Chapter 1 Economics
I. Basic Terms
Models 1 Video
United States Economic Goals 1 Video
Economic Disciplines 4
V. Why Economist Disagree Video
VI. Sundry Materials 2
is a short review of basic dynamic math skills
from R. Larry Reynolds of Boise State.
Political Economy Controversies
are designed for class discussions.
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.
Resources are the inputs, want satisfaction is the output
C. Key Concepts for understanding and analysis
1. Scarcity of resources
results in the need for choices by participants.
2. Purposeful behavior by
and sellers) is exhibited
to enhance their own rational
analysis where the change in benefit received is balanced with
the change in cost is a
common purposeful behavior.
of composition: applying to the whole that which is true for a part
without adequate proof. 1 and
3 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
D. Economic methodology
What something is
Objective, can be measured
Example: measuring disposable personal income which is an
individual's salary after taxes
Theorem on the Methodology of Positive Economics
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
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
1. Models may be quantities or qualitative
Models 3 minute video
3. Three Pitfalls
to model analysis
a. Restrictive, unrealistic assumptions
b. Omitted details
c. Are economic models falsifiable?
4. Model representations are not
Are economic models falsifiable?
Pfleiderer on The Misuse of Economic Models 1 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.
Beware of economic textbooks
United States Economic Goals
Act of 1946 set goals in response to a
Hawkins Act of 1978 added goals.
1. Economic growth
2. Full employment of all
3. Price stability (low
4. Positive balance of payments
(international flow of dollars)
5. Economic freedom
6. Equitable distribution of
7. Economic security (if you have A
through F, you have G)
Economic Report of the President gives the President's annual
view on our achieving these goals.
Video 1 hr. 27 min. on 2014 report
Important Economic Discipnlines
1. Why Economist Disagree? 1 hour 8 minutes video
VI. Sundry Materials
Glossary from Amosweb
The Library of Economics and Liberty
has a concise economics
Encyclopedia at the bottom of the page.
Review 9.08 Video
economics a science?
Economics is more like history than physics
Can economics be ethical?
The History of Economics
9 minute Video Adam Smith, David Ricardo,
John Stuart Mill, William Stanley Jevons,
Alfred Marshall and
Lord John Maynard Keynes are
Assent of Money: A
Financial History of World 4 hour Video
Economists Do It With Models
is an interesting blog