Poul krugman

03/09/2012

How Did Economists Get It So Wrong?

How Did Economists Get It So Wrong?

By PAUL KRUGMAN

By PAUL KRUGMAN

Unit
1

How Did Economists Get It So Wrong?
By PAUL KRUGMAN

Positive & Normative
Economics

Introduction
José Felipe García Balderas

WHAT YOU WILL LEARN IN THIS UNIT

 The meaning of economics

What’s economics?

 It’s the social science thatanalyzes the
production, distribution, and consumption
of goods and services.

 Why use economic models?
 The difference between positive
economics and normative economics

(http://en.wikipedia.org/wiki/Economics).

 Target of positve economy

José Felipe García Balderas

José Felipe García Balderas

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03/09/2012

Why use economic models?

Levels of economic sciencePositive economics

 Simplified representations of reality

A model is any simplified representation of
reality that is used to better understand reallife situations.

Economic
science

Normative economics.

José Felipe García Balderas

Levels of economic science

José Felipe García Balderas

Positive conomics



Positive economics (descriptive) is the
branch of economicanalysis that
describes the way the economy
actually works.

Normative economics makes
prescriptions about the way the
economy should work.



Positive economics is in principle
independent of any particular ethical
position or normative judgments.



As John Neville Keynes said, it deals with
“what is,” not with “what ought to be.”





Its task is to provide a system ofgeneralizations that can be used to make
correct predictions about the
consequences of any change in
circumstances.

José Felipe García Balderas

José Felipe García Balderas

Its objective is…

Positive conomics



Its performance is to be judged by
the precision, scope, and conformity
with experience of the predictions it
yields.



In short, positive economics is, or canbe, an “objective” science, in
precisely the same sense as any of
the physical sciences.

José Felipe García Balderas

…the development of “theory” or
“hypothesis” that yields valid and meaningful
predictions about phenomena not yet
observed. Such a theory is, in general, a
complex intermixture of two elements. In
part, it is a “language” designed to promote
“systematic and organizedmethods of
reasoning.” In part, it is a body of
substantive hypotheses designed to abstract
essential features of complex reality.

José Felipe García Balderas

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Unit
2
Measuring results of the
Production

WHAT YOU WILL LEARN IN THIS UNIT

 The meaning of production
 VBP, VA, PN and IN
 Overview Supply and Demand model.

José Felipe García Balderas

Someideas…

VBP

 VBP ó PBT, se le define como “la suma
monetaria, computada a precios del
mercado, de todos los bienes y servicios
producidos por una comunidad en un
lapso determinado, generalmente un
año, y que pudieron ser objeto de
transacción económica”.

VBP
Production

Income

José Felipe García Balderas

PN

IN

José Felipe García Balderas

VBP




José FelipeGarcía Balderas

VBP
Este indicador es una primera aproximación
para medir el resultado de la actividad
económica, pues suma los valores monetarios
de todos los bienes y servicios que se
produjeron en un periodo determinado, sin
importar el uso para el cual fueron destinados.
En este indicador se computarán los valores
monetarios tanto de las materias primas y de
los bienes semielaborados,como el de los
bienes y servicios destinados a satisfacer la
demanda de los consumidores finales y las
necesidades de bienes de capital por parte de
los inversionistas.
José Felipe García Balderas

DF = C + I

José Felipe García Balderas

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VBP

VBP
Example:

Example:


Supongamos que un país únicamente produce
una pieza de pan; sin embargo, para la...