I. Basic Terms
A. Economy is the social science
concerned with the use of scarce resources
like land and labor to
fulfill unlimited human.
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
self interest. See
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 odd number.
This fallacy is the basis of police profiling.
Why Do People Continue to Believe Stupid Economic Ideas - Mark Blyth
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
a pattern of reasoning rendered invalid by a flaw in its
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 (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
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
Self Interest, Marginal Analysis,
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)
2016 Economic Report of the President gives the President's annual
view on our achieving these goals.
Video 1 hr. 27 min. on 2014 report Please
growth, Full employment of all
Price stability (reasonable
Positive balance of payments, Economic freedom,
Equitable distribution of
income Economic security
Important Economic Disciplines
Economics Video Lectures,
History of Capitalism
Videos from Cornell X
Macro Test Review 1,
Test Review 2,
Macro Test Review 3,
Micro Test Review 1, Micro Test Review 2,
Test Review 3
Gilded Age Observation
Is becoming a predominant 21st Century belief?
Policies have improved TV's, made them a necessity, even on a phone. Is your
As a kid in the 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 education and we got a 12 inch set.