Who wants to be an economist?

1. Who wants to be an economist?

3. Zero-sum thinking • Refers to the idea that there is a winner and loser in all transactions, kind of like a tennis or boxing match • So if Bill Gates is rich, he must have taken that wealth from others • The economic pie is only so big, so government has to make sure we all get the same size slice… “fairness” and “social justice”

4. Fallacy of composition • The mistaken assumption that what applies to a part applies to the whole • In economics, we’re looking at the economy in total… not any given individual, company or industry • We know that the economy is dynamic… some companies and industries must pass (typesetters, milkmen) so others can rise (app developers, organic bakers)

5. Fractional Reserve Banking A system that enables banks to only have on hand a fraction of the total reserves needed to cover all deposits Since all depositors won’t demand their money at once, banks lend out the rest and earn interest and fees Fractional reserve banking creates “new” money to create wealth

6. Why does corruption lead to poverty? • “The law’s delay...” • Bureaucrat ability to delay often means an opportunity for bribes • The lost opportunity for SRTHAU in businesses not started, investment not made, jobs not created • Which means fewer goods and services... and less prosperity

9. Just what does an economist do?

10. Economists Do research including preparing surveys and crunching the numbers

11. Economists Do research including preparing surveys and crunching the numbers Forecast how the economy might change in the future

12. Economists Do research including preparing surveys and crunching the numbers Forecast how the economy might change in the future They study topics such as prices, jobs, interest rates, taxes, the stock market, commodities, money, the banking system, impacts from political decisions

13. Economists They then write up their reports and present the findings to clients

14. Economists They then write up their reports and present the findings to clients They are really good at PowerPoint and developing charts, graphs and flow charts

15. Economists They then write up their reports and present the findings to clients They are really good at PowerPoint and developing charts, graphs and flow charts They spend a lot of time crunching numbers and doing statistical modeling

17. Economists More than half of economists work for federal, state and local governments

18. Economists More than half of economists work for federal, state and local governments Many work for banks, consulting firms, NGOs or are self-employed

19. NGOs United Nations, Greenpeace, Amnesty International, AARP, Doctors Without Borders,

20. Economists More than half of economists work for federal, state and local governments Many work for banks, consulting firms, NGOs or are self-employed And the rest live in the academic environment or non-profit “think” tanks such as The Heritage Foundation, Hoover Institution and Brookings Institute

21. Economists The media pay is $90,000 year

22. Economists The media pay is $90,000 year There arejust 15,400 jobs and it’s a slow-growth profession

23. Economists The media pay is $90,000 year There arejust 15,400 jobs and it’s a slow-growth profession Most positions require a Ph.D. or at least a master’s degree

24. Economists The media pay is $90,000 year There arejust 15,400 jobs and it’s a slow-growth profession Most positions require a Ph.D. or at least a master’s degree Lots of young people with a B.A. degree in econ work in other fields

25. Top economics schools

26. Top economics schools Harvard Massachusetts Institute of Technology (MIT) Princeton University of Chicago Stanford University of California – Berkeley Northwestern Yale University of Pennsylvania Columbia

27. Top economics schools University of Florida was #48

30. History of economics Modern economics began in 1776 with our pal Adam Smith (1723-1790) and The Wealth of Nations

32. History of economics Modern economics began in 1776 with our pal Adam Smith (1723-1790) and The Wealth of Nations Smith influenced generations of economists and thinkers including David Ricardo, John Stuart Mill, James Madison, Thomas Jefferson, Alexander Hamilton… and Thomas Sowell

33. Adam Smith “Every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain; and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.”[

34. Adam Smith In short, the “invisible hand” refers to the self-regulating behavior of the marketplace when people, acting in their own self interest, benefit society

35. History of economics Over time, “schools” of economics formed about common framework of assumptions and that continues today

36. History of economics Over time, “schools” of economics formed about common framework of assumptions and that continues today Chicago, London, Austrian, Carnegie… also loosely organized around “saltwater” schools (on both U.S. coasts) and “freshwater” schools (Chicago, Carnegie Mellon)

37. Mercantilists Popular from 16th to late 18th centuries, the earliest of the economic schools

38. Mercantilists Popular from 16th to late 18th centuries, the earliest of the economic schools James Steuart was most prominent writer Mercantilists argued that the most important role for government was to ensure a positive balance of trade… export more than you import

39. Mercantilists Popular from 16th to late 18th centuries, the earliest of the economic schools James Steuart was most prominent writer Mercantilists argued that the most important role for government was to ensure a positive balance of trade… export more than you import They were zero summers!

40. Mercantilists Were concerned with the power of their nation relative to others They didn’t care about SRTHAU to maximize their nation’s standard of living, they wanted more wealth and military power than other nations

41. Mercantilists Were concerned with the power of their nation relative to others They didn’t care about SRTHAU to maximize their nation’s standard of living, they wanted more wealth and military power than other nations Typical policies included overseas colonies, ban on the export of gold, tariffs, wage limits, imperialism, subsidies for domestic manufacture

42. Final Mercantilist thought • Although gone from modern economic thinking, concepts about imports/exports remain such as “favorable balance of trade”

44. Classical economics ‘Wealth of Nations’ ended the mercantilists, although some of their policies such as positive balance of trade and tariffs endure

45. Classical economics ‘Wealth of Nations’ ended the mercantilists, although some of their policies such as positive balance of trade and tariffs endure Smith realized that the prosperity of a nation depended on creating more goods and services… and that economic policy should be for everyone’s benefit, not just the merchants

46. Classical economics ‘Wealth of Nations’ ended the mercantilists, although some of their policies such as positive balance of trade and tariffs endure Smith realized that the prosperity of a nation depended on creating more goods and services… and that economic policy should be for everyone’s benefit, not just the merchants Smith also rejected slavery and imperialism

47. Classical economics ‘Wealth of Nations’ ended the mercantilists, although some of their policies such as positive balance of trade and tariffs endure Smith realized that the prosperity of a nation depended on creating more goods and services… and that economic policy should be for everyone’s benefit, not just the merchants Smith also rejected slavery and imperialism His theories led to the school of Classical Economics, with a nod to the Physiocrats

48. Physiocrats French economists who advocated that productive farm work, not gold, was key to wealth of a nation Because of the agrarian society, they thought only agriculture land counted First used the term “laissez-faire”… originally meaning not having the government intervene in marketplace on behalf of merchants

49. Classical economics Smith was radical: preached a sharply reduced role for government and elites

50. Classical economics Smith was radical: preached a sharply reduced role for government and elites Argued that wealth is not a zero-sum game… everyone can win in both foreign trade and the domestic market