ch 4 (vb) ON FINAL EXAM Flashcards
capitalism
An economic system based on private ownership of capital
central bank
an institution designed to oversee the banking system and regulate the quantity of money in the economy
currency
money
deflation
A situation in which prices are declining
enlightened self-interest
the realization that by helping others we are really helping ourselves in the end
federal reserve rate
Interest rate Federal Reserve charges on loans to banks
feudalism
A political system in which nobles are granted the use of lands that legally belong to their king, in exchange for their loyalty, military service, and protection of the people who live on the land
humanist
European scholars, writers, and teachers associated with the study of the humanities (grammar, rhetoric, poetry, history, languages, and moral philosophy), influential in the fifteenth century and later.
inflation
A general and progressive increase in prices
laissez-faire capitalism
an economic system in which the means of production and distribution are privately owned and operated for profit with minimal or no government interference
means of production
farms, factories, railways, and other large businesses that produce and distribute goods
monetary policy
Government policy that attempts to manage the economy by controlling the money supply and thus interest rates
socialism
A system in which society, usually in the form of the government, owns and controls the means of production.
stag hunt
a commonly used parable that demonstrates how the interdependence of actions and choices affects collective efforts to attain a goal
tragedy of the commons
A parable that illustrates why common resources are used more than is desirable from the standpoint of society as a whole
what does our author argue in this chapter?
Our author begins by making the argument that economics may be the reason why people created government in the first place. Remember their story of Caveman Bob trying to protect his rice. He had a resource that was valuable, and government formed to protect it.
textbook explanation of tragedy of commons
It is defined as the over-exploitation of shared resources. The idea centers around a pool of shared resources, like fish or trees or grazing lands. If everyone is responsible and follows the agreed-upon limits, the resource should last indefinitely. However, if even one person goes beyond those limits, then the resource will become exhausted at some point.
ENLIGHTENED SELF INTEREST SHOULD PREVENT THIS IN THEORY
IN REALITY COLLECTIVE ACTIVE WILL (GOVERNMENT)
enlightened self interest: idealist and realist
the idealist to benefit less in the long term than more up front, but then not at all later.
the realist believe that enlightened self-interest is not enough to keep this from happening. All it takes is one person to be selfish, and the tragedy will occur. In fact, they argue that rational choice may force us to cheat, since we operate from the idea that someone else will probably cheat.
productiction versus labor
production: which are the mechanisms for transforming labor into wealth.
labor: is a resource that can be overexploited and produce the tragedy of the commons.
karl marx’s beliefs
- The first thing we need to know about him is that he believed that economics is the key variable in politics.
- can be described as a humanist, or an idealist who is interested in and motivated by concern for the broader human condition and the quality of people’s lives.
- In particular, he appreciated how it made people constantly search for better, more efficient ways to do things
key principle of capitalism
competition
four elements of cost for owners
Profit = not optional; has to be present to justify the risk of initial investment Materials = also not optional; must have materials to make product Overhead = again, not optional; production costs money Wages = the only area with some flexibility
marx argument
Labor, at this point, is a resource that can produce the tragedy of the commons if over-exploited. And this is Marx’s argument. If wages are constantly bid down, due to a large supply of unskilled labor, you can hit a point where the workers can no longer afford to purchase the products they produce.
what else did Marx argue
Marx argued that the workers would eventually catch on to this and, using collective action, revolt against this exploitive system.
what is socialism
It is an economic system in which society controls the means of production. Instead of competition for profits, the goal is equality in the distribution of wealth. Everyone should share in the proceeds of their labor.
