Reading Assignment #4- Aspen Ideas Festival Debate

A. 

Overall, I found the points made by Justin Wolfers and Robert Frank to be quite interesting. Broken up by what each of them had to, below is what I found to be most interesting:

Wolfers:
Wolfers did an extremely good job arguing that overall, people become happier as their income increases. What I found fascinating was that he showed the happiness trends in the US. According to Wolfers, in America, most people haven't had income gains, which explains why Americans aren't necessarily becoming happier.

I found this fascinating because as one of the richest countries in the world, I assumed the US was experiencing income increases. But perhaps as we learned in class, we are not experiencing such astronomical income growths as we did in the past because or economic growth is slowing down.

One other very interesting point Wolfers made was that while it appears income growth is directly correlated with happiness to an extent, it is NOT the desire of all humans to be rich. A perfect example of this is how no one goes from moving from poor America in southern Texas to northern Mexico, where those same Texans who may be poor would be extremely rich in Mexico, a poor country. Thus it appears we are all giving up the option of being rich in a poor country.

Frank:
As I explain in part C, I did not find Frank's argument to be that convincing, which really wasn't his fault. It is difficult to argue something that is proven untrue by statistical evidence, which is why in my opinion, Wolfers had such an easier time arguing his point.

This hockey player didn't wear a helmet, perhaps trying to gain a competi-
tive advantage. As Frank points out, this resembles the real life economy.

Nonetheless, Frank really did present some fascinating points that sort of proved that it is not necessarily money that makes us happy, but how we as human beings feel in comparison to other humans.

I really found Frank's example about how hockey players are a good example to show how competitive advantages in society work to be very interesting. He asked the question: Why do hockey players often wear no helmets when they have the chance to, but they will often vote to make helmet wearing a requirement?

Frank's response: If one person takes a helmet off, that player gets a competitive advantage because he can skate faster and move around easier on the ice without having to worry about a helmet on his head. The other team's response to a player taking a helmet off, however, is that they too take their helmets off. The end result is that now everyone skates without a helmet and neither team gains a competitive edge, and we are right back to wear we started.

I thought this was an interesting way to look at competitive advantages in the market because one of the things Frank was trying to show is how valuable competitive advantages are in the economy. In the case of the hockey players, they were willing to risk their lives by taking off their helmets. But competitive advantages are so desired, it is worth such a big risk.

I also found Frank's points about relativivity to be very interesting as well. He talked about how people set the bar for wealth in many instances. Take a mansion for example. People consider a mansion to be a house that is bigger than what is considered a normally sized house. But, if you live in a poor country where houses are small, a "normal size" house might be a mansion.

Also consider the example he shared about celebrity birthday parties. Celebrities spend millions of dollars on birthday parties, so other celebrities are pressured to do the same, and if they don't the party might not be considered a good party.

This is a perfect example of relativity because to one person, a house/party might be great but to another, it might be horrible. Thus, in many instances, we as a society decide what is good or bad and what will makes us content.


B.


1. In my opinion, Frank had the unfair task of trying to prove that income and happiness are unrelated. Have we gotten to the point where we can literally say that income and happiness are 100% correlated?
2. Frank also mentioned how it might be relativity that makes us all happy and not income. Do we as people really care about how much money we make, or is it more about how much success/materials we have in comparison to others in the world?
3. While the data does support that wealthier people seem to be happier, there have to be at least a handful of poor people who are happy (I don't recall either Wolfers or Frank mentioning this in the debate, this is just an assumption on my part). What is it that allows certain poor people to be happy when data suggests income is such a big part of happiness.

C. 

The video we watched for our weekly reading assignment was a video that covered the topic of the economics of happiness. In short, it was a debate between the two economic professors about whether or not income and happiness are related. Justin Wolfers argued that happiness and income are related, while Robert Frank argued that happiness and income are not related.

Here is a brief summary of what Wolfers had to say:

Overall, I'd say that Wolfers did a better job presenting graphical evidence about his argument. His argument that happiness and income are related was extremely convincing. One graph in particular that he showed was a graph depicting the 25 largest countries in the world and their reported happiness. What the graph showed was that richer people are happier than poorer people.

Wolfers showed several more graphs that proved his point- that it appears wealthier nations are indeed happier.

There were also some other findings Wolfers presented relating to income and happiness. Here is a list of them:

1. People who are wealthier have more enjoyment during the day
2. Less depression for wealthy
3. More stress in wealthy world- perhaps from having to work harder to generate more income
4. More likely to receive respect from people in richer countries
5. More likely people ate good tasting food recently in rich countries
6. People smile/laugh more in richer countries
7. Less pain experienced by people in richer world

I also found one final point of Wolfers to be fascinating: Love is not at all more likely in the rich world. What does the show? It shows that money can't buy a person love. Love is its own entity, and can be attained in any type of culture.

Here is a brief summary of what Frank had to say:

When it came time for Frank to debate his side of the argument, I feel as if he sort of shied away from the topic he was assigned, mostly because it seemed like he didn't entire believe that happiness and income are not related. You can't really blame him either- the is so much evidence to prove that income and happiness are indeed intertwined, so it was a very hard task for Frank to convincingly argue that income and happiness are complete unrelated.

Because of this, he sort of argued that money does buy happiness, but there are other aspects of life as well that lead to our happiness, such as:

1. Adapting to the world around us- this is very important
2. Relative income- perhaps it is not money that makes us happy, but rather, how much money we have in comparison to others, or how big our house is in comparison to others, or how much food we have in comparison to others
3. People care about relative consumption more in some domains than in others
4. Such concerns lead to expenditure arms races focused on positional goods, or those goods for which relative position matters most.
5. These arms races divert resources from non-positional goods, causing large welfare losses.
6. Top earners spend more because they have more money. This too can lead to happiness because these people can have more material gain.

One very interesting point that Frank made for his argument (an argument that actually was very convincing):

1. Large US counties with higher growth also had higher growth in commute times, divorce rates, and bankruptcy rates.
1. Clearly, all of the above things do not make people happy, which could point to the fact that areas with high income/growth could have unhappy people because of the strains/issues with which high income societies commonly have to deal.

Class Summary #13 for 9/30/11

Today's class was filled with Prof. Rizzo presenting ideas from economic philosophers, specifically Adam Smith.

First, Prof. Rizzo summarized what he told us about the philosopher Hume in the previous class. Hume argued why mercantilist thinking (that prices will adjust) on trade was hurtful (because what matters is how much stuff you can consume). You should expect prices to be the same everywhere.

Then, we learned about Adam Smith, the great economic philosopher who lived from 1723-1790.

In 1776, Smith wrote Wealth of Nations. In this book, Smith argues that government doesn't need to control the economy. Rather, we should be free and good outcomes will follow. Some government is good (so as it is not an anarchy), but more freedom from government allows for us to prosper more.

Prof. Rizzo then explained three important things Smith thought regarding what the government SHOULD do:

1. Create/control a police and court system
2. National defense- to protect us from foreign bandits
3. Take care of public works (roads, bridges, things that private companies probably wouldn't do if no one else did)

In short, Adam Smith completely believed in laissez-faire, which was the belief that transactions between private parties should be free from state intervention, intervention that may include tariffs, force/seizure, enforced monopolies, etc. This makes sense as laissez-faire is french for "let do", but it also has been translated to mean "let it be"or "leave it alone".

Below are three more beliefs of Smith that Prof. Rizzo emphasized in class. They represent ways we can flourish in a society that has some governmental control and is not an anarchy. Thus, we as people to have a flourishing economic environment need to have:

1. Rights to property
2. Division of labor- this is vital. Poverty and chaos will occur if we don't have this. Division of labor increases our propensity to make our lives easier.
3. Exchange has to be peaceful and mutually agreed upon (voluntary trade, not forced by threats)- in other words, one can't kill, rob, defraud you or secure special privileges for the authority through exchange.
4. No special privilege for anyone

If these all exist, a society resembling capitalism will exist.

The source of wealth according to Smith= our ability to produce stuff and exchange stuff that people value. In other words:

WEALTH=Produce and Exchange. If you can't do this consistently, it is hard to be wealthy.

Also, Smith believed that the way to get rich and increase production is by making rational decisions that benefit one's self-interests and do not take other's self-interest into account as ones main worry.

For example: A potato farmer wakes up at 5am to farm. Does he do this for us, so we can eat? No, his incentive to do this is to make money. Without incentive to work, nothing in the world would consistently get done. Sure, maybe the potato farmer cares about us. But the bottom line is that he is doing this job because it makes sense for his own best interest.

Another example of this is Prof. Rizzo. Does he teach us economics because he wants us to learn? No, he teaches us economics so he can get a pay check. He may do some things extra for free because he is a good guy, but overall, he teaches us because doing so gets him money. One needs incentive or it is hard to be motivated.

Smith also argues that while it may mostly be about our self-interest, it is not completely: For example, helping out others is important, and in fact, doing so may benefit our self-interests as well.

Another Smith philosophy is that effective competition is important to promoting production. It doesn't guarantee a utopia, but having effective competition seems to bolster production that does have no competition.

Another important belief of Smith is that the government allows people to be able to buy and sell whenever, wherever and with whomever they want. The keys to this are as follows:

1. Parties should be able to set own prices
2. People should be free to sell and buy anything
3. Enter into trade freely, no restrictions or force to trade
4. Any attempt to control prices prevents competition

Smith worried about two things in England. He felt future wealth was threatened by two forces:

1. Prejudices of public may sabotage ourselves
2. Main worry: Power of the interests may cause governments to pass laws to prevent competition/being overthrown. This is very bad for the growth of people/societies.

After the days of Smith, some very interesting things happened that Prof. Rizzo shared with us in class.

In 1790, after Smith dies, Grain (which was the name of corn) prices quadruple in England. Thus, people start bringing in food from abroad because of the prices. Naturally, the landowners in England hated this as did the government, so what is known as The Corn Laws resulted.

The Corn Laws basically stated that France could charge all citizens whatever price they wanted on grain regardless of where people bought the grain. Grain was hard to grow in England because it wasn't flat like other countries, so prices were high in England. Thus if a person bought grain in one country cheap, they'd automatically have to pay a traiff of the difference to match the price in England.

For example, if a person went to France to buy grain for $2, and the price was set at $10 in England, the person would have to pay an $8 tariff, thus making them pay $10 for grain.

In 1820, as would be expected, British citizens became upset and fought against the law- AKA the Anti-Corn Laws. In 1846, the Corn Laws were repealed.

Three years later, English reduced all food tariffs and eventually, there were no tariff at all. England was the first nation to have free trade. This caused prices to fall and competition/growth was spurred.

Prof. Rizzo concluded class by sharing some facts:

1. Karl Marx believed that capitalism was production for the masses. He argued that capitalism produced too many goods for us to handle.
2. When economists refer to necessities, they mean the same necessities that were necessities in the past. So a refrigerator isn't a necessity but not dying from rotten food is a necessity (so having good food to eat).
3. Proof of our progress in the world: Freeing the masses and us being at the point where normal people now have the opportunities that only wealthy people used to have in the past.

Class Summary #12 for 9/28/11

Today, Prof. Rizzo began class with the Factor Market/Goods Market diagram with which he ended last class.

Basically, the Factor Market is the top of the diagram, where people send stuff (their labor, machines, etc.) to businesses, and in exchange, people receive payments (money or anything else) from the businesses. Therefore, the flow of money in this instance is from the businesses to the people.

In short, the Fact Market is when businesses receive the input they need from people to make products.

The Goods Market is the lower part of the diagram and in short, it is anything you purchase. Basically, you as the person send any form of payment to the business to receive the stuff you desire.

Another important less was that all money spent by people becomes income for others.

Prof. Rizzo also presented us with a formula: (C-T) + I + G +NX

C= consume consumer goods
I= invest (purchasing financial assets for a company)
T= taxes
G= government purchases (like a bridge and its material, highway streets, etc.)
N= your spending on certain products.

Then Prof. Rizzo went on to speaking about the French Physiocrats, a group that he talked about last class as well.

The Physiocrats believed that food/production was the source of all income and wealth because we need food to live. Their model was that if farmers produce a surplus of food for their family, less people in the family need to work. Their idea was that these nonworking, "free" people can work on other crafts to improve farming productivity. Thus, it allows people to work on crafts, instead of working on the farm, to make farm production more productive.

One problem with this theory, however, was that the Physiocrats thought the craft making was a leisurely activity and not a necessary practice, but for the production of our world, it was completely necessary and un-leisurely.

Then, we move on to the Mercantilists, who didn't agree with the Physiocrats- they didn't think this was the source of wealth.


Rather, the Mercantilists believed the following were sources of wealth:

1. Gold in treasury (modern day equivalent= making of dollar bills)
2. Wealth/finances of king (modern day equivalent= tax revenues)
3. Positive balance of trade (modern day equivalent= still trade)

Then there was another group called the Scottish Moral Philosophers. The most prominent moral philosopher was Hume, who was mostly known for doing two things:

1. took modern approach to a lot of things, unlike physiocrats, he believed that the laws of economics could stand on their own. He also rejects mercantilistic doctrine and physiocrat doctrine (food is source of income).
2. Commerce was the source of economic growth

Another important idea is that of the Law of One Price, which stated that, for example:

• When British spend money in France or other countries, there is more gold in France, so prices increase in France because people have more money there, and prices in England decrease because people have less money. That is one of the reason why the kings of countries didn't want people spending money outside their own country- they didn't want to lose wealth.
• The belief, however, is that prices around world should be the same. Money is neutral, so the amount of money/gold in a certain country shouldn't alter the price of something.

Below are some other important notes from class:

1. Mercantilists believed trade has a zero sum and net effect of 0, and that money is wealth. At this time, the king controls trade because he had to make sure that gold kept coming in to stay wealthy.
1. Reason why this was the case was because there was a fixed amount of gold in production during this time period, which means as one country got richer, others had to get poorer. And of course, the richer you are, the better opportunity you have to engage in war more and win war, which is important to gain more land and defend yourself.
2. In result of all of this, the king restricts imports because then one country will get more gold and take away from country's wealth when their country pays for the import. It is, of course, ok to import from within country, but not from outside.
3. Kings of course would promote exports so they could get/take away money from other countries.

The end conclusion of all of this: Trade cannot be free. The mercantilists supported this in their doctrine.

The reason why its so imperative to keep gold in country and not encourage outside trade: Trade promotes individual gain in this time, and at this time, it is in social/community interest to have gold. Not about the individual, more about society as a whole, so its important to keep gold in country and not trade for personal gain at expense of country.

Hume continued IMPORTANT:

Prices across border will adjust

If money goes into other countries, three positive things happen:

1. Competition- lights fire under native population that you might otherwise never see. Without competition, production would not improve. Kodak film cameras would still be in use today.
2. Learning and Innovation comes from trade, learn new techniques/ideas
3. Without a lot of trade, there is no DIVISION OF LABOR, which is dividing up tasks for different people to do different things, thus being more productive by getting more stuff done. Also, this leads to more wealth as with new technologies, wealth is a result.

Class Summary #11 for 9/26

Today was a class filled with a ton of information. According to Prof. Rizzo, it was the first day we finally started talking about what economics really is.

Prof. Rizzo began class my discussing the importance of technology. Technology makes each worker more productive, which in turn increases the number of sales producers make and increases wages.

Therefore, there is a chain of events that occurs with the influx of technology:

1. Workers become-
2. More productive
3. Wages rise because there are more sales. This wage rise should motivate those who don't work or who don't produce to get into the production industry because wages are rising in that industry. That, in turn, causes more to be produced, which is good for the improvement of more technology.

A result of wage rises, of course, is that living standards rise as well.

Then Prof. Rizzo went on to discuss some of the reasons why we were able to begin the Industrial Revolution (18th to 19th century). Here are some of them:

1. The revolution did not occur because of one particular event, rather it was the culmination of many spontaneous changes that probably took 400-500 years to come into being.
2. More and more, people were encouraged to trade with/travel to other countries. 
3. There was a slow decay of religious mysticism. In other words, life today became just as important as life after death- prior to this era of IR (18th to 19th century), the after-life was emphasized. But now, religions began to preach how important it was to take advantage of our talents and make the most of our lives.
4. Certain material changes made market systems possible, as did scientific progresses.
5. This era connected groups of smart people who stole each other's ideas, which led to new creations. This was a huge benefit for our society.
6. We improved our defense systems- it is important to be able to defend ourselves to maintain our innovations and improvements.
7. We had many good ideas. The IR was as much about good ideas as it was about the actual creation of goods.
8. One scholar, Adam Smith, argued that institutions are most important determiner of wealth. An institution is something other than money that we do that helps us get better social lives.
1. respect of the rule of law=one part of institution
9. England's government offered more freedom and tolerance than other countries, which allowed for more innovation among England that led to IR.
10. People changed their attitudes on Bourgeoise (middle class)

After this, Prof. Rizzo shared with us some very important information about Mercantilism.

Mercantilism: a system that was present in the Western world before the IR.

1. It was a system that existed until the mid-18th century, system where kings saw it as a their right and duty to oversee and plan all economic activity.
2. AKA "progressive corporation"

Major aspects of Mercantilism included:

1. Heavy restraints on citizens by king
2. Protectionism 
3. Existence of craft guilds
4. Licenses
5. Government granted monopolies like British East India Company
6. Import/Export regulation
7. Restriction on free movement of people, free movement was prohibited
8. Limits on domestic production by kings. In other words, kings could stop people from making stuff.
9. Extensive price controls- king set the prices on items
10. Wage controls- There was a maximum wage limit, and people were incarcerated for paying people too much.

One reason why the king could do this was because back then, resources and people were deemed to be property of the kings. The kings owned 100% of the land and people and people accepted this. The king ultimately would only make decisions to better himself.

One the reasons why mercantilism declined was because of the French Physiocrats, who thought you could define how people interacted with one another. The most prominent man was Quesnay, who was the first guy to ever write the Circular Flow of Economic Activity (AKA Circular Flow of Money).

The circular flow was defined as follows (see your notes for diagram): 

• It included two groups: individuals and firms. There is always going to be a constant flow of stuff between these two groups because:
• People rent their labor to firms
• Then the firms pay the individuals money
• The individuals then use their money to pay for goods that are made by firms
• Thus, the flow of money is circular- it goes from the individuals to the firms and then from the firms to the individuals and all over again, this continues.
• In other words, all income spent is used as expenditures in some way and all expenditues become peoples' income when they work.

Therefore, the big message of this is that: 

INCOME=EXPENDITURES (they are both the same thing)

EWOT Goggles #4

My weekly EWOT entry is about a story that Prof. Rizzo sent us earlier this morning about how "Driverless Car" had been recently navigating around Berlin's streets. Basically, a car built on computer chips and technology is in the works, and in 30-40 years, the article states, we should be able to drive our very own cars without actually having to drive it. We could have have the car pick us up by pressing a button on our iPod and just relax in the back seat as the car takes us where we want to go.

I read the entire article, found it interesting, and after reading the article, I began to reflect on what I just read to try to think of it in economic terms. Click here for the link to the article.

The first thing that came to mind was that these cars would be bad because that they would kill many jobs for people (taxi drivers, for example). But then, something that was discussed in one of my weekly recitations with Alex Ray a couple weeks ago popped into my head.

Driverless cars may cause some jobs to become extinct, but they would not
be bad for the job economy because they would create "job displacement."

I remember that in recitation, Alex taught us about how "The Luddites" protested and often destroyed the creation of new technologies during the 19th century (at the peak of the Industrial Revolution) because they worried that all of these new technologies would take away their jobs in the factory, as with more machines doing the work, less people would be needed to work to make the things the machines were now making.

In other words, the Luddites believed that technology took away their jobs. But as we learned in recitation, this couldn't be farther from the truth. When new technologies are created, there is what is called "job displacement"- while some jobs are lost, others are created because there needs to be people to make the technology.

Therefore, new technology is actually a good thing, despite what the Luddites believed. New technologies allow us to become more productive, while creating different jobs for people to work. Technology may cause jobs to be lost, but from the technology, just as many different ones are created. And new technology allows us to produce more things at a faster rate than ever before.

Anyway, in terms of the "driverless car" story, I thought about what having a car like this would do to the job economy- would it be bad or good for the job economy.

I think that at first glance, many people would say that having driverless cars would not be good for the job economy- it would take away taxi companies, as people could just use a remote control to have a car pick them up. No longer would people need a taxi driver for them to take them places.

Also, a side effect of having driverless cars is that many gas stations would probably struggle, because if there were driverless cars, people would really only have to buy 1-2 cars per household, as opposed to the commonly seen, 1 car per person in each household. The reason behind this is because if lets say I needed a ride to the gym one day and my mom needed to go to the mall, the car could drive us both there and pick us up at our conveniences. Basically, the driverless car would need to make less trips since it could drive itself.

These above ideas are exactly what I thought when I finished the story. But after taking a few moments to think economically, I reminded myself that I was entirely wrong because of the Luddite example from recitation.

To begin with, the driverless cars would improve peoples' lives in society drastically, as people could get work done and do other things while driving places instead of having to worry about driving/controlling the car. People would therefore save a lot of time by having driverless cars.

Having driverless cars, just as was taught in recitation, would also create job displacement. Sure, maybe taxi drivers would become extinct. But there would still be car service companies that would be made because of these new cars. Companies would be created to have a lot of driverless cars that could be rented out to people who need a ride somewhere.

There would also be new jobs created in the form of having people build the new cars and constantly program/update the software in the cars. In cars today, there are not computer chips that control everything the car does. A lot of new jobs would be created so that people could make these new computer chips to control the car. Not to mention, all technology has to be updated at one point or another, so jobs would also be created in the form of software updaters.

As far as gasoline goes, maybe less gas would be needed but other types of fuel would be needed as well because of these new cars.

While some gas stations could continue to be gas stations, others could turn into "battery stations". In cars today, cars sometimes die and need new batteries. Think about how often a battery will need to be changed in a car that is completely full of technology. More jobs would be created in that regard- people to make stronger batteries, and jobs needed to make replacement batteries for dead batteries.

While I have found economics to be a bit confusing at times this semester, I have noticed that I am starting to think more in economic terms- at least enough so to know that while some jobs will be hurt because of the creation of driverless cars, the new jobs that will be created from it, and the improvement in everyday life that the car will give us, will make for an equally-as-good, if not better, economy.

EWOT Goggles #3

Last night, I had to deal with an important cost/benefit analysis connected to my participation on the baseball team here at the U of R. I made a decision on a situation using the economic theory we learned in class about cost/benefit.

This weekend, our baseball team hosted a number of recruits to visit the school for the weekend. Just to give a little insight, the typical recruit stays with a player on the team overnight and then spends the following day with him. The two recruits our team was hosting were staying in the Wilder Residential Hall- one of them in the Wilder Suite I live in (I'll call him John), and the other with the other Wilder Baseball Suite (I'll refer to him as Scott).

As I mentioned above, Scott was scheduled to stay in the other Wilder Suite while John was already settled in and set to sleep on the couch I have in my common room.

In the other suite, however, a player's friend had come in for the weekend to visit, and he was sleeping on the couch in the other suite.

Long story short, Scott didn't have a place to sleep at all- no extra bed/couch to sleep in. It was 10:30pm, pretty much the entire baseball team was out and about for the night, and I was left having to solve a problem that truthfully, shouldn't have been my worry- I did my job by hosting John, the other suite was irresponsible for not having a place for Scott to sleep.

Because I was the only baseball player left with the two recruits, I had a decision to make, which I thought of in economic terms:

1. Go to sleep and forget about finding Scott a bed.
2. Go out of my way to find the recruit a bed.

Here were the cost/benefits of my decision:

1. Go out of my way to find Scott a bed to sleep in.

I had a decision to make last night: to sleep or not to sleep.
The benefit of not sleeping outweighed the cost, which led
me to my decision of choosing option 1- find Scott a bed.

• Cost: Lose sleep because I'd have to go to bed later than I wanted. I had to wake up early the next morning to go and do my homework, so a result of me having to go to bed later would be having to wake up later the next morning, and thus, getting started on my homework later.
• Benefit: I'd be making sure that Scott has a good experience on his visit, which in turn might make him more likely to decide to come to Rochester (that is, assuming that in his mind, sleeping on the floor/in a chair would make his visit miserable). By coming to Rochester, Scott would definitely help our team out as he is a very good player. So therefore, the end benefit is that the baseball team at Rochester gets better.

2. Go to sleep and forget about finding Scott a bed and let Scott worry about where he was going to sleep on his own.

• Cost: Lose out on adding a very talented player to our team because of the fact that by not finding him a bed, he would probably have a miserable time on his visit because he'd be uncomfortable sleeping.
• Benefit: I'd get more sleep and thus I'd be looking out for myself as opposed to the betterment of the team. By going to sleep and letting Scott figure out his own sleeping arrangements, I'd be able to wake up earlier and get more of my homework done the following day because I'd be able to get to the library sooner.

The decision:

I chose decision 1 because I thought to myself how in the long run, potentially adding Scott to our team would be a much better benefit to receive than I could receive in option 2. In the end, after about 45 minutes of calling my friends, I found Scott a bed in the Tiernan Residential Hall. I may have lost 45 minutes of sleep, but I truly feel it was worth it.

In short, in my mind, the benefit of option one far outweighed the cost while the benefit for option two did not outweigh the cost. If we lost the chance to add a very good player to our program, I knew I'd regret making that decision down the line, which is why I decided to go with option 1.

I sincerely hope Scott had a good time on his visit- I guess I will learn next year if my decision was actually worth it when I see whether or not Scott decides to enroll at UR.

Class Summary #10 for 9/23/11

Today's class involved Prof. Rizzo continuing to share facts about our societal improvements.

Some of the facts he mentioned were:

1. In earlier days, there was no threat of nuclear war but bubonic plagues were rampant because of the lack of medical care. Nowadays, our medical technology prevents bubonic plagues but nuclear war is very well a possibility. We had no nuclear wars before because we are poor, now that we are rich we have that threat.
2. We have fewer conflicts and less deaths in war than before, which results in having more people alive today.
3. Despite the common belief of many, we have not wrecked the environment we have today to accomplish all we have accomplished. Around the world, resources are more abundant than ever. Every single resource is more abundant than before. The belief that the extravagant western lifestyle came at the expense of the environment is a myth.
4. The environment is also in better shape today than before- we have better air and water quality.
5. Many studies have shown that America is no more happier than poor countries, despite the fact that America is one of the richest countries. Political and social liberation is what seems to be where happiness comes from, not money.
6. Suicides have increased in US in the past 50 years. Potential reasoning for this? As Prof. Rizzo says:
1. there is better technology than ever to commit suicide, and there are different benefits/costs of committing suicide than there were in the past.
7. Although we continue to improve economically as a society, there has indeed been a slowdown in economic growth in recent years.
1. Biggest difference in terms of technology: between great-grandparents vs. grandparents, as opposed to parents and me. This shows growth is indeed slowing down.
8. Another phrase for the Industrial Revolution is the Commercial Revolution.

Prof. Rizzo then went on to talk about children in today's society vs. the past, which I found to be very interesting. Economically, this is how we think about children today:

1. Today: Child quality if more important than child quantity
2. Before: Quantity was more important than quality

Today, many people prefer to have productive, smart children over having a lot of unintelligent children. This explains why the average fertility rate per woman has fell in poor countries from 6 to 3 since 1950.

It is interesting when you think about it because in the past, people had a lot of children so the kids could help with chores and tend to the farm. Today, that is not how society is run as much of society is suburban nowadays. Now, families are content with only having a few children because we have more money and don't need to have a lot of children to help with work. As the poor moves up in society as well, they are needing less and less children and the children even become somewhat of a financial burden in some instances as having kids is expensive (raising them, buying things, medical bills, etc.)

The bottom line is that throughout human history, parents aren't making monetary profit off kids, especially in contemporary times.

Reading Assignment #3, "What Social Science Does- and Doesn't- Know"

A.

Truthfully, there was not too much I found interesting with this article, but there were two specific parts from which I did take something.

First, I found it interesting how the article argued that there is no sure-fire way to test social science/economic bills/programs because unlike natural sciences, you can't control everything that the bill/program is effecting. This leads to not being able to find definitive results when trying to test whether or not a social science program for improve will work successfully or not- at least without letting a program run its course for a significant amount of time.

I found this to be interesting because in today's society, so many people act as if they know what is the best way to improve our economy. Politicians trying to win office will promote a certain stimulus plan that they are confident will improve our economy.

Regardless of what George W. Bush may have claimed, he had no way of
knowing how successful- or unsuccessful- one of his bills/economic refo-
rms was going to be until he allowed it significant time to run its course.

But this article has made me realize that while there may be some reason to believe such politicians, the bottom line is that it is ultimately impossible for anybody to predict how successful (or unsuccessful) a bill/program will be, and therefore, it is important to take those claims with a grain of salt.

One other aspect of the article I found interesting was how the article suggested that over time/through social science experimentation, it was determined that changing one's environment is almost always more successful at fixing a social/economic problem than trying to changing a person.

For example, the article discusses a "social science experiment" about criminals and trying to reduce the crime rate in America. Following the "experiment", it was found that trying to counsel the criminals and changing their outlook on life really didn't change anything and crimes continued to be committed. But when they changed their environment- perhaps by moving them to a different, safer, city, crime was indeed reduced.

In another example, the article mentions how an economic program that creates more jobs was more effective in improve the economy than was a program that helped to build peoples' skills. Changing peoples' skills did not improve the problem, but by changing the environment- and adding more jobs- there was an improvement in a problem.

B.

1. Why is that people continue to be influenced by- and believe- politicians/governmental officials who claim they know how a certain economic program will work? It is clear from this article that in the majority of instances, it is imperative to allow a program to play out before evaluating how successful it is, so why is it that people continue to listen to these types of claims?
2. Since we can't experiment and find a definitive answer about whether or not a bill/program will be successful, on what do people base their beliefs regarding whether or not they think a certain program will improve a problem?
3. The article claims it is very difficult to accurately predict how successful a program will be. Is this really the case? Do you think that one can actually predict the success of a program after doing sufficient research and experimentation and if so, what is the best way to go about performing social science/economic experimentation?

C.

Overall, this article tried to summarize one main point: It is very difficult- or perhaps even impossible- to accurately test social science/economic reform with experimentation, as is does in the natural sciences. Because of this, it is imperative to give new bills/programs time to run its course before claiming that a program is either successful or unsuccessful.

Experimentation works in natural sciences because of how a "control" can be attained. If one does an experiment on let's say a plant, one can control the plants environment completely. If a person wants to see how a certain type of nutrient effect the growth of a certain plant, the person can pretty much get accurate results because they can do everything in their power to make sure that each plant is living in the same exact environment and receiving all the exact same treatments as another plant, except for the nutrient it is receiving. Therefore, from the experiment, one will learn a definitive answer about how successful a certain nutrient is at nourishing a plant.

In economic/social science bills/programs meant for improvement, you simply cannot do this. Let's say the government is trying to improve education in America, and it passes a certain program it thinks will help education in America imrpove. There is no definitive way to know whether or not the program will be an overall success without allowing it to run its course for a significant amount of time because unlike a plant, you can't control everything in different schools around the country. No matter what you do, there are always going to be differences in the school that could affect the success of such a program, such as how different weather might affect one's learning capabilities, how one school's financial situation might affect students' learning capabilities more than a school with another financial situation, etc.

The article also explains that through the social science experiments the author-and other-conducted, there are three lessons that have emerged:

1. Few programs can be show to work in properly randomized and replicated trials ---> one should be reluctant to believe claims of the effectiveness of new programs and policies. It is important to see how each program plays out before deciding whether or not one was a success.
2. In this universe, plans are more likely to fail than succeed. Programs that attempt to change people are more likely to fail than those than try to chance incentives or the environment in which the problem is taking place.
3. It is a rare occasion that a program creates enormous improvements---> programs that do work usually improve problems modestly in comparison to how serious the problem actually is.

The bottom line that we as human beings do not have a scientific method with which to understand human society. We may be heading that way down the line, but at this point in time, we are not yet there. The only way to learn whether or not a program is truly successful and to make a successful program is by trial and error and allowing a program significant time to run its course.

Class Summary #9 for 9/21/11

Today, Prof. Rizzo spent class presenting us with several different facts that prove how much better off we are in today's world compared to the past.

He also said that within the next few classes, we are going to begin to learn "real economics", so I am definitely looking forward to that.

Prof. Rizzo began class by showing us a pie chart which showed the typical expenditures of people in different eras.

In the 1790s, the typical American spent 75% of his/her income on food, and 91% on necessities as a whole.  In 1900, the typical American spends 44% on food and 76% on necessities. In today's day and age, the typical American spends 14% of his/her income on food and 32% on necessities.

What does this mean has happened to income?

1. Today, we have twice as much income to spend on other things, things we couldn't afford to spend on in past.
2. We are 14x better off now than ever before. In short, our income allows us to buy more because certain things are more affordable, we make more money, etc.

Additionally, many of the expenditures on the 2005 pie chart ceased to even exist on the 1790's version. On the 2005 pie chart, people spent their money on entertainment, soap/haircuts, education. This all shows that back in the 1790's those things weren't a priority because people didn't have enough money to use on other things besides necessities.

Also, in today's world, we could afford food prices if they doubled. 100 years ago, if prices doubled on food, we would all very likely die because we would not be able to afford it.

There are two major implications that everything above has on today's world, as explained by Prof. Rizzo. They are:

1. Risk- there is less of a risk nowadays because necessities (food) don't cost as much in comparison to our income. 
2. We can spend lots of money on other stuff because we don't have to spend as much money on food as we had to in the past.

Some more interesting facts Prof. Rizzo taught us today:

• The US government employs 20 million people, which comes out to about 1 in 7 Americans. The government is the biggest employer in the US.
• The US spends 1.2 trillion dollars on military/national defense. This is a result of our less spending on food- if we spent as much on food today as we did in past, we wouldn't be able to afford this level of national defense.
• In today's world, more people have cell phone subscriptions than people have access to clean toilets.
• We have more leisure time now than ever before: Men, on average, spend 8 hrs a week leisurely since 1965. Since 1965, women on average spend 6 hours a week leisurely.
• In 2007-2008, the price of wheat tripled. The last time that happened, 30% of the European population starved. This once again shows the progress we have made with income.
• The richer we become, the safer we become. Natural disasters aren't killing us as frequently as they did before, despite the fact that we continue to live in more and more dangerous areas than ever before.
• Homicides are down- before the IR, 35 per 100,000 people were killed of homicide. Today, that statistic is under 10 per 100,000.

Having this increase in come allows people to be different and have their own identity, because it is so easy to afford our own things, things that are not necessities.

Class Summary #8 for 9/19/11

Today in class, we discussed how much our world has improved since earlier time periods, specifically since the early 1900s.

Prof. Rizzo began class by summing up what we were going to be discussing . He said that "We're living much longer and healthier lives than ever before, and we're spending less time being sick and dying."

Here are some interesting facts Prof. Rizzo explained during his power point presentation in class:

1. There has been a 2% decline in each of the last 10 years in cancer diagnoses and the cancer mortality rate continues to decrease year by year.
• Prof. Rizzo also pointed out that "he loves cancer" because since new cancers are being discovered and people are getting it later in life, it means that we are living longer than ever before. The longer we live, the better chance there is of new diseases/sicknesses developing. Cancer is a prime example of that.
2. There is less of a risk for heart attacks today- because of ability to be saved from them from hospitals.
3. Obesity and diabetes are on the rise. This could have to do with the fact that people care less about their body because of the influx in medical technology. Therefore, people don't need to eat as healthy as they did a hundred years ago because there are simply not as many risks involved.
4. The average male height has risen nearly two inches since the Industrial Revolution.
5. Commonly cured diseases/illnesses from today, such as the Flu, Pnemonia, and diarrhea, were some of the most deadly 100 years ago and before that.

All of these facts bring up the quesitons: Do we care about this and why?

According to Prof. Rizzo, we do care about this. As he points out, the value of our health improvements are worth about $3 trillion dollars per year. The healthier we stay, the more wealthy we can become.

Prof. Rizzo also showed us a very fascinating graph, which showed how from 1962 to 2009, the greater income a person has (all over the world), a person will generally have a greater life expectancy.

It was also interesting to see how at the bottom of the graph were African countries, a continent that is generally poorer than other continents, and the top of the graph included countries such as the US, Japan, and China, which are all more wealthy countries.

Income has also dramatically increased since the past. In 1900, the per capita income was $7,000. Today, that value is at $45,000.

A person earning $45,000 in 1900 would be the equivalent of earning $350,000 today.

Because of our increase in income, we are able to work less to buy more things.

For example, a bike in 1895 cost approximately 260 hours of work, whereas, today, a bike would only cost around 7 hours of work.

We are also much wealthier today than ever before because of the fact that we don't need to pay for a lot of things that we had to before, such as an encyclopedia. We can just go on wikipedia for free online, and get ultimately the same result.

Another example of how we are working less and getting more: Many people are spending half of their full-time jobs doing leisurely activities such as Facebook. We are making more money now, and not nearly working as much as before when people had to tend to farms and work in factories.

One final thought Prof. Rizzo shared that I found very interesting was that prices of everything have not decreased since older times. 

Take, for example, the piper-cub airplane. It actually costs more for a piper-cub airplane today than it did 100 years ago. Why you might ask?

Back then, property and liability insurance was barely a part of business deals. Eventually, a ton of accidents began to occur and victims started suing the companies they bought the product (airplane) from. So, in some things, such as the piper-cub plane, there has been a price increase mostly because of insurance payments, which are payments that weren't really paid for earlier on.

EWOT Goggles #2

In recitation this week, we talked a little bit about incentives, which is a commonly discussed topic in economics.

Specifically, my TA Alex and I talked after class about the implication of a specific situation that I face in my real life on a weekly basis.

Three days a week, I go into downtown Rochester to work a job at a local radio station. I do not have a car on campus, thus transportation is often an issue for me.

To get downtown, I have one of two options:

1. Call a cab
2. Ask my friend who has a car to take me

Taxi is the way I'm getting to work from now on because
I now understand how significant it is for someone to
have a important incentive to properly get a job done.

Every single time I have went to my job this year, I have called a taxi and have had to spend $24 roundtrip. Each time though, I am tempted to ask my friend to get a free ride.

But as I learned in my recitation class, even though it is much more expensive, calling a taxi is actually there more economically intelligent way to travel. Here is why:

I need to get to work by 3pm. If I am late, I risk being fired, which would be very bad because my job is a very good resume booster for what I want to do with my life someday- be a sports radio personality.

Therefore, I really can't afford to be late to work and risk being fired- the opportunity to work where I work is a once in a lifetime opportunity and it will allow me to learn the requisite skills to someday become a successful sports talk radio host.

Because of the risk involved in not getting to work on time, I am better off calling a taxi because of the incentives each person would receive for taking me.

The taxi driver has the incentive of being paid. Because of this, he has a lot of reason to pick me up on time and be reliable, because if he doesn't, I might never call him again for business or will not give him a tip. In short, he is very likely to pick me up on time because his incentive is money, which is necessary to have in today's world.

My friend's incentive to take me is ultimately nothing- perhaps it is just feeling good about doing a favor for a friend. But, because there is not as great of an incentive for my friend, there is more of a chance that my friend will either:

1. forget to take me and not come
2. not be in the mood to take me, so just not come

Therefore, from here on out, I am definitely going to call a taxi to take me to work. It makes a lot of sense when thinking economically about it as well.

There is a much better chance that I will get to work on time when I call a taxi, because his incentive is so great. A taxi driver is a taxi driver for basically one reason only: to make money and to make a living. Therefore, money is a taxi driver's ultimate incentive. When an ultimate incentive is at stake, there is a much better chance that someone will get a job done- and do the job well.

Because the incentive for my friend to take me is not the "ultimate" incentive, there is less of a chance that he will be reliable and do that job he would be set out to do if he agreed to take me to work.

Class Summary #7 for 9/16/11

Today in class, Prof. Rizzo showed us a power point that showed the major differences between earlier time periods and today. The overall message he was trying to send us today in class was that we are much better off in today's day and age than people we're in the past- even most people who are in "poverty" are better off than those who we're wealthy in earlier time periods. I will explain why later on in this post.

Prof. Rizzo began class by explaining that when he, or other economists, talk about us as a society getting richer, they have already taken into account predicted inflation rates. Also, getting richer does not necessarily have to mean getting rich in the traditional sense- getting rich doesn't necessarily mean getting rich monetarily.

It could mean getting rich in terms of one's ability to command goods and services. For example, if technology improves to the point where we have faster working computers, we are getting richer in terms of our materialistic gain.

We also learned how a benefit does not necessarily have to be monetary as well. Prof. Rizzo gave us an example about his relationship with his daughter. His daughter just had her ears pierced, and he bought her 12 different pairs of earrings. Most people probably would thing that 12 pairs of earrings is a bit extreme, and that one or two is more than sufficient.

But the benefit in the form of the happy feelings Prof. Rizzo receives when he comes home everyday and, with his daughter, decides which pair to put in her ears, far exceeds the monetary cost to buy all of the earrings. Therefore, a benefit can be anything if it means someone is getting something positive out of something, even if it is as simple as a happy feeling.

A key note from today's class was that prior to the industrial revolution, people simply did not improve their income as we do today. I read about this in the Economic Revolution article we had to read.

A perfect example of how most people (except for those of royal families and nobles) didn't not become wealthy in earlier times can be seen by considering the Egyptians and the pyramids they built in ancient times.

If one looked at Egypt back long ago, and saw their newly made pyramids, one would probably thing that the Egypts were wealthy, and had to be, to build such phenomenal structures.

But this is not the case at all. In fact, building those structures reflected how messed up their economy really was. All of the resources/money that was used to build those structures came from serfs who lived in the area- the serfs would be given land to tend and take care of, and then as part of the deal, the serfs would have to give up 30-40% of their income.

This practice really screwed up their economy because it prevented people lower down in society- the serfs- to grow economically since they were constantly giving up their income.

One final point that Prof. Rizzo made throughout class was extremely important- the fact that we as a society are SO much better off than ever the royalty was back long ago.

As Prof Rizzo puts it, the difference between the average joe in today's society and Bill Gates in terms of economic standing is much smaller than the average joe today and someone with a lot of money from long ago.

Consider the stories of how these renowned people from long ago suffered towards the end of their lives.

1. Isaac Newton- died of a kidney stone, a very painful death. There was no medication/treatment he could receive that could save him because during the era in which he lived, not medication/treatment existed for kidney stones.
2. Mozart- died of strep throat, a common infection today that is easily cured. The reason why he died from strep throat was because there was no Penicillin available, the drug that cures strep throat. Back then, no technology had been created to cure strep throat.
3. Queen Anne of England- gave birth to 13 still born babies, 4 other babies died by the age of 2, and 1 child died by the age of 11. All of those babies, in many instances, could have been saved in 2011 because of today's technology. Queen Anne also died in 1714 from Gout, which is a gas build-up in skin. Her body swelled up to twice her original size. Penicillin could have easily cured Gout nowadays.

So you see, even those in the upper class didn't have it so good in earlier times. A scratch, cut, or broken bone could've led to death since technology did not exist to cure those things. Even people in poverty today don't have to worry about dying from facing such terrible fates because of the medical security we have.

In short, we live much better lives nowadays than anyone in the past did, simply because we have so many more technologies that keep us alive longer and make our lives easier.

Our health has also improved over time. Consider the US life expectancy since 1750:

1750: 51

1900: 48

1950: 68

1990: 76

2010: 78.2

It was even lower before 1750, so this shows how much better, healthier, and easier lives we live in the current era.

One final point that Prof. Rizzo made that I found very interesting was his economic outlook on the impact of cars. Many people nowadays complain that cars are horrible for the environment and that it causes terrible pollution.

But, as Prof. Rizzo points out, the alternative to having cars from the past was much worse for the environment. Here's why:

Back in early days, people got around on horse. With all the horses, there was manor everywhere. On average, horses would drop 22 pounds of manor a day. Specifically, in Rochester, horses left on average 1 acre, and 175 ft high of poop a year. The problem with this is that this caused there to be a lot of flies everywhere. The flies landed on the poop, then fly around and land on peoples' food, we eat the food, and can get a number of diseases from the horse poop including dysentery.

Therefore, cars today are a lot more healthier for us than the alternative form of transportation back in the older days. Cars today are even much better than earlier cars. A car in 2011 that travels 10,000 miles causes less pollution than a parked car in the year 1970 caused.

Reading Assignment #2, Economic Revolution

A.

I found several things to be interesting in this piece, but I'd have to say that I found the development that took place for our society to turn into a market system that emphasizes person gain the most interesting.

I had absolutely no idea that societies did not run under a capitalism in the past. In fact, it was frowned upon to try to improve/better oneself by making profit off an item. Everything was about doing what was necessary to keep society running properly, not necessarily bettering it.

And that is what is key. In the Middle Ages and earlier times of society, the way people deal/guarded against breakdown of society was:

1. Handing down responsibilities/jobs from generation to generation. In other words, people knew what they had to do to survive and keep everything running properly by what past generations had done, and continuing the tradition of living/working in that certain way.
• Ex. a son follows a dad, so the son knows what to do in the future. This process repeated over and over again.
2. Oppressive rule also was another way societies stayed in order. That is, by an overseer giving orders.
• Ex. Pyramids in Egypt were created by many people, but one person (a Pharaoh) was giving the orders. Thus, this authority preserved the economic survival of that society.

As mentioned in the article, it turns out that some Eastern countries actually run in the aforementioned ways even today.

But this is how many societies now preserve against chaos/breakdown:

1. Deregulation, or in other words, not having governmental/oppressive intervention and allowing individuals to do as he/she saw fit. This is pretty much how our current society is in many regards. It is a market system, which is where each person should do what is to his/her best monetary advantage.

I just found this to be extremely interesting because of the fact that I had no idea that in prior years, and even in today in the East, it is basically frowned upon to try to better oneself. In America, we live in a society where competition is everywhere and so much of life is about making as much money as possible.

Truthfully, it sounds like it might be kind of nice, in some ways, to live a life that is not all about bettering oneself, but rather, accomplishing the needs of everyone to keep everyone content.

One other thing I found interesting was that in early civilization, an item wasn't worth something specific. In today's day and age, there is a price tag for everything. But back then, there was no set price for anything- people would trade for different things, and there was not necessarily a "standard" that had to be met to complete a trade for a certain item.

B.

1. Which societal system mentioned in the essay worked the best? Was it when tradition/custom, command, or capitalism/the desire for individual gain kept our society in order?
2. In other countries on Earth (specifically as the essay states, the Eastern World), societies are based on command and/or tradition/custom. This leads me to wonder whether or not in today's day and age of America, could a system based on tradition/custom or command be successful? Could America be kept in order if everyone wasn't striving to better his/her own life as the majority of America does today?
3. Why is it that some countries in today's world function on command and/or tradition/custom while others function on the idea that people should work towards gain and improvement? What decides/causes countries to rely on one of the aforementioned principles to keep the country in order and make sure that everything necessary is getting done?

C.

Economic Revolution is an article that delves into the development of how our market, a free market and the market system, came into being in today's world.

The article starts off by talking about very primitive civilizations, including 1305 France and 1639 Boston, both of which did not yet incorporate the idea of personal gain into its economy. The point of showing these civilizations was to exemplify how the idea of personal gain and profit is a relatively modern one. Back then, everything was about doing things to make needs met, not going above and beyond so as to thrive and prosper.

Sure, there were indeed people back then who did thrive and prosper- like royal families and the nobility- but for the general public, it was almost looked down upon to try to attain improvement in one's life monetarily. Back then, gain for gain's sake was foreign to the world. And while it is no longer  totally foreign to the world, gain for gain's sake still remains foreign in some places in the worlds, specifically in Eastern civilizations.

As the article puts it: back then, kings wanted treasure, nobility wanted land, and everyone else simply wanted to be left alone and live as their fathers before them did.

The so-called "free-for-all" or deregulation of society that led to what we now call capitalism began in the 18th century. This article gets it name from the change in society that took place during this time period. According to the article, a revolution of sorts took place to change society to a deregulated, capitalistic society.

By 1700, the world had changed, and some of the accepted changes included:

1. Every man is naturally covetous of those who live lucrative lives.

2. No laws to prevent people from achieving monetary/personal gain in life

3. Gain becomes the center of the circle of commerce

At this point, the market system was officially born. The problem of survival would no longer be solved by custom or command, but rather, by the actions of free people who were seeking one thing: profit.

Class Summary #6 for class on 9/14/11

As explained at the very beginning of class by Prof. Rizzo, today's class presented a "detailed history of how standards of living have changed over time, and what exactly that history teaches us as economists."

Prof. Rizzo showed us a detailed powerpoint presentation to teach us about this history. In the early 1,000 years of our documented history, the average individual income barely changed. In the past few years, however, individual income has really begun to increase.

Part of the reason for this increase is the influx in new technologies that have come about in our world today. But as Prof. Rizzo points out, having new technologies is not sufficient to guarantee economic growth.

A very interesting fact Prof. Rizzo shared with us was that back in the year 1500, America's gross domestic product (GDP) great at 1.2%. Our economy has really grown a lot since then, but consider this: If our GDP was still 1.2% today, the average american would have the same income as those people who live in the poorest countries in the world.

Then, Prof. Rizzo went on to answer the question of how exactly do we get rich in our society today? The answer to this is:

Here is a picture of Singapore, a country with one of the
highest GDPs of any other country in the entire world.

1. Mass production
• If someone produces more stuff, it won't impoverish other people. This shows that having more people in our population won't cause less people to get rich.
2. Trading things is imperative to get rich
• Trading things to get other things that you need/don't have is important because doing so allows one to create great things. This won't impoverish anybody either.

The only way to impoverish other people is by receiving things with out any type of benefit to the person who gives you something. For example, if one asks his/her parents for a lot of toys/items, the child is impoverishing the parents because the parents are receiving no type of benefit by giving their child a boatload of items.

Later on, Prof. Rizzo explained how there are two major events in our economic history that have affected what/how much we could produce in this world.

1. 5,000 years ago- The Agricultural Revolution. This event vastly improved our growth thanks to all we could produce.
2. Industrial Revolution of 1800

An issue that is widely considered by economists is that of our world population- 6.85 billion. In reality though, population pressure is a laughable worry and should not be a real concern despite what people might say.

Consider this: if every person in the world lived in Texas, there would be the same population density of Boston or Westchester County, which exemplifies that we have plenty of room for more people to live in the world.

Not to mention that our world GDP of 65 trillion is growing much more rapidly than the world population. In 1960, the world GDP was 13 trillion and in just 50 years, that number has increased significantly. The way things are going, that should continue to be the case.

It is also important to note that population growth is a measurement of how stable and good an economy is, because of the fact that if a population continues to thrive, then an economy must be working well to support all of those people.

Here is a picture of Ghana, a country in Africa. Clearly,
living conditions here are different than those in Singapore.

Some final important notes we discussed in class:

The difference between extensive and intensive growth is as follows:

1. Extensive growth: helping/supporting the world population and therefore, living conditions for the general/average person doesn't improve much.
2. Intensive growth- Individual/personal growth. This is the reason why we go to college, so that someday, we have a lot of intensive growth and can live affluent lifestyles.

The reason why from 1000-1800 there was not really a great income growth is because most of the new technologies developed during that time period ended up spurring extensive growth as opposed to intensive growth. The technologies, for example, went towards hosing/feeding the general public.

One final interesting fact we learned about in class was how early on in civilization, in the year 0 specifically, the financial differences between countries and its income were miniscule. By 1820, there was a bigger difference and finally, in today's day and age, the difference between the richest and poorest is a large one.

The richest countries-Australia and USA have an average-American income that is 554.7% more than the world average. Back in the year 0, one would probably not notice differences between countries in terms of how everything looks in each country. But not, if you traveled from a very wealthy country to a very poor one, you would see many differences.

And some final proof that we are getting wealthier as time goes on in America:

In 1970, 27% of people lived on a dollar or less per day. Now, that figure is at 6%. 

Also, the UA is currently 75 times richer than the poorest countries in the world. Back in 1960, that figure was 51 times and back in 1870, that figure was just 9 times.

Class Summary #5 for Class on 9/12/11

Professor Rizzo spent the majority of class reviewing last week's required reading, I, Pencil.

Prof. Rizzo explained how there we're four major points he wanted us to glean from the essay regarding the making of a pencil. The four major points, which are explained below, also correspond to any process for making something in the world:

1. Impersonality- There we're a lot of things that had to occur for the pencil in I, Pencil to be made, but I personally do not know who completed all of the steps that led to the pencil's creation. Therefore, the production of a pencil (and every other creation) is extremely impersonal because I do not know everyone/everything that played a part in making the writing utensil. 
• As Prof. Rizzo explains, there is 6.85 billion people in the world, and in result, almost everything in this world is impersonal. Because of the gargantuan amount of people alive, there is nothing we can do about this impersonality.
2. Self-Interest- More than likely, all of the people that completed the many steps necessary to make a pencil did so for their own reasons. The people almost definitely did the work they did necessary to get something they wanted, whether that be money to use on their family, to buy a house, etc.
3. Cognitive Issue- Is there any one person who knows exactly how to make a pencil on his/her own? Most likely no one knows how to do every single step necessary to make a pencil.
• Assuming one does not know how to do everything to make a pencil, is it at all pragmatic for a person to do it all by him/herself and then sell each pencil for the normal price of a pencil (let's just say a pencil costs $1.50). The answer to this is probably now because it would cost millions and millions of dollars to take care of every aspect of the production of a pencil between transportation costs, digging up necessary elements for the pencil, cutting down trees, etc. One could not make a serious profit if he/she did everything all on his/her own. This explains how people make money off a pencil- by specific people doing different steps and then selling their services to the next person in line who is prepared to take the next step in pencil making. 
4. Who gave the orders?- People from all over the world cooperate with one another to make one single pencil. People might hate each other if they worked together in person for various reasons, but nonetheless, all different people from different backgrounds cooperate with one another for a common cause. And in the end, a pencil is created from countless people putting in work, even though there is not one single overseer watching over the process. Instead of one single overseer, there are many different businesses/workers that contribute to the making of a pencil in their own individual way.

These four steps beg the question about what all of this illustrates? According to Prof. Rizzo, this all illustrates that:

1. Invisible Hand- it means that a load of people come together and cooperate to make a creation, despite the fact there are not bosses or leaders giving specific orders. Each workers' considerable small impact in the creation of a pencil leads to the compilation of all of the workers making something very important that fulfills a societal need.
2. Tacit Knowledge- litte bits of knowledge that cannot be known by anyone else except for the people who have first hand experience doing something. In short, tacit knowledge is party allowing people with specific knowledge to work without interruption from other people who may not know as well.
• Prof. Rizzo provided an example of this to me during his office hours. He told me that if the baseball field was hit by a lot of rain the night before, he might say we should practice indoors. But as a baseball player, I might say otherwise, that perhaps the field drains very well and we could indeed practice outside. Since I have experience playing baseball, I would know that. Prof. Rizzo would not, since he is a professor and not a baseball player. This idea can be translated into a market because as Prof. Rizzo explains, those with experience have an incentive to act on the knowledge they have from personal experience, knowledge that other people who are not as experienced in a certain field may not have.

Prof. Rizzo concluded class by discussing Modern Market Economies, which means:

1. producers make decisions on production depending on whether or not consumers need a certain product.

And finally, the web that keeps the process together (the four steps above) are:

• The Price System
• perfect signal of scarcity because prices, almost always, tell a person how scarce an item is
• Terms of Exchange- provide us incentive to do the right thing

Class Summary #4, 9/9/11

To begin class, Prof. Rizzo once again began with the differences between micro and macro economics. Micro is "the study of small things" and focuses on analyzing individual choices, while macro is the "study of big things" and is the study of consequences of individual choices. Macro also involves analyzing the unintended consequence of our behavior.

Prof. Rizzo's example of an unintended consequence/macro-economics/cost-benefit was one relating to obesity in America.

Prof. Rizzo talked about how the negative impact of eating unhealthy nowadays is much less than it was 50-60 years ago simply because of the fact that in today's day and age, medical technology is much improved.

If a person got a clogged artery many years ago, it would be much more difficult to fix than it is nowadays, which could explain why in the current era, there is more widespread obesity than in the past.

So basically, the cost of being unhealthy is less than it was in the past because there is less of a risk, and there is more of a benefit because there is better health-care to take care of unhealthy patients.

He used this example to explain that as an economist, it is important to consider how to make a problem better.

So, Prof. Rizzo suggested the idea that by putting a tax on soda, less people will buy soda, which in turn may help reduce obesity since soda is such a significant part of our obesity problem.

But as Prof. Rizzo points out, putting a tax on soda probably won't do anything because people will then turn to a boatload of other sugar drinks as a replacement.

As an economist, we apply these types of theories to all things. Prof. Rizzo then explained that the reason for the study of economics is:

1. To know how processes work to fix problems when they work well and to have an idea of the processes/ideas that do not work and cause more problems

Prof. Rizzo concluded class by discussing how intentions don't equal results. For example, just because we as a society care about endangered species doesn't mean that an animal will be preserved. 

This is clearly the case because animals have gone extinct over time, or continue to barely avoid extinction, despite our desire to keep certain animals alive.

EWOT Goggles Post #1

For my first "EWOT Goggles" post, I'd like to connect something we learned in class with something in my own life.

In the first week of class, Professor Rizzo spent a significant amount of time teaching us about different costs/benefits and the decisions one has to make in life.

Just about an hour ago, I had to make a significant cost/benefit decisions to best make use of my time, specifically when it came to deciding which campus dining hall I should eat at.

The only places to eat on campus for a full meal are Danforth, Douglas, and The Pit.

With this year's influx of new students, the student body has grown in number and it has shown in most of the dining halls.

Here is a picture of the always-over-crowded Danforth Dining Center.
Having to write this blog post left me with a serious economic decision
regarding whether or not it was the best decision to eat lunch there.

Danforth and Douglas are almost always so crowded that to eat a well-balanced and satisfying meal, I'd have to stay there for at least an hour while waiting in long lines to get the food I desire.

At The Pit, however, the waits are not nearly as long because eating at The Pit is not part of the meal plan and it costs extra money to eat there. The Pit also offers filling meals, but one has to pay extra money to eat there since it is not part of the meal plan.

Danforth/Douglas does have overall better food though, while The Pit is more cafeteria-like and is not as high-quality.

But as I write this, it is 12:30pm and I have to get this blog post written before 2pm because I have baseball practice and I don't want to be writing this post later tonight after practice because I will probably be very tired.

So at 11:30am, I had to get something to eat so that I had sufficient energy to perform well in practice. I had a decision to make- should I go to Danforth/Douglas or go to The Pit?

Here was the cost/benefit breakdown that I had to consider:


Douglas/Danforth- 

1. Cost: Having to wait a long time to eat a satisfying meal, thus giving up valuable time that could've been spent writing this blog post.
2. Benefit: Being able to enjoy my meal by eating the highest-quality food on campus, which could also allow me  to perform better at baseball practice because of having more energy.

The Pit:

1. Cost: Having to eat lesser quality food that I might not enjoy as much as Danforth/Douglas and, not to mention, the lower quality food might leave me with less energy for practice which might cause me to perform poorer.
2. Benefit: By going to The Pit, I'd be done my meal a lot faster and have more time to write a good blog post.

The winning dining hall was The Pit, where I was forced to eat less-quality
food, but was left with more time to work on this EWOT Goggles blog post.

After considering both options, I decided to go to The Pit because my baseball coach always tells us that school comes before baseball. On that note, I figured that I would be better off taking a risk and eating less quality food at The Pit so I could write the best blog post possible for class.

Thus, in my mind, the benefit of eating at The Pit exceeded the cost more than the Danforth/Douglas benefit exceed the Danforth/Douglas cost.

And now I am finished this blog post just in the nick of time- right before I need to head off to the field for practice. I hope I made the right decision.

Reading Assignment #1- I, Pencil

A. I found a number of parts of I, Pencil to be extremely interesting and eye-opening. For one, I never actually considered how much work goes into making what seem to be the littlest things, such as a pencil. As the essay shows, literally thousands upon thousands of people took part in creating a pencil, which is a tool that almost every single working person in today's world uses at least once a day. The article really has given me a new perspective on the value of items that seem as unimportant as a pencil.

A pencil provides a very good example of how we as human beings are
more than capable of creating very good solutions to societal problems.

But by far, the most interesting idea that I took away from the essay was whether or not we as a society may indeed be better off with as little governmental intervention as possible. The author's writing is extremely convincing in this regard.

I mean, just consider how much we as human beings have created to simplify our lives when the government has not regulated what we are and are not allowed to do. I think the best example shared in the essay was that of the email.

As our society progressed through time, simple letter sending through government mail became too slow of a process, especially when an urgent message needed to be sent to someone. People- "free people" as the essay calls them- developed an new way to send letters through E-mail, which costs a lot less in terms of how much time is being wasted sending one's message to a final address. 

The cost of sending an important letter in the past by mail was the lengthy amount of time it took for the letter to arrive at the desired destination (and not to mention, the monetary cost of buying an envelope, the paper used to write the letter and a stamp). Now, with email, communication is as seamless as people can receive emails within seconds. That takes away the cost of having to wait a lengthy amount of time to contact a person through a letter (as well as the cost of a stamp/paper/envelope). The government had absolutely nothing to do with the development of email. Email was all created by "free people".

This leads me to side with the author's point of view completely. While I do believe that some governmental regulation is important to maintain peace in our country, I truly feel that the less restrictions the government puts on us, the better. As we have seen throughout history, we as people are more than capable of responding to human need by developing our own creations- without the guidance of governing bodies.

B. 

1. The author is trying to argue that in many (if not all) instances, society is better off when government does not place restrictions on what we can and cannot do. We as human beings are more than capable of developing solutions to our own human needs- as seen by such creations as email, airplanes, etc. Is it at all possible that the author believes that we would be better off with no government at all? On that note, could we as a society live safe and productive lives without a government guiding us?
2. At one point in the essay, the author comments that oil/gas is shipped for less money than it costs to send a letter across the street with a stamp. How would not having such governmental intervention be reflected in our economy? For example, would monetary prices for items that our government plays a large part in obtaining (such as gasoline for cars) be as high as they currently are today if our government did not regulate society as much as it currently does?
3. The author mentions that we as people don't believe we can accomplish certain things that the government runs- such as delivering mail. The government takes care of our national defense as well. In today's day and age, is it in anyway viable to believe that someday, we actually could take over mail delivery, national defense, and other responsibilities from the government? If so, how would we go about doing that?

C. I, Pencil is an extremely interesting essay that explains a number of ideas relating to economics.

According to the author of I, Pencil, we as a society are more than capable
of taking care of ourselves without the over regulation of a government.

The majority of the piece explains how a pencil is not made by one single person. When you stop to think about it, there are thousands upon thousands of people who take part in the creation of a pencil. This idea can of course be related to the production of pretty much every single thing in the world no matter how big or small the item is.

Just to give an idea of exactly what I'm talking about, here are a couple of the tasks that go into the making of a pencil, as described in the essay:

-Trees taken down to use for the wood of a pencil. The tools being used to take down the trees are made by many people.

-People who cut down the trees and covert them into logs have to live in a camp on-site where the trees are being taken down, as it is a more than one day job. The camps of course have living arrangements for the workers, so consider how many people took part in building shelter for the workers. Also consider how many people we're involved with making all of the food and the electricity/water pipes in the house.

-Then there is also a countless amount of scientific elements that must be mined from the Earth's surface for the pencil to be made- such as zinc. Consider how many people had to work to find the zinc in the Earth.

-The eraser is made by something called factice, which is a product from the Dutch East Indies. Think about how many people are involved with finding factice and then shipping over the factice from the East Indies to wherever the pencil factory is. Think about how many people we're involved in making the form of transportation that is used to send over the factice.

Following the author's explanation about the creation of a pencil, he goes on to explain how man is capable of doing so many great things in the world when he is left to try on his own. 

For example, take a pencil. When a pencil was first created, there was no direction being given out by the government or some overseeing body as to how a pencil should be made. On their own, people simply figured out the best way to make some sort of writing utensil, which ended up with the development of the pencil. Email, airplanes, and many, many more tools we're created in the same way.

The author's point is that when we as a society are left to fix our own problems, we almost always figure out the best - or at least a very successful- way deal with them. We don't always need governmental intervention to fix our problems.

The author uses the example of regular mail. The government takes care of all of our mail, but is it really necessary for the government to do this?

Over time, we as humans could have adapted to the problem of not being able to communicate over long distances, and would have most likely figured out a process of how to best send letters to one another.

The end lesson the author is trying to make is that the government should remove certain societal obstacles/problems the best it can, but it should, for the most part, allow people to figure out how to make things/deal with issues on their own. The government should let human beings be free to invent and produce as they wish, because as history has proven, when the government has given humans the freedom to create new technologies, some pretty amazing tools have been produced.