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Econ 104 2/1/16 Notes

by: Grant Pitarys

Econ 104 2/1/16 Notes ECON 104

Marketplace > George Mason University > Economcs > ECON 104 > Econ 104 2 1 16 Notes
Grant Pitarys
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About this Document

The notes of the first class on 2/1/16
Thomas C. Rustici
Class Notes
Economics, Macroeconomics, econ 104




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This 2 page Class Notes was uploaded by Grant Pitarys on Wednesday February 3, 2016. The Class Notes belongs to ECON 104 at George Mason University taught by Thomas C. Rustici in Winter 2016. Since its upload, it has received 521 views. For similar materials see Macroeconomics in Economcs at George Mason University.

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Date Created: 02/03/16
2/1/16 Notes • Economicsis the science of purposeful human action and the unintended consequences of those actions Mind Microeconomics Price Theory Social Order Values Market Wants Needs Macroeconomics Institutions Desires Economy Coordination ○ How do the Choices we make end up with social order?  Economicscience says choices matter to explaining the social order, but the "why" of those choices don’t matter "Spontaneous Order" • Product of human design, but not intention ○ Six examplesof spontaneous order 1. The Price System (Information) 2. Money (Medium of exchange)  Problem with bartering is the double coincidence of wants  In the middle of every transaction is a medium of exchange 3. Banks (Financial Institutions/Intermediaries)  Banks coordinate savers and borrowers 4. Stocks + Bonds  Stocks + Bonds are secondary financial markets  100 million people + $30 Trillion in Wall Street 5. Futures Markets (Speculators)  Speculators acquire informationabout the future 6. Accounting Systems (Information)  Information systemsthat lead to more understanding of profits • Theory is always abstract ○ Abstraction away from reality ○ Statistically valid inferences ○ Abstract theory must have a direct correspondenceto reality ○ Theory always organizes the facts in a fundamental causal way Why would people disagree in a science? Especially economics? 1. Future prediction ○ No scientist can predict the future 2. Normative(What should be…) Vs. Positive(What is… cause/effect)questions ○ Scientists can disagree on morals with normativequestions ○ But scientists can explain the process of positive questions ○ Burden is on the person asking positive questions 3. Assumptions Microeconomics= Science/Foundations ○ Microeconomics= Science/Foundations ○ Macroeconomics= Assumptions What are the four assumptions of Microeconomics? 1. Scarcity ○ Confucius once said "Man with open mouth waits long time for roast duck to fly in."  Just because we have needs doesn't mean the universe fulfills them ○ Prices are proof of scarcity ○ Scarcity does not equal shortages ○ No scarcity = no economics 2. Only individuals choose (methodologicalindividuals) ○ The decision maker is the analysis 3. Rational choices ○ Rationality = Purposes, Intent ○ Mistakes can be rational 4. Unlimited wants/needs ○ Humans are greedy, greedy, greedy Scarcity and unlimited wants lead to individual and rational choices Price Theory: History Why are prices what they are? 1. Aristotle: 300 B.C. ○ Coined the term economics(meant "Household management") ○ Wanted to explain prices with a theory  "The Equality of Exchange"  If his theory were true no trade would be possible ○ Example: There are two individuals A and B  Person A has an apple, B has an orange, but wants an apple  B wants to trade, but A is the short side and will limit trade □ Short side limits trade 2. Scholasticism: St. Thomas 1300 AD  "The Just Price Doctrine" ○ Normativeanalysis to get a positive result ○ Rustici acid test: Provethe unjust price without subjective input 3. Mercantilism:T. Mun, T. Law, J. Colbert 1500->1776 ○ Opposite of modern economics,childish view of the world ○ Colbert was finance minister of King Louis XIV (Sun King) ○ Four major flaws  No concept of spontaneous order  Earliest version of central economicplanning □ Socialism


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