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Naked Economics Chapter 6
Transcript of Naked Economics Chapter 6
The skills (and skillz) and abilities that an individual has to
contribute to production and/or society.
Can you give me examples from your family?
People are poor because they lack human capital
. What can/do they add to a business and society as a whole? If nothing, you're going to be left behind by economic progress
Key factor: an education
Secondary factor: birth rate
You're one year away from embarking on gaining the most important skill set of your life. Your K-12 education has set a foundation, and you will build upon that with further education and training.
"What skills do we add that provide economic benefit?"
My advice (take it or leave it):
Do something that will give you utility (financially and otherwise); don't do something because you feel like you have to, because you'll hate it.
What does this guy contribute to society?
This incorrect belief states that there are a set number of jobs in the world, and for each job gained in one place, there must be a job lost somewhere else.
The Lump of Labor Fallacy
You've heard a ton about "job creation" through President Obama's time in office. Though (not enough) jobs have been created, it does NOT mean we've stolen jobs from elsewhere. With economic growth, NET jobs increase.
"School Years." The Economist. The Economist Newspaper, 25 Nov. 2008. Web. 10 June 2012. <http://www.economist.com/node/12672414>.
How efficient is a producer of G & S at converting inputs into outputs?
The lower the cost of production
(including our cost factors of labor, natural resources, time, etc.),
the greater the productivity
Free trade is supposed to help our economy grow (and we're therefore more productive)
NAFTA=North American Free Trade Agreement
It seems the agreement hurt Michigan, but it's caused a shift in human capital instead
This is used to find out how long it will take for something to double if you know the percent of growth. The rule is certainly not unique to economics, as you may have seen it in science and math.
The Rule of 72
In economics, it's commonly used with:
--to see how long it will take for prices to double
--to see how long before a country's economy will double in size
--to see how long it will take for your investment to double
2000-2008--2.5%=28.8 years to double our economy's size
2010--3%=24 years to double our economy
2011--1.5%=48 years to double our economy
2012--2.2% (down from a 2.4% estimate, by the way) =32.72 yrs to double our economy
2015--2.6% = 27.69 years to double our economy
As a comparison:
2000 (when times were good)-- 6%=12 years
An international comparison:
averaged 9% growth
7.7% = 9.35 years
6.9% = 10.43 years
Growth in the US
Heard of the "Jobless Recovery"? What does this mean?
How is the US an example of the Lump of Labor Fallacy?
have simultaneously made us
less reliable on humans
. What does this mean? Fewer people are needed to do things, which makes job creation ever more difficult.
How does the debate about immigration fit/apply to the Lump of Labor Fallacy?
How is the US an example of the Lump of Labor Fallacy? (cont.)
We will only allow a certain number of people from certain countries with certain skills into the US. We can't have immigrants take our jobs, can we?
If you're focusing on
food production, the US is very productive.
In the last 100 years, we have drastically improved how much we can produce, we have shortened the amount of time it takes to make it, and we have decreased how much labor it takes to produce it.
What has occurred with productivity in the US?
Do math: Let's Compute some of the rates of doubling time for GDP and inflation for the following countries.
Use the Rule of 72 to figure out how long it will take for prices to double in:
"Productivity is the real value of output produced by a unit of labor during a certain time."
US Productivity 1959-2012
Source: "United States Productivity." TRADING ECONOMICS. N.p., 2013. Web. 30 May 2013.
"USDA ERS - Agricultural Productivity in the U.S." USDA ERS - Agricultural Productivity in the U.S. Economic Research Service, 20 May 2013. Web. 30 May 2013.
Each month, US job creation is measured. This is a key economic indicator.
Use CIA World Factobook