Mid-term Flashcards
(27 cards)
Friedman ideas on individualism
♣ What is the proper relationship between government and individual?
• Monetarism = is an economic theory that focuses on macro effects
o Excessive expansion of the money supply is inherently inflationary
o Authorities should focus on solely maintaining price stability
o Financial Crisis: caused or made worse by government
o Crowding Out: Keynesian: multiplayer does no work
♣ i.e. more gov spending means less private spending, no net increase
o Time Lag: Government policies are slow
• Friedman Wants
o Rules not decision-makers
o Steady growth of money supply
♣ “We do not know we can only know that entrepreneurs working in competition make the world a better place”
Friedman on Rationalism
♣ The Theory of Consumption Function
• “Permanent income hypothesis” = individuals make rational plans over the course of a lifetime.
Friedman Associated with what consensus ?
Neoliberalism
Friedman on Corporations?
Corporations
♣ “The Social Responsibility of Business is to increase its Profits”
♣ Gov. Has responsibility to impose taxes and determine expenditures for such “social purposes as controlling pollution or training the hard-core unemployed…
Friedman on Monopolies?
three alternatives for a monopoly: public monopoly, private monopoly, or public regulation. None of these is desirable
social responsibility
Friedman on Gov?
Government as Umpire 1) enforce law and order 2) property rights, Only Intervene ---- technical monopolies ----- diminish negative "neighborhood effects."
Friedman on the market
Bends argument that market is good for consumers
- —“Wherever you had freedom you had capitalism”
- —-“Mix of incentives and competition is the best system”
The Market= 5 Basic Functions
- —Free Exchange is efficient
- —Free Exchange leads to peaceful cooperation
- —Free exchange is voluntary and not coercive
- —Diversity instead of conformity
- —Economic freedom is required for political Freedom
Friedman’s work?
Capitalism and Freedom 1962
Polanyi associated with what?
Embedded liberalism
Polanyi on Markets
“Laissez-faire planned. Planning was not”
Fictitious Commodities
—Land
—Labor
—-Money
As Markets grow so does the need for regulation which leads to The Double Movement
1) Birth of the Liberal Creed
2) The self protection of society
The dangers ahead
—–The market advocates that gov intervention is reason for failure
Galbraith on society
Dependency affect / - Sovereignty Consumer
Lack of “consumer sovereignty”
Accepted sequence - demand drives supply
—–Market System
Revised sequence - producers create demand
——–Industrial System
How?
—–Marketing and Advertising
Machinery of consumption demand creation
Consumers are no longer sovereign
Galbraith Corporations System and Problems
Industrial System 3 parts
1) Small number of powerful corporations
Monopolies
2) Controlled by a technostructure
——–Managers (technicians) make decisions (Not owners
3) Goals: Survival. Continuous growth.
Maximum Size Profit is not top priority (relates to drucker)
Corporations Problems
1) Increased control over markets
2) Not subject to demand constraints
3) Power over consumers and commercial culture
4) Power over government and politics
5) Concentrated power: inconsistent with Democracy
Creates problem of social imbalance:Money is spent on consumer, not in public sector, imbalance of public/ private spending
Drucker Corporations
- Corporation is NOT to be profit maximizing but is to create a CUSTOMER
- Profits = limitation
- Main functions are innovation and marketing
Sweezy on corporations
-Monopolies/ Corporations o 3 Themes 1) Monopolization • Concentration of profits 2) Stagnation • Limited investment opportunities 3) Finicalization • Movement from production to finance o Solution = Find new markets
Keynes 4 main ideas
1) Animal Spirits (not rational beings)
2) Multiplier (changes in spending as snowball effect)
3) Prices and wages do not always adjust
4) Self regulation (investments wont auto-return to pre-depression)
- —Says Law supply creates demand therefore focus on production
Galbraith’s view of Capitalism 5 Sections
1) Private enterprise
2) Competition =. Market power (monopolies)
3) Private property
4) Profit motives = technostructure
5) Consumers Sovereignty = Dependency effect
Schumpeter on entrepreneur and Why Innovate?
Profit comes from entrepreneurs and their innovation
—-Intelligence of the innovator
——-Not from labor or the ownership of resources(rent)
Entrepreneur : Profit Generator
—Not necessarily The one who receives it!
——Driven by inter-demons to change the world
Why Entrepreneurs Innovate?
1) Money
- —To found a private kingdom
2) Success
- –To prove oneself superior
3) Joy of Creating
Schumpeter on Market
Creative Destructiveness
Capitalism is a process of creating and destroying its own creations; create something new then destroy it for new innovation
Schumpeter vs Mazzucato
Schumpeter: innovation comes from entrepreneur
Mazzucato: innovation stems from state influence
Schumpeter associated with? work?
Keynesian Consensus; Capitalism, Socialism & Democracy
Schumpeter’s theory of economics
Does not think capitalism can survive but thinks socialism will
- –Schumpeter thinks socialism will happen easily, peacefully
- —Marx = violent, riots
Sweezy vs Galbraith
Agree on Market
1) Competitive firms - Price Takers
2) Monopolies - Price Movers
3) Result
- —-Monopolies don’t cut prices, they cut costs
- —Prices are consistent demand stays the same
- Costs go down– increasing rate of profit
Kindleberger on business cycle
Neoliberalism 4 steps to Financial crisis 1) Displacement 2) Euphoria (boom) (Credit expands) 3) Mania (Irrational) - "This time is different" ----Optimism spreads to new sectors ----Short-term profit seeking 4) Distress ----Credit dries up
Pro-Cynical role of Credit
Lender of Last Resort
—Problem; Moral Hazard
Thaler & Sunstein on society
Neoliberalism
Two Brain Systems
1) Reflective
—–Slow, conscious, one thing at a time, analytical
—–High-energy release
2) Automatic
—-Fast, unconscious, Muti-tasking
—–Low-energy use
•Libertarian Paternalism
oLibertarian
♣ “People should be able to do what they like”
oPaternalism
♣ “It is legitimate … to influence peoples behavior in order to make their lives longer, healthier and better”
oChoice Architecture
♣ “…organizing the context in which people make decisions”
•Nudging
o Make it easy for consumer to make good decisions
o Opt out rather than opt. out people are poorly informed thorugh lack of time
