Econ 1020 Week 3 Notes Winter Quarter
Econ 1020 Week 3 Notes Winter Quarter ECON 1020
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This 4 page Class Notes was uploaded by Matthew Stein Oakley on Sunday January 31, 2016. The Class Notes belongs to ECON 1020 at University of Denver taught by Dr. Chiara Piovani in Winter 2016. Since its upload, it has received 9 views. For similar materials see Intro to Macroeconomics in Economcs at University of Denver.
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Date Created: 01/31/16
Changes w/ Capitalism: Migration Urbanization The nature of work LABOR: Division of labor o Employment wage labor Risk of unemployment Transformation of the family o Social implications: CARE Environmental degradation Environment o Source o Sink 2005: Millennium Ecosystem Assessment o 1360 scientists Political development o Democracy – “Welfare State” Debate on relationship between government and markets Globalization o After the Great Depression Keynesianism o After WW2 Keynesianism = dominant paradigm Gov’t intervention to promote economic growth/employment o Developing countries ISI Domestic economic growth supported to grow globally 1970’s Stagflation Stagflation o Increase in unemployment Inflation If unemployment increases, WAGES are decreased, thus PRICES go down Since the early 1980’s: NEOLIBERALISM – New traditional economy Deregulation Privatization Trade & Financial liberalization In developing countries: o Development promoted by the Washington consensus o East Asia: manufacturing (FDI) Industrialize countries: o Financialization Real interest rates = i – π Low inflation higher real interest rates o Goal: Economic growth, low inflation History of Economic Thought th -18 century: the emergence of “economics” -Adam Smith: Lived in commercial capitalism era – the “system of perfect liberty” (Economic freedom) Commercial Capitalism: Manufacturing prod = MANUFACTORIES - Handcraft techniques of production and division of labor - High productivity Self-interest Profit-making Wealth accumulation 1776: THE WEALTH OF NATIONS - Pursuing self-interest Social harmony o “The Invisible Hand” – complete integration of society from collective natural wants What supports wealth accumulation? - Source of wealth = LABOR o Division of labor = Greater productivity Specialization of labor Time-saving Specialized machinery The extent of the market explains the degree of division of labor Markets: - Natural prices v. Market price o Market price - variates in response to supply/demand When D>S ; market prices > natural prices Profits > Social average level of profit New entry (more capitalists joining the market) Decrease in market prices until market prices are = natural prices o Natural price – equilibrium price - Supply - Demand Karl Polanyi: Pre-Capitalism vs. Capitalism “The Great Transformation” Pre-capitalism – EMBEDDED ECONOMICS (Economy/Society not separate) o Economic activities and relations were based on social values, expectations, and relations The role of pre-capitalist markets: complementary role o Institutional arrangements for production and distribution Polanyi Redistribution Reciprocity Household Hellbroner & al. Tradition Command Economics Pre-Capitalism Politics, Culture, & Technology were enough to understand economic interactions Capitalism emergence of markets: self-interest, freedom, choice, material gain o Emergence of “the economy” as separate from rest of society o DISEMBEDDED ECONOMICS (economy/society completely separate) Transition to Capitalism -15 to 16 century -increase in merchants Mercantilism: commercial phase of capitalism England – changes in the country side (17 – 18 century)= foundations of the transition to capitalism o 2nd enclosure movement Defining characteristics of Capitalism 1. Private property & the rule of law 2. The role of markets a. Emergence of factors of production: Labor, Land, Capital i. “Fictitious commodities” 3. Critical economics: 4 socio-economic classes – ownership of productive capacity a. Wealthy capitalists (high-profit segment of the economy) b. Small businesses & independent professionals (low-profit segment of the econ) c. Workers – sells labor to capitalist d. The destitute class 4. Objective = profit i.e. growing profit over time a. Karl Marx i. Pre-capitalism: Commodities Money Commodities ii. Capitalism: Money Commodities Money’ 1. Money’ > Money 2. Money’ – Money = (the change in money) aka profit or surplus value 3. M’ Commodities M’’ 4. Expansionary economic system Changes after Capitalism Inequality o Between countries o Within countries
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