Your first papers

1. Your first papers • Study MLA

3. Your first papers • Study MLA • Effects= noun • Affects= verb • Attribute when direct lift • Cite text to show you’ve done reading • Economics is a singular subject for this class… (not “Economics are”)

4. Your first paper • Awk= awkward, needs to be rewritten or the sentence/passage is not clear • Proper nouns: be certain (e.g., it’s economics, not Economics as a general area of study) • It’s= it is • Its= possessive

5. Ok, what’s up with all those scrawls on my paper??

6. What price did you find… and what did it say to you?

7. What is a nation’s wealth?

8. What make a nation prosperous? • Total of goods and services available • Not just houses, cars, smart phones, strong coffee… also the things that make a society great • Universities, hospitals, security, freedom, the arts, scientific discovery, educated population • Strong moral consensus… Judeo-Christian values

14. 2006 Fender Telecaster American Deluxe FMT HH • Gorgeous flame • Ebony board • Screaming Enforcer pups • Tweed hard case • Only played in church on Saturdays and Sundays by a careful economics teacher

15. 2006 Fender Telecaster American Deluxe FMT HH • Price?

16. 2006 Fender Telecaster American Deluxe FMT HH • Price? • $149,999!!!!!!!!!!!!!!!!!!!!!!!!! • You save $125,000 compared to the older Les Paul Standard… wow!!!!!!!!!!!!

17. Is that the price? Is it??

18. Prices “…understanding how prices function is the foundation for understanding much of the rest of economics…”

20. iPhone • Tens of thousands of people on three continents, working for more than 30 companies make the iPhone • U.S., Korea, Taiwan, China, Germany, UK, Malaysia • Only $10 in direct labor goes to Chinese workers, says Forbes

21. Other people had to be incented to produce these things for us

22. Other people had to be incented to produce these things for us • Prices are at the heart of such incentives in a market economy

23. Other people had to be incented to produce these things for us • Prices are at the heart of such incentives in a market economy • We depend on millions of strangers for our food, clothing, shelter, entertainment, almost everything • Prices do that

24. “Since we know that the key task facing any economy is the allocation of SRTHAU, the next question is: How does an economy do that?” What are the two major options?

25. Price-controlled (capitalism) or central control

26. Prices or central control • Margaret Thatcher didn’t bring food to the UK… prices brought food from throughout the world to a nation that cannot feed itself

28. Prices • No one person or bureaucracy -- whether in Moscow, Beijing, Tallahassee or Washington -- can possibly effectively coordinate all the millions of economic transaction that occur each minute in a complex society

29. Prices • No one person or bureaucracy -- whether in Moscow, Beijing, Tallahassee or Washington -- can possibly effectively coordinate all the millions of economic transaction that occur each minute in a complex society • Example of USSR food system compared to Britain’s • Gorbachev with “little understanding of economics” as leader of the biggest nation

30. President Obama’s ‘Les Paul guitars for guys and gals program’

31. President Obama’s ‘Les Paul guitars for guys and gals program’ • How would this work?

32. President Obama’s ‘Les Paul guitars for guys and gals program’ • How would this work? • Prices are not just an obstacle to your getting a 1959 Les Paul. The $275,000 price reflects the reality that there are only a handful of these instruments in the world

33. Primary Roles of Prices

34. Primary Roles of Prices • Provide incentives to affect behavior in the use of resources and resulting products

35. Primary Roles of Prices • Provide incentives to affect behavior in the use of resources and resulting products • Convey terms of financial transactions among consumers, producers, retailers, workers, landlords, etc.

36. “Prices are like messengers conveying news”

38. Prices • Why does Dr. Sowell compare prices to the worldwide web?

39. Prices • Why does Dr. Sowell compare prices to the worldwide web? • Prices connect you to anyone, anywhere where prices operate freely

41. Prices • Why does Dr. Sowell compare prices to the worldwide web? • Prices connect you to anyone, anywhere where prices operate freely • Price-coordinated markets enable people to signal to other people how much they want and what they’re willing to pay

42. Profits & Losses • Why are losses as important as profits to businesses in a free market economy?

43. Profits & Losses • Why are losses as important as profits to businesses in a free market economy? • Losses tell companies what to stop producing

47. Romans 3:23 • “For all have sinned and fall short of the glory of God”

48. Romans 3:23 • “For all have sinned and fall short of the glory of God” • Humans will make mistakes in every economic system. Key question: what incentives and constraints force them to correct mistakes?

49. Romans 3:23 • “For all have sinned and fall short of the glory of God” • Humans will make mistakes in every economic system. Key question: what incentives and constraints force them to correct mistakes? • Price-controlled economy, bankruptcy looms; in socialist, leaders can continue to make same mistakes indefinitely (Cuba, N. Korea)

50. Prices and Central Planning • Countries with socialist or Marxist economic systems rely on central planners to set prices and determine what goods are produced and where