Development of the American economy
Lecture 1
Objective:
– Explain and go over the seven or eight reasons that Capitalism generates wealth.
– Discuss whether capitalism is a fair, just, or moral system of social organization.
Much of our conflict in our politics today, stems from progressives on the left wanting to change
our system of socialization from a capitalist oriented one to a, socialist-oriented one, and then, of
course, people on the right, called conservatives, want to maintain a capitalist system or, as they
would argue, tried to restore it.
Explanation of what capitalism is: the idea behind capitalism is that people own themselves. You
are not owned by your neighbors, by, societies, or by the government, but you own yourself. we
are not slaves. We are not owned by others. Given that you own yourself, you al, own the work
of your hands and the thoughts in your brain. If one writes a poem or a piece of software, that
individual owns it. This is because it came out of the person’s brain. Another example is, if a
person comes across a log in the woods that is not owned by anyone else, and that person makes
that log into a canoe, they own it because they mix their labor. Even with the wealth of
civilizations being enhanced, living standards remained very low.
Farming was a step forward from hunting and gathering. Rather than traveling the wilderness
hunting and gathering. Humans lived in the same spot year after year, farming, growing crops,
and domesticating animals. This was a step forward. Nonetheless, since there was certainly some
trading between people from different tribes or communities.
Development of the American economy
Nonetheless, living standards were quite low by today’s standards, and they remained, until
around 1800. For the next 10,000 to 12,000 years, there was little economic advancement and
little increase in material well-being. Until around 1800. Then came capitalism, and in a very
short span of time (approximately 200 years), living standards increased by three to 4,000
percent overall. And they’ve increased by a lot more than three or 4,000 percent in the most
industrialized and advanced economies. This is appropriately referred to as a miracle.
Except for the arrival of capitalism, we will be back to near-subsistence level life. Capitalism
arose as a result of the Scottish Enlightenment. John Locke was one of the key figures of the
Scottish Enlightenment. He was a native Englishman. In the 1600s, he published a book titled his
Second Treatise on Government. But he contended that all humans, all men, all women, weren’t
people back then. He asserted that all men should have the right to life, liberty, and property.
That was revolutionary in the sense that in medieval times, there were knights and castles and
serfs and nobles and monarchs. The ordinary man lacked the right to property. You were born on
someone else’s land, which was owned by the Baron or Lord of your village. Your parents and
grandparents were born on the land as well. You were exiled to that place. The socialists on the
left are arguing for a return to subsistence living and foregoing the prosperity that we have today,
as we’ve seen in Venezuela over the last couple of decades where they’ve gone from one of the
richer countries, although this does lead to poverty.
Over the last few decades, they’ve moved from one of the wealthier countries to one of the
poorer countries, which causes problems because if there is a totalitarian system, even if
capitalistic, say the governing party is, there needs to be a pluralist Dems to ensure that there is
competition in the economic sphere and not special favors.
Development of the American economy
This is referred to as crony capitalism, and it occurs when the government protects its economic
allies. Capitalism, rather than democracy, creates prosperity. To prevent capitalism from
devolving into crony capitalism, democracy may be essential. However, it is capitalism, rather
than democracy, that saves the day. You cannot deduce that as long as we have democracy, there
will be economic wealth because the intellectual elites of government, no matter how well
thought out, lack the information required to carry out a government plan.
As in the old Soviet Union, or today in Cuba, North Korea, or Venezuela, the usual suspects,
possibly in rural China, the government planner must select how many acres of wheat, soybeans,
and rice to plant. How many acres are there for corn? The issue is that the government planner
lacks the knowledge to make those decisions. It’s a little like asking a two-year-old to make
decisions that a five-year-old would make. That is the absence of knowledge that our
knowledgeable elites have about how resources should be utilized.
even if we recruit the best agricultural economists from the best Departments of Agriculture at
our institutions, they will be unable to determine how much of each crop should be planted,
where it should be planted, and how the crops should be cultivated. socialism brings misery and
death as opposed to capitalism, which brings peace and prosperity is the knowledge problem.
Development of the American economy
Lecture 2
In capitalism, each participant doesn’t have to know anything else other than what that
participant is sort of specializing in. A cattle rancher in Montana only knows how to grow beef
cattle on his ranch, in the cheapest possible way to produce the best meat he can. In this sense
capitalism is an organizer of knowledge. Whereas the government planner has to know all of the
knowledge contained by all people in these markets in order to properly plan. If you own
yourself, you own the thoughts in your brain and the work of your hands.
You get to keep whatever you make. You don’t have to share your profits with your neighbors
unless you want to. It’s merely part of the incentive structure of capitalism; you don’t have the
freedom to leave money to your children in a socialist, society. Alternatively, because it belongs
to the state, you might donate it to your preferred charity. The following is regarded as one of the
greatest economic insights. It is something you may not be aware of, and it may appear
counterintuitive. Wheat can be farmed more cheaply in the United States than in Central
America. Farmers in the United States specialize in wheat, while Central Americans specialize in
coffee. Trade and specialization could raise living standards in each location. Even if one country
can more efficiently produce every good than another, both countries can increase their living
standards through trade.
Every Saturday, Mr. Smith spends an hour mowing his lawn and an hour tending to his garden.
Mr. Brown, the neighbor, mows his grass in four hours. And it took him two hours to weed his
garden. Mr. Brown spent four hours mowing the grass and two hours weeding. Mr. Smith clearly
Development of the American economy
outperforms in both tasks. Now we’re going to demonstrate that if they trade, collaborate, and
specialize, they can both benefit, we’re going to start by having Smith mow his lawn and then
mow three-quarters of Brown’s grass. He now spends an hour on each grass. As a result, he’s
accomplishing one and three-quarters of lawns. He has worked for an hour and 45 minutes.
He’s gained 15 minutes if that’s all he does. Let’s have a look at Mr. Brown. Mr. Brown used to
labor six hours on Saturday, two hours mowing the grass and two hours gardening. There are
now only two gardens and one-quarter of the lawn remaining. Brown takes care of both gardens.
He needs four hours to do this task. One-quarter of the lawn remains to be mowed. Brown could
mow a quarter of a lawn in an hour since he mows the entire lawn in four hours. All of the work
is now completed. Both lawns and gardens have been mowed and weeded. Samantha is an expert
at mowing. Brown is an expert at weeding. Smith spends, perhaps, 15 minutes Brown, and one
hour was saved. Brown may complete two gardens in four hours, one-quarter of an hour, and one
hour, for a total time commitment of five hours. Brown saves one hour through trade and
specialization after previously working six hours. Both neighbors save time compared to the
previous condition in which they did not exchange and specialize. Smith excels in both roles. But
Smith can benefit from trade and specialization even if he is better at both Smith and brown gate,
which is known as an economic comparative advantage. Even if one country is better at
producing all goods, that country will have a comparative advantage over another country in
some goods, and the other country will have a comparative advantage over the initial country in
some goods.
Example: There is a farmer, but he’s not a very good farmer. He’s going bankrupt. He declares
bankruptcy. His land is foreclosed on by the bank. The bank then sells the farm to a savvier
farmer. When you take resources away from an incompetent and provide them to a more
Development of the American economy
knowledgeable, better producer, you know that a very desirable outcome has been attained. You
have a poor business person who is performing a poor job. You get rid of him and put those
resources in the hands of a capable producer. It’s a win-win situation for everyone. This is a
common issue in government. In fact, when the government has a lousy program, it may be the
most serious challenge the government has.
One good example is the use of corn for ethanol. Almost everyone across the political spectrum
believes that growing corn for gasoline is a terrible idea. It’s quite pricey. It harms the
environment because, in the Midwest, all of this fertilizer is dumped into the Mississippi, which
runs into the Gulf of Mexico and destroys everything because we’re cultivating gasoline.
Lecture 3
Objective: review a list of three or four reasons why discrimination or unfair treatment is
minimized under capitalism.
The theoretical argument, the theoretical number one, is very strong. In other words, businesses
are maximizing profits. They are attempting to reduce production costs in order to maximize
profit from a given revenue stream. Discrimination has a cost-benefit analysis. To avoid this,
hunt for the greatest staff you can get at market rates, regardless of their personal attributes.
Development of the American economy
Businesses don’t care; all they want are the best workers available at the market rate. Those
employees will leave and work for, someone else. There will be mental discrimination in
capitalism, but there may be a lot more in, socialism because there is no monetary motive.
There’s no need to cut costs unless they’re greater than they could be. There are no surpluses or
shortages in capitalism.
If the apple crop is twice as large as usual, we don’t have to worry about whether there will be
enough trucks to transport your apples to market under capitalism. We don’t stand in lines and
waste time waiting to buy things. In a market price economy, prices rise and fall in order to
eliminate shortages. If gasoline supply is limited for whatever reason, the price of gasoline will
