Huomautukset Remarks ЗамечанияPagetop
|Parametre lines at the beginning of the reader notes|
|2. 1,6983,718,eco,eng,20210227,20210311,5,DK: Ecoomics Book||???|
|3. ama Link to source of purchased ebook...||???|
|4. eng Link to Ajk review at source of purchased ebook...||???|
|2||01||LET THE TRADING BEGIN 400 BCE–1770 CE|
|2||0101||Property should be private •|
|3||0102||The function of money|
|4||0103||Make money from money •|
|12||0104||The role of technology|
|9||02||THE AGE OF REASON 1770–1820 Man is a cold, rational calculator •|
|9||03||Economic man The invisible hand of the market brings order •|
|9||04||Free-market economics The last worker adds less to output than the first • Diminishing returns Why do diamonds cost more than water? •|
|9||05||The paradox of value Make taxes fair and efficient •|
|9||06||and you get more pins •|
|9||07||The division of labour Population growth keeps us poor •|
|9||08||Demographics and economics Meetings of merchants end in conspiracies to raise prices •|
|9||09||Cartels and collusion Supply creates its own demand •|
|9||10||tax later •|
|9||11||Borrowing and debt The economy is a yo-yo •|
|9||12||Boom and bust Trade is beneficial for all •|
|17||14||INDUSTRIAL AND ECONOMIC REVOLUTIONS 1820–1929 How much should I produce, given the competition? •|
|17||15||Effects of limited competition Phone calls are dearer without competition • Monopolies Crowds breed collective insanity •|
|17||16||Economic bubbles Let the ruling classes tremble at a communist revolution • Marxist economics The value of a product comes from the effort needed to make it •|
|17||17||The labour theory of value Prices come from supply and demand •|
|17||18||Supply and demand You enjoy the last chocolate less than the first •|
|17||19||some people buy more •|
|17||20||Spending paradoxes A system of free markets is stable •|
|17||21||buy caviar not bread •|
|17||22||Elasticity of demand Firms are price takers not price makers •|
|17||23||the lower the cost •|
|17||24||Economies of scale The cost of going to the movies is the fun you’d have had at the ice rink •|
|17||25||Opportunity cost Workers must improve their lot together •|
|17||26||Collective bargaining People consume to be noticed •|
|17||27||Conspicuous consumption Make the polluter pay •|
|17||28||External costs Protestantism has made us rich •|
|17||29||not bad •|
|17||30||The poverty problem Socialism is the abolition of rational economy •|
|17||31||Central planning Capitalism destroys the old and creates the new •|
|31||33||WAR AND DEPRESSIONS 1929–1945|
|31||3302||Unemployment is not a choice •|
|31||3303||Depressions and unemployment|
|33||3304||Some people love risk, others avoid it • Risk and uncertainty|
|34||3305||Government spending boosts the economy by more than what is spent • The Keynesian multiplier|
|34||3306||Economies are embedded in culture • Economics and tradition|
|35||3307||Managers go for perks, not their firm’s profits • Corporate governance|
|35||3308||The economy is a predictable machine • Testing economic theories|
|35||3309||Economics is the science of scarce resources • Definitions of economics|
|36||3310||We wish to preserve a free society • Economic liberalism|
|36||331001||Birth of neoliberalism|
|37||3311||Industrialization creates sustained growth • The emergence of modern economies|
|37||3312||Different prices to different people • Price discrimination|
|38||34||POST-WAR ECONOMICS 1945–1970|
|38||3402||In the wake of war and depression, nations must cooperate • International trade and Bretton Woods|
|38||3403||All poor countries need is a big push • Development economics|
|39||340304||POST-WAR DEVELOPMENT IN LATIN AMERICA|
|40||3404||People are influenced by irrelevant alternatives • Irrational decision-making|
|40||3405||Governments should do nothing but control the money supply • Monetarist policy|
|40||340501||Theory of consumption|
|41||3406||The more people in work, the higher their bills • Inflation and unemployment|
|42||340601||Inflation or employment?|
|42||3407||People smooth consumption over their life spans • Saving to spend|
|43||3408||Institutions matter • Institutions in economics|
|43||3409||People will shirk if they can • Market information and incentives|
|44||3410||Theories about market efficiency require many assumptions • Markets and social outcomes|
|45||3411||There is no perfect voting system • Social choice theory|
|45||3412||The aim is to maximize happiness, not income •|
|46||3413||The economics of happiness Policies to correct markets can make things worse • The theory of the second best|
|47||3414||Make markets fair • The social market economy|
|47||3415||Over time, all countries will be rich • Economic growth theories|
|48||3416||Globalization is not inevitable • Market integration|
|49||3417||Socialism leads to empty shops • Shortages in planned economies|
|49||3418||What does the other man think I am going to do? • Game theory|
|51||3419||Rich countries impoverish the poor • Dependency theory|
|51||3420||You can’t fool the people • Rational expectations|
|52||3421||People don’t care about probability when they choose • Paradoxes in decision-making|
|53||3422||Similar economies can benefit from a single currency • Exchange rates and currencies|
|54||3423||Famine can happen in good harvests • Entitlement theory|
|54||3424||CONTEMPORARY ECONOMICS 1970–PRESENT|
|54||3425||It is possible to invest without risk • Financial engineering|
|56||3426||People are not 100 per cent rational • Behavioural economics|
|57||3427||Tax cuts can increase the tax take • Taxation and economic incentives|
|57||3428||Prices tell you everything • Efficient markets|
|57||3429||Over time, even the selfish cooperate with others • Competition and cooperation|
|58||3430||Most cars traded will be lemons • Market uncertainty|
|58||3431||The government’s promises are incredible • Independent central banks|
|59||3432||The economy is chaotic even when individuals are not • Complexity and chaos|
|59||3433||Social networks are a kind of capital • Social capital|
|60||3434||Education is only a signal of ability • Signalling and screening|
|60||3435||The East Asian state governs the market • Asian Tiger economies|
|61||3436||Beliefs can trigger currency crises • Speculation and currency devaluation|
|62||3437||Auction winners pay over the odds • The winner’s curse|
|63||3438||Stable economies contain the seeds of instability • Financial crises|
|64||3439||Businesses pay more than the market wage • Incentives and wages|
|64||3440||Real wages rise during a recession • Sticky wages|
|64||3441||Finding a job is like finding a partner or a house • Searching and matching|
|65||3442||The biggest challenge for collective action is climate change • Economics and the environment|
|66||3443||GDP ignores women • Gender and economics|
|66||3444||Comparative advantage is an accident • Trade and geography|
|67||3445||Like steam, computers have revolutionized economies • Technological leaps|
|67||3446||We can kick-start poor economies by writing off debt • International debt relief|
|67||3447||Pessimism can destroy healthy banks • Bank runs|
|68||3448||Savings gluts abroad fuel speculation at home • Global savings imbalances|
|69||3449||More equal societies grow faster • Inequality and growth|
|70||3450||Even beneficial economic reforms can fail • Resisting economic change|
|70||3451||The housing market mirrors boom and bust • Housing and the economic cycle|
Historically, material property has been organized three different ways. First, everything can be held in common and used by everyone as they wish, on the basis of mutual trust and custom. This was the case in tribal economies, and it is still practised by the Huaorani people of the Amazon. Second, property can be held and used collectively; this is the essence of the communist system. Third, property can be held in private, with each person free to do with it as they choose. This is the concept at the heart of capitalism.
Barter depends on the double coincidence of wants, where not only does the other person happen to have what I want, but I also have what he wants.
"A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain." Mark Twain US author (1835–1910)
The idea of measuring the economy dates back to the 1670s and the pioneering work of English scientist William Petty. His insight was to apply the new empirical methods of science to financial and political affairs – to use real world data, rather than relying on logical reasoning. He decided to express himself only “in terms of number, weight, or measure”. This approach helped form the basis of the discipline that would become known as economics. In his 1671–2 book Political Arithmetick, Petty used real data to show that, contrary to popular belief, England was wealthier than ever. One of his ground-breaking decisions was to include the value of labour, as well as land and capital. Although Petty’s figures are open to dispute, there is no doubting the effectiveness of his basic idea. His calculations included population size, personal spending, wages per person, the value of rents, and others. He then multiplied these In his 1671–2 book Political Arithmetick, Petty used real data to show that, contrary to popular belief, England was wealthier than ever. One of his ground-breaking decisions was to include the value of labour, as well as land and capital. Although Petty’s figures are open to dispute, there is no doubting the effectiveness of his basic idea. His calculations included population size, personal spending, wages per person, the value of rents, and others. He then multiplied these figures to give a total figure for the nation’s total wealth, creating accounts for an entire nation.
Economists have now begun to broaden the measurement of prosperity. They have formulated new measures such as the genuine progress indicator (GPI), which includes adjustments for income distribution, crime, pollution, and the happy planet index (HPI), a measure of human well-being and environmental impact.
In the 20th century, much of the analysis of macroeconomies has revolved around the Keynesian multiplier. Keynes showed how government spending could stimulate further spending in a “multiplier effect”.
While workers produced goods and services in return for a wage, the owners of capital – the industrialists and factory owners – sold those goods and services for profit. If, as Marx believed, a commodity’s value is based on the labour needed to produce it, capitalists must price the finished goods by first adding the price of labour to the initial commodity cost, then adding profit. In a capitalist system, the worker must produce more value than he receives in wages. In this way, capitalists extract a surplus value from the workers – this is profit.
To maximize profit, it is clearly in the interests of the capitalist to keep wages at a minimum, but also to introduce technology to improve efficiency, often condemning the workforce to degrading or monotonous work, or even unemployment. This exploitation of the workforce, seen by Marx as a necessary feature of capitalism, denies workers both an adequate financial reward and job satisfaction, alienating them from the process of production. Marx argued that this alienation would inevitably lead to social unrest.
Georg Hegel, which showed how contradictory notions are resolved in a process of dialectic: every idea or state of affairs (the original “thesis”), contains within it a contradiction (the “antithesis”), and from this conflict, a new, richer notion (the “synthesis”) arises.
Marx did not deny that supply and demand in the marketplace would influence the value or price of goods in the short run, but said that in the long run, the basic structure and dynamics of the value system must come from labour.
How can an artistic masterpiece be valued from the amount of labour hours used to make it? The defence to this critique is that a great work of art is an exception to the rule because it is a one-off. Therefore, there is no average quantity of labour from which to derive a price.
John Maynard Keynes was particularly damning of Walras’s approach, arguing that general equilibrium theory is not a good picture of reality because economies are never in equilibrium.
Property rights What is a just price? •
Markets and morality You don’t need to barter when you have coins •
Financial services Money causes inflation •
The quantity theory of money Protect us from foreign goods •
Protectionism and trade The economy can be counted •
Measuring wealth Let firms be traded •
Public companies Wealth comes from the land •
Agriculture in the economy Money and goods flow between producers and consumers •
The circular flow of the economy Private individuals never pay for street lights •
Provision of public goods and services
Keynes himself saw it as part of a British Liberal tradition, in which the hard facts of economics are tempered by social considerations.
He famously said that “the treasury could fill old bottles with banknotes and bury them… and leave it to private enterprise on well tried principles of laissez-faire to dig the notes up again”. As long as the government injected demand into the economy, the whole system would start to recover.
Keynes concluded that the fastest way to help an economy recover was to boost demand through an increase in short-term government spending.
Home-based economic activities such as cooking, cleaning, and childcare – in both traditional and modern economies – are done for their usefulness rather than for profit. Offer estimates that in late-20th-century Britain, this type of non-market production amounts to 30 per cent of national income.
In the 1930s, Norwegian economist Ragnar Frisch developed a new discipline that he called “econometrics”. His aim was to develop methods to explain and predict the movements of the economy.
"The more the state ‘plans’, the more difficult planning becomes for the individual." Friedrich Hayek
In 1947, a General Agreement on Tariffs and Trade (GATT) aimed to rebuild international trade.
The conclusion was clear: it is futile for governments to try to stabilize employment through fiscal policy. Increasing the money supply likewise only leads to higher prices. In the long run, the Phillips Curve is a straight vertical line at the natural rate of unemployment.
“Pareto efficiency”. In a Pareto-efficient situation, it is impossible to make one person better off without making another person worse off.
what Müller-Armack called a social market economy: not just a “mixed economy”, with government providing a bare minimum of necessary public goods, but a middle way between free-market capitalism and socialism that aimed for the best of both worlds. Industry remained in private ownership, and was free to compete, but government provided a range of public goods and services, including a social security system with universal health care, pensions, unemployment benefit, and measures to outlaw monopolies and cartels (agreements between firms). The theory was that this would allow the economic growth of free markets, but at the same time produce low inflation, low unemployment, and a more equitable distribution of wealth.
The so-called Nordic model is characterized by generous welfare systems and a commitment to fair distribution of wealth, achieved through high taxes and public spending. These countries have enjoyed high living standards and strong economic growth, helped by having small populations with strong manufacturing industries and, in the case of Norway, oil.
Christopher Columbus stumbled across the Americas on an expedition intended to find a new trade route to China. Such efforts to globalize trade have taken place for centuries.
different currency for every postcode in a city would be very inefficient. On the other hand, one currency for the entire world would be an undesirable straitjacket on so many diverse economies.
The social policies of so-called Reaganomics and Thatcherism were influenced by the Austrian-born economist Friedrich Hayek, who put the individual, not the state, at the heart of economic thinking, and by economists who saw tax cuts as a means of increasing tax revenue.
US economist Edmund Phelps argues that globalization is a big factor in this, as jobs created in richer countries tend to be in “non-tradable” sectors such as government and healthcare, while tradable jobs (such as phone-making) have moved to countries such as China and the Philippines, where wages are generally low. Resolving problems like these is one of the chief concerns for economists today.
There are strong arguments for government intervention: the atmosphere can be considered in economic terms as a public good, which tends to be under-supplied by markets; pollution can be seen as an externality where the social costs of an action are not reflected in prices and so are not fully borne by the person taking it. For these reasons Stern described climate change as the greatest market failure ever experienced.
For example, an environmentalist would say that GDP does not allow for the depletion of natural resources. Deforestation generally adds to GDP, assuming the timber is sold. But a potentially irreplaceable natural resource is being consumed, and GDP gives no indication of this. Similarly, if an economic activity produces pollution, GDP would count only the products sold, and ignore the undesirable undesirable side effects, such as loss of biodiversity or worsened public health.
Saving seems, at first sight, a prudent thing to do, a safeguarding of the future. However, savings in the global capitalist world are a mixed blessing. Any money that goes into savings is money lost to direct investment or consumer spending, but it doesn’t just vanish.
Economists have analysed the relationship between the housing market and the overall economy, and believe that by studying the levels of investment in housing, it is possible to accurately forecast recessions and recoveries. In their 2006 book Housing Prices and the Macroeconomy,
Niall. The Economics Book (Big Ideas) (p. 687). Dorling Kindersley Ltd. Kindle Edition.
"No man should sell a thing to another man for more than its worth." Thomas Aquinas
There are two kinds of money: commodity and fiat. Commodity money has intrinsic value besides its specified worth, for example when gold coins are used as currency. Fiat money, first used in China in the 10th century, is money that is simply a token of exchange with no value other than that assigned to it by the government. A paper bank note is fiat money.
philosopher David Hume. An earlier French writer, Pierre de Boisguilbert, used the phrase laisse faire la nature (“leave nature alone”), by which he meant “leave business alone”.
"Consumption is the sole end and purpose of all production." Adam Smith
Demand in a market can change for many reasons. As it does so, the market responds by altering supply. This happens spontaneously – there is no need for a guiding hand or plan in a market that encourages competition among self-interested people.
Many public utilities are natural monopolies, including telephone networks, gas, and water. The fixed cost of setting up a network
"The bourgeoisie… compels all nations, on pain of extinction, to adopt the bourgeois mode of production." Karl Marx, Friedrich Engels
Mixed economies In the decades following World War II, Western Europe developed a “third way” between communism and capitalism. Many European Union states still operate mixed economies with varying degrees of state intervention and ownership, although some, most notably Great Britain, have moved away from mixed economies towards a more laissez-faire
IN CONTEXT FOCUS Theories of value KEY THINKER Karl Marx (1818–83) BEFORE 1662 English economist William Petty argues that land is a free gift of nature and so all capital is “past labour”.
"All commodities, as values, are realized human labour." Karl Marx
Adam Smith and David Ricardo linked the price of a product to the labour required in its production. This is called the classical labour theory of value.
"When the demand price is equal to the supply price, the amount produced has no tendency either to be increased or to be diminished; it is in equilibrium." Alfred Marshall
"Intermediate between mathematics, statistics, and economics we find a new discipline which… may be called econometrics." Ragnar Frisch
"In a capitalist democracy there are essentially two methods by which social choices can be made: voting…and the market mechanism." Kenneth Arrow
"Game theory is rational behaviour in social situations." John Harsanyi US economist (1920–2000)
BRIC nations (Brazil, Russia, India, and China).
Capitalism An economic system in which the means of production are privately owned, firms compete to sell goods for a profit, and workers exchange their labour for a wage.
Factors of production The inputs used to make products or services: land, labour, capital, and enterprise.
as) (pp. 1-7). Dorling Kindersley Ltd. Kindle Edition.