ENT 4353 Exam #2
Rule of 72:
72/R = T
Some people worry the economic growth will deplete resources. How does Baumol refute this?
As some resources are depleted, prices rise and consumers cut demand. Also, there are stronger incentives to find alternative resources. Maybe treat emissions like hunting by selling licenses.
Why is incapacity a motive for exclusion?
Because it is not the voter alone who suffers the consequences of his vote
Rural cities in ___________ were greatly benefited through market competition.
China
Decentralization:
Economies with sustained gains from innovation typically incorporate a range of funding agents and research organizations that interact both cooperatively and competitively
When plunder is organized by law, what is the natural reaction of the plundered classes?
Either they may wish to stop lawful plunder, or they may wish to share in it (via laws)
_______________ keeps others from using private property.
Exclusivity
T/F--Growth is a zero-sum game.
F
T/F--In anarchy, there is effective enforcement of property rights by the state.
F
T/F--Labor time required to purchase expensive items has increased over the years.
F
T/F--Market incentives are always positive.
F
T/F--Most market competition occurs between buyers and sellers.
F
T/F--Opening markets to competition guarantees that the wealth created by economic growth will be distributed evenly
F
T/F--With the rule of men, there are no formal laws.
F
T/F--The government gives us rights.
F (God)
T/F--Institutions are the formal rules of the game that shape incentives and outline expected and acceptable forms of behavior in social interactions.
F (formal and informal)
T/F--Enforcement of property rights is a public function.
F (public and private)
T/F--The rule of men is in direct opposition to anarchy.
F (rule of law)
Who developed the concept of "dead capital"?
Hernando de Soto
Without enforcement, property rights for the poor are meaningless. Which country exemplifies this statement?
India (caste system)
______________ consists of recognizing the implications of inventions and putting them into productive use.
Innovation
______________ flourishes in economies where openness, clearly defined property rights, and established rule of law make it easy to start new enterprises.
Innovation
What was the name of de Soto's organization?
Institute of Liberty and Democracy (ILD)
Why is the positive use of law to regulate society dangerous?
It substitutes the will of the legislator for their own wills
Which factors comprise the essential foundation for economic progress and reductions in poverty?
Property rights Rule of law
How is legal plunder to be identified?
See if the law takes from some persons what belongs to them, and gives it to other persons to whom it does not belong. See if the law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime.
Where did de Soto go to school?
Switzerland
T/F--An equally important 18th century development was that property rights were not only recognized, but were secured.
T
T/F--Anarchy, the condition of competitive violence, has been the norm through most of human history, rendering it virtually impossible for the poor to own property.
T
T/F--Baumol said that growth and poverty reduction go hand-in-hand.
T
T/F--Buyers compete with other buyers, trying to pay the least they can without losing to buyers who would pay more
T
T/F--Competition may vary within an economy because of characteristics inherent in individual markets.
T
T/F--De Soto claimed that the poor were rich.
T
T/F--Debt can be an instrument of economic growth.
T
T/F--If you protect Detroit car makers from competition, then you must damage Iowa farmers, because Iowa farmers are the competition.
T
T/F--In many, perhaps most, developing countries, the informal economy is bigger than the formal one
T
T/F--In recent decades, India has significantly improved the well-being of its people
T
T/F--India's growth is most clearly evident in its burgeoning information technology sector.
T
T/F--Innovation is a leaky process.
T
T/F--Overall world output could increase if countries produced goods for which they have a comparative advantage and traded these goods for other necessities.
T
T/F--Poverty in China dropped from 245m to 33m, partially because of competition in rural markets.
T
T/F--Rule of men maintains power through political connections and military might.
T
T/F--Rural per capita income doubled in China.
T
T/F--Scientists are conspicuously absent from lists of early innovators
T
T/F--Sellers compete with other sellers, trying to charge the most they can without losing to sellers who attract buyers by offering a lower price.
T
T/F--Technological change typically creates "losers" as well as "winners."
T
T/F--The question is not whether we shall have competition, but what forms it will take
T
T/F--Until the mid-18th century, property was a right of the wealthy who could privately afford the coercive power necessary to assert and enforce ownership.
T
What occurs when innovation grows out of invention?
Technological progress
Why does Bastiat criticize the use of the treasury for charitable, educational, and religious purposes?
The law can be an instrument of equalization only as it takes from some persons and gives to other persons. When the law does this, it is an instrument of plunder.
What does Baumol use to illustrate the benefits of free trade?
The states
Which country was generally most successful in keeping the law in bounds around 1850?
USA
What is the problem with having minimum wages for Uber drivers?
Uber is researching self-driving cars
In the manual system, land records were maintained by 9,000 __________ ___________, each serving a cluster of 3-4 villages.
Village Accountants
What is the remedy to legal plunder?
abolish the law
In market economies, access to clean water, housing, heat and affordable food has moved millions out of ______ poverty, even in areas where significant ________ poverty, or income inequality, remains.
absolute relative
Economics 2.0 is about ____________.
abundance
rent seeking
advantage (rent) is gained by manipulating the political or economic environment instead of adding value
In reality, competition in almost all markets takes place ________ buyers and _________ sellers, not _________ buyers and sellers.
among between
The poor are rich in _____________, but those ____________ are dead.
assets
dead capital
assets that cannot be used to their fullest often refers to property unfit for collateral
Who has rejected MPesa?
banking
Why is true law negative?
because justice can only be achieved by eliminated injustice
Why is the victim of plunder sometimes treated as a criminal?
because the law supports the plunderer
What has Uber done that taxies couldn't?
break down barriers to entry adjusts prices to meet needs
As people acquire more _____________, their productivity and their income increase
capital
Even if globalization can worsen income disparities, why should we continue growing?
ceasing growth would lead to lower standards of living everywhere
Without title, householders were more likely to secure ownership with the presence of an adult and, therefore, to send ______ to work to replace the income of that adult.
children
By depriving people of ______________, insecure property rights reduce investment in capital, businesses, or other wealth-creating assets
collateral
Secure property rights can also increase the likelihood of investment by providing--
collateral for debt
Collateral
commonly in the form of assets (property) to which the borrower has secure property rights, is offered as a surety that reduces the risk taken by banks and other lenders
Two words have revolutionized the spread of cell-phone usage in Africa:
community access
Market economies with high levels of _________ are those with the best record of reducing poverty and elevating overall standards of living.
competition
Markets are characterized by different degrees of ____________.
competition
What is the inevitable result of scarcity?
competition
What replaced Village Accountants?
computerized land owner kiosks
What happens to those who express doubts as to the morality of such institutions that condone plunder?
considered dangerous innovator
The extent of the free flow of information includes
consumers' access to information about the market producers' ability to disburse information
How has the law been used to destroy its own objective?
converted plunder into a right converted lawful defense into a crime
Buyer-seller exchange is ___________ rather than rivalrous.
cooperative
Investment means foregoing ? in anticipation of ?.
current consumption future benefits
Informal property rights may be based on--
custom tradition precedent
Barring international trade can...
damage domestic industries reduce economic efficiency
What are some critiques of economic growth?
depletion of resources income inequality money can't buy happiness
Invention -
discovery of new knowledge
creative destruction
dynamic process by which capitalism continually renews itself
Enforcement of property rights is characterized by huge ? - which the rich can achieve and the poor cannot.
economies of scale
Property rights are meaningful only if they can be...
enforced
Competition gives the poor opportunities to increase their income as workers or _____________.
entrepreneurs
Reasons capitalist economies are best able to exploit the growth potential of technology--
entrepreneurship multiplies the sources of innovation diversity of research organizations markets incorporate strong incentives for innovation
What are the consequences of using the law to plunder?
erases distinction between justice and injustice
Three standards identify the benefits of the rule of law:
establishes limits on governors and the governed system of ordered liberty protects basic citizen rights promotes the common good
When the law is used to redistribute property (plunder), why does every class grasp for power over it?
every class wants to benefit without working for it
Why, if law were confined to its proper functions, would everyone's interest in the law be the same?
everyone's interest in the law would be the same
What is the nature of plunder as an idea, a system, and an injustice independent of personal intentions?
false idea unjust system we profit w/out wishing & suffer w/out knowing cause
Non-market economies can, and occasionally do, innovate. They do not, however, set up the _____________ ___________ between producers and consumers that sustains innovation
feedback cycle
Transferability may have ___________ or ______________ limitations.
formal informal
Property rights
formal and informal arrangements that govern the ownership, use, and transfer of assets
Why is the word fraternity inseparable from the word voluntary?
fraternity cannot be legally enforced without liberty being legally destroyed, and thus justice being legally trampled underfoot
Rule of law
governed according to widely known and accepted rules followed not only by the governed but also by those in authority
State-created displacements
government perverts the law by displacing someone's individual rights
How does government suppress free speech?
governments censors what is taught
Why do governments regulate innovation?
governments don't like unregulated industries governments don't like disruption
How do politicians attempt to remedy the ills of society, which may in fact be due to earlier plundering?
he attempts to remedy the evil by increasing and perpetuating legal plunder
What were two things de Soto noticed in Peru?
he dealt with lawyers frequently businesses were marginalized
Property rights are ________ ________.
human rights
Regardless of one's preferences concerning the extent of suffrage, what would cause the excitement over suffrage to die down?
if law's only purpose were to protect individual rights
Why is socialism not an example of illegal plunder?
illegal plunder is condemned by the law, but socialism is supported by the law
The right to enter the market with their produce drastically changed the ___________ facing Chinese farmers
incentives
Technological change
increase in a body of knowledge
What is the source of the collective right to protection?
individual rights to lawful defense
Justice is achieved only when ___________ is absent.
injustice
The competitive pursuit of lower production cost also leads to ___________, a process that makes affordable to the masses a range of goods once accessible only to the wealthy
innovation
The recent economic history of India offers an example of the importance of ____________ changes in property rights and the rule of law in encouraging economic growth.
institutional
Incentives are shaped by ____________.
institutions
Markets, and the rules that govern them, are....
institutions of voluntary exchange. A market exists wherever and whenever buyers and sellers interact to exchange goods, services, or resources
What were some effects of having title to land?
invest in larger (more immovable) livestock built more fences made more improvements more permanent crops planted cleared land
Many Latin American countries have focused on __________ ___________ in their efforts to alleviate poverty.
land redistribution
The role of collateral in fostering investment and productivity growth underscores the importance of the rule of ______.
law
Formal property rights are encoded into....
law statute ordinance contract
What accounts for its almost universal perversion?
law is made by one man or one class of men (these men value their own self-interests)
Why did Argentina go bankrupt?
law supported favoritism, coups, etc. (rule of law was damaged)
Life, liberty, and property existed beforehand, causing men to make _________ in the first place.
laws
The level of competition may also vary because ________ and _________ within a nation may limit market entry and exit, the number of producers, and/or the availability of information.
laws regulations
What are the two kinds of plunder?
legal illegal
Title
legal evidence of the right of possession or control over property
Tariffs, protection, benefits, subsidies, encouragements, progressive taxation, public schools, guaranteed jobs, guaranteed profits, minimum wages, a right to relief, a right to the tools of labor, free credit... To what do these names refer?
legal plunder
What three gifts of God precede legislation?
life liberty property
People with ______ incomes are often the biggest beneficiaries of collateral-secured debt
low
The total fertility rate for India's population - which exceeds 1 billion people - has been ____________ from six children per woman to three since the 1960s.
lowered
What is the origin of property?
man can live and satisfy his wants only by ceaseless labor
Origin of plunder?
man may live and satisfy his wants by seizing and consuming the products of the labor of others
What was the consequence of not allowing Peruvians to sell their land?
markets have been stifled and banks have offered fewer loans due to lack of collateral
Under the rule of _______, the capricious nature of property rights undermines the value of assets as collateral
men
When law and morality contradict each other, the citizen has the cruel alternative of either losing his _________ sense or losing his respect for the ________.
moral law
High level of competition among sellers leads to improvements in the well-being of the poor by making _________ goods and services available at ________ prices.
more lower
When it comes to trade versus domestic production, the best strategy is to let the market determine a _______ __________.
natural ratio
What is the origin of the desire to live and prosper at the expense of others?
nature of man
Why has land redistribution failed to alleviate poverty in Latin America?
no formally recognized and reliably enforced property rights to encourage capital formation and economic growth
Why was the USSR poor?
no incentives, markets, property rights
How may socialism be opposed? What are the choices?
not necessarily via the law few plunder many (limited legal plunder) everyone plunders everybody (universal legal plunder) nobody plunders anybody (no legal plunder)
The degree of competition in any particular market is influenced by...
number of firms in the market relative ease of entry and exit degree of substitutability relative availability/ease of access to market info
Globalization
opening a nation's markets to competition from foreign producers
Current income distribution does not matter as much as _______________.
opportunities
What is the proper function of law?
organized justice
Private enforcement includes measures taken by __________- such as installing locks or occupying their property - to defend their rights
owners
Why do property owners have higher incentives to preserve assets?
owners bear opportunity cost of damaged property owners consider the future value of assets
Secure property rights create incentives for owners to invest in capital and capital improvements--
owners confident in right to future value owners enjoy the benefits of investments
Debt allows people to use both their _________ income and their _____________ income to acquire human and physical capital.
past future
Clues about USSR incentives--
people respond predictably to incentives property rights shape incentives in markets, profits --> competition shaping incentives
How did this popular aspiration to promote the general welfare through general plunder originate?
people tried to use the law to accomplish positive actions
In anarchy, the source of property rights is coercion by ________ force.
physical
Throughout history and continuing into the 21st century, technological change has generated disproportionately greater gains in standard-of-living for the _______ than for the ________.
poor wealthy
rules of the game that affect market interaction includes
private property rights clearly defined rule of law offers consistent enforcement nature/extent of regulation of commerce
Market competition
process by which the right to use resources is contested
Privatization
process of converting government enterprises into privately owned companies
Investment
process of increasing the stock of capital, which increases productivity and future production
Of the capitalist institutions that offer opportunities for the poor to ascend the economic ladder, secure _____________ ___________ is one of the most fundamental.
property rights
What is the proper function of the law?
protect property and punish plunder
Identify three varieties or systems of plunder.
protectionism socialism communism
Secure property rights contribute to economic growth by releasing resources from ___________ activities to ___________ activities.
protective productive
Knowledge is a pure _________ good; those who have it can give it away without reducing how much they have.
public
Services, the least ___________ sector in India's economy, continues to be the strongest performer, while manufacturing, the most ___________ sector, is the weakest.
regulated
How is innovation impeded?
regulations license requirements (ex: taxi medallions and Airbnb reqs)
Specified conditions of asset-use--
restrictions or regulations conditions of receiving income from assets characteristics of the property-holding arrangement conditions about excluding others from an asset
Incentives
rewards or punishments that shape people's choices about their behavior
What is the poor man's plunder?
right to relief
Under the ____________ ______ ____________, formal law may exist, but the hierarchy of power determines if, when, and how it is applied.
rule of men
Which kind of property enforcement is arbitrary and inconsistent?
rule of men
Property rights can be established and secured in three ways:
rule of physical force (anarchy) rule of men rule of law
The degree of competition in the economy as a whole is a function of the....
rules of the game
Factors that determine the degree of competitiveness of a nation's markets are:
rules of the game that affect market interaction flow of information level of openness to enter/exit market
Increasingly, poverty is concentrated in _________ areas in some of India's largest states.
rural
What were the two issues in the United States around 1850 that always endangered the public peace?
slavery tariffs
externalization of costs
some people are privileged to escape paying by passing "the buck" or the bill along to others
Why is voting restricted?
some people are thought incapable of making universally good decisions
What is the price of the state's intervention into the private affairs of its citizens?
sources of our existence are made uncertain and pre-carious
Property rights have 3 critical features in law:
specified conditions of asset-use specified conditions of transferability established security of possession
When humans gained the right to claim the fruits of their labor, they gained the ability to change their own ___________ of ___________. In that sense, property rights must be regarded as the _________ _______ right.
standard living essential human
The law has been perverted by the influence of two entirely different causes:
stupid greed false philanthropy
Most important outcome of markets for the poor's wellbeing is general, __________ increase in standard of living. This is brought through price competition, better quality, and more variety.
sustained
De Soto has found the same underlying cause of poverty: the lack of a ____________ which gives the poor title to the assets which they create outside the formal economy - assets which can account for more than 80 per cent of the real economy.
system
International trade is nothing but a form of _____________.
technology
comparative advantage
the ability to produce a good at a lower opportunity cost than another producer
Institutions
the codes of conduct and established behaviors upon which the life of a community is built
Innovation -
the introduction of an invention into a use that has economic value
How is plunder legitimized?
the law decrees and sanctions it
How is legal plunder defended? How may it be built into a whole system?
the person who profits from this law will complain bitterly, defending his acquired rights acceptance of these arguments
entrepreneurship
the willingness to bear the risks of production
Why do the poor have "dead" assets?
they have no legal title to property, so they cannot use it as collateral
According to de Soto, what is the "great leveler"?
title
The Pará investigation provided empirical evidence that--
titled land has a high perceived value titled landholders invest in more capital improvements
According to Baumol, what is one major reason we need economic growth in the future?
to fund the elderly
Why does the law sometimes defend plunder and participate in it?
to spare beneficiaries from punishment
Western property laws also protect ______________.
transactions
Voluntary exchange:
transactions are entered into freely every completed transaction indicates that seller and the buyer are better off (w/out negative variables)
Under the rule of physical force (anarchy), _________ and _________ surrounding ownership of assets renders property largely useless as collateral, severely constraining the growth of capital.
uncertainty instability
What reduces the benefits of making investments and improvements?
unclear ownership
How do arguments over universal suffrage illustrate the problem?
universal is a fallacy (only certain people are allowed to vote)
What uses of force pervert the law from its true purpose: organized justice?
using the law to violate someone else's individual rights
According to Baumol, countries that experience economic growth are less likely to enact ___________.
wars
Why does false philanthropy not work?
we can't be free and not free at the same time
How is property gained by use of our talents?
we convert natural resources into useful products
Example of owners caring more about future value of assets--
we do not treat rent cars the same as personal automobiles
Baumol's critique of "money can't buy happiness"--
we don't understand how much economic growth has truly benefited us
How does Bastiat respond to socialist objections to individualism?
we repudiate only forced organization, not natural organization (same with unity, association, fraternity)
What is the meaning of plunder?
wealth is transferred from owner—without his consent/compensation, and whether by force/fraud—to anyone who does not own it
When does the use of force destroy justice?
when it's used to organize any kind of human activity
Under what circumstances will political questions become "prejudicial, dominant, and all-absorbing?"
when the law is diverted from its true purpose
How do the socialists confuse the distinction between government and society
when we object to a thing done by government, socialists conclude we object to its being done at all