The Market and International Trade. What we will discuss today. A closer look at the illegal drug trade Some downsides of liberal economic theory Markets and states: the tension Markets, states, and the Financial Crisis What’s the difference between liberals and conservatives?
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The Market and International Trade
Corn: $150 per acre
Livestock: few $ per acre
Cocoa: $5-10,000 per acre
What crop would a rational farmer grow?
Obscene profits for drug lords
The state’s main job is to “create
conditions in which competition will be
as effective as possible, prevent fraud
and deception, to break up monopolies–
these tasks provide a wide and unquestioned field for state activity.”
Housing supply overwhelms demand housing prices fall + mortgage defaults
CDOs lose value + Bank stock prices fall credit drys up Begin the bailout (hopefully) more credit (hopefully) save businesses and jobs (hopefully) economic growth
Total goods produced = 23
Total goods produced = 27 note: efficiency increases total number of goods available
England trades Portugal 4 units of cloth for 4 units of wine
Exchange rate is 1 to 1.
Total goods produced is still 27 but each country is better off than before trade and both are better off than before “efficiency”