ECON 103 Study Guide - Final Guide: Absolute Advantage, Externality, Fallacy
14 Dec 2020
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Believed we exchange things because they have equal value. No incentive to trade you come out no better than before. Just-price doctrine using normative theory trying to get a positive result. Believed there was a just price to certain goods. Policy of france: the people may be poor, but the country is rich! . Believed imports were bad and exports were good. No concept of spontaneous order govt imposed and micromanaged everything. Zero-sum frame thought trade had a sum of zero. First to consider that spontaneous/unplanned order may occur in a free market. Wealth of nations (1776) it is not the benevolence of the butcher, baker . Market is driven by self-interest and mutual selection. Believed price could be explained by its historical cost of production. Exchange benefits both sides, because of inverse valuation of goods being exchanged. Invisible hand : unseen market forces allocate resources efficiently.
