Modern principles of economics chapter 21, Cowen, T., & Tabarrok, A. (2015)

Question 1

Positive economics

Answer 1

entails describing, explaining, or predicting economic events

Question 1

Normative economics

Answer 1

Entails recommendations or arguments about what economic policy should be

Question 2

economic reasoning in trade

Answer 2

The idea is that trade benefits both sides because each party values things differently:
A poor person might value money more than their kidney. A wealthy person might value health more than their money.

Question 3

what is the negative side of economic reasoning: exploitation

Answer 3

1. Exploitation: poor individuals might be coerced into selling things due to poverty, leaving them with no choice

Question 4

what is the negative side of economic reasoning: fair and equal treatment

Answer 4

poorer countries or individuals often lack bargaining power, Fair and equal treatment often conflicts with economic efficiency

Question 5

what is the negative side of economic reasoning: meddlesome preferences

Answer 5

Preferences where people have strong feelings about what others do, even if it doesn’t affect them directly. Resolving such preferences requires balancing values (freedom, religious liberty, and individual rights)

“live and let live” approach might help reduce conflicts, but these issues are often hard to resolve because different values clash

Question 6

Whats the negative side of economic reasoning: cultural goods and paternalism

Answer 6

Should governments pay for cultural or educational goods? bc they know whats best for everyone according to some people

Pragmatic criticism: These policies can be wasteful or ineffective.

Philosophical criticism (anti-paternalism): People should have the freedom to decide how to spend their own money, rather than governments imposing their ideas of what’s best

Question 7

Whats the negative side of economic reasoning: poverty and inequality and the distribution of income

Answer 7

What is a fair way to distribute income? 3 theories:

1. John Rawls maximin principle: Focuses on helping the disadvantaged rather than the average income or total wealth (even if it means neglecting higher earners)
2. Utilitarianism: maximizes total utility (happiness or well-being) for everyone. Unlike Rawls, utilitarians prioritize the sum of happiness, not just the worst-off.taking too much from the rich could discourage hard work, and giving too much to the poor might reduce their motivation
3. Entitlement Theory: fair acquisition and voluntary exchange of property and wealth. As long as wealth is earned legally and fairly, inequalities are acceptable.

Question 8

Whats the negative side of economic reasoning: who counts?

Answer 8

When evaluating policies like immigration or trade, whose welfare should matter the most:
1. All individuals equally (citizens and foreigners)?
2. Just the welfare of citizens?
3. Or prioritize foreigners’ welfare?
immigration is a huge benefit for countries were foreigners are treated equally or more important than citizens.