| Line 1: |
Line 1: |
| | {{Economics_Lectures}} | | {{Economics_Lectures}} |
| | | | |
| − | '''Next week: Midterm exam, about 30 multiple choice questions. Closed book. Answer every question, because there is no penalty for wrong answers (the CLEP exam has no penalty for wrong answers either).''' | + | '''Next week: Midterm exam, about 15 multiple choice questions. Closed book. Answer every question, because there is no penalty for wrong answers (the CLEP exam has no penalty for wrong answers either).''' |
| | | | |
| | The word "economy" is derived from the Greek word for "household", which is the most basic and perhaps the most efficient unit of an economy. Think of how there is division of labor among family members; diminishing marginal utility for activities; supply and demand for food in the refrigerator; both "long run" and "short run" decisions; economies of scale in buying dinner; and very few transaction costs within a family. The family or household unit may be the most efficient structure possible. | | The word "economy" is derived from the Greek word for "household", which is the most basic and perhaps the most efficient unit of an economy. Think of how there is division of labor among family members; diminishing marginal utility for activities; supply and demand for food in the refrigerator; both "long run" and "short run" decisions; economies of scale in buying dinner; and very few transaction costs within a family. The family or household unit may be the most efficient structure possible. |
| Line 139: |
Line 139: |
| | | | |
| | == Example 1: Economic Insights into Politics == | | == Example 1: Economic Insights into Politics == |
| − |
| |
| − | Next Tuesday is Election Day, and this is a good time to see if we can apply insights from this course to understand and predict election outcomes.
| |
| | | | |
| | Economics affects election outcomes in two ways. First, many people vote based on how they are personally doing economically. Voters who recently lost their job are more inclined to be angry about the incumbents (the politicians currently in power). Those voters may choose not to vote for the incumbent, either by not voting at all or by voting for the opponent. Some economists feel that the outcome of every presidential election can be predicted by looking at key economic indicators (such as unemployment) on Election Day. | | Economics affects election outcomes in two ways. First, many people vote based on how they are personally doing economically. Voters who recently lost their job are more inclined to be angry about the incumbents (the politicians currently in power). Those voters may choose not to vote for the incumbent, either by not voting at all or by voting for the opponent. Some economists feel that the outcome of every presidential election can be predicted by looking at key economic indicators (such as unemployment) on Election Day. |
| Line 146: |
Line 144: |
| | Second, the side that spends the most money in a political campaign usually wins. In 2008, we can compare the campaign spending by Barack Obama and John McCain to the votes they actually received. Obama spent $7.39 per vote that he received, while McCain spent only $5.78 per vote that he received. That's a large difference of nearly 25%. | | Second, the side that spends the most money in a political campaign usually wins. In 2008, we can compare the campaign spending by Barack Obama and John McCain to the votes they actually received. Obama spent $7.39 per vote that he received, while McCain spent only $5.78 per vote that he received. That's a large difference of nearly 25%. |
| | | | |
| − | One reason Obama spent more was because he received far more in campaign contributions than McCain did. But that was partly due to a strategic decision made by McCain in the summer of 2009: he decided to take federal campaign funds, which prohibited him from raising money from the public after around September 1st. Between September 1st and Election Day (in early November), McCain was stuck with the roughly $75 million provided by law to candidates who choose to take federal financing rather than funds from public donors. Obama made the opposite choice, and elected to receive contributions from the public and not take any federal financing. Obama then raised over $300 million from internet donations during that same period, which is 4 times as much as McCain received. | + | One reason Obama spent more was because he received far more in campaign contributions than McCain did. But that was partly due to a strategic decision made by McCain in the summer of 2008: he decided to take federal campaign funds, which prohibited him from raising money from the public after around September 1st. Between September 1st and Election Day (in early November), McCain was stuck with the roughly $75 million provided by law to candidates who choose to take federal financing rather than funds from public donors. Obama made the opposite choice, and elected to receive contributions from the public and not take any federal financing. Obama then raised over $300 million from internet donations during that same period, which is 4 times as much as McCain received. |
| | | | |
| | From this simple observation about the differences in funding, several conclusions can be drawn: | | From this simple observation about the differences in funding, several conclusions can be drawn: |