pretty much meet a new person every day. Among the usual introductory conversation topics is an inquiry about what the other person's intended major is. Among the more "practical" answers like Business or Economics are majors such as  Art History or Gender Studies. The salaries related to the latter degrees aren't likely to even repay the total cost of college. What would possess people to decide so early on in their lives that a large salary wasn't in the cards? Doesn't everyone crave a luxurious lifestyle?

The answers to the questions posed above lie in the idea that values are subjective. Clearly the people who choose a Humanities degree value the subjects that they're studying. Perhaps the opportunity cost of not making a high salary is worth pursuing careers in those fields. Money doesn't incentivize the person who settles on a Gender Studies degree, but rather the joy that the subject matter provides for them. We haven't been introduced to the concept of utils yet, but they definitely apply to this scenario. The relative satisfaction of the subject content this person would receive from majoring in Art History is higher than that of someone who would prefer to major in Economics.

It's also a tad ridiculous to focus on the monetary cost of college versus how much a Humanities major will make in their lifetime because college tuition is a sunk cost. A refund is impossible, so they continue to study what they love because that has infinite utils of utility for them. Therefore, these people are "getting their money's worth" from college, and subsequently, their career.

Class Summary 10/7/11

Cost


Cost is subjective because values are subjective. The value you place on your next best option is how much something costs you. Amazingly, the costs you use to make decisions are never imposed upon you.

Marginal Cost: the change in your cost from taking an action; additional cost incurred by another unit of something; decisions correlate to either more or less cost

Sunk Cost: resources that aren't recoverable--bad economic decisions are made when sunk costs are factored into the equation

The Water-Diamond Paradox: water is extremely valuable, but has a very low exchange value, while diamonds are frivolously useless, but have a very high exchange value.

We have the ability to address this paradox that Adam Smith didn't possess. Statements such as "it's awful that teachers are paid so little, and professional athletes are paid so much" ignore the margin. Some people might assert that the pay discrepancy shows how misplaced "society's" values are, but they would be incorrect. How much we value the total might be more than we value the margin. The Water-Diamond Paradox is an effect of scarcity. It's not that we value sports more than education, but rather that there are simply far more teachers than there are professional athletes.

Class Summary 10/5/11

The Broken Window Fallacy


Natural disasters don't boost the economy! It just appears that way because the need for products immediately after a disaster is higher. No new jobs are created, there's no net change, and people value spending on something not disaster-related. Simply think about what someone has before and after the destruction. The Broken Window Fallacy is net-negative.

There are three problems with the idea that destruction stimulates the economy:

1. We didn't choose to spend our money on disaster-related expenses--our values lie elsewhere.
2. We lose the value of the resources used to repair the damage.
3. Even if it employs people for a short amount of time, it raises the price of labor--skills are resources, too.

This also explains why government stimulus doesn't make sense. Stimulus money comes from raising taxes now, raising taxes later, or borrowing. Since the money has to come from taxpayers, less of peoples' income is spent elsewhere. It also lessens spending on infrastructure, and other portions of the government pie. 

Class Summary 10/3/11

Basic Economic Principles


These deal with how people make decisions, how people interact, and how aggregates (i.e. the economy) work.

People face trade-offs. The decisions we make in the presence of scarcity displays a lot about what we value. Also, nothing is free. There ain't no such thing as a free lunch because resources are always used in the production of things. Therefore, nothing on earth is free. This is why it's possible to have too much of a good thing--we have to endure a cost whenever we trade off. A cost is anything that consumes resources.


Taxes aren't costs! No resources are consumed by cutting taxes, and allowing people to keep more of their income. What would be a cost, however, is if the government had to spend more in order to collect more taxes later to replace the deficit of funds created by cutting taxes.

Opportunity Cost: the net value/benefit from/of your next best opportunity; compares value and cost; net pleasure of your next best opportunity

Hypothetical Situation of the Century
Suppose you win Bruce Springsteen tickets. You can't resell them, and your only other option for entertainment other than Springsteen is Barry Manilow. The cost of the latter concert is $40, however, you would get $50 worth of enjoyment from the Manilow concert. What is your opportunity cost?

Answer: $10 for your next best option instead of seeing Bruce Springsteen. This is because the monetary cost of the Barry Manilow concert is ten dollar less than what you would be willing to pay to see him.

Reading Analysis of 'Economics of Happiness' from the Aspen Ideas Festival

What did you find interesting or uninteresting about the piece? Was there something that seemed intuitive or counterintuitive?
Two of the most interesting and intuitive points in the video were made by Robert H. Frank. Firstly, he suggested that money can buy happiness, but we just don't purchase all of the right things. Perhaps this is due to financial planning or the desire to save our earnings. Money-wise people don't spend frivolously, but their happiness might know no bounds if they did. The second assertion Frank makes that caught my attention was that economists of the future will regard Charles Darwin, not Adam Smith, as the father of economics. Because economics is a social science, this actually makes perfect sense. While Adam Smith will always be credited for turning social behaviors into economic theories, Charles Darwin was the original studier of human tendencies. After all, economics is a social science.

Discussion Questions
Justin Wolfers says that money can't buy love. For many people, however, love or being loved may equate to happiness. What do you think about this? Will wealth and happiness ever correlate for these people?

If studies and graphs show that people become happier as their wealth increases exponentially, is the opposite also true? Does poverty cause depression? Does one have to have a personal experience with wealth in order to make poverty so unbearable? Explain.

Annotation
This video further elaborates upon the Easterlin Paradox. Both featured economists essentially convey the difficulty with quantifying happiness. Surveys upon surveys had to be conducted to obtain the data expressed in the graphs and charts in the movie. As Wolfers explains, the questions that were asked of people changed over time. This directly affected the accuracy of the responses. Issues highlighted here further emphasize the problems that arise in social sciences because people and their habits are riddled with variables.

EWOT Goggles #4

http://buzzpunching.blogspot.com/2011/07.html

The problems surrounding corn subsidies in America are strikingly similar to the grain price issues that plagued England around the late 18th and early 19th centuries. As a result of the price of British grain quadrupling, foreign grain was brought into England because it was far less expensive. The government attempted to rectify the situation by imposing "corn laws" to protect English land owners. America is currently facing the same issue, except now many would argue that corn prices are too low. 

American corn farmers can no longer eat what they grow. This is quite the agricultural phenomena. Ignoring the whole other can of worms containing GMO debates, today's corn is a raw product that is basically inconsumable in its unprocessed state. The government has caused a series of unintended consequences by subsidizing corn to the extent at which it has. For one, things containing high fructose corn syrup are usually wildly unhealthy. Because corn is so heavily subsidized, these products are much cheaper than nutritious alternatives like raw fruits and vegetables. The low prices incentivize people to purchase these unwholesome items. Nutritional value in soda and candy is basically non-existentent, and people who regularly consume such products gain significant amounts of weight. Therefore, one could make the assertion that the corn subsidies in the United States are a driving force behind obesity in Americans. If you further extended this idea, you could probably prove that corn subsidies also contribute to a lot of the healthcare budget issues as well. Sometimes the interconnectedness of such processes are staggering.

Along with contributing to obesity, the corn subsidies also dis-incentivize farmers from growing other crops. Corn is "safe" because they know it will bring in a steady paycheck since the fluctuation of the price doesn't directly affect them. Crop rotation has been completely taken out of the equation because of technological developments that allow corn to be effectively grown on the same land year after year. This has actually caused such an influx in corn that there is so much that we have to find more and more uses for it. Cows, chicken, and even fish are being fed corn. None of the aforementioned animals are biologically compatible with corn consumption, but the product is cheap and plentiful. The bottom line is that as long as there is so much corn floating around, people will find ways to utilize it because they are incentivized by its cheapness.

Class Summary 9/30/11

Adam Smith


He was the first public choice economist, lived from 1723-1790, and wrote The Wealth of Nations in 1776. The two main points for this book were that governments don't need to regulate economic affairs and that it's necessary to allow a system of free and peaceful associations.


Lassiez Faire: 
the theory or system of government that upholds theautonomous character of the economic order, believing that government should intervene as little as possible in the direction of economic affairs


Governments need to provide:

• police and courts (protection from internal bandits)
• national defense (protection from foreign bandits)
• public works

If we pursue our own interests:

• private property rights need to be protected
• division of labor must exist
• exchange has to be peaceful and mutually agreed upon
• there can't be any special privileges for anyone

Smith stated that our source of wealth was our ability to produce and exchange goods that people value. He also argued that people have a moral obligation to seek out things other than just their own self-interests, and that we should be suspicious of anyone that claims to know what we want. Smith's other assertion was that market competition can be created anywhere it's feasible for it to exist. There are certain things that need to be precluded from entering the economic market.

1. The market should be free.
2. The people should be free.
3. Price controls shouldn't exist, and entry to the market is open to everyone.
4. Efforts should be restricted.

Spontaneous Order: essentially, the clusterfuck of human society will always figure itself out --> no one decided that we should have a capitalist society

Ferguson (1767) determined that nobody designs human social society, BUT not everything that comes about because of spontaneous order is good. He also stated that we truck, barter, and exchange to better ourselves because something between extinct and reason that tells us we want to make our lives better.

Corn (a.k.a grain) prices quadrupled post-Smith. To combat the rise in price, Jews began to bring in wheat from abroad. This caused the imposition of sliding duties on imported grains. The corn laws kept the price floor down for land owners in England. When these laws were eradicated, there were no more tariffs in Britain, which allowed for huge economic growth.

Short-run Inequality: the more capitalist a country is, the less important capital is

Long-run Inequality: the more capitalist a country is, the less amount of capital comes from property