In this, our 10th week of economics studies, we broached two big questions that needed discussion:

  • Is capitalism consistent with Christianity?
  • If somebody gets rich, does that mean somebody else becomes poor?

1TrillionWe then launched into what comprises a nation’s output.  GDP, or gross domestic product, while imperfect, is the agreed-upon metric for comparing the world’s economies as well as gauging growth in an economy.  The U.S. GDP of $16.8 trillion still leads the world, although China is closing at $10 trillion.

And as the illustration next door illustrates, a trillion is a huge stack of $100 bills.  We all admired a genuine $100 as it moved around the classroom and back into the thin wallet of Mr. G.

GDP, as it turns out, has two major components: private consumption and investment, and public (government) spending.  And  we instantly memorized the simple formula for computing GDP:  GDP = C+I+G+ (X-M).

Here’s the PPT from today.  Week 10, March 18

 

 

The LAF economists today tackled a challenging mini-MOAT (Mother-Of-All-Tests) and agreed that they were better off for the experience.  Covering two sections, the test required more analysis that prior DPQs.

We then dove into the world of controls on the free deployment of labor.  From minimum wages to paid family leave, we discovered that the U.S. and international labor markets are anything but free.

Sounds good on paper... but beware unintended consequences

Sounds good on paper… but beware the unintended consequences

Much of the discussion centered on minimum wage.  President Obama is making his proposal to hike the rate to $10.10 the centerpiece of Democrat re-election efforts this fall.

Alas, Dr. S punctures the myths of minimum wages, showing how they actually hurt the very people they are intended to help.  Fewer jobs, higher unemployment (particularly among teens and minorities), increasing automation and rising costs for goods and services by owners forced to pay more for labor are among the consequences.  The beneficiaries?  Those who manage to keep their jobs.

We also looked at labor unions.  Although in long-term decline, unions, particularly public-sector unions, remain a powerful political force in the U.S.

Here’s the PPT from today.  Week 9 March 4    Have a relaxing spring break and see you on March 18.

All LAF econ students likely will enter the work-a-day world at some point in their lives, so Tuesday’s study of pay was of high interest.  What will I make in the marketplace and why is that that my pay?

Making $50+ million and worth every bit of it

Making $50+ million and worth every bit of it

But before tackling such weighty issues, we all enjoyed a DPQ, then shared our thoughts on whether our highly compensated subject was in fact worth their pay.  From Kobe to Iger, we agreed supply-and-demand was what set their pay and they were worth it.  A-Rod, however, was a matter of some controversy.

Scarcity also plays a role in higher pay, at least in the case of electrical engineers… but not for PhDs in 14th century Persian poetry.

Productivity, we learned, is not just dependent on our own efforts.  The quality of our boss, co-workers, equipment and transportation costs all factor in our overall productivity.

We also blew up several myths: fair wages, the idle rich (Warren Buffett working prodigious hours while aged 83 and worth $58 billion), the working poor, and the wage “gap” between men and women.  The class concluded with a discussion of the choice between labor and capital.

Here’s the PPT from today.  Week 8, February 25

Lots of work coming up this week, so don’t wait to get going, but spring break looms!

No one in the theater today will ever forget the chilling moment when the revolutionary guards commandeered the Boyz and Girlz lemonade stands.  Hearts wept when economic freedom ended, knowing what central planning means to an economy… and for its citizens.

The audience was truly riveted by the thespian prowess on display during the debut of “Visible Hands.” Congrats to all actor/economists for a theatric and educational performance.

We then dug into big business and government.  Monopolies, cartels, oligopolies, anti-trust laws and the growth of regulations (hello $2 trillion burden) flashed by with amazing speed.

Have fun researching and writing about whether your highly compensated person is worthy of her/his remuneration.  Be sure to use Sowellian thinking!  Here’s the PPT from today.  Week 7, February 18

After a refreshing DPQ, the Sowellians resumed their economics studies about the importance of profits and, of course, of losses.

Saved by capitalism... the Center Rock drill

Saved by capitalism… the Center Rock drill

As always, we’re looking for real-life examples and we found one in the Center Rock drill.  This amazing, down-the-hole four-banger bored through a half mile of the hardest Chilean rock to free Los 33.  The profit motive in action.

One of the main lessons we absorbed today: profits are the visible cost of capitalism, while inefficiency is the invisible cost of socialism (and its ilk).  Based on centuries of relevant data, a profit-driven (and loss-fearing) economy by far will result in dramatically more prosperity than socialism.

Oh, we also selected the stocks that will comprise the LAF Sowellian Fund, soon to be offered on the New York Stock Exchange.

Here’s the PPT from today.  Week 6, February 11  Be prepared to be dramatic next Tuesday.

The LAF Sowellians began their studies today with a review of I Pencil, a brilliant essay containing many econ lessons.  The pencil, perhaps the most humble object we interact with regularly, is in fact an amazingly complex collection of contributions from tens of thousands of people around the globe.

Falling behind...

Falling behind…

We then moved into the definition of capitalism, socialism and communism.  Be sure you know these.

Businesses, we learned, have to adapt to changing times.  Social, economic and technical changes are necessary for a company to survive in a market-based economy.  Business leaders have to stay current… or be buried under the threat of bankruptcy.

Remember: in capitalism, business executive receive instructions from the marketplace on what to produce and what to not produce.  In socialism and communism, government officials give instructions to the marketplace.

Here’s the PPT from today.  Have fun picking and researching your publicly traded companies.Week 5, February 4

 

The LAF econ crew blew through the section test today on prices and markets.  All agreed that their hard work and prep paid off in a stellar performance.

Sounds good... but most of the benefits accrue to the wealthy

Sounds good… but most of the benefits accrue to the wealthy

We then dug into the  consequences of price controls.  We discussed how both floors and ceilings have results as predictable as the sunrise.  Hint: it’s isn’t pretty.

On the ceiling side, rent control destroy a city like a bomb, in the immortal words of Assar Lindbeck.  Gas price controls in the ’70s led to massive shortages and hours-long gas lines.  We also looked at floors such as those enjoyed by the sugar producers, which cost the American consumer billions each year.  And we’ll dig deeper  into minimum wage laws in the future.

Here’s the link to I Pencil by Leonard Read.  Be prepared to discuss this.

And here’s the PPT from today.  Week 4, January 28