Midterm - 1 Economics Economics is the study of scarcity...

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1. Economics Economics is the study of scarcity, Cannot avoid scarcity Economics is the study of choices and incentives The more freedom you have, the more responsible you will act Macroeconomics is concerned with the whole economy and aggregate output Economists often say no when deal with scarcity issues A good heart isn’t a good enough for economics 2. Liberals vs. conservatives Liberals i. wants government action by taking from rich and giving to poor ii. like wage and price controls iii. wants gov spending iv. high taxes on rich v. fair trade vi. believe we need people making decisions for us Conservatives i. Against gov action ii. Never wage price controls iii. Gov balanced spending iv. Simple flat tax v. Wealthy shouldn’t be condemned vi. People can make their own decisions vii. There are evil people in the world who cannot be reformed How smart you think people are and how much envy you have affects which on you are 3. Modern themes in econ There are no such things as a free lunch All decisions have costs and benefits to you as well as the society Demand and supply determine value, so value is 2-dimensional Moral capitalism generates more happiness for the masses than any other system Important to reward productive people in system of moral capitalism Voluntary exchange benefits both parties People make choices for own self interest 4. Martin Luther/ Isaac Newton
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Luther protested the payments to priests to enhance peoples personal relationship with God Luther’s protests set off religious wars in Europe between the protestants and Catholics After graduating from Cambridge, the plague forced Newton to return to his hometown where he formulated his law of motion and studied light Newton did not become famous right after 1666 because his works were not published immediately Newton became head of the mint in England in the late 1690’s and put England on a gold standard in 1717 that lasted 2 years Newton was well known when he died 5. Adam Smiths lives before 1776 Kidnapped by gypsies, dad passed away before he was born Met Thomas Jefferson and ben franklin Began giving lectures after he got his PhD in moral philosophy at Oxford “Moral” means there are absolute universal truths theory of moral sentiments, society doesn’t need many formal government laws to control peoples’ behaviors talented individuals need to give back to society in a positive way traveled through Europe while teaching a young duke 6. Adam Smith “Wealth of Nations” The wealth of nations is goods and services, not money Free trade increases the opportunities for division and specialization The gov needs to regulate the banking system The gov must define private property rights and must set up a justice system that defends these property rights As individuals purse their own self-interests, there will be greater
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