CRM/LAW C142 Lecture Notes - Lecture 4: Factor Price, Economic Freedom, Apple Inc.
30 Oct 2014
School
Department
Course
Professor
Private Ownership implies responsibility
•Smith opposed corporate concept because it diffused responsibility among a large number of
owners.
•Later return to corporations and responsibility
•Violations of Smith Ideology
•Labor Unions
•Immigration Laws
•Minimum Wage
•He preferred limited partnerships
•You know who to sue
Free Market
•One that is not positively regulated or manipulated by any social agency or organization, political
or otherwise
•Determined by the impartial operation of unregulated supply and demand
•as demand increases, prices rise, causing increases in production (Supply)
•Higher prices cause demand to decrease, leaving producers with too much supply.
•Producers lower prices to reduce supply
•IBM PC $3k in 1982, $300 in 2010
U.S. Auto Sales Plunge in December
•Sales fall 38% in state, slump means no good deals for consumers (Richmond Times- Dispatch,
VA)
•December U.S. sales plunged
•Dealers must adjust how they do business, cut sales personel 18%
•Officials with Michelin NA said on Oct. 30 they decided to reduce production due to lessened
demand
OPEC
•After five months in which gasoline prices slid from their record highs, gasoline prices have begun
creeping back up. The shift signals that production cuts by OPEC may be having an effect.
•New York Times, January 6, 2009
Smith commented on the need for a free market in his Lectures
•Whatever policy tends to raise market price above the natural tends to diminish public opulence
•What is the "Wealth of Nations"?
•A few people with a lot of wealth aren't a wealthy nation
•When commodities are in abundance, they can be sold to inferior ranks of people, who can afford
to give less of them, but not if they are scarce.
•The society lives less happy when only the few can possess them
•Whatever therefore keeps goods above their natural price for a permanency, diminishes a nation's
opulence.
•The need for a free market was essential for the Smith position, and he was willing to allow
governmental intervention "where the need could be shown and the competence of government for
the task demonstrated" (Viner, 1927: 232).
Airlines pay $504M to settle price-fixing scam
