Lecture 13 "Adam Smith and The Wealth of Nations" (09/30/2011

Rizzo mainly covered a synthesis of The Wealth of Nations and some of Adam Smiths views:

·         David Hughes and his contribution to the Industrial Revolution

·         The mercantilist forgot that the amount of money in the market is not as important as the price.

·         Adam Smith (1723-1790)

o   We should allow a system of free and … association

o   Laissez-Faire (Let the people do whatever they want; No anarchy)

§  It does not support the idea of no taxes but the idea of fare taxes.

o   What do we need (3):

§  Police and court

§  National Defense

§  Public Works

o   The government should do a lot of things it was doing.

o   Reasons if people pursue their own interests why will not fall into a chaos or anarchy:

§  Rights to Property

§  Division of labor exists

§  Exchange should be peaceful and mutually voluntary and accepted   

·         When I exchange you and can’t kill you.

·         When I exchange you I can’t robbed you.

§  No especial privilege

o   Wealth of Nations by Adam Smith (900 page book)

§  Source of wealth:  Ability to produce and exchange (3 words).

§  Any question that asks why can we be reach can be related and answer by saying that it gives us the ability to produce “something” and exchange.

§  People always are motivated by a self interest. 

§  How many times would Rizzo show up in class if he wasn’t pay?

§  The trick is to think about how satisfying their need.

o   Spontaneous Order

§  Ferguson (1767)

§  Google “Esperanto”

o   Where languages come from?

§  We concluded is much better to say please than “oh umm oh err”.

o   Corn Laws

o   Great part of the income in a country comes from property income. (Land owners getting a rent and more)

§  In the United States 25% of the income come from property

§  In other countries up to 50% 

-Rizzo

Daniel Gaona 

Lecture #12 "Mercantilism/Scottish Moral Philosophers/Physiocrats " (09/28/2011)

Through this lecture several systems and economic ways of thinking.

Mercantilism 

• Largely responsible for the lack of growth in several countries.
• Huge regulation and restrictions on everything, stifled innovation. 
• Source of wealth was king's bank account. 
• Gold in Treasury
• Positive Balance of Trade

Mercantalists argued:

1. Anytime there was a trade, it was zero sum (wealth was fixed). There was a winner and loser in every transaction.
2. Money is wealth

Thus based on (1) and (2), they concluded that the King should control trade and push for a positive exchange balance by restricting imports and promoting exports. 

Basic Idea:  no free trade because individuals see the private benefit, not the country as a whole.

French Physiocrats:

• They believe that the source of wealth of a country relies on their agriculture
• No other source was as important as the production of farm goods

Scottish Moral Philosophers:

• There believe was strongly based on the understanding of acting freely.
• Community does not require to act as a whole in order to succeed
• Price-specie flow mechanism works

David Hume (1711-1766):

• Disagree with the Physiocratcs since agriculture was defenetivly not the source of wealth
• Commerce is the source of wealth since it trading tgives. 
• Competition
• Innovation and Leaning
• Division of Labor

Rizzo

-Daniel Gaona

Lecture #11 "Industrial Revolution/ Mercantilism " (09/26/2011)

The Industrial Revolution:
Let us synthesis the idea....

Technology--->Increases workers productivity ----> Each workers produces more "Rise in wages"----> leads to more technology. (Cycle repeats) 

Rizzo told us about several reasons that lead to the IR. Still it is not believe that a massive cause lead to the IR but a process of numerous developments.

• Adams Smith's belief: Institutions, defined as something that is done without the incentive of money that people do together with the objective of giving their lives an improvement, are the main determinants or causes that lead to the economic growth of a country. 
• England was a place of freedom and development in the 18th Century. 
• Where the government was a lot more tolerant and an open mind to new and innovative ideas which became the land of the IR. 
• Most of the countries in Europe didn't had this freedom.

Coordination:

       A problem that was seen in several English communities where business did not establish new businesses or shop around some areas since their was not educated people to hire. Therefore, they were families that did not sent their children to school since shops where not hiring them. A problematic cycle

Mercantilism

The Mercantilism lasted until the med 18th Century. In this economic system the government, which was a king, belief that planning and overseeing all economic activity within his nation was his right. 

This planning and control over the economy could be describe as: 

• No freedom on movment
• High amount of regultions for imports and exports
• Domestic production limited
• A high control over the price system
• Wage control 

When the mercantilism ended several things happen. The FP and the SMP were attributed. 

There is another belief about how the money was seen. What happen is that people become more ambitious about  making money and having money, this initiated a period of the creations of new businesses and to expand the ones that already existed. 

Rizzo

-Daniel Gaona 

EWOT Goggles #3 "Can security affect a countries economy?" Week #3

My economics view is about something I have been observing throughout the past year. A lot of people think that security is a factor that does not relate to the economy of a country at all. What do I mean by security? By security I mean the amount of crimes in a country like kidnapping, homicides, robbery and a lot more like drug wars.

Now I'm going to take this to the specific case of Mexico.
People in Mexico thought that the increase of kidnapping, killings, and robbery were not going to affect our economy. In the past years a drug war initiated in my country. This drug war was something that made the security in Mexico drop to the floor. So people were just thinking that the only bad thing that the drug war was making people not to feel safe in their own house. Now I want to connect the factor of security with the economy. Can security affect a countries economy? I ask myself this and I have answer myselpf as well.
Mexico's drug war has gone to far. For example, in mexico when you establish a small business where you have a physical store and you start being successful they will come and charge you for "piso". Piso in English means floor and what this mean is that the drug cartel will analyze the business that are bien successful and they will pay a visit. They will talk to the owner and force him to pay a certain amount of money just because their are being succsefull and they feel they own the floor where they are when actually they are not legally the owners of anything. Now my dad establish a business in 2005, his business has been very successful in the past 2 years. He had to close his office and where his business was physically and do everything from his home in order for the drug lords not to find him and charge him for floor. This floor thing has make thousands of people to close their business because what they charge is so ridiculous that sometimes not even the total net income of the business can make it to pay this or in other cases will leave very few money for the owner that at the end it will not be profitable to have the business. Now what happen next? Foreign investment in Mexico decrease in the past years since people don't feel save to establish business in Mexico or to go and invest in something. Hundreds of cases of Americans getting kidnapped also affected the fact that tourist don't fell safe. So in the past summer the tourism lost a lot of money. Why will somebody go to Mexico if you can get kill so business like hotels, resorts or any other business that depends or tourist when to bankruptcy.
What is happening with Mexico?
The problem that started with just a problem of security end up affecting our economy greatly. To the matter that it might control the destiny of our economy if no thins done.

Can security affect a countries economy?
You can read more about this topic in the links that I attached and answer this question because I already did.

Additional Links


Mexican Economy Shrugs of Drug War
http://www.cnbc.com/id/42603398/Mexican_Economy_Shrugs_Off_Narco_War

Drug War hits Mexican Economy in Crisis
http://www.cnbc.com/id/42603398/Mexican_Economy_Shrugs_Off_Narco_War

Mexico's drug war affects tourism
http://articles.latimes.com/2010/dec/26/travel/la-tr-mexico-20101226

Tourist Kidnappings on the rise in Mexico
http://gogirlfriend.com/travel-news/american-tourist-kidnappings-and-torture-rise-mexico-8300

Kidnappings are out of control in Mexico
http://mexidata.info/id217.html

Reading Analysis #3 "What Social Sciences Does - and Doesn't - Know" (09/25/2011)

A)
      This reading was really interesting and straight forward about reality. I think one of the most interesting concepts of the reading is when the author starts explaining us how criminology had tried really hard to establish a program that could prevent or reduce crimes that would work the same everywhere. How the only thing that have establish is the fact that what can work somewhere can fail in another place. So our world has not yet reach the period of a true understanding of the human behavior and therefore having a control or prediction of it. Some parts of this reading are intuitive since we know human behavior can show trends but never a standard and an always predictable behavior.
      Another factor that seemed very interesting for me was that the experimental approach is the most effective approach. What I understood from this reading is that companies and business spent a lot of time analyzing factors to make the best decision when others like the one the author was involve just experiment instead of analyzing and based on the results decide. Like the example of the blue and white envelopes. The business didn't realize which one should be used so they just sent out 50,000 thousand envelopes of each color to see results. It seems I can conclude social science will always have the factor that can never me control which is the characteristics human have of being spontaneous and unpredictable.


B)

1. Is there really a possibility that social sciences like criminology get to establish a complete understanding, prediction and control over human behavior or in reality this will be the same for a lot more years? For example: So will there someday be an actual a crime reduction program that works efficiently everywhere?
2. Can social sciences become as exact as natural sciences or they will always have that debatable factor? (Does this mean that meanwhile a lot of aspects of social sciences are debatable?)
3. The author said that experimental approach is probably the best approach when decisions have to be made, but this is not always cost effective. When a decision has to be made should analysis be avoided and a trial and error process of decision be used or is there things we can decide without experimenting? 
4. Who says the experiment are not bias? since experimental samples might be predetermines or not big enough to make good assumptions or to have a good experimental result. 

C)
This reading will make all of the students to think critical and analytic at all times. This is not only applicable in natural sciences but also in social sciences. This means that after reading this article will show question things a lot more and know that there will never be somebody that truly predicts eocnomics in a correct manner at all times. Even economic Nobel winners tend to disagree among themselves proving our point that nobody knows everything. Another important learning is that experimental approach is the most efficient.

Lecture #9 "Work Less- Earn More- Spent less in food" (9/21/2010)

        Families right now use a smaller part of their income in food and other necessities than before. You could read about facts that show that in the 1970s people used up to 80% of their income in basic species or food. When right now in 2005 statistics came out showing that we only spent like 38% of our income in food or basic necessities.

When also right now people is earning a lot more than ever before. Moreover working hours has decrease a lot through history. Are we more lazy than before? We are working less hours, earning more money and spending a lot less money in food and necessities than before. Isn't that great? I think that shows how we have before more efficient in our working hours and earning but more but luxurious in our spendings.

What can we interpret from this?
After listening to this we can interpret the information and make other assumptions. So an increase in food price right now is basically no as severe as it would have been in the past. That is why we see around the globe how business and big companies right prices in food and basic necessities. Since a er small part of families income is used for food their is a big portion of the income that could be also used for this. Therefore if the food market gets more expensive it will not caused a chaos to everybody when if food price increase 200 years ago people will stop eating or eating less.

-Rizzo

Daniel Gaona

Lecture #10 "Stagnation and the Modern World" (09/23/2011)

       Through this lecture Rizzo was pointing out several issues and arguments that I thought they were counter intuitive to most of our class. So many people thing that right now the world is full of conflicts and wars. They think that our world is completely dirty and nobody takes care of it. Moreover that our world is truly endanger of destroying. When then he flips everything saying that the globe was actually worst before. That people died like a lot more before than in the past 10 years. Not only that but but also our globe is now facing a lot less conflicts and deaths than before. So the reality is that because today media and news is so fast we get to know everything that happens around the world easily. 

So now knowing that something wrong is going in Libya or in another country is easy when 60 years ago news didn't have the state of the art technology we have now to report and public material. Finally we conclude that is not that our world is more polluted or full of conflicts but that news and getting to know whats happening in the world is a lot easier right now than before. 

Rizzo touched another topic about growth stagnation. So in the past 50 years western countries have faced a great stagnation or more specific a slow down in their economic growth. When in the other hand other countries like China had the best growth they have ever had. One of the consequences is inequality around the globe. 

Just to conclude I will like to point out the difference between the 2 theories of production. The Classical which points out more production since the population grows so basically no more net profit and the modern which actually overpasses the population growth since it had improvements in technology and knowledge. 

Some facts pointed out in class:

• Suicide rates have maintain constant through history
• Less wars, conflicts and deaths than ever in history.
• Is not that we have more wars and pollution than before but the fact that our worlds media and technology to 
• Are we stagnated?
• Should we have more children?
• Coordination problem!

-Rizzo

Daniel Gaona