Chapter 4 Flashcards
What is referred to how politics and economics are related and how each affects the balance between equality and freedom?
Political Economy
True or False: The term “natural markets” is a myth
True
Once created, are markets easy to replace? Why?
No because they’re institutionalized
What is the interaction between forces of supply and demand?
Markets
What creates value for goods and services?
Markets
Is the market centralized or decentralized?
Decentralized
Ownership of goods and services is what?
Property
What are property rights?
What you can do with your property
Who or what regulates and protects markets and property?
States
What does it mean for something to be “market ready”
That it’s still not able to be sold at an affordable price where the manufacturer can make money
True or False: Some goods can’t function well in market or in private hands
True
Give some examples of good that can’t function well in market or in private hands
Roads & National Defense
What are public goods?
Goods that are used by society, but are privately owned
Public goods vary widely from what?
Country to country
What is considered social expenditures?
“Welfare”
List 3 examples of social expenditures
- Education
- Healthcare
- Transportation
What does taxation determine?
Who pays for public goods?
Are Social Expenditures ever controversial?
Yes, over the issue of who benefits
How does taxation vary?
It varies in who is taxed and how much is taxed
A medium of exchange, a form of IOU is what?
Money
The legitimacy of money is backed by what?
The state
Who controls the supply of money?
Central banks
How does the central bank control the supply of money?
Typically through interest rates
The action of Money and Inflation are tied to what?
Inflation and unemployment
What are the orders that set the boundaries of given procedure?
Regulations
Who manages markets and property through regulations?
The state
List 3 examples of regulations
- Monopoly (Microsoft)
- Environmental
- Social
Who manages the sale of goods and services between themselves and other countries?
The state
List 3 tools of trade regulation:
- Tariffs
- Quotas
- Non-tariff regulatory barriers
What has a high priority on individual political and economic freedom, less on equality?
Liberalism
What argues that a weak state and strong capital markets foster democracy?
Liberalism
True or False: Liberalism is related to ideology of the same name
True
The following policies describe what? - Best state is a weak one - Limited regulations - Fewer public goods - Lower taxes - Free trade - Laissez faire-allow economy to function as it wishes Greater tolerance for inequality and poverty
Liberal policies
The following describe what?
- Attempts to balance individual freedom and collective equality
- Accepts private property and markets but seeks to regulate
- Many European countries fall into this category
Social Democracy
In Social Democratic Policies, trade and competition and managed by who?
The state
In Social Democratic Policies, there is less tolerance for what?
Inequality, poverty
How is outright ownership of some industries by state seen as in Social Democratic societies?
Acceptable or necessary
State, labor, and business set policy in concert, not through conflict (such as strikes) refers to what?
Neo-corporatism
Where are social democratic policies most common?
In Europe
Which policies advocate for no private property?
Communist Policies
Which policies place an emphasis on collective equality over individual freedom?
Communist Policies
Property, markets viewed as instruments of exploitation refers to what?
Communism
What are some examples of Communistic countries?
- Soviet Union and much of Eastern Europe until 1989-91
- Cuba, North Korea
- China—but evolving capital markets
In which countries are the markets non existent because they’re directed by the state?
In communist countries
Which countries have extremely high autonomy, but often lack capacity?
Communist
Private property along with national ownership describes a state with which policies?
Mercantilist Policies
State tries to direct production, parastatals refers to what?
Active Industrial Policy
The following describe what kind a state with which kind of policies?
- Small Welfare State
- Tariffs and other trade barriers
- More authoritarian than democratic
Mercantilist Policies
Neither individual freedom or collective equality emphasized—rather, state power relative to other states refers to what?
Mercantilist Policies
How can we compare and measure successes or limitations of each?
- Gini Index
- Human Development Index
- Happiness
- Gross Domestic Product (GDP)
Purchasing Power Parity (PPP)
What defines the total production in a country? This is irrespective of who owns it…
Gross Domestic Product
What is one of the limits of GDP?
It doesn’t take into account costs of living in different countries
What does PPP look at in regards to GDP?
Buying power
In countries where costs are low, what happens to GDP?
GDP is increased when adjusted for PPP
In countries where costs are high, what happens to GDP?
GDP is lowered when adjusted for PPP
The following are limits of what?
- Captures all economic transactions, including bad ones!
- Costs of economic growth not factored in, such as pollution
- Economic distribution not measured—who gets the wealth?
GDP and PPP
List 3 examples of bad economic transactions
- Disasters
- Expenditures based on crime prevention
Are costs of economic growth, such as pollution, factored in GDP and PPP?
No
What is the Gini Index?
Mathematical formula that measures inequality (not poverty) in countries
What is the Gini Index score for perfect equality?
What is it for perfect inequality?
Perfect equality = 0
Perfect inequality = 100
Gini Index asks what question?
What percent of the populations owns what percent of the country’s total wealth?
Higher inequality in liberal countries than in which ones?
Social democratic countries
Higher inequality in poorer countries than what ones?
Richer countries
What determines quality of life? (List two)
- Literacy and education
- Life expectancy and health
Human development Index places an emphasis on what?
Poverty/ development over inequality
What does Human Development Index focus on?
Wealth, but rather outcome of that wealth
True or False: There is a strong correlation between GDP and HDI
True
What is the main motivation for human behavior?
The pursuit of happiness
Happiness stagnates above certain economic threshold refers to what?
“Easterlin Paradox”
True or Fase: The world has become more liberal over time
True
One is one reason for the world becoming more liberal over time?
Increased Economic Liberalization
Return/resurgence of liberal policies and institutions refers to what?
Neo-liberalism
