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Sep.12 2013.docx

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University of Ottawa
David Gray

th ECO1104 Sep.12 , 2013 YUJIE YI #7038840 What is bad economic reasoning is often good politics. Correct economic thinking: Case: - The ‘transitional jobs fund’ of Human Resources Development Canada in the late 1990s provided subsidies for construction of golf courses - The Chrétien government asserted that these subsidies ‘created jobs’ and thus ‘worked well for Canadians’ Analysis: - Creating jobs, conferring benefits … however, this is the “manna from heaven” or “free lunch” fallacy - The construction of the golf course has an opportunity cost – land, labour, capital must be reallocated from other potential uses, which might be more productive elsewhere. THE MARKET ECONOMY Types of economies: Robinson Crusoe, tribal (couldn't be expelled from the land either), feudalistic, command, free-market (Singapore, Hong Kong), social democratic (mixed)( the US, Canada, the UK, Italy…G7, G20, G8) Principle #6 Markets are USUALLY a good way to organize economic activity (P9) (Financial meltdown on Wall Street and the horrific damage that it did to the broader economy) ------- Not always  As rule-of-thumb, the more “right wing” one is, the more one agrees with that statement, and the more left-wing one is, the more one disagrees with it. (never & always) Any economy has to address THREE COORDINATION TASKS - WHAT goods and services should be produced, and in what quantities? 1/3 - HOW should they be produced? In other words, what is the technology? Technology of production: HOW TO allocate those scarce resources … - FOR WHOM are the goods and services produced?  How does the market economy go about addressing these tasks? Resources allocated to their HIGHEST AND BEST USE. - WHAT goods and services will be produced? Those that are PROFITABLE. Production of unprofitable G&S is discon
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