Econ 1010: Principles of Macroeconomics: Day 1

Professor Driskill

August 24, 2016

Professor Driskill ()

Econ 1010: Principles of Macroeconomics: Day 1

August 24, 2016

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Is this the right class for you?

"IT WAS 5: 00 a.m. on an April morning in 2010. Eight teams of
surgeons were preparing to operate on eight patients in four dierent
cities. Four healthy people would each be donating one of their kidneys to
someone they had never met, and those four recipients, each suering
from end-stage renal disease, would receive a new lease on life. At the
same time, Jerry and Pamela Green were at their kitchen table in Lincoln,
Massachusetts, studying the weather. They were soon to y as volunteers,
in their own small airplane, to Lebanon, New Hampshire, to pick up one of
those kidneys, take it to Philadelphia, pick up another kidney there, and
take it to Boston. (Two other pilots would transport the other two
kidneys.) Because they identied their ight with the call sign
Lifeguard, signifying medical urgency, the air tra c controllers would
take them, no questions asked, right through one of the worlds busiest
airspaces, down the Hudson River and over Newark airport, on their way
to Philadelphia, where they would be scheduled to land immediately.
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Are you in the right place?

Several jetliners carrying hundreds of passengers would be briey delayed

by their passage. Kidneys for transplantation are scarce. So is airspace: an
airliner uses several hundred dollars per minute in fuel, and only one
airplane can occupy a given block of airspace at a time. Passengerstime
is also costly. Who got which kidney, which operating room, and which
ight path that day in April all required an allocation of scarce resources,
so it is perhaps tting that when Jerry is not ying a small plane, he is a
professor of economics at Harvard. Economics is about the ... allocation of
scarce resources..."

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Overview of class
Is this the right class for you?

What is economics? Study of the allocation of scarce resources: who

gets what, and why (our book says, equivalently: what gets
produced, how is it produced, who gets it).
Kidneys from Boston to Philadelphia (Roth, Alvin E. (2015-06-02).
Who Gets What and Why: The New Economics of Matchmaking
and Market Design (p. 3). Houghton Mi- in Harcourt. Kindle Edition).
What is scarce?
Kidneys themselves. How are they produced? How are decisions made
on who gets them? Is there a market?
Airplanes. Same questions.
Airspace. Same questions.
Operating rooms. Why allocated to Kidneys, not heart transplant? A
market?
Doctors. Jet fuel. Travelers time. Pilots. On and on.

Spots in college; dorm rooms; Careers; life partners; Toothpaste?

BMWs? Gulfstreams?
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Overview
Econ 1010: my goals

This may be the only Econ class you take:

Fundamentals of "who gets what and why":
The big picture. A description and evaluation of systems and methods
societies have used (and use now) to answer these questions?
An introduction to basic cognitive structures economists use to study
the economic question (a focus on markets and supply and demand)
About one-third of the class.

Macroeconomics: about two-thirds. Business cycles, long-run growth,

ination, unemployment, money, nancial intermediation, scal and
monetary policy.

This may not be the only Econ class you take:

Do you like Econ, and does Econ like you?
Requires me to expose you to "how economists do business," i.e., the
characteristics of how economists address economic
questions/problems.
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Introduction
Econ 1010: my goals

To enhance your ability to read and listen critically to non-academic

writings and presentations about economic issues.
Nota Bene: To think critically: use cohesive and logical reasoning
patterns that lead to careful and deliberate decisions of whether to
accept, reject, or suspend judgment about the issues in question.
This is a goal of mine for ALL students in this class.

Expose hypocrisy:
Michael Walzer on how to evaluate a politicians argument : "But
thats not to suggest that we can do nothing more than describe the
judgements and justications that people commonly put forward. We
can analyze these ... claims, seek out their coherence, lay bare the
principles that they exemplify. We can reveal commitments that go
deeper ... . And then we can expose the hypocrisy... . Exposure of
hypocrisy is certainly the most ordinary, and it also may be the most
important form of moral criticism." (Just and Unjust Wars, Michael
Walzer, pg. xv, Basic Books, NY, 1977).
Examples? Sugar and Rubio.
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Introduction
My goals: exposing hypocrisy

WSJ editorial, Nov. 5, 2015: Senator Rubio explains his support

with the last refuge of protectionist scoundrels national security. If
the U.S. opens the market for sugar, he says, other countries will
capture the market share, our agricultural capacity will be developed
into real estate, and then we lose the capacity to produce our own
food, at which point were at the mercy of a foreign country for food
security.
Is Senator Rubio being hypocritical? Is his stance on sugar
protectionism at variance with his other views on economics? You
might not be able to say without more knowledge of what he believes.
But after this course, you should be able to argue that if he is not
being hypocritical, he must believe in a set of factsand in the
implications of those factsthat support his statement. You can then
evaluate the soundness of his argument: are his facts and hypotheses
correct, do the laws of logic in concert with his facts and hypotheses
support his hypothesis?
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Introduction
My goals: exposing hypocrisy

A question to ask of Sen. Rubio would be: Do you support

protectionism for steel? Surely steel security is as important as
food security. How about protection for lace manufacturers? These
producers may be called upon to shift to manufacture of mosquito
netting if we the US become embroiled in a tropical war (lace
manufacturers really did make such an argument at one time).
Alt. hyp.:
"The Fanjul brothers are renowned for their inuence over an array of
American political gures, ranging from ex-President Bill Clinton to
Sunshine State Sen. Marco Rubio. But both liberals and conservatives
have bemoaned the way federal subsidies and price supports have
fattened the clans fabulous fortune." Observer.com: "Sugar Magnates
Threaten Congressional Candidate With Lawsuit Over Campaign
Literature," By Will Bredderman 06/16/16 11:44am;
Wikipedia: "Alfonso Fanjul ... is a major contributor and fundraiser for
the Democratic Party. His brother Pepe, who is a U.S. citizen,
contributes to the Republicans."
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Introduction
Housekeeping

Grades
Attendance:
10%; you must attend the section in which you enrolled to get credit
for this!
Why so much?

In-class reponses: 15%.

Exams before nal: 50%:
Wednesday, Sept. 21.
Wednesday, Oct. 19.
Wednesday, Nov. 16.
Best two scores out of three: no make-ups

Final: 25% (scheduled by the University) Section 01 (1:10-2:00), Mon.,

Dec. 12, 3:00 PM; Section 02 (2:10-3:00), Fri., Dec. 16, 3:00 P.M.

Make your plans accordingly.

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Introdution
Housekeeping

"Professor Driskill, I have your exam and another one on Sept. 21.
The other professor will not let me take it at another time. Can I
take our exam a day later?"
"My mother already bought my plane ticket so I can come home for
her birthday, and I will be gone Oct. 19. Can I have a make-up?
"Im scheduled to be with Professor Buckles at a rave party on Ibiza
on Dec. 15th, so I need to take the nal exam early."
"I represent Vanderbilt as a member of a varsity sports team, and we
have a meet on Wednesday, Nov. 16, so I will need to take the exam
later."
"Hey, I got overserved last nightjerky bartenderand arrested on a
DUI, so I missed the exam. When can I make it up?
Everyone would probably like to take all three examsnot put all their
eggs in two basketsbut if happenstance causes you to miss one
exam, letting you drop one exam grade is the best we can do given
the sizes of these classes.
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Overview
Housekeeping

For every complex problem there is an answer that is clear, simple, and
wrong. H. L. Mencken.
Most economic problems are complex, and most clear, simple answers
are wrong.
If you know high school algebra and geometry, you can understand
many of the economics professions analyses of economic problems.
For some of you, if history is a guide, any use of equations triggers
PTSD-like symptoms from your High School math class. Fight
through it: economics as a discipline, even at the Principles level,
requires use of high-school algebra and analytic geometry. We will not
use calculus.

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Where we go from here

First four-ve weeks:

1

How do other people think about the economic problem, and how are
economists dierent in this respect? (Day 2,3)
What are the major approaches economic societies have used to solve
the economic problem? What are the advantages and disadvantages of
the dierent approaches?
A deeper dive into one of these approaches: a "market" or,
equivalently, "commercial" society.
1
2

Institutions, use of resources, comparisons with Command and Control.

The basic cognitive device used by economists as a pedagogical device:
supply and demand.

Pericolo! Much more than what is in the textbook!

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Graco quotidiano: facts matter

Fed employment

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Graco quotidiano
State employment

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Graco quotidiano
Local employment

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Graco quotidiano
Inoltre, US population

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