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9/13 and 9/15 notes

by: HD

9/13 and 9/15 notes CDAE 061

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This weeks notes!
Principles of Community Development Economics
Joshua Farley
Class Notes
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This 4 page Class Notes was uploaded by HD on Saturday September 17, 2016. The Class Notes belongs to CDAE 061 at University of Vermont taught by Joshua Farley in Fall 2016. Since its upload, it has received 12 views.


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Date Created: 09/17/16
9/13/16  *iclicker* According to the readings, (conventional economics) what question best summarizes the economic problem? o A: How do we allocate limited resources toward unlimited wants?  The Economic Problem o Unlimited wants  Contradicted by hunter gatherer economies o Limited resources  Confirmed by laws of thermodynamics  Some resources are ulimited and not depleted by use (example: information)  Some resources are over consumed  marginal consumption may actually make the individual worse of o Too much use of transportation, people are more happy if they walk places o What should we produce?  Big decision, big challenge  Should we strive to satisfy wants or needs?  Natural Capital o Neoclassical economics  How do we allocate natural capital among the production of diferent economic goods and services? o Ecological economics  How do we allocate natural capital and ecosystem services (both essential to survival)?  How do we distribute natural capital within and between generations?  Make decisions on the margin (marginal analysis)  Comparative advantage vs. absolute advantage o Absolute  Maria is a better lawyer and typist than Jon o Coparative  Maria is a better lawyer but only a slightly better typist than Jon o If the opportunity to practice law is the cost, then Jon has a comparative advantage in typing o Opportunity cost and exchange  Maria types x2 fast as Jon  She gets $200/hr for practicing law  Jon charges $10/hr for typing  She should practice law and pay Jon to type to save both hours and money o Opportunity cost = value of the best forgone alternative  What I have to give up to do something else  Example: guns and butter  Maximum amount of one good that can be produced for every possible level of production of the other good o Gains from trade  If each person produces what they specialize in, they can double production  12 guns, 12 gallons of butter o *iclicker* What happens to the marginal cost of agricultural output as production increases?  A: it goes up o Sources of comparative advantage  Nations  Natural resources  Human capital  Built capital  Individual  Natural abilities  Education and training  Experience  Capital o Benefits of specialization  Economy produces more  Everyone gets better at the task in which they specialize o Cost of specialization  Each person can only do one activity  What if what you’re the best at doesn’t give you the most satisfaction  Macro opportunity costs o Ecological resources you lose when you boost the economy  What is lost when we produce more guns and butter? o Giving up ecosystem  Linear throughput = waste output  All resource extraction and waste output degrade ecosystems  There’s a real cost to greater economic output!! st nd o 1 and 2 law of thermodynamics  Matter and energy can’t be created or destroyed  Disorder and uselessness increase o Shifts in the production possibility frontier  Get bigger, shifts out o Why do shifts lead to more production instead of more leisure?  You lose more nowadays  When productivity increases, what happens to the opportunity cost of leisure? 9/15/16  *iclicker* What would be the most likely cause of this type of shift in the production possibility frontier? Guns Butter o A: loss of skilled labor in manufacturing  Downward shifts through time  What is the intergenerational production possibility frontier? o Do our activities have impact on production by future generations? o Non renewable resources  OIL  Global warming, loss of coastlines o Renewable resources  Loss of Louisiana wetlands, sandbars  Fisheries  Forests o Technology  Advances but also superfund sites  Double edged sword o Dealing with uncertainty  Wiping out mosquitos example o Using resources efficiently  Efficiency = ratio between outputs and inputs  Economist definition = producing greater monetary value of goods and services from a given quality of inputs o What determines market value?  Preferences weighted by income  Productive efficiency o When we cannot produce more of one good or service without producing less of another  Allocative efficiency o We produce the combination of goods that we value most highly  Neoclassical logic o Who said that?  Is increasing economic output the economic problem? o Life satisfaction graph  If you feel richer than others you feel happier  SUPPLY AND DEMAND o What, why and for whom do we produce?  Problems all economic systems must address  Lots of ways to answer  Focus on competitive markets in order to understand mainstream views  Is this focus appropriate? o Recent headlines examples (Monsanto, Epipens) o Supplying food to NYC  How does the right amount of the right food get to the right place at the right time and right price?  Requires land, chemical, labor, transport, etc.  People get insufficient food but the market still pulls it of pretty well o Housing in NYC  Housing shortage  Too few units and repairs  Homelessness


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