Class summary 10/14

Econ 10/14/11

Communist manifesto suggests complete abolition of property. But the irony is that employees could only be exploited if they are deprived of property and wages.

Price system promotes better outcome. Price system gives information to the producers what consumer’s value. And the price is regulated by relation between supply and demand.

Markets are often “ WRONG” : often do not offer the good outcome that we contribute to it

a.     Lack of markets (some force prevents marking from working) EXTERNALITIES & MARKET POWER & IMFORMATION PROBLEMS

b.     Institutions matter

The market fails because the market transaction simply cannot happen

We purchase health insurance to make sure that awful diseases don’t bankrupt us

Efficiency: economic system is producing what people want & at lowest feasible cost

Institution is any arrangement that people come up with either formally or informally to live side by side. Market is just one of many small institutions.

THE RULE OF LAW

Apply equally to everyone.

Law should not be arbitrary 

Good laws must be genral

Inflation

Inflation refers to general increase in all prices in the economy.

Causes of inflation: When there is too much money in the economy.

Money shouldn't matter, but it does matter.

Free society works well when people are honest and free society does

promote honesty. Transactions are positive sum. It would be better morally if we satisfy the needs of others at the first place rather than satisfy ourselves at the first place.