Economics & our everyday life

1. Economics & our everyday life

2. Ancient Economic Thought • Plato (468 BC) • Xenophane (433 BC) • Aristotle (384 BC) • Hesiod (8 BC)

4. Plato • Specialization • increasing the production • the individual becomes more knowledgeable about their craft. • Two effects of specialization • it increases output • producing more goods and services. • Interpersonal relationship • justice exists when each group does those things that are in their nature.

6. Xenophane • division of labor and the allocation of resources: • as a way of self-sufficiency • Efficient management as a way to self-sufficiency is called : • “Oeconomicus”

8. Aristotle • Divided the concerns of economics into 2 separate fields • Oikonomiks (household management) • production and consumption of goods • management of natural resources • Chrematistiks (wealth-acquisition) • Encompassed the activities of money-making • the "necessary" chrematistic economy is licit if the sale of goods is made directly between the producer and buyer at the right price; it does not generate a value-added product.

10. Hesiod • wanted to help alleviate the problem of scarcity • Because of scarcity time, labor, and production goods had to be carefully allocated

12. Mercantilism • the idea that a nation's existence depended on power, • and power depended on wealth. • To gain wealth a country had to have colonies. • constant source of raw materials and become markets for the manufactured goods to the country that owned them or their "Mother Country."

13. MERCANTILISM • the prosperity of a nation depends upon its supply of capital, and that global volume of trade is “unchangeable” • Economic assets, or capital, are best increased through a positive balance of trade with other nations (exports minus imports) • Trade was seen as the source of national wealth.

14. PHYSIOCRATS ("Government of Nature") • wealth of nations was derived solely from the value of land agriculture or land development. • the ability of the natural environment to renew itself. • emphasis on productive work as the source of national wealth. • works best when there is a complementary relationship between one person’s needs and another person’s desires • positive law would be in harmony with natural law.

15. Laissez-Faire Theory ("let them do as they will") • private initiative and production are best allowed to roam free • Government should have a “hands off” approach to business • A free market with unregulated exchange of goods and services would help all • Free market will produce more goods at lower prices • opposing economic interventionism and taxation by the state

17. Man → World → School → Work → Death → ? → MARX → Loss of Meaning → ↑Meaning in life: free time Framework: loss & gain State → → → Businessmen Recovery? → Capitalist → → Exploitation/ Suffering → Workers → Class Structure Thesis: Bourgeois (Capitalist) Antithesis: revolution Parts: Replaceable Alienation/ separation → Synthesis: Communist Society → → Worker to the product/ activities No Private Ownership Religion: Opium SOCIALISM: no private individual would own the “means of production” but the community as a whole Wealth and power will be equally shared by all

19. MASLOW'S HIERARCHY OF NEEDS: THEORY OF HUMAN MOTIVATION • Why do common Filipinos with a common social status in life would still patronize establishments like Starbucks? How would you assess the sustainability of such a market in a Third World country like the Philippines? Evaluate the following possible present elements: • Consumers’ wants & needs • supply & demand • Profit • Asset & liability

21. Economic wants vs. non-economic wants

24. THE INDUSTRIAL REVOLUTION AND CLASSICAL ECONOMICS • ADAM SMITH AND THE CLASSICAL SCHOOL • DAVID RICARDO & THE THEORY OF COMPARATIVE ADVANTAGE • THOMAS ROBERT MALTHUS & THE PRINCIPLE OF POPULATION • MARGINALIST SCHOOL • THE MARXIST ECONOMICS

26. ADAM SMITH & THE CLASSICAL SCHOOL ↑production Division of labor Self-interest: constrained by morality, markets, and government ↑ wage = ↑production Lead to man’s ignorant state Product shortage ↑price ↑profit ↑production ↓product shortage ↑producers = competition ↓price ↓profit ↓producers

30. DAVID RICARDO & THE THEORY OF COMPARATIVE ADVANTAGE • would reap gains from specializing in what it was best at producing and trading with other nations.

31. Opportunity cost • refers to the cost of giving up an alternative by selecting the next best choice. • When resources are scarce or limited, consumers are compelled to choose how to manage them efficiently and decide how much of their wants or needs will be satisfied and how of them will be left unsatisfied. • when a particular need is pursued, all the other alternatives are forgone/ sacrificed.

32. cost of a soda drink is P25. The opportunity cost of buying it corresponds to all other items that can be bought on the same amount. • When a consumer pursues to purchase two soda drinks, he will be giving up a P50 worth for other things • The important concept about this is that we can identify the good points that we have to give up in order to get another. • This is what economists call a “trade-off”