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Lecture 2

Week 2.docx

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Department
Philosophy
Course Code
PHL295H1
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all

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Week 2
September-18-13
10:20 AM
Late for Class
Desirability of Markets
Efficiency- Based Justification (EBJ)- we should have a market because there are more efficient
ways to have a market
o Committed to efficiency although freedom may be constricted, at least we wont undermine
the total wealth
Liberty- Based Justification (LBJ)- in a market economy people have a more liberties (less liberty
constraints)
o Opens a range of freedom
o Even though it doesn’t increase efficiency there will be still liberties
There are trade-offs- if we still keep giving liberties they are going to be negative impacts on
efficiency and vice versa
Many people say liberty and wealth go together but economists like Smith and Freeman do not
agree
Smith: 2 basic principals of human behaviour
Sympathy: Theory of Moral Sentiments:
Self-Interest- important forces behind human behaviour in markets (main study): Wealth of
Nations (books)- he wants to argue against Mercantile policies- tended to have beauracuy
tendencies- a how a nation can increase its wealth:
o Invisible Hand of the Market: in the market a lot of people who are self-interest actually
benefit society as a total
o Les a Faire - if let people exchange we will be better off in the end- more wealth in society
Markets are more efficient then other form of organizations in institutions- creating a bigger
market creates more wealth
Jared Debreu: 2 Fundamental Theories of Welfare Economies
Parteo- Efficiency : cannot improve the position of 1 person without making another person least
wealthy-
o Parteo-improvement- making someone better off without making another person worse off
o ex. 5,5 10,5 5,10
Formulated a mathematical proof- central of economic markets
o Efficiency: ratio of the outputs and inputs in a system
Missed 2nd Reading

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Description
Week 2 September-18-13 10:20 AM Late for Class Desirability of Markets  Efficiency- Based Justification (EBJ)- we should have a market because there are more efficient ways to have a market o Committed to efficiency although freedom may be constricted, at least we wont undermine the total wealth  Liberty- Based Justification (LBJ)- in a market economy people have a more liberties (less liberty constraints) o Opens a range of freedom o Even though it doesn’t increase efficiency there will be still liberties  There are trade-offs- if we still keep giving liberties they are going to be negative impacts on efficiency and vice versa  Many people say liberty and wealth go together but economists like Smith and Freeman do not agree Smith: 2 basic principals of human behaviour  Sympathy: Theory of Moral Sentiments:  Self-Interest- important forces behind human behaviour in markets (main study): Wealth of
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