1. DIVIDE UP PIN PRODUCTION, AND YOU GET MORE PINS THE DIVISION OF LABOUR When workers concentrate on one task → repetition increases skill and speed → no time is wasted through switching between tasks → this increases production and reduces cost Adam Smith: The pin-maker example* Division of labour and specialization (social division of labour) Bernard Mandeville coins the term “division of labour” in his Fable of the Bees. Plato: In The Republic he explains how a city grows by exploiting the gains made by dividing labour. Al-Ghazali (1058-1111) → a loaf of bread takes its final form with the help of over a thousand workers. Karl Marx: argues that division of labour alienates workers (it turns workers into a machine performing repetitive tasks → Charlie Chaplin: The Modern Times** Ludwig von Mises: Division of labour is not alienating but brings huge benefits, including greater leisure time... The economic gains accruing from the division of labour far outweigh the costs.

2. POPULATION GROWTH KEEPS US POOR DEMOGRAPHICS AND ECONOMICS Thomas Malthus (1766-1834): An Essay on the Principle of Population - The human reproduction drive causes the population to grow (geometrically) → Growth in the food supply is unable to keep up (it grows arithmatically) → As there is not enough food for all, some people die from hunger → The population decreases and the food supply is adequate again - Geometric progression*: a, a r, a r 2, a r 3 … (example: 2, 6, 18, 54,… ) - Arithmetic progression** : a n = a 1 +(n-1)d (example: 1, 3, 5, 7,…) Over time, technology has overcome the constraint of land and demographics Today, Malthus’s ideas are echoed in fears that population levels are pushing against the capacity of Earth in ways that new technology cannot offset.

3. MEETİNGS OF MERCHANTS END IN CONSPIRACIES TO RAISE PRICES CARTELS AND COLLUSION Market structure: 1. Perfect competition: - many buyers and many sellers - homogeneous product - full information - free entry and exit 2. Monopoly: single seller, supplier. It can choose to restrict its output and charge higher prices. 3. Between perfect competition and monopoly we have Oligopoly: a few suppliers - sometimes only two or three - dominate the market for a particular product. Instead of competition they can cooperate = collude →price fixing

4. MEETİNGS OF MERCHANTS END IN CONSPIRACIES TO RAISE PRICES CARTELS AND COLLUSION Formation of cartels: 1. Unilever-Procter and Gamble: washing powder 2. OPEC (Organization of Petroleum Exporting Countries ) Challenges for cartels 1. fix prices → output quotas 2. To ensure that members of a cartel abide by the rules

5. SUPPLY CREATES ITS OWN DEMAND GLUTS IN MARKETS Jean-Baptiste Say (1767-1832): A Treatise on Political Economy (1803): impossibility of over-production: supply creates its own demand (Fred Taylor, 1921) – Say’s law, law of markets* (Mahreçler kanunu**) – People produce commodities and sell them to earn money → nobody wants to hold on to money because it falls in value, so → people swap money for the other products they want → supply creates its own demand. A fight of supply and demand; a fight between classics and Keynesians - Say: money is held for buying other goods - Keynes: money is held for other reasons. Saving. If this money is not borrowed by others and invested in the economy, the money would no longer be circulating. Therefore demand deficiency; pervasive unemployment