FSU ECO 3622 - Growth, Welfare, and the American Economy

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Ch 1 Growth Welfare and the American Economy Ch 29 Achievements of the Past Challenges of the Future Why study economic history The best short answer is to better prepare you for the future Economic history provides you with a clear perspective on the forces of change and a good understanding of the lessons of the past The study of economic history also provides lessons on nation building and ways to analyze policies and institutions that affect the nation as well as you personally The skills developed in studying economic history critically analyzing the economic record drawing conclusions from it based on economic theory and writing up the results in clear English are valuable skills in many lines of everyday work The longer back you look the farther into the future you can see Economics does not furnish a body of settled conclusions immediately applicable to policy It is a method rather than a doctrine an apparatus of the mind a technique of thinking which helps its possessor to draw correct conclusions Living in Exponential Times The rate of change is greater today than any previous point in time Douglass North contends that 1750 was a major turning point in human existence Sources of productivity advances 1 Technology knowledge 2 Specialization and division of labor 3 Economies of scale 4 Organization and resource allocation 5 Human capital education and health Institutional determinants 1 Rule of law coupled with limited government and open political participation 2 Rights to private property that are clearly defined and consistently enforced 3 Open competitive markets with freedom of entry and exit widespread access to capital and information low transaction costs mobile resource inputs and reliable contract enforcement 4 An atmosphere of individual freedom in which education and health are accessible and valued Four Major Developments in US Economic History 1 Rise in real capita per income better indicator than GDP 2 Convergence of per capita incomes among regions i e US North v South 3 Improvement in a variety of biomedical indicators of well being 4 Increase in the levels of education Especially in higher education 2 Ch 2 Founding the Colonies European Background to the Voyages of Discovery Factors of commercial growth in Europe 1 Greater security of persons and property 2 Rapid increase in population The Latecomers Holland France and England 1763 Victor Mirabeau coined the phrase mercantilism Political economy of the era Phillip Wilhelm von Hornick published mercantilist manifesto in 1684 1 Every inch of a country s soil should be utilized for agriculture mining or manufacturing maximize resources 2 All raw materials found in a country should be used in domestic manufacture since finished goods have a higher value than raw materials 3 Encourage a large working population PPC curve expands 4 All export of gold and silver should be kept in circulation velocity of money Gold and silver main source of wealth at the time 5 All imports should be discouraged i e inelastic imports Paid in gold and silver cid 224 conflicts with 4 Do not buy finished products that you can make yourself 6 Where certain imports are indispensible they should be obtained at first hand that is exchanged for other goods instead of gold and silver cid 224 promote barter 7 As much as possible imports should be confined to raw materials that can be finished at home 8 Opportunities should be constantly sought for selling a country s surplus manufactures to foreigners for gold and silver Okay to export in gold or silver ultimate goal 9 No imports should be allowed for goods that can be sufficiently and suitably made at home even if opportunity cost is high Ch 2 Founding the Colonies Self sufficiency fastest surest way to poverty trade creates wealth 1 How and why was the English attempt at colonization in North America different from other countries and other colonies Primary reason for success permanent colonization and settlement compared to Latin America cid 224 colonizers returned to homeland If permanent colonization was the goal the major obstacle was to move people to the colonies Labor shortage would prove to be a persistent problem cid 224 strong incentive to increase labor productivity and freedom of labor market US today relatively loose labor laws Indentured servants almost always left 1st indentured servant job Reliance on cash crops huge emphasis on agriculture 1 No gold or silver 2 No natives to trade with 2 Which were the early colonies in North America First Englishmen to take serious ventures Humphrey Gilbert Walter Raleigh Gilbert died after two attempts Raleigh s first attempt in Roanoke failed His second attempt with John White failed as the lost colony in 1590 cid 224 after returning to the colony no people were there mystery 1607 Two new colonies 1 Sagadahoc Maine 2 Jamestown Virginia cid 224 1 st permanent English settlement Colonies were financial and human disasters 3 What were the early reforms Major reform was property rights Ch 2 Founding the Colonies Landholdings changed from common rights to private rights Jamestown property rights changes 1 Early settlers were given planters shares communal 2 Later settlers were given garden plots of their own private 3 Management became more local cid 224 better managed 4 Why would someone immigrate to the New World What were the economic arrangements that allowed for immigration Came to New World to own land cid 224 led to elite social status Joint stock companies today s mutual fund As more investments did not return colony became crown colony cid 224 King would fund investments because not enough money in the colonies Indenture contract allowed a person to pay for their passage by selling their labor to someone for a specified future period of time 5 Why were farms usually larger in the Southern colonies Comparative advantage cid 224 fertile new land Grew tobacco that was cheaper to produce and better quality than tobacco grown elsewhere Economy relied on cash crops that were in great demand in the populous industrializing areas of Europe 6 What were the major economic incentives that caused North America to develop differently than other colonies Open labor market of indentured servitude to facilitate migration exclusively used by the British Establishment of permanent British settlements which fostered privately owned farms and families and ultimately towns High levels of English migration encouraged with wide ranging economic


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FSU ECO 3622 - Growth, Welfare, and the American Economy

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