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Chapter 8

SOC 2280 Chapter Notes - Chapter 8: North American Free Trade Agreement, Subsidy, Gross Domestic Product

Course Code
SOC 2280
Mark Juhasz

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Chapter 8 Transforming Structures: Markets, Politics and Policy
The chapter opens with two Case Studies
1 – Curitiba, Brazil- in 1973, mayor Jamie Lerner paid people for their
garbage. She also gave tokens in exchange for food, in order to clean up the
slums (known as favelas)
2 – Southern Mexico – Zapatista National Liberation (rebels) vs the
The ‘rain forest rebels’ wanted to save what remained of the rain forest in
southern Mexico. They declared war in 1994, while the government had just
signed the North American Free Trade Agreement (NAFTA). No real reforms
were made.
Both deal with Structural Change.
-humans have needs and those needs are provided by the earth’s
-investors, producers, sellers and buyers are all a part of the economic
-ex of a market : old times & less developed countries are prime ex of
small markets; the competition is right next door and clearly visible,
easy to compare product quickly, prices can be haggled
-Now; not traditional but abstractions to represent the interaction
among the costs of production, the asking price and the price
consumers are willing to pay for goods and services
-Real economic values (prices) are determined by the interplay of
supply and demand

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-Markets send realistic signals : you see the actual economic value of
goods and services, and the work put in with the prices people are
willing to pay
-Neoclassical economic theory views markets as primarily as structures
to allocate values, it emphasizes that many human problems can be
understood as market problems and failures
-Resources are limited - you get what you pay for and you lose what
you don’t pay for.
-Neoclassical economic theory is embedded in an intellectual Resource
Allocation Paradigm of the human world.
It argues that producers and consumers respond to changing
relative incomes, prices, and external constraints SO if market
signals are allowed to reach individuals and market prices include all
the social costs and benefits of individual actions
Market Failures
-Some reasons why markets don’t always work is because not all
resources are owned or used in the same manner
3categories :
1 – private property resources (owned and used by individuals),
> eye to long term sustainability
> ex : clothing and cars
2 – common property resources(people have virtually free and
unrestricted access)
> not owned by individuals

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> few incentives exist to manage or pay for upkeep because of few
existing incentives for managing them
> common-property resources : air, water, biological resources
3 – public- property resources
> jointly owned by all people of a country, state or local community
> ex : national and state forests, beaches, parks, and rangelands
- Social institutions can also be understood as resources restricted from
private ownership
- Air and rivers have been polluted, fishing grounds depleted and water is
down and because they are all controlled by the government, rights of
access to timber, minerals, grazing land, and energy resources are often
priced far below what they would be if they were all treated as private
property resources
- no real economic reason to preserve them
More problems …
- Externalities are another problem
Externalities : someone pays the full cost of production and consumption but
they are not calculated into existing marketing price. Individuals are not
involved in buying or selling a good may be affected.
- Externalities may be a tax on you or others (in the future)
- Governments often impede the market by providing price regulations or
creating a sort of quasicommons (public-property resource) from what
COULD be privately owned.
- Those favours can lead excessive, uneconomic and environmentally
destructive production
- Cost Accounting problems exist.
- The accounting problem is intense when there is a dilemma of consuming
something now and saving for the future
- Neoclassical economist usually discount the future and that consuming now
is of greater economic value
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