the earth is littered with the ruins of empires that believed they were eternal

Question 1

usual economic categories

Answer 1

rents, profits, income, capital, labor costs, etc.

Question 2

Thorstein Veblen

Answer 2

old school institutionalist

Question 3

what were the 2 pillars of neoclassical economics that veblen was against

Answer 3

• Marshall’s law of demand → says that people buy more of a good when the price falls
• the assumption that laborers work only because they are paid and do not “work for work’s sake”

Question 4

“emulatory instinct”

Answer 4

people are globules that look at other globules before making a decision (keeping up with the Joneses)

Question 5

veblen good

Answer 5

good where demand increases when price increases (conspicuous price)

Question 6

what is the leisure class

Answer 6

family that attains social status through property ownership

Question 7

2 examples of the leisure class

Answer 7

• Polynesian chiefs preferred to starve than carry out hunts
• French king who let shit burn than do shi

Question 8

what did galbraith argue

Answer 8

argues that firms mold consumers to serve their sales needs, not that consumers have “consumer sovereignty”

Question 9

what did galbraith argue for

Answer 9

• government should limit private consumption
• more public schools
• ban advertising consumer goods (didn’t believe in consumer sovereignty –> “need comes from within”)

Question 10

4 legal practices that economists have changed legal analysis

Answer 10

• negligence law
• property law
• criminal law
• corporate finance

Question 11

Judge Learned Hand

Answer 11

identified three key factors in negligence law:
- the probability of injury (P)
- the extent of injury or loss (L)
- the cost of preventing the accident (C)

Question 12

equation for negligence

Answer 12

P x L > C
(a person is negligent if the probable injury to the victim exceeds the cost of avoiding the accident)

Question 13

Coase’s theorem

Answer 13

once a property right is clearly defined, the property will be put to its most valued use
(bargaining between individuals/groups over property rights will lead to an optimally efficient outcome)

Question 14

two important variables for criminal law

Answer 14

• apprehension rates
• severity of punishment

Question 15

corporate finance

Answer 15

owners often give managers incentives to raise profits to lower agency costs

Question 16

conscientious withdrawal of efficiency

Answer 16

businessmen don’t know how to be efficient cuz they chase money so they shit managers