Institutions & Revolutions - Intro to Political Economy, Lecture2

https://sites.duke.edu/intrope

COURSE OVERVIEW:
Introduction to Political Economy is a self-contained and nontechnical overview of the intellectual history of political economy, the logic of microeconomics, and the definitions used in macroeconomics. It introduces the notion of a political economy, emphasizing the moral and ethical problems that markets solve, and fail to solve.

LECTURE OVERVIEW:
1. Human beings are self-interested, but they are also intensely moral beings. Our moral sense evolved in a setting where trade and exchange were limited, however. As a result some of our moral reactions to markets may be atavistic, like the hips of whales.
2. Another way of thinking of this is that we have "lifeboats minds" but live in a "Walmart world." The actual function of price is explained. Munger argues that we can "never run out of anything," because if we start to run out the price goes up, and then three things happen: (a) consumers buy less; (b) producers make more; and (c) entrepreneurs invent substitutes.
3. Still, people object to these important functions of prices. Examples are given from the POW camp article by Radford, and in a remote area of Germany and "price-gouging" after hurricanes.
4. What's important to remember is that there are always two considerations in dealing with market processes:
a. Moral outrage/strong negative affect at being taken advantage of in the "lifeboat"
b. Expectation of material benefit from consummating exchange of money for needed products

READINGS:
Agriculture and the Origins of Civilization (http://history-world.org/neolithic.htm )
Industrial Revolution (http://history-world.org/Industrial%20Intro.htm )
Radford, R. A. 1945. “The Economics of a POW Camp,” Economica.
http://www-rohan.sdsu.edu/~hfoad/e111su08/Radford.pdf
Munger, M.C. 2005. “Everybody Loves Mikey.” (http://www.econlib.org/library/Columns/y2005/Mungerinvisiblehand.html )
Video 1: Michael Munger, “Why Do We Exchange Things?” (http://www.youtube.com/watch?v=W-qGYlRtCcM&feature=player_embedded )
Video 2: Cosmides and Tooby, “Stone Age Minds,” (http://youtu.be/nNW_B8EwgH4 )
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Produced by Shaun King, Duke University Department of Political Science Multimedia Specialist

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