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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
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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