*Typically the transactions are characterized as between a buyer (who might value a pair of sunglasses at $90) and a seller (who might be able to produce it for $30), but that need not be the case. It is simply any exchange between any two actors who value things differently.
*I still get confusion because people argue that many people have no money, so allocating goods by money prices is unfair and unjust. But once you understand that money simply represents goods and services that you have produced, and that are found to be valuable by your fellow citizens, you are partway to addressing this dilemma. Everyone has the ability to produce – and the natural state of nature is non-production – it is poverty. Wealth and happiness is not an entitlement, they can only be possible when you take efforts to produce things of value (broadly defined too). The collectivists among us run away from this reality by talking about “causes of poverty” as if nothingness has a cause. Wealth and somethingness is the thing to be explained, and it is up to the astute reader to understand what things make it difficult for people to move from a state of nothingness and into a state of somethingness.
Thursday, February 9, 2012
Friday, January 27, 2012
Chapter 16 Frideman
There are three ways in which the market outcome could be changed. （Marshall improvement? NO!）
i. The bureaucrat-god could have the same quantity of the good produced in the same way, while changing its allocation--who gets it.
ii. He could produce the same quantity and allocate it to the same people, while changing how it is produced.
iii. He could change the quantity.
i. The bureaucrat-god could have the same quantity of the good produced in the same way, while changing its allocation--who gets it.
ii. He could produce the same quantity and allocate it to the same people, while changing how it is produced.
iii. He could change the quantity.
Chapter 4 Frideman
a change in the price of one good affects not only the cost of that good in terms of others but also the consumer's total command over goods and services--a drop in price is equivalent to an increase in income. A full discussion of this would involve the income-compensated (Hicksian) demand curve discussed in the previous chapter.
Thursday, January 26, 2012
The methodologies of economics
i. Deductivism by John Stuart Mill.
So many causal factors influence economic phenomena, and experimentation is generally not possible, there is no way to employ the methods of induction directly.
*independently established laws. The basic generalizations are instead statements of tendencies.
*neoclassical theory focuses much more on individual preferences and decision making than did classical economics.
ii. Positivist or Popperian Views
Good science be well-confirmed by empirical data.
iii. Predictionism by Milton Friedman
The goals of a positive science are predictive, not at all explanatory.
All that matters is how well a theory predicts the phenomena in which economists are interested. (falsity of assumptions or of predictions is unimportant unless it detracts from a theory's performance in predicting the phenomena in which one is interested )
iv. Eclecticism (various)
to fucos on the methodology economists practice, making use of whatever tools philosophers of science have had to offer that appear to be well-made and apt for the job
So many causal factors influence economic phenomena, and experimentation is generally not possible, there is no way to employ the methods of induction directly.
*independently established laws. The basic generalizations are instead statements of tendencies.
*neoclassical theory focuses much more on individual preferences and decision making than did classical economics.
ii. Positivist or Popperian Views
Good science be well-confirmed by empirical data.
iii. Predictionism by Milton Friedman
The goals of a positive science are predictive, not at all explanatory.
All that matters is how well a theory predicts the phenomena in which economists are interested. (falsity of assumptions or of predictions is unimportant unless it detracts from a theory's performance in predicting the phenomena in which one is interested )
iv. Eclecticism (various)
to fucos on the methodology economists practice, making use of whatever tools philosophers of science have had to offer that appear to be well-made and apt for the job
Friday, January 20, 2012
How Economists Think
*Differentiate wants and needs
Two major assumptions:
i. comparability, the assumption that the different things we value are comparable.
ii. non-satiation, the assumption that in any plausible society, present or future, we cannot all have everything we want and must give up some things we desire in order to have others.
*value (of things) means how much we value them and that how much we value them is properly estimated not by our words but by our actions
This definition is called the principle of revealed preference--meaning that your preferences are revealed by your actions.
the claim that people do not really have any choice confuses the lack of alternatives with the lack of attractive or desirable ones. Having chosen the best alternative, you may say that you had little choice; in a sense you are correct. There may be only one best alternative.
* Choice or Necessity? You just don't want it(given the cost, eg. $1000 shirts)
Two major assumptions:
i. comparability, the assumption that the different things we value are comparable.
ii. non-satiation, the assumption that in any plausible society, present or future, we cannot all have everything we want and must give up some things we desire in order to have others.
*value (of things) means how much we value them and that how much we value them is properly estimated not by our words but by our actions
This definition is called the principle of revealed preference--meaning that your preferences are revealed by your actions.
the claim that people do not really have any choice confuses the lack of alternatives with the lack of attractive or desirable ones. Having chosen the best alternative, you may say that you had little choice; in a sense you are correct. There may be only one best alternative.
* Choice or Necessity? You just don't want it(given the cost, eg. $1000 shirts)
Thursday, January 19, 2012
David Frideman, Price Theory Ch 1
We assume that every people has reasonably simple objectives and choose the correct means to achieve them.
Rationality is an assumption about individual, not about group (think about the prisoner's dilemma)
*rational ignorance: it is rational to be ignorant when the information costs more than it is worth.
Rational behavior (in the sense of "making the right decision") requires information. If that information is itself costly, rational behavior consists of acquiring information (paying information costs) only as long as the return from additional information is at least as great as the cost of getting it.
Rationality is not the same as the assumption that people reason logically. Logical reasoning is not the only, or even the most common, way of getting a correct answer. Since there're rationality with no mind to reason with. (computers that can learn)
Rationality is an assumption about individual, not about group (think about the prisoner's dilemma)
*rational ignorance: it is rational to be ignorant when the information costs more than it is worth.
Rational behavior (in the sense of "making the right decision") requires information. If that information is itself costly, rational behavior consists of acquiring information (paying information costs) only as long as the return from additional information is at least as great as the cost of getting it.
Rationality is not the same as the assumption that people reason logically. Logical reasoning is not the only, or even the most common, way of getting a correct answer. Since there're rationality with no mind to reason with. (computers that can learn)
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