Lecture 3 Outline

Lecture 3 Outline - b. Intertemporal coordination across...

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Lecture 3 Coordination in the Market Economy I. Central Economic Planning v. Entrepreneurial Economic Planning a. Robinson Crusoe and Economic Planning b. The Family Farm and Economic Planning c. Central Planning in a Modern Economy i. Problem of Dispersed Information ii. Problem of Economic Calculation d. Entrepreneurial Planning i. Market prices as information ii. Profit and Loss as information and incentive II. Coordination Occurs along two dimensions a. Intratemporal – coordination between markets at the same time i. Prices in the final goods and factors markets help here. ii. Expected profits tell entrepreneurs what is important.
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Unformatted text preview: b. Intertemporal coordination across time i. Prices in the time market tell entrepreneurs how valuable time is. ii. Time market = market for loanable funds 1. This is where present and future value are exchanged directly, in some sense. III. Expectations a. Expectations play in all along the way. i. Expected prices ii. Expected demand iii. Expected technology b. Errors occur i. Often unsystematic seemingly random. ii. Occasionally, systematic. Occurs is people have been misled in some way....
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Lecture 3 Outline - b. Intertemporal coordination across...

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