Economics 2301/2302 Foundational Definitions

Summary

In this initial lecture by Professor Hank Lewis, foundational concepts and definitions of economics are explored with an engaging blend of humor and practicality. The lecture defines economics as the science of how societies allocate scarce resources to satisfy unlimited desires, drawing comparisons between behavioral and physical sciences. A key focus is on core economic resources: land, labor, capital, and entrepreneurship, highlighting their scarcity and importance. Professor Lewis emphasizes the significance of choice, utility, and opportunity cost within economic decisions, punctuated by the concept that 'there is no free lunch.' The lecture underscores the relevance of macroeconomics and microeconomics and the fundamental functions of money, offering a comprehensive kickoff to the economics course with engaging anecdotes and clear illustrations.

Highlights

• Prof. Hank Lewis introduces economics as the allocation of scarce resources. 📚
• Discussion on the role of economists as behavioral scientists. 👨‍🔬
• Explanation of utility, a core economic concept measuring satisfaction. 😊
• Opportunity cost: the value of what you sacrifice when choosing. 🔄
• Key resources: land, labor, capital, entrepreneurship, and their scarcity. 🌱
• Covered practical examples, from burgers to business resources. 🍔🏢
• Explored money's functions: medium of exchange, value, and more. 💴
• Highlighted macro vs. microeconomics and their unique focuses. 🏛️
• Engaging anecdotes, humor, and clear illustrations throughout. 😄

Key Takeaways

• Economics is the study of resource allocation to satisfy unlimited human wants. 💼
• Key economic resources include land, labor, capital, and entrepreneurship. 🌍👷‍♂️💡
• Understanding utility and opportunity cost is crucial for economic decision-making. 🤔
• 'No free lunch' underscores the ever-present costs in economic transactions. 🍽️
• Money enhances market efficiency through its roles in trade, value, and debt. 💰

Overview

Professor Hank Lewis kicks off his economics class with an exciting journey into the foundational concepts that drive the study of resource allocation. By comparing economists to behavioral scientists, he sets the stage for understanding economics as a methodical science, emphasizing the importance of observations, data collection, and the formulation of theories and laws. Professor Lewis humorously elaborates on the intricacies of cost-benefit analysis, utility, and opportunity cost, ensuring students grasp these critical concepts with relatable examples and witty commentary.

The lecture delves into the scarce economic resources crucial for understanding both microeconomics and macroeconomics. Professor Lewis highlights the four essential resources: land, labor, capital, and entrepreneurship, detailing their unique characteristics and the impact of scarcity on each. Through vivid examples ranging from natural resources like crude oil to businessmen like Bill Gates, students gain insights into how these elements shape the economic landscape. The professor's candid explanation of scarcity and his engaging storytelling keep the discussion lively and informative.

Professor Lewis wraps up the lecture by focusing on the functions of money and its vital role in enhancing market efficiency. As he explains the medium of exchange, standard of value, and store of value functions of money, he relates them to practical scenarios to underscore their importance. Through engaging anecdotes about everyday transactions, students learn how money simplifies trade and supports the broader economic system. With a final cheerful send-off, Professor Lewis assures students that more detailed lectures on specific economic topics are forthcoming, enticing their curiosity and readiness for the course ahead.

Chapters

• 00:00 - 01:00: Introduction and Test The chapter 'Introduction and Test' appears to be a lecture where the speaker is in the process of preparing and testing the setup for the first day's lecture. There are some technical or organizational issues that have led to things not going as planned. The speaker mentions restarting the session and that they are conducting a test run. Additionally, there's a noted reference to popular culture ('Game of Thrones'), possibly as a light-hearted comment or metaphor. The main focus seems to be on sharing a screen and discussing some PowerPoint presentations.
• 01:00 - 03:00: Foundational Definitions and Concepts This chapter introduces foundational definitions and concepts, beginning with a slideshow presentation. The focus appears to be on establishing basic understanding, although technical issues such as visibility on the YouTube feed were encountered.
• 03:00 - 04:00: Economics Definition and Methodology The chapter starts with the lecturer addressing the class, indicating a discussion about foundational definitions and concepts within economics. The lecturer critiques the adequacy of dictionaries like Webster's for providing general definitions, suggesting they are not suitable for a more specific understanding required for economics.
• 04:00 - 06:00: Utility and Cost-Benefit Analysis Economics is defined as the science or method of allocation of scarce and limited resources to satisfy unlimited human desires. Economists, as behavioral scientists, make observations, collect data, and use statistics to validate their findings, similar to physical sciences.
• 06:00 - 12:00: Scarcity and Economic Resources The chapter titled "Scarcity and Economic Resources" discusses the methodologies used by behavioral scientists. It contrasts these with methods used in physical sciences, such as the Newtonian scientific method and proof by exhaustion through simulation. While acknowledging that no method is foolproof, it notes that achieving 80% accuracy is typically sufficient, likening this to the common consensus among dentists. The emphasis is on the applicability of these methods in social and behavioral sciences.
• 12:00 - 16:00: Micro and Macroeconomics Overview This chapter provides an overview of both microeconomics and macroeconomics, emphasizing their focus on human interactions and societal institutions. Economics is concerned with individuals, societies, and their relationships in business and trade. The chapter highlights the importance of the concept of 'choice' in economics, which is crucial for understanding both micro and macroeconomic perspectives.
• 16:00 - 19:00: Functions of Money The chapter titled 'Functions of Money' introduces the concept of utility, which represents the benefit, usefulness, or satisfaction received from consuming a good or service. It touches upon the idea of cost-benefit analysis, suggesting that economic and personal choices are affected by weighing the costs and benefits. The chapter explains that goods are physical objects whose ownership and use provide benefits, using examples such as a bag of chips, a can of soda, an automobile, and gasoline. These examples illustrate the physicality of goods that, once owned and used, offer benefits.
• 19:00 - 21:00: Closing Remarks and Homework Instructions The chapter provides an overview of what constitutes a service, using the example of a restaurant to explain the various actions involved in providing a service to customers. It emphasizes the different roles people play, such as cooking, assembly, processing payment, and delivery, to ensure that the consumer receives the benefit of the service. This chapter underlines the human actions in service provision, contrasting it with products.

Economics 2301/2302 Foundational Definitions Transcription

• 00:00 - 00:30 foreign I hope all is well with you here we are in the process of taking care of this first day's lecture here this has not been going the way of planned I'm going to start it over in a second I'm just doing a little bit of a test run right now before Game of Thrones anyhow here's part of the test we're going to share the screen I'm going to go over here and we're going to talk about some Powerpoint stuff today here so we're
• 00:30 - 01:00 going to start from the beginning we're going to look at the slideshow here and what we're talking about today here are foundational definitions and Concepts and it's not showing up on the YouTube feed
• 01:00 - 01:30 thank you okay students so we're gonna be talking about today here foundational definitions and Concepts and it's always nice to start off with a definition from Webster but the problem with the dictionaries dictionaries are good for a general type setup but for a more specific setup they're not so great here and so I always begin my first day
• 01:30 - 02:00 talking about this definition economics is defined as a science or method of determining how individuals and societies how they choose to allocate scarce and limited resources in order to maximally satisfy unlimited human desires that's the best definition I've ever found and I always start off by saying that economists are scientists we are behavioral scientists but we're scientists nonetheless like physical sciences we make observations and collect data we use statistics to validate the results of observations and data we work on both
• 02:00 - 02:30 theories and laws however behavioral scientists use different methodologies to prove or disprove things the Newtonian scientific method improved by simulation exhaustion is used in the physical sciences whereas the legal Historical Method which is you know and proof by exhaustion through simulation is also as well keep in mind none of these methods is foolproof they're about 80 accuracy is best but hey four out of five dentists right it's good enough for what we're trying to do again social or behavioral scientists
• 02:30 - 03:00 deal with human beings Homo sapiens or the institutions of functioning of our society and the inter and intrapersonal relationship of individuals in the realm of Economics we deal with individuals and societies and their inter or interpersonal relationships in the areas of business and trade now I'm going to squat on this slide for a moment for the micro students this is majorly important but even macro students can get a benefit out of this choice is part of the economics definition for a reason there are two
• 03:00 - 03:30 forces that affect any choices we make whether economically or personally if you've ever heard of cost benefit analysis it has its roots in these economic Concepts utility represents the benefit it's usefulness or satisfaction received from consuming a good or our service now a good is a physical object whose ownership and use provides some benefit think about a bag of chips or a can of soda think about an automobile or gasoline that runs the automobile these are physical objects and the fact that we can own them and can use them provides us with benefit
• 03:30 - 04:00 now a service refers to actions performed by another person or people that provides the receiver of the action with the benefit you go to a restaurant for example you may be buying a burger but somebody has to cook it somebody has to take your payment somebody has to assemble and package your order deliver it to you the actions that the human beings are performing the cooking the assembly the ringing up the order and making change and get delivering it to you that's the service some types of items we consume are pure
• 04:00 - 04:30 Services think about when you go to a doctor and receive treatment for example think about if you visit a massage therapist or chiropractor and receive treatment the only thing you're getting from that individual is the actions but if the actions are performed correctly they provide a benefit now the act of consumption means you drink the soda you eat the chips of the burger you drive the automobile and it uses gasoline that's how you consume a good you use it for the intended purpose on the other hand for a service partaking of it being a patient
• 04:30 - 05:00 receiving treatment is consuming the service now a saying that appears in the first chapter of almost every economic textbook written since the 70s is there is no such thing as a free lunch task an awful as some might call it but no there is no such thing as a free lunch even if the end user doesn't pay for the so-called free lunch it costs material it costs resources it costs energy it costs effort it costs time to actually create the so-called free lunch and so no it's not truly free
• 05:00 - 05:30 the thing is we choose to engage our activities our energies in certain Pursuits like studying for a class like taking tests like exercise we have to weigh the utility the benefit versus the cost the opportunity cost in this case the value of the things we give up whatever we would most likely be doing when we're specifically committed to a certain activity we're engaging in its value is our opportunity cost like for example if you went to the gym but you
• 05:30 - 06:00 could have been sleeping the value of the sleep you're giving up is your opportunity cost for your exercise a lot of students also say sleep is the opportunity cost they pay when they come to classes other students tell me they're missing out on a couple of hours of work and a couple of hours of work experience and that's fine uh some students are giving up time our leisure time with family or loved ones whatever value would be assigned to those things you would be doing if you weren't in class is the opportunity cost of being in class obviously the reason why you come to
• 06:00 - 06:30 class is the benefit first-hand learning from the professor is always the best way to go on top of that uh being able to get first-hand understanding ask questions in the moment they occur those kinds of things and of course doing better in the course one would hope those are the utilities you receive and you have to weigh them accordingly now these other definitions you can read on your own but a couple of the ones I want to focus on are scarcity scarcity is a condition that's real it exists and we have to manage it it's where human
• 06:30 - 07:00 desires go beyond available resources optimization means achieving the best possible results that are given conditions that is a concept for the microeconomic students in 2302 for macro optimization just does not work because there's too many variables we can't control whereas with micro there's fewer variables and they're more often in the control of the individual trying to optimize a resource refers to an input something that is used to accomplish something else now we are about to hit our first
• 07:00 - 07:30 major student learning objective on the first day of class SLO number one says you need to be able to name the four types of economic resources you need to be able to find them you need to be able to give specific examples of them and explain how they are scarce so here they are land labor capital and Entrepreneurship are the four categories of economic resources land refers to those resources that occur naturally
• 07:30 - 08:00 those resources that come from the earth think about dirt think about rain water we're getting in a lot of that right now think about uh trees and crops livestock think about mineral deposits under the Earth substances like crude oil and natural gas these are all naturally occurring meaning they're not made by human hands and they're not made by Machinery they're free gifts of God or mother age nature that exists whether you would want them there or not the thing about Land Resources is they are scarce what this means is that
• 08:00 - 08:30 there's a finite amount it is possible in some cases for the non-renewable resources to be so exhausted there's no more left uh some land resources like trees and water are renewable we can make more of it through precipitation our seeds growing but if we over consume water or if there's a drought weather conditions make it rare and some of us are saying we wish we had a drought right now often this would make that resource scarce
• 08:30 - 09:00 now labor is one of our two human resources labor refers to the physical and mental human abilities of human beings that are used to produce and sell goods and services the skills the mechanic would possess as far as working with his tools knowledge of engines and Motors safety equipment like that constitutes a labor resources uh the advanced degree and the communication skills of a college professor his organizationalizational skills are her ability to manage time in students and some students might be
• 09:00 - 09:30 emotional manage different personalities these are some things uh that constitute the labor resource uh although we may have over seven and a half billion people on the planet uh labor resources are scarce because not everybody is equally gifted mentally or physically not everybody can shoot baskets like Michael Jordan or uh Lebron James not everybody can play hockey like Roberto Luongo as a goalie or Wayne Gretzky as a forward but the thing is here is it's like you know certain types of Labor resources can become scarce when there's
• 09:30 - 10:00 a greater need for those resources than there are people with the skills we currently have shortages of nurses and engineers in the United States and there's not enough Americans that are earning degrees in nursing and Engineering these types of jobs are going to pay pretty well even with a two-year certificate capital is not money this is not an accounting course I don't care what the accountants call it this is context the word hand is four different definitions that differ on context the thing at the end of your arm is a hand but if you're playing poker it's the card you're
• 10:00 - 10:30 holding capital and economics does not mean money at all it strictly means those non-human non-living manufactured resources that are used in the production process to produce and sell goods and services factoring Office Buildings Factory equipment and office equipment office supplies uh vehicles that are used in businesses such as fleet vehicles airplanes taxi cabs fire trucks and police cruisers are all capital resources the thing these have in common is first of all they have to be made by
• 10:30 - 11:00 human hands on our machinery and second of all you know they are used as part of producing some other good or service uh don't confuse Capital with Goods goods are something different goods are physical objects that we use personally a good that is used by a business isn't a good at all it's a capital resource and I don't like the phrase capital goods capital resources are scarce because the material they're made from is scarce and so by extension anything you would make from them think about how people steal metal these days metal is used to
• 11:00 - 11:30 manufacture cars and automobile parts and aircraft parts and the like and so because metal is scarce any type of capital resources made using metal also is scarce by extension now our other human resource our more specialized form is called entrepreneurship entrepreneurship refers to a person or group of people that gathers together the other economic resource organizes them and then uses them to produce and sell goods and services we have a lot of entrepreneurs in the Houston area and I'm acquainted with a fair number my
• 11:30 - 12:00 brother-in-law Bill Fong he is a named partner of William Fong and Associates Fong Legal Services over in southwest Houston Lee Ellis is the CEO and owner of cherry pie hospitality and him and his Partners Jim Mills and Anthony Kaleo and Alyssa Dole are all entrepreneurs they own and operate a group of restaurants that produce elevated southern food pizza seafood and desserts in the Houston area and oh yeah fried chicken and donuts too I can't forget those Tillman Fertitta is
• 12:00 - 12:30 a well-known entrepreneur as is Bill Gates now here's something here I need to tell y'all Thomas Edison and Steve Jobs used to be entrepreneurs but they're not anymore any idea why I'll give you a minute to think about it if you said because they're dead you're right sorry but used to be doesn't count in this world here somebody who used to be an entrepreneur but is retired and sold the business isn't an entrepreneur anymore Donald Trump can't be an entrepreneur while
• 12:30 - 13:00 he's president for example and since Bill Gates is alive and still actively running businesses he is an entrepreneur because Steve Jobs and Thomas Edison are dead they're not entrepreneurs are scarce for a number of reasons one of them is because they possess a combination of personal skills and traits that all together the ability to manage personal risk and Financial Risk the ability to be organized to be creative and Innovative the ability to manage lots of different personalities
• 13:00 - 13:30 the ability to recover from failure very well and when you look at the fact that factoring in all the probabilities and the results about one-third of all entrepreneurs have businesses that last longer than five years and two-thirds have businesses fail within the first five years the low success rate combined with all the traits put together makes them scarce now the name of these courses I teach econ 2301 is principles of macroeconomics the study of the economy is a whole entity
• 13:30 - 14:00 if you are taking 2301 we're going to learn about things like gross domestic product rates of inflation how we measure the labor force and unemployment we're going to talk about fiscal and monetary policy we're going to talk about International Trade we're going to talk about policy failures all these things that affect the entire nation's economy and international economies are a macro topic now 2302 the microeconomic course is a study of the individual elements of the economy we study the theory of individual markets individual firms and the like and I will add both
• 14:00 - 14:30 courses studies some Market Theory however microeconomics is going to study markets and businesses and how they operate in production markets and resource markets consumer Theory and a lot more granular detail and we're not going to talk really about inflation or GDP because it's not really relevant so if you're in 2301 macroeconomics is the focus if you're in 2302 microeconomics is the focus now regardless of which course you're taking markets are going to be a big
• 14:30 - 15:00 piece of it we focus primarily on the United States economy which is a largely market-based economy and markets are institutions that bring together buyers and sellers we have goods and services markets like the flea market you see like Craigslist or Amazon.com or the shopping mall you see here we have markets for resources think about employment agencies and want ads think about Commodities markets where raw materials are sold the thing is buyers and sellers interact in whatever framework the market provides and they agree and haggle on terms of trade
• 15:00 - 15:30 and so we're going to be focusing on market-based economies and Market orientation in both courses but again in micro we're studying this in a lot more detail now if you've opened up connect you've probably seen one of the assignments called connect the dots list three of the four functions of money and what they call a unit of account I prefer to call standard of value money is not an economic resource and one of the things that I said a couple of slides ago is that money is not Capital but I didn't
• 15:30 - 16:00 say it wasn't useful it's just it's not a resource because primitive economies like berder capital resources like the wheel and the horse and buggy existed before currency existed but money makes it easier because of these functions think of it as motor oil and internal combustion engine can work very well with motor oil it can still operate without it just not very efficiently it's because of these functions that money makes markets work better the term medium of exchange means that money replaces the need to barter we
• 16:00 - 16:30 trade indirectly using money as an intermediary I work and get paid to paycheck that comes from tuition and other sources for the college and then you get to see the seat in my class and learn about economics the thing is it's a lot easier for y'all to pay tuition and for me to get a paycheck with the money as an intermediary that me trying to find ways to barter food and clothing and a house from people that want to learn about econ it's a lot easier standard of value has to do with money being a unit of account our unit of measurement you go to the store goods
• 16:30 - 17:00 are rendered we know what they're worth in dollars and cents because these are called prices that's how we measure their worth you know what you're worth as a labor resource because your paycheck tells you what you're worth and most of us think really that little different types of uh other things are their values measured like you know Services you've got scheduled fees for services like an auto body shop or a massage therapy clinic and so forth and so all these things are rendered in dollars and cents currency units so we say that money is a standard of value it
• 17:00 - 17:30 means we measure how much these things are worth in currency units now to say that money stores value or some would say a store of value has to do with transferring value from the present into the future or accumulating value would be another way to say it I guessed my car this past week and it cost me roughly about twenty two dollars to gas up the week before it is about twenty four dollars the week before that about 23 dollars and so as long as nothing really crazy happens in the world of gasoline and petrochemicals if I had
• 17:30 - 18:00 about say 25 bucks next week I should be able to gas at my car based upon my driving but I can only say that because the dollar holds on to that buying power over time or another good way to visualize it is a hundred dollars worth of groceries and household supplies three months ago that amount of food and household supplies fills with the shopping cart about the same way as it does today as long as nothing crazy happens in the world of food and I can only say this because the US dollar is very good at storing value we also wouldn't save money if it didn't
• 18:00 - 18:30 store value because how could we hope to transfer value from the present to the Future now what the video is missing is the fourth function for money but I hold y'all responsible for it anyway and that is standard of deferred payment we are talking about debt Delta Echo Bravo Tango the filthiest four-letter word the English language if you're dealing with credit cards or loans the amount you've borrowed the periodic payment the finance charges everything except for the interest rate is rendered in currency units dollars and cents
• 18:30 - 19:00 credit cards aren't money credit cards are a portable reusable loan contract where you can borrow a small amount of money like say nine bucks to buy what a meal Whataburger and they'll charge you like say 30 interest on it I don't advise making use of those by the way but that's what it is but the thing is for people who don't have 200 Grand sitting around to buy a house being able to borrow and finance and pay the extra fee over time enables large purchases to happen the thing is all four of these functions make it a lot easier for trade
• 19:00 - 19:30 to happen and that's the thing markets work more efficiently because of the functions that money performs if you got nothing else out of it this is what I want you to get out of it now I'm going to stop at this moment here because this topic is more for them Pro students and not for the micro students and this is just really what I cover the first day if you've not already taken an opportunity to read the syllabus I'm going to recommend that you do so but one more thing I'm going to say I'm going to get out of this thing here and go back to my original screen
• 19:30 - 20:00 I'm going to stop sharing the screen here that's freaking in okay stop screen sharing boom yeah I don't know if you wanted to see my face again after that or not uh students I do understand that this flood has been difficult for everybody including yours truly and what I'm trying to do here is find a way to keep us from getting behind and so I've done the slideshow narration for today I'm going to do another one later this week for both macro and micro separately
• 20:00 - 20:30 so keep your eyes on your student email tune into these channels and hopefully this will help you along the way one last thing I'm going to mention your handwritten homework has problem number one which asks you to name and give us a sample for each of the four categories of economic resources and explain for each category how it's scarce we've covered that so go ahead and work that that needs to be handwritten not typed just hold on to
• 20:30 - 21:00 that in the folder for now class thank you very much for your time and please stay safe and drawing and I'll be seeing y'all after Labor Day but be looking for my next video this is Professor Lewis saying success to you all and I'll see you soon