Economics & our everyday life

Plato (468 BC)Xenophane (433 BC)Aristotle (384 BC)Hesiod (8 BC)

Ancient Economic Thought

Specializationincreasing the

productionthe individual becomes

more knowledgeable about their craft.

Two effects of specializationit increases output

producing more goods and services.

Interpersonal relationship justice exists when each

group does those things that are in their nature.

Plato

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”

Xenophane

Divided the concerns of economics into 2 separate fieldsOikonomiks (household

management)production and

consumption of goods management of natural

resourcesChrematistiks (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.

Aristotle

wanted to help alleviate the problem of scarcity

Because of scarcity time, labor, and production goods had to be carefully allocated

Hesiod

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."

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.

MERCANTILISM

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.

PHYSIOCRATS ("Government of Nature")

private initiative and production are best allowed to roam freeGovernment 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

Laissez-Faire Theory ("let them do as they will")

Man → World School → Work Death ?

MARXLoss of

MeaningFramework: loss &

gain

Recovery?

Thesis: Bourgeois (Capitalist)

Antithesis: revolution

Synthesis: Communist SocietyNo Private Ownership

Capitalist

StateBusinessmen

WorkersExploitation/

SufferingClass

Structure

Religion: Opium

Alienation/ separation

Worker to the product/ activities

↑Meaning in life: free

time

→→→

→→

→→

→

→

→

→→ → →→ →

Parts: Replaceable→

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

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 & needssupply & demand Profit Asset & liability

MASLOW'S HIERARCHY OF NEEDS: THEORY OF HUMAN MOTIVATION

Economic wants vs. non-economic wants

THE INDUSTRIAL REVOLUTION AND CLASSICAL ECONOMICS1. ADAM SMITH AND THE

CLASSICAL SCHOOL2. DAVID RICARDO & THE

THEORY OF COMPARATIVE ADVANTAGE

3. THOMAS ROBERT MALTHUS & THE PRINCIPLE OF POPULATION

4. MARGINALIST SCHOOL5. THE MARXIST ECONOMICS

ADAM SMITH & THE CLASSICAL SCHOOL

Self-interest: constrained by morality, markets, and

government

Division of labor

↑production

Lead to man’s ignorant state

↑ wage = ↑production

Product shortage

↑price↑profit ↑production ↓product

shortage↑producers = competition

↓price

↓profit

↓producers

would reap gains from specializing in what it was best at producing and trading with other nations.

DAVID RICARDO & THE THEORY OF COMPARATIVE ADVANTAGE

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.

Opportunity cost

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”