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AGENDA Fri 1/27 & Mon 1/30 Review HW & Greed Reflection QOD #7: Ethics and Self-interest Paperclip Pick-up Free Enterprise Features A study in ethics Top 10 list HW: pg 49 #2-5; pg 53 #3; pg 57 #1-5; pg 60 #2-5 Study for Chapter 2 Quiz Slide 2 QOD #7: Self-Interest vs. Ethics Consider the following situation: You heard that a friend in class came upon the answers to the next test. (They got the answer sheet passed back to them w/ their homework by mistake.)You heard that a friend in class came upon the answers to the next test. (They got the answer sheet passed back to them w/ their homework by mistake.) What will you do?What will you do? Now consider the following as your only options. What are the costs and benefits of each option? What is in your self-interest? You can ask your friend for the answers. You can tell the teacher of the situation. You can do nothing. Slide 3 QOD #7 cont. Now consider the following: The next test will be graded on a curve. Reconsider your previous answers, and decide if you would choose to do anything differently. Explain why you would or would not. What is the ethical response to the preceding situation? Slide 4 Paper Clip Pickup Reflection 1.Why did people have incentives in Round 1 to pick up the clips during the 1st 30 seconds even thought the payoff was higher if they waited? 2.Why did people have incentives in Round 2 to wait until the 2nd time period to pick up the clips? How were the incentives different from Round 1? 3.What did people do in Round 2 to resolve the issue of clips on the boundaries? 4.During Round 2, why would students pick up clips in the 1st 30-second period? 5.Imagine the paper clips were whales, the floor was the ocean and the student volunteers were whale hunters. How could the activity relate to problems of harvesting whales? 6.There is a concern about whales becoming extinct, noted by the campaign to Save the Whales. How much beef and chicken is produced and consumed every day. Why arent cattle and chickens in danger of extinction, along with whales? 7.List other resources for which property rights are not clearly defined. What problems occur as a result? Slide 5 5 FEATURES OF FREE-ENTERPRISE (hand mnemonics) 1.Private property 2.Choices (freedom to choose) 3.Voluntary exchange 4.Competition 5.Economic incentives Slide 6 Private property Any good owned by an individual Private individuals and companies own businesses and industry Private property rights are strictly enforced even when they result in many poor people and few very wealthy people. www.cartoonstock.com/.../cgo/lowres/cgon93l.jpg Slide 7 Choices (freedom to choose) buyers have the right to choose what products they will buy Producers decide what to produce based on consumer tastes and demands Governments role in the economy is limited Slide 8 Voluntary exchange the right to make exchanges that will make them better off Productivity results in more personal wealth Slide 9 Competition individuals are free to compete with one another Slide 10 motivates a person towards action Entrepreneurship and risk taking are rewarded with big financial gains Economic incentives Slide 11 Market (Capitalist) v. Command (Socialist) MarketCommand Resources Government Role Economic Planning Income Distribution Price Controls Slide 12 Comparative Economic Systems Free EnterpriseSocialism RESOURCES -owned and controlled by private individuals -the government controls and may own many of the resources GOVERNMENT ROLE -small role to play -does not make productions decisions -government may make those decisions Slide 13 Comparative Economic Systems Free EnterpriseSocialism ECONOMIC PLANS no government plangovernment may plan and direct economic activity INCOME DISTRIBUTION less attention paid to distribution US income mobility government likely to use its power to redistribute income Slide 14 Comparative Economic Systems Free EnterpriseSocialism PRICE CONTROLS -prices are allowed to fluctuate according to the market -some degree of price control -may set minimum wage Slide 15 Rights come with responsibilities in a Free-enterprise economy. Voluntary exchange comes with the added responsibility of giving the person accurate information. The right to ownership comes with the added responsibility of using the property for legal purposes. The right to compete for business comes with the added responsibility of being truthful about the competition. Slide 16 List 5 products make your life easier How many of those products did entrepreneurs develop? Entrepreneur is a person who has a special talent for doing 3 things: S/he Searches out and takes advantage of new business opportunities Develops new products Develops new ways of doing things. Slide 17 Contract- an agreement between 2 or more people to do something. Most economist agree that our free-enterprise system could work but it would not be as effective without the govt enforcing contracts. Have you ever signed a contract? Teachers sign a contract to work. When you rent an apartment you have to sign a contract. Slide 18 Govt as provider of non-excludable public goods Private (apple) vs. public good (movie) 2 types of public goods 1.Excludable public goods must pay to consume (movie, college lecture) 2.Non-excludable public goods individuals cannot be excluded from consuming (national defense, fire protection) Who pays for these services? Free Rider- a person who receives the benefits of a good without paying for it. Can you think of some legal examples? Slide 19 Circular flow of economic activity see pg 59 Slide 20