Three examples of division of labor
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Three examples of division of labor. Sports  different positions (attack, defense) Academia  different subjects and professors Medicine  different diseases and specialists Electronics, software development, internet… can you think of one person doing it all ?

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Three examples of division of labor

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Three examples of division of labor

Three examples of division of labor

  • Sports  different positions (attack, defense)

  • Academia  different subjects and professors

  • Medicine  different diseases and specialists

  • Electronics, software development, internet… can you think of one person doing it all?

  • More technology comes w/ more specialization


Explain friedman s quotation

Explain Friedman’s quotation

  • You pay the pencil with money

  • You get the money by working just a few minutes

  • Stores split this money to pay suppliers and other related business

  • These suppliers and other business also use their money to get other services (yours perhaps!)

  • Markets economies are like barter economies: money is just like any other commodity, except that all exchanges have to be carried with money


Impersonal operation of prices

Impersonal operation of prices

  • Prices transmit information throughout the economy without any need of additional communication

  • Prices  “traffic light system”

  • Friedman is a staunch supporter of free markets and liberalism (classical)

  • He opposes socialism/communism, but also Keynesianism

  • That is, all kinds of interventionism (?) / Austrians


Explain the best lawyer

Explain: the best lawyer…

  • A lawyer can also work as a secretary, but he or she will earn more if focusing on what he/she does best (even if he/she is still better than most secretaries)

  • Society benefits too (e.g. doctors and nurses)

  • The underlying economic concept is comparative advantage (e.g. young and old castaways)

  • Division of labor and capitalism

  • Efficiency / development / improved quality of life


Positive and normative economics

Positive and normative economics

  • In general, positive sciences are those involving measuring, calculations, etc.

  • Find relations among these quantities

  • Normative sciences are applied to discovering what is just, good, and better

  • Only positive sciences are ‘true sciences’. No scientific method in normative sciences

  • Scientific method / Milton Friedman


Example

Example

  • You are visiting Paris and decide to go to a museum.

  • You will have to answer 3 questions:

  • Where are we now?

  • What museum to visit?

  • How to get there?

  • Questions 1. and 3. are positive, but 2. is clearly normative


How to answer a normative question 1

How to answer a normative question - 1

It can be made positive:

  • Why do we want to go to the museum?

    • We feel conformists: Let’s go to the Louvre

    • We don’t want to pay for commuting: Let’s go to the nearest one

    • We want to get a glance at impressionist painters: Let’s go to d’Orsay museum

    • We want to meet people: Let’s go to the most fashionable these days

  • The problem is not yet solved; we still have to decide which is more important

  • These questions can be easier (or not) to answer than the original


How to answer a normative question 2

How to answer a normative question - 2

  • Economics: make positive some complex questions

  • Among other alternatives, this matter can be turned to a superior authority (moral code, religious authorities, parents, etc.)

  • In the end, almost every real-life problem has both a positive and a normative component


Conclusions

Conclusions

  • Positive economics: determines what it is and what it might be

  • Normative economics: determines which one of the alternatives to choose

  • Positive economics helps in dissecting a normative question into more simpler ones

  • Normative questions only have answer in the context of a certain code of values (do values/rights evolve?)


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