AGENDA Fri 1/27 & Mon 1/30 Review HW & Greed Reflection QOD #7: Ethics and Self-interest Paperclip Pick-up Free Enterprise Features A study in ethics Top 10 list HW: pg 49 #2-5; pg 53 #3; pg 57 #1-5; pg 60 #2-5 Study for Chapter 2 Quiz

QOD #7: Self-Interest vs. Ethics Consider the following situation: You heard that a friend in class “came upon” the answers to the next test. (They got the answer sheet passed back to them w/ their homework by mistake.)You heard that a friend in class “came upon” the answers to the next test. (They got the answer sheet passed back to them w/ their homework by mistake.) What will you do?What will you do? Now consider the following as your only options. What are the costs and benefits of each option? What is in your self-interest? ▫You can ask your friend for the answers. ▫You can tell the teacher of the situation. ▫You can do nothing.

QOD #7 cont. Now consider the following: The next test will be graded on a curve. Reconsider your previous answers, and decide if you would choose to do anything differently. Explain why you would or would not. What is the ethical response to the preceding situation?

Paper Clip Pickup Reflection 1.Why did people have incentives in Round 1 to pick up the clips during the 1st 30 seconds even thought the payoff was higher if they waited? 2.Why did people have incentives in Round 2 to wait until the 2nd time period to pick up the clips? How were the incentives different from Round 1? 3.What did people do in Round 2 to resolve the issue of clips on the boundaries? 4.During Round 2, why would students pick up clips in the 1st 30-second period? 5.Imagine the paper clips were whales, the floor was the ocean and the student volunteers were whale hunters. How could the activity relate to problems of harvesting whales? 6.There is a concern about whales becoming extinct, noted by the campaign to “Save the Whales.” How much beef and chicken is produced and consumed every day. Why aren’t cattle and chickens in danger of extinction, along with whales? 7.List other resources for which property rights are not clearly defined. What problems occur as a result?

5 FEATURES OF FREE-ENTERPRISE (hand mnemonics) 1.Private property 2.Choices (freedom to choose) 3.Voluntary exchange 4.Competition 5.Economic incentives

Private property Any good owned by an individual Private individuals and companies own businesses and industry Private property rights are strictly enforced even when they result in many poor people and few very wealthy people.

Choices (freedom to choose) buyers have the right to choose what products they will buy Producers decide what to produce based on consumer tastes and demands Government’s role in the economy is limited

Voluntary exchange the right to make exchanges that will make them better off Productivity results in more personal wealth

Competition individuals are free to compete with one another

motivates a person towards action Entrepreneurship and risk taking are rewarded with big financial gains Economic incentives

Market (Capitalist) v. Command (Socialist) MarketCommand Resources Government Role Economic Planning Income Distribution Price Controls

Comparative Economic Systems Free EnterpriseSocialism RESOURCES -owned and controlled by private individuals -the government controls and may own many of the resources GOVERNMENT ROLE -small role to play -does not make productions decisions -government may make those decisions

Comparative Economic Systems Free EnterpriseSocialism ECONOMIC PLANS no government plangovernment may plan and direct economic activity INCOME DISTRIBUTION less attention paid to distribution US income mobility government likely to use its power to redistribute income

Comparative Economic Systems Free EnterpriseSocialism PRICE CONTROLS -prices are allowed to fluctuate according to the market -some degree of price control -may set minimum wage

Rights come with responsibilities in a Free-enterprise economy. Voluntary exchange comes with the added responsibility of giving the person accurate information. The right to ownership comes with the added responsibility of using the property for legal purposes. The right to compete for business comes with the added responsibility of being truthful about the competition.

List 5 products make your life easier How many of those products did entrepreneurs develop? Entrepreneur – is a person who has a special talent for doing 3 things: S/he ▫Searches out and takes advantage of new business opportunities ▫Develops new products ▫Develops new ways of doing things.

Contract- an agreement between 2 or more people to do something. Most economist agree that our free-enterprise system could work but it would not be as effective without the govt enforcing contracts. Have you ever signed a contract? Teachers sign a contract to work. When you rent an apartment you have to sign a contract.

Govt as provider of non-excludable public goods Private (apple) vs. public good (movie) 2 types of public goods ▫1.Excludable public goods –must pay to consume (movie, college lecture) ▫2.Non-excludable public goods – individuals cannot be excluded from consuming (national defense, fire protection) ▫Who pays for these services? Free Rider- a person who receives the benefits of a good without paying for it. Can you think of some legal examples?

Circular flow of economic activity see pg 59

Ethics (Greek ethika, from ethos, “character,” “custom”), principles or standards of human conduct, sometimes called morals (Latin mores, “customs”), and, by extension, the study of such principles, sometimes called moral philosophy. Are you playing by rules that, on close examination, are fair to everyone?" Would you be willing to have any business action of yours printed on the front page of the local paper?

Ethics and Free-enterprise 1.Allows for individuals to choose their own occupations. 2.Produces goods/services preferred by both the majority and the minority. 3.Rewards or punishes producers based on how well or poorly they respond to the buying public. 4.Supports the right of the individual to be free. 5.Provides an opportunity for individuals to strengthen and develop their abilities.

▫Create a Top 10 list of rules /guidelines for conducting business ethically in a market economy.  You may use sources, but should cite all appropriately.

Vocabulary for unit 1 1.Scarcity 2.Opportunity cost 3.Tangible 4.Intangible 5.Economics 6.Macroeconomics 7.Socialism 8.Economic system 9.Entrepreneurship 10.Incentives 11.Free enterprise/ market economy 12.Microeconomic 13.Private property 14. loss 15.Public property 16.Ethics 17.free rider 18.profit 19. resources 20.mixed economy 21.Global economy 22. excludable public goods 23. nonexcludable public goods

References Arnold, R (2001). Economics in our times, 2nd edition. Chicago, IL: National Textbook Company nomic%20System%20Web%20Quest.ppt