I. Basic Terms
A. Economy is the social science
concerned with the use of
resources like land
and labor to fulfill human needs.
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
Economics in the dock
6 min video
analysis where the change in benefit received is balanced
with the change in cost is a
common purposeful behavior.
and Thinking at the Margin
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
This fallacy is the basis of police profiling.
Why Do People Continue to Believe Stupid Economic Ideas
This is the assumption that if something is
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
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
a pattern of reasoning rendered invalid by a flaw
that can neatly be expressed in a standard
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
politicians, economists, etc.
d. Examples: should the minimum wage be increased,
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
for the elderly (Social Security) increased
and spending for children
(Head Start) decreased 1234
4. Using Statistics
1. Why Do Economists Use Statistics?
2. Common Errors
Beginning with video 3 the series, statistics
are used in a questionable manner to analyze
to current economic issues of concern to Libertarians.
Unit I. Review
Economics, Resources, Scarcity, Rational
Fallacy of Composition Fallacy of Division,
Hoc Fallacy, Cum
generalizations to represent of real-world economic activity
2. Requires Ceteris Paribus: Latin for holding other
economic variables constant
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
Why Do People Continue To Believe Stupid Economic Ideas? 4/17 Mark Blyth
Economics Rules: the rights and wrongs of the dismal science
Economists And Statistical Tests Are Bias
Unit II. Review
Simplified generalizations represents real-world
economic activity requiring Ceteris Paribus or holding other
economic variables constant
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)
Political Goals Differ
D. Economic Report of the President
growth, Full employment of
Price stability (reasonable
Positive balance of payments, Economic freedom,
Equitable distribution of
income Economic security
Preface: Political Economy
American Capitalism is designed to
efficiently maximize total production while creating the profit required to pay
for perceived risk.
American Politics is designed to satisfy perceived needs
of the majority in accordance with the
It evolves to meet majority needs while
protect minority rights with decisions compatible with American Capitalism.
Disputes go to the
or Political Economy
a battle between Positive Economics and Normative economics. The result is
economic policy. Opinions on political economy questions, like those depicted
here, are considered
2016 Election Issues in One-Page.
1995 statement concerning
Theory Notes Only
1-2 pages per chapter
No Internet Links, Pictures
Ch 8 -13
Gilded Age Observation
Is becoming a predominant 21st Century belief?
As a kid in the early 1950's, we didn't have
a TV so I only saw one when I visited my cousin. Eventually my dad realized they
wouldn't destroy his children's education so we got a 12 inch set.
Norm Peterson of Cheers
Policies have improved TV's, made them a necessity, even on your phone. Is your
Understanding Fake News
Wages Stagnation As Fake News
Economics Video Lectures,
History of Capitalism
Videos from Cornell
One-Page Chapter Review
Macro Test Review 1
Macro Test Review 2
Macro Test Review3
Micro Test Review 1
Test Review 2
Micro Test Review 3