101Lecture02F'07post

101Lecture02F'07post - Professor Bogan ECO 101 Lecture 2...

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Professor Bogan ECO 101 Lecture 2 POLITICAL ECONOMY PROCEDURAL ITEMS: Powerpoint Slides are available on Blackboard web page under Course Materials. If you need a precept or to change precepts, email Antonella Tutino atutino@Princeton.EDU Precepts/classes start today. Check your location for class on Blackboard
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2 Some aspects of theoretical socialism THEORETICAL SOCIALISM Group ownership Social Responsibility Consensus on goals Ethics are state-taught Group allocation: planned economy, prices set by the government Incentive to produce: common good Role of government is the allocation of most resources QuickTime an TIFF (Uncompress are needed to see
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3 Some aspects of theoretical capitalism THEORETICAL CAPITALISM Private ownership Individual perspective Less need for consensus Ethics: religion or family-taught Market allocation: price determined by supply and demand; income determined by ability to produce (and inheritance) Incentive to produce: personal share of output QuickTime TIFF (Uncompres are needed to see
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4 The role of government in pure capitalism 2) Provision of pure public goods, especially military defense 3) Correct externalities 1) Protect private property: courts, laws, political stability
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5 Pure Socialism vs. Pure Capitalism —1 Pros of each system: SOCIALISM More even distribution of income (social justice) CAPITALISM Efficient, leading to higher GDP Fosters innovation
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6 Pure Socialism vs. Pure Capitalism — 2 Cons of socialism: 1) Inefficiency leads to less overall growth and innovation 2) Collective ownership causes increased bureaucracy 4) Lack of information 3) Weak incentives to work, or to save and invest 6) No losses or bankruptcies to drive out the inefficient 5) Few true prices , and bad signals
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Pure socialism vs. Pure capitalism — 3 Cons of capitalism: 1) In market system, uneven distribution of talents results in uneven distribution of income
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This note was uploaded on 04/08/2008 for the course ECO 101 taught by Professor Elizabethc.bogan during the Fall '08 term at Princeton.

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101Lecture02F'07post - Professor Bogan ECO 101 Lecture 2...

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