ECON 102 Lecture Notes - Lecture 4: Spontaneous Order, Mercantilism

• School: University of Illinois
• Department: Economics
• Course: ECON 102
• Professor: Isaac Dilanni

Document Summary

Econ 102 - lecture 4 - early economic thought. Zero sum game: a situation in which for one party to gain, another must lose. Mutually beneficial exchange: an exchange that benefits both parties. There is public interest separate from the interests of actual individuals. The classical school of economic thought (1776 ad): Heavily influenced by adam smith (a professor of moral philosophy and the founder of economic science) The invisible hand : smith"s metaphor for the power of individual self- interest to create spontaneous order. Subjective theory of price: the theory that the price of a good is determined by its utility, rejected by classical economists. Water-diamonds paradox (the paradox of value): water is very useful but has a low price, while a diamond is not very useful but has a high price.