ECON 312 - Exam 1 Study Guide
Question and answers correctly
solved 2025
Marx's Theory of Change - correct answer • Karl Marx concluded that
capitalism isn't sustainable
• Materialist conception of history: productive forces determine production
relations, markets, and society itself
• Why materialistic approach? His main idea is that economic forces
determine how society itself is organized
• Underproductive forces: labor
o The agent of change to Marx is a class antagonism:
o Underdeveloped relationships and superstructure: weak production
o The new arrangements not compatible with the old, tensions arise
wars arise as a result of incompatibilities between emerging class and land
gentry--
Joseph Thumpeters theory of Change - correct answer Capitalism is driven
by change through innovation
The New Instiutional Economics: Friederick Hayek, Ronald Coase, Douglas
North, Gordon Tullock, Mancur Olson. - correct answer ¥How institutions
evolve and what is an effect of this evolution on economic performance
(Hayek).
¥ Economic institutions arise according to a spontaneous order in which new
organizations, laws, regulations, and customs are tested by daily economic
life. "Working" arrangements are retained by society.
, ¥ Standard microeconomic theory holds time and institutions constant.
¥ Changes in institutions can be explained by changes in property rights,
innovations that alter transaction costs, information asymmetries, and
opportunities for voluntary behavior (Douglas North).
¥ Market institutions such as banks, contract law, etc. were created because
they happened to be economically rational at the time of their creation
¥ Institutions will change as a result of conditions (decrease of transaction
costs, increase of information costs, change in property rights)
Marx versus New Institutional Economics - correct answer ¥ Marx -
institutional change is inevitable and follows predetermined path.
¥ New Institutional Economics - institutional change is dictated by economic
variables, and cannot be predicted. The path depends on initial conditions
(history, culture, resource endowments) from which progress begins.
Hayek and Mises Critique of Socialism - correct answer ¥ Lack of price
system
¥ The principal problem of economics is "how to secure the best use of
resources known to any member of society, for ends whose relative
importance only these individuals know."
¥ Without relative prices, socialist managers would lack of information that
would to lead efficient decision making, and they would waste resources•
Socialist economy cannot effectively plan from the center because it can
digest information on prices, needs private firms to effectively digest
information
Question and answers correctly
solved 2025
Marx's Theory of Change - correct answer • Karl Marx concluded that
capitalism isn't sustainable
• Materialist conception of history: productive forces determine production
relations, markets, and society itself
• Why materialistic approach? His main idea is that economic forces
determine how society itself is organized
• Underproductive forces: labor
o The agent of change to Marx is a class antagonism:
o Underdeveloped relationships and superstructure: weak production
o The new arrangements not compatible with the old, tensions arise
wars arise as a result of incompatibilities between emerging class and land
gentry--
Joseph Thumpeters theory of Change - correct answer Capitalism is driven
by change through innovation
The New Instiutional Economics: Friederick Hayek, Ronald Coase, Douglas
North, Gordon Tullock, Mancur Olson. - correct answer ¥How institutions
evolve and what is an effect of this evolution on economic performance
(Hayek).
¥ Economic institutions arise according to a spontaneous order in which new
organizations, laws, regulations, and customs are tested by daily economic
life. "Working" arrangements are retained by society.
, ¥ Standard microeconomic theory holds time and institutions constant.
¥ Changes in institutions can be explained by changes in property rights,
innovations that alter transaction costs, information asymmetries, and
opportunities for voluntary behavior (Douglas North).
¥ Market institutions such as banks, contract law, etc. were created because
they happened to be economically rational at the time of their creation
¥ Institutions will change as a result of conditions (decrease of transaction
costs, increase of information costs, change in property rights)
Marx versus New Institutional Economics - correct answer ¥ Marx -
institutional change is inevitable and follows predetermined path.
¥ New Institutional Economics - institutional change is dictated by economic
variables, and cannot be predicted. The path depends on initial conditions
(history, culture, resource endowments) from which progress begins.
Hayek and Mises Critique of Socialism - correct answer ¥ Lack of price
system
¥ The principal problem of economics is "how to secure the best use of
resources known to any member of society, for ends whose relative
importance only these individuals know."
¥ Without relative prices, socialist managers would lack of information that
would to lead efficient decision making, and they would waste resources•
Socialist economy cannot effectively plan from the center because it can
digest information on prices, needs private firms to effectively digest
information
