Posts tagged with: economy

Note: This is the seventh post in a weekly video series on basic microeconomics.

In previous videos in this series from Marginal Revolution University we learned how prices reach equilibrium and how the market works like an invisible hand coordinating economic activity. In the next couple of videos you’ll see why the equilibrium price (he market price where the quantity of goods supplied is equal to the quantity of goods demanded) is the only stable price and whether this model works in the real world.


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initiativeThe term “free market” doesn’t really capture the essence of the economic system that produces prosperity, says Michael Novak. The secret that “liberated more than a half billion of their citizens from poverty” was not mere freedom but private ownership and personal initiative.

The new economy in which we live is often called “the free market economy.” But markets are universal. Markets were central during the long agrarian centuries, through biblical times, in all times. For this reason, the term “the market economy” or even “the free-market economy” somewhat misses the mark.

More accurate is the “initiative-centered,” the “invention-centered,” or in general the “mind-centered economy.” More than anything, mind is the cause of wealth today. The Latin word caput (head) — the linguistic root of “capitalism” — has inadvertently caught the new reality quite well.

“The free economy” captures only part of the secret — it emphasizes the conditions under which the mind is more easily creative, in the fresh air of freedom. Freedom is a necessary condition, but the dynamic driving cause of new wealth is the initiative, enterprise, creativity, invention — which use the freedom.

Freedom alone is not enough. Freedom alone can also produce indolence and indulgence. To awaken slothful human beings out of the habitual slumber and slowness of the species, the fuel of interest must normally be ignited. One must move the will to action by showing it a route to a better world. Since humans are fallen creatures, mixed creatures, not angels, the fuel of interest is a practical necessity. The fire of invention lies hidden in every human mind, the very image of the Creator infusing the creature. To ignite it, one must offer incentives, a vision of a higher, better human condition, not only this-worldly, but also nourishing the expansion of the human soul and easement of bodily infirmities.

There is a natural desire in every human being, although it is often slumbering, to better his or her condition. And it is good for a woman to liberate herself and her whole people from the narrower horizons within which they find themselves. It is good for humans to catch glimmers of new possibilities for human development.

This, or something very like this, is the famous, celebrated and usually misunderstood “spirit of capitalism.” This is not a spirit of greed or avarice, which are grasping and small, not creative. It is an esprit, a gift of the spirit rather than of the body.

Read more . . .

unemployment-octoberSeries Note: Jobs are one of the most important aspects of a morally functioning economy. They help us serve the needs of our neighbors and lead to human flourishing both for the individual and for communities. Conversely, not having a job can adversely affect spiritual and psychological well-being of individuals and families. Because unemployment is a spiritual problem, Christians in America need to understand and be aware of the monthly data on employment. Each month highlight the latest numbers we need to know (see also: What Christians Should Know About Unemployment).

Positive news is marked with the plus sign (+) while negative employment data is marked with a minus sign (-). No significant change is marked by (NC).

Overview: While most of the metrics were positive, few jobs were added and a large number of Americans dropped out of the labor for, making this one of the worst jobs report in years.
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Note: This is the fourth post in a weekly video series on basic microeconomics.

Now that we know what the supply and demand curves are we can put them together to understand how they affect prices.

In this video from Marginal Revolution University, we learn how prices reach equilibrium and how the market works like an invisible hand coordinating economic activity. We also discover why at equilibrium the price is stable and gains from trade are maximized, and why when the price is not at equilibrium, a shortage or a surplus occurs.

(If you find the pace of the videos too slow, I’d recommend watching them at 1.5 to 2 times the speed. You can adjust the speed at which the video plays by clicking on “Settings” (the gear symbol) and changing “Speed” from normal to 1.25, 1.5 or 2.)

Previous in series: How to understand the supply curve

epipen22Pharmaceutical company Mylan recently spurred a flurry of outrage after raising the price of their lifesaving EpiPen by 400%, leading many to decry “corporate greed” and point the finger at capitalism.

Unfortunately, such anger routinely fails to consider the systemic reasons as to why Mylan can charge such prices, resorting instead to knee-jerk calls for fresh tricks by the FDA and new layers of price-fixing tomfoolery from Washington.

Yet the problem, as detailed by Rep. Mick Mulvaney in a new video from FEE, begins with the very same interventions, back-room deals, and price manipulations that the critics now propose.

Why, we might ask, is Mylan able to wield this monopolistic power and exploit its consumers with little challenge? As Mulvaney demonstrates, the answer has far more to do with the FDA, Congress, President Obama, and the Affordable Care Act than a free market with free-flowing prices. (more…)

Every year, the U.S. Census comes out with its report on incomes and poverty. And every year the same finding repeatedly surprises me.

As economist David Henderson says, the report “always shows that there is mobility between income categories, even in the short run, and that poverty is temporary for most people in America who experience it. Virtually all reporters ignore it.”

First, the bad news. The report reveals that during the 4-year period from 2009 to 2012, more than one out of three Americans (34.5 percent) had at least one spell of poverty lasting 2 or more months.

But the good news is that few people stayed in poverty all four years. Chronic poverty from 2009 to 2012 was relatively uncommon, with 2.7 percent of the population living in poverty all 48 months.
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Recently we considered a simple tool and metric for measuring economic well-being: real GDP per capita.

Yet such metrics feel can seem materialistic. What about the things that money can’t buy, we wonder, like health and happiness?

As economist Alex Tabarrok explains, while real GDP is an imperfect measure, it tends to be correlated with many of the non-monetary improvements that contribute to human flourishing.