Mia
Probst
1st year class notes : Economics for Political Scientists
Overview
1. Lecture 1: introduction, growth and inequality
2. Lecture 2 : game theory
3. Lecture 3 : modeling
4. Lecture 4 : institutions, production and inequality
5. Lecture 5 : firms, principal-agent problem and transaction costs
6. Lecture 6 : firms, supply and demand
7. Lecture 7 : monopoly redux and macro labor market
8. Lecture 8 : time travel (credit and borrowing)
9. Lecture 9 : money and financial assets
10. Lecture 10 : market failures
11. Lecture 11 : governments and markets
12. Lecture 12 : globalization of commerce
13. Lecture 13 : environmental economics
,lecture 1 (02/11): intro & growth & inequality
what is the study of economics
- centers on the study of human behavior
- but w focus: eco incentives & eco outcomes
eco incentive: choose outcome that improves your economic welfare & how those choices
are shaped by markets & other circumstances
how ppl make choices under scarcity : eco vs sentiment
eco outcomes:
study indiv incentives = microeconomics
study of aggregated outcomes = macroeconomics
what eco does not tell → no moral judgment
⇒ study of the world as it is
pol scientists need to understand eco
- who gets what, where, when and how
- pol can shape eco incentives
1. key concepts
- nominal GDP (or GDP growth)
- GDP measured in current currency amount
- does not account for inflat° or diff in purchasing power across country
- “sticker price”
- real GDP (in constant price)
- important to measure change over time
- growth adjusted for changes in inflat°
- applies to any type of price measure
- translate current nominal prices → consistant baseline
- PPP
- change across countries & time
- adjust for differences in currencies & what they purchase
- generally translate local eco activity in $ of a particular year
- consumer price index (CPI)
2. nominal vs constant
, 3. economic growth
how to measure it ?
- GDP : compare size of ecos across time & countries
4. where do eco growth come from?
= learning to produce more w the same amount of stuff
increase: techno, human K, natural resources, law & creat institut° to make eco actv easier,
short term: ex:rainfall, war
5. what does GDP measure
gdp: measure the market value of all finished goods produced within a country (usually per
y).
finished good: good that will not be sold again as a part of another good
intermediate goods: goods that will be used to make something else that will be sold
capital goods: goods that are used to produce other goods but not a part of other goods
does not include: things imported from other countries
includes: exports
Y= C+I+G+(X-M)
y= gdp
c= consumer spending on finished goods
I= investment in capital goods
G= gov spending
X= exports
M= imports
GDP per capita
how wealthy a country is
GDP/populat°
6. calculate eco growth (tx de variat°)
7. wealth & health of nat°
gdp : calculates material values
BUT good indicator of “dev” bc correlated w health, happiness…
hockey stick : rapid, sustained growth in average living standards
8. faults of GDP
inequality across countries
1000 y ago world was flat: small diff between countries
1980 & since: skyscrapers increased
, 9. local & global inequality
eco → techno & capitalism
pol → demo & property rights
eco systems :
explosion growth rates correlate w development of diff eco systems (+ capitalist)
BUT no pure eco system
increase in eco growth likely starts w capitalism
capitalism: en eco system in which pv property markets & firms play an important role
⇒ eco system based on individualism & eco incentives
3 elements of capitalism
- pv property
- can keep gains of their labour protected from gov & others
- markets : allocat° of goods & services are determined by buying & selling, not govs
- firms (pv & organized)
what capitalism gives us
- division of labour
- specializat°
- entrepreneurial innovators
- new technology
incentives (incentive to work in smt you good at & being + compensated) & eco organizat°
→ leads to specializat° & division of labor : leads to + eco growth
self sufficiency road to poverty
every step of the way = someone specialized in a particular element
resources wasted to do everything by oneself → someone can do it + effiently
specializat°: when entity produces a + narrow range of goods and services that it consimes
aquiring the goods and services that is not producced by trade
division of labour: specializat° of producers to carry out diff tasks in the product° process
gains increased when individuals incentivized to do what they do best
techno innovat°
techno innovat° tied to improving eco & improving living standards
where do techno innvovat° comes from → incentives matter
Probst
1st year class notes : Economics for Political Scientists
Overview
1. Lecture 1: introduction, growth and inequality
2. Lecture 2 : game theory
3. Lecture 3 : modeling
4. Lecture 4 : institutions, production and inequality
5. Lecture 5 : firms, principal-agent problem and transaction costs
6. Lecture 6 : firms, supply and demand
7. Lecture 7 : monopoly redux and macro labor market
8. Lecture 8 : time travel (credit and borrowing)
9. Lecture 9 : money and financial assets
10. Lecture 10 : market failures
11. Lecture 11 : governments and markets
12. Lecture 12 : globalization of commerce
13. Lecture 13 : environmental economics
,lecture 1 (02/11): intro & growth & inequality
what is the study of economics
- centers on the study of human behavior
- but w focus: eco incentives & eco outcomes
eco incentive: choose outcome that improves your economic welfare & how those choices
are shaped by markets & other circumstances
how ppl make choices under scarcity : eco vs sentiment
eco outcomes:
study indiv incentives = microeconomics
study of aggregated outcomes = macroeconomics
what eco does not tell → no moral judgment
⇒ study of the world as it is
pol scientists need to understand eco
- who gets what, where, when and how
- pol can shape eco incentives
1. key concepts
- nominal GDP (or GDP growth)
- GDP measured in current currency amount
- does not account for inflat° or diff in purchasing power across country
- “sticker price”
- real GDP (in constant price)
- important to measure change over time
- growth adjusted for changes in inflat°
- applies to any type of price measure
- translate current nominal prices → consistant baseline
- PPP
- change across countries & time
- adjust for differences in currencies & what they purchase
- generally translate local eco activity in $ of a particular year
- consumer price index (CPI)
2. nominal vs constant
, 3. economic growth
how to measure it ?
- GDP : compare size of ecos across time & countries
4. where do eco growth come from?
= learning to produce more w the same amount of stuff
increase: techno, human K, natural resources, law & creat institut° to make eco actv easier,
short term: ex:rainfall, war
5. what does GDP measure
gdp: measure the market value of all finished goods produced within a country (usually per
y).
finished good: good that will not be sold again as a part of another good
intermediate goods: goods that will be used to make something else that will be sold
capital goods: goods that are used to produce other goods but not a part of other goods
does not include: things imported from other countries
includes: exports
Y= C+I+G+(X-M)
y= gdp
c= consumer spending on finished goods
I= investment in capital goods
G= gov spending
X= exports
M= imports
GDP per capita
how wealthy a country is
GDP/populat°
6. calculate eco growth (tx de variat°)
7. wealth & health of nat°
gdp : calculates material values
BUT good indicator of “dev” bc correlated w health, happiness…
hockey stick : rapid, sustained growth in average living standards
8. faults of GDP
inequality across countries
1000 y ago world was flat: small diff between countries
1980 & since: skyscrapers increased
, 9. local & global inequality
eco → techno & capitalism
pol → demo & property rights
eco systems :
explosion growth rates correlate w development of diff eco systems (+ capitalist)
BUT no pure eco system
increase in eco growth likely starts w capitalism
capitalism: en eco system in which pv property markets & firms play an important role
⇒ eco system based on individualism & eco incentives
3 elements of capitalism
- pv property
- can keep gains of their labour protected from gov & others
- markets : allocat° of goods & services are determined by buying & selling, not govs
- firms (pv & organized)
what capitalism gives us
- division of labour
- specializat°
- entrepreneurial innovators
- new technology
incentives (incentive to work in smt you good at & being + compensated) & eco organizat°
→ leads to specializat° & division of labor : leads to + eco growth
self sufficiency road to poverty
every step of the way = someone specialized in a particular element
resources wasted to do everything by oneself → someone can do it + effiently
specializat°: when entity produces a + narrow range of goods and services that it consimes
aquiring the goods and services that is not producced by trade
division of labour: specializat° of producers to carry out diff tasks in the product° process
gains increased when individuals incentivized to do what they do best
techno innovat°
techno innovat° tied to improving eco & improving living standards
where do techno innvovat° comes from → incentives matter
