Jim’s Notes

Jim’s Notes – MACRO Unit 1 v.2012.6

  • Intro to Macro

  • Your advice, please on economy

  • What should be our goals?

  • How’s the economy doing?

  • What is greatest issue?

  • What can govt do?

  • What should policy makers do?

  • Course Basics

    • Who are you & why here?

    • Details on Course Requirements

    • Who is Jim Luke?

    • contact info

    • jimluke.com site

    • econproph.com site

  • Syllabus

    • available on D2L and jimluke.com

  • How to Succeed or Fail

  • Quick Quiz Time!

    • The textbook is:

    • Which one is NOT a good way to contact Jim (the professor) at:

    • This class will have the following graded assessments:

    • Your grade is based on:

    • Grades for each exam are:

    • It is important to access the D2L website for this course because:

    • Attendance:

  • Motivation for Macro – The Big Questions

    • How can a nation, or its people, get richer?

    • Why do some countries get richer and others don’t?

    • Is there anything society can do to make sure we all get richer and have a better life?

    • What should the government do about ‘the economy’?

    • How do we make the economy better and more predictable?

    • Coordinate the production and consumption plans of a large number of people over time?

  • Historical Roots in Political Economy

    • Most of history

    • Economic Systems are dominated by Tradition and Dictates of Rulers; Markets are relatively insignificant to daily economic life.

    • widespread poverty & short lives

    • rule and domination by an elite few, often enforced by violence or religion

    • most production was household production; some modest amounts of trade

  • Middle Ages and Age of Enlightenment:

    • Markets & trade emerge as powerful and increasingly significant in economic systems, threatening at times the authority of tradition and rulers.

    • Small scale production for markets emerges

    • Trading becomes a source of wealth

    • Political Economy: Monarchy and Mercantilism

    • Mercantilism

    • The Nation as The King’s Household

    • Accumulate gold & money

    • Export Manufactured Goods;

    • Import only raw materials not at home

    • Keep profits

  • Markets bef

  • Then, Triple Revolution

    • Democratic political government

    • Industrial revolution

    • Banking and Financial System

    • Together, industrial and banking-financial revolutions create ‘capitalism’ and markets begin to dominate the economy.

  • Economics is born

    • Study of markets and capitalism

    • Adam Smith (and others such as Quesnay) refute Mercantilism – ‘Economics’ is born as a discipline

    • Micro: focus on individual decision-making and individual markets

    • Macro: focus on the overall economic system performance and government policy options

  • Macro economic concerns

    • Markets Work, but does a market system work?

    • What is the proper role of government when markets and capitalism dominate the economy?

    • How should the banking and financial system work?

    • Will a market-based capitalist economy achieve our social goals?

  • Types of Policy Options

    • Laissez-Faire

    • Monetary Policy

    • Fiscal Policy

    • Institutional & Financial Regulation

    • Nationalization

  • Overview of Schools of Thought in Macroeconomics

    • Libertarian-Austrian (extreme Classical)

    • Classical, NeoClassical, and New Classical (Classical w/ monetary policy)

    • ‘Keynesian’ : Simple Keynesian, Keynesian-NeoClassical Synthesis, Post-Keynesian, MMT,

    • Radical: Marxist, True Socialist,

  • Society’s Goals & Challenges for Macroeconomic System

    • Growth

    • Stable price level and value of money

    • Full Employment

    • Cyclical Stability

  • Why Macro is difficult and complex

    • Aggregate social science

    • nearly impossible to have ‘controlled experiments’

    • must try to explain reality and experience

  • Models necessary to simplify things

    • models require assumptions

    • open the door for ideology

  • Macro is not micro summed together

  • Easy-to-make errors and fallacies

    • composition

    • money is a limited asset

    • government is a household or firm

    • scale of numbers

    • past is not necessarily same as future (institutions don’t change)