BCOR 1015 Final EXAM WITH VERIFIED SOLUTIONS (GRADE A+) 2023

What are Hayeks views on planning and decision making? he believes in decentralized knowledge HAYEK: what is decentralized knowledge? spreading knowledge amongst people is Hayek against centralization? yes HAYEK: how does the price system coordinate resources? price signals are used to make decisions and send information to other groups because prices are lower or higher what are price signals? signals wrapped up in incentives; prices can constantly adapt and update in response to new information HAYEK: what is arbitrage? benefitting from peoples ignorance; buying something cheap at a flea market then re-selling at a higher price Does Hayek argue that arbitrage is moral or immoral? arbitrage is moral if its helping allocate resources What article did Cohen write? Why not socialism COHEN: what is the bourgeois equality of opportunity removal of socially constructed status restrictions COHEN: what is the leftest liberal equality of opportunity removal of the disadvantages of circumstances, even if not socially constructed (but leaves differences in opportunity related to "naive or inborn traits") COHEN:what is the socialist equality of opportunity corrects for all unchosen disadvantages, that is, for which the agent cannot be held responsible, whether they be disadvantages What were the three inequalities Cohen thought existed? 1. Laws (formal) 2. Unchosen Social Disadvantages (informal) 3. Raw Talent Because of these 3 things, he wanted to diminish the equality of opportunity COHEN: what is the relationship between equality and community? According to cohen reducing inequality involves both equalizing and also a redistribution policy Is Cohen a socialist? yes FRIEDMAN: is income equality or inequality fair? he thinks inequality should be allowed due to practical and moral reasons COHEN: what did he believe in, in regards to redistribution? Believed in redistribution through a flat tax rate - equality People w/ higher incomes get taxed more than poor people and that is UNFAIR COHEN: if people are willing or prefer to work harder jobs, they should or should not be paid more? SHOULD How does Friedman conceptualize capitalism? believes strongly in free-market capitalism How does Friedman think about redistribution, freedom, ethics, and market efficiency? Economic freedom means not only the right of individuals to act freely in the market, but for markets themselves to be free of government regulation What is the tragedy of the commons? overpopulation= overuse of resources What does Smith argue in regards to the pursuit of self interests? Virtue Theory: although we all have self-interest, we still have empathy and capitalists will achieve civic duty/benevolence. People acting in Self-interest → increased market Productivity what does Hardin argue in regards to the pursuit of self interests? the pursuit of self-interest in an open-access commons leads to ruin. Without controls on access and use of the underlying resource, the tragedy of the commons is inevitable What is the tradeoff between efficiency and equality? Makes sure people don't infringe on others rights- social welfare approach for positive human rights Maximum efficiency leads to low equality. Maximum equality leads to low efficiency what is an externality? a direct, unintended and uncompensated effect on a third party by an individual what is a positive externality? an externality that creates social benefits reaped by others what is a negative externality impose an additional cost on society that is not explicitly recognized by the buyers & sellers in the market (ex. Smoking) what is the Coase Theorem? Doesn't matter who has property rights, you can reach optimal outcome if you allow bargaining w/ externalities Always reaches optimal outcome(coasean bargaining) What are private property rights? well defined, monitored, enforced, transferrable commons goods are... rival and not excludable