Post Lesson 38/Pre Lesson 39

It is really important to keep in mind the difference between claims or value judgments (normative) and statements of reality (postive) especially when evaluating an argument. Arguments rest on premises and draw to conclusions based on logic. That logic should take you from the facts to the conclusions and you should constantly be evaluating whether there is another alternative to the proposed logic. This is a life skill not just a skill relating to economics. If you have further questions PLEASE come see me.

Secondarily, identifying those normative statements which may be intended to "frame" an argument or discussion by taking certain tradeoffs off the discussion table are important. So, for example, this often occurs when the words 'fairness,' 'greed,' or 'exploitation' are used. It is not that none of those things may occur but rather that we should be sceptical that those words will not merely be used to avoid a conversation about the opportunity cost of an action. The best current examples I can think of come from sequestration. So many of the arguments against sequestration go something like: you can't cut funding from there itll cost lives! The idea being that you should never do something which may, however indirectly, result in death. Of course what often gets left out is that funding that project may cost lives in other areas, so that spending money on airline safety might actually result in fewer dollars allocated to vehicular safety and actually result in far more deaths. In any case, we need to be aware of this.

For next time, in addition to your paper, write out two questions you would put on the final and answer them. Your final 15 IP points will be based on this submission.

Post lesson 37/Pre Lesson 38

The problems of government and business solutions to "unethical" practices as the same. Both government and business involve men, who, if given the wrong sets of incentives, may act in ways that ARE selfish AND at the expense of others. Such situations TRANSFER rather than CREATE wealth. This is something worth thinking about because economics is all about the ways we better allocate resources to CREATE wealth.

Just like in Smith's argument, someone who earns money by producing something has benefitted himself but he likely has also benefited someone else. The key here is that he will have benefited someone else if he is in a competitive market. Generally, markets will police, on their own, any attempt for an individual to be greedy, selfish, unfair etc and in the case where they do not, while governments may be able to help, they often won't for similar reasons because governments do not generally face competition.

In the last part of the discussion about Smith v. Marx v. Keynes I wanted to point out two crucial things. First, all of the above were focused on trying to allocate resources most efficiently. The fact that they came up with different answers is somewhat a result of the different circumstances they saw around them. Second, it is important to know how economists ended up where they are and to value what Smith and economics actually says. Economics does not say that being selfish is the way to get ahead, what it does say is that competition will allow for incentives that align acting in self-interest with service to others.

Next time we'll focus on normative and positive statements. You need to read BE 570-571, 596-603, and 608-612. Then bring an article which addresses an issue you believe needs to be corrected because of greed/fairness/equality etc. Finally, separate this list of statements into normative and positive:

• Higher interest rates cause people to save more
• High income taxes discourage effort
• High taxes on cigarettes discourage smoking
• Road-use charges would increase traffic
• People are more worried about inflation than global warming.
• People should save more
• Government should tax the rich to help the poor
• Smoking should be discouraged
• The tax system should be used to reduce traffic
• Technical change is a bad thing because it puts some people out of work
• Government should do more to reduce carbon emissions in order to save the planet from global warming

Post Lesson 36/Pre Lesson 37

Next time,

1. Read BE 621-627 and 634-637.
2. Then, think about what makes scrooge so unbearable to you. What stands out about Adam Smith's arguments, at least as Sowell tells them? How is this similar or different from Keynes' arguments?
3. Finally respond to this quote in your journal: "It is not from the benevolence of the butcher, the brewer, or the baker that we can expect our dinner, but from their regard to their own interest." Does this quote imply that we only get ahead by being selfish?

You will turn in your journal after this class.

I hope you enjoyed the discussion and review that Maj Ackerman did with you. Different perspectives are always helpful.

Next time we'll discuss both journals and sets of readings.

Post Lesson 35/Pre Lesson 36

Folks,

I want you to read the short 6 page section of conscious capitalism I emailed to you. In your journal please explain why you want to be an Air Force officer…why would you potentially risk your life for others…and what you think, if anything, that has to do with economics and business.

Last time we wrapped up the section on macroeconomics. In particular most classes played a game involving the role of government in society. We saw that different constructs provide different incentives to work or not work and thus provide different outcomes. Government has a crucially important role in both ensuring that free trade can occur (most notably by protecting property rights) but also in keeping itself from preventing trade (or avoiding onerous regulation).

The important things:

1. Property Rights (no one stealing your work after the fact)
2. Stucture of Laws
3. Competitive Markets
4. Efficient Capital Markets (ability to get more papers, staplers, workers etc)
5. Limited Regulation
6. Low Taxes
7. Monetary Stability (your work is worth roughly the same across time)
8. Free Trade

Government can either allow for these things to occur or keep them from occuring through being either too involved or not involved enough.