Editors NotesMath Review
is a short review of basic dynamic math skills for economics
from R. Larry Reynolds of Boise State.
Political Economy Controversies
are areas for class
C. This chapter contains 3 brief videos plus a one-hour podcast.
I. Basic Terms
A. Economics is the social science
concerned with the use of scarce resources like land and labor
to fulfill unlimited human wants.
B. Resources are the inputs, want satisfaction is the
C. Key Concepts for understanding and analysis
1. Scarcity of resources
results in the need for choices by participants.
2 Participants, buyers
and sellers, exhibit purposeful behavior to enhance their own rational
analysis where the change in benefit received is balanced with the change in cost is a
of composition: applying to the whole that which is true for a part
without adequate proof. 1 and
are odd numbers, so four is odd number. This fallacy is the basis of police profiling.
5. Fallacy of
This is the assumption that if something is
true for the whole then it must be true
for its parts.
The absolutely worst abuse here involves inferring from an
average that all elements are average.
hoc fallacy: Assumption
that correlation proves causation.
This is related to the concept in law
of circumstantial evidence.
Hoc Fallacy :simultaneous correlations while post hoc refers to sequential
D. Economic methodology
What something is
Objective, can be measured
Example: measuring disposable personal income which is an
individual's salary after taxes
What something ought to be
Subjective, difficult to measure
Requires value judgments by citizens, Political Action Committees (PAC's),
politicians, economists, etc.
d. Examples: should the minimum wage be increased,
should defense spending increase and social
spending be lowered
Looking at the real-world to develop Economic Theory
1. Generalizations concerning economic behavior based upon
real-world observations, empirical by nature
2. Economic theories are objective "positive economics"
3. Assumes behavior is rational and economic (self-serving)
4. Example: as the price of a product increases, consumers tend to buy less
c. Economic Policy
1. Application of economic theory to solve economic problems
2. Economic policies are subjective, "normative economics".
3. How society makes economic choices such as in the 1980's when
for the elderly (Social Security) increased
b. spending for children
(Head Start) decreased 1234
generalizations to represent of real-world economic activity
2. Requires Ceteris Paribus: Latin for holding other
economic variables constant. See Ceteris Paribus
3. Models may be quantities or qualitative
to model analysis
Restrictive, unrealistic assumptions
Are economic models falsifiable?
5. Model representations are not
Are economic models falsifiable?
Pfleiderer on The Misue of Economic Models one hour podcast
c. Models such as the Production Possibility Curve
chapter 2 and supply and demand, chapter 3,
explained in the next chapter
provide a simplified description of how some aspect of an economy works.
III. Economic goals of the United States
A. Economic growth
B. Full employment of all
C. Price stability (low
D. Positive balance of payments
(international flow of dollars)
E. Economic freedom
F. Equitable distribution of
G. Economic security (if you have A
through F, you have G)
Economic Report of the
gives the President's
view on achieving these goals.
Important Economic Disciplines