Week 1 - Laying the Foundation
Day 1 - Getting Started
- What is economics and why might it be an important subject to study and understand?
- Economics is knowledge of consumption, productivity, and transfer of wealth. It's important to study to understand the world around us. More specifically people, businesses and markets.
- Can the government provide services like education and healthcare for “free”?
- No, the stuff the government proposes can be free still has to be payed for and the money has to come from somewhere. It's usually means the country goes more into debt or it comes out of Americans tax dollars.
Day 2 - Addressing the Sacred-Secular Divide
Stewardship, Oikonomia, and Imago Dei
- 1. Instead of thinking of capitalism as a worldview, ideology, or political system, we should think of it as an economic system with certain institutions, habits, beliefs, and rules. What are the features of a healthy capitalist economy?
- It is "Clear private property laws, a stable rule of law in the limited government, institutions that allow credit and investment and reasonably free markets. That means slavery and theft are banned, and price controls and production quotas are rare." Pg. 6
- 2. How does Richards explain the idea that economics is fundamentally about us?
- He says "At its base, economics is about us--- what we choose, what we value, what we represent in language and symbols, how we interact with each other in a market, and especially how we produce, exchange, and distribute goods, services, risk, wealth, and information. Understand these things, and you're well on your way to understanding economics." Pg. 7
- 3. Why do market economies work and how do they allow wealth to be created?
- he states "Paradoxically, the key source of material wealth in a modern market economy is immaterial. It's spiritual. When we can exercise our creative freedom, we can create new value, new wealth, for ourselves and others." Pg. 10
- 4. What is “one of the least appreciated truths of economics” and why might understanding its meaning be especially relevant for Christians?
- "We believe that human beings are made in Gods image--- the imago Dei. our creative freedom reflects that divine image. This is one of the least appreciated truths of economics." Pg. 10
- 5. Grabill asserts that we are often "diverted from oikonomia." What does he mean by the term "oikonomia"?
- "Oikonomia is God's vision for the purpose and direction of all things." He has a vision of how the world should be but we as humans have fallen from that ideal.
- 6. Grabill states that we are to live "faithfully in exile." What does he mean by "exile" and how do we live it in "faithfully"?
- we are not where we should be because of how us and our ancestors have lived, we don't deserve to be in heaven but with work we could be. With much spiritual work and devotion, we could be allowed to be free from this punishment that we've inherited and earned during our lifetime.
- 7. Grabill maintains that not only are we to live faithfully in exile, we are also to seek the "shalom" of our cities. What does he mean by "shalom"?
- "A comprehensive sense of well-being and wholeness." Us humans always feel the need to get satisfaction out of everything we do and when we don't get that feeling we tend to feel cheated out of something we think we deserve. We are a selfish species but with God we could definitely be better.
- 8. How can we exist in such a way as to bring life to the world? How does our "gift-giving” lead to flourishing?
- We can do our best to spread and share our belief and plant seeds that may or may not flourish in as many places as possible. When people see us freely giving it might inspire them to ask us why we do this, and if they ask us, we should gladly explain to them and plant that seed of thought.
The Big Picture - Exile: Our New Perspective by Stephen Grabill (pdf - 132.45 KB)
The Big Picture - Exile: Our New Perspective by Stephen Grabill
Day 3 - Discovering Economic Principles in Everyday Life
The Power of Incentives
- 9. According to the authors of Common Sense Economics, the choices we make as voters and citizens can exert an enormous impact on our freedom and prosperity. In order for us to choose intelligently, we must understand what three basic principles of economics? ?
- Human decision-making, the analysis of the forces underlying choice, and the Implications for how societies work.
- 10. What does the "economic way of thinking" involve?
- The economic way of thinking includes the integration of certain key concepts into your thought process.
- 11. What phrase is used to reflect how incentives affect our choices in predictable ways?
- "Incentives matter"
- 12. How do changes in market prices alter incentives in a manner that works to coordinate the actions of both buyers and sellers?
- If the customers are demanding more of an item than the producers can or wants to produce, its price will rise. As the price increases, the sellers will be more likely to provide the item, while the customers will buy less. The higher price will bring the amount produced and the amount demanded to a balance.
- 14. True or False: Changes in incentives influence persons who are self-centered, but not those who are compassionate and altruistic, like Mother Teresa.
- 15. According to Dwight Lee, what are the two important functions of incentives?
- First, to communicate information on the best things to do, and second, to motivate people to do them.
- 16. From where do the most important incentives come?
- The most important incentives come from the subjective desires of individuals.
- 13. True or False: Incentives matter just as much under socialism as under capitalism.
The Power of Incentives by Dwight Lee
Day 4 - Discovering Economic Principles in Everyday Life
Scarcity and Opportunity Costs
- 17. What is the reality of life on our planet?
- Productive resources are limited while the human desire for goods and services is virtually unlimited.
- 18. We are forced to choose among alternatives because we are constrained by the _________________ of resources.
- Limited amount
- 19. What is the opportunity cost of a purchase? Give an example of an opportunity cost you experienced this past week.
- The money you spent on this purchase could have been spent on something else you value. An example from this past week for me, is that I bought myself soda and candy for a road trip, but the opportunity cost of that is that I can't spend that money on something else like, say, a burger and fry from a fast food place during the car ride.
- 20. Are some things so important that we should do them without considering the costs? Why, or why not?
- No. Saying that we should do some things without considering the cost is the same as saying we should do some things without considering the alternatives. You should always consider the alternatives, because no matter how important the thing you want to do is, or how good your idea is, there may be an alternative that is better or more important.
- 21. State and federal governments currently supply various goods and services, such as housing, public parks, education, and health care, to citizens and charge them either nothing, or far below the full cost. Is free housing for poor people or free education for everyone, really free?
- No. The cost of them, is the opportunity cost. The cost of not being able to spend the time or money on something else that may be either just as valuable or more valuable. They use scarce resources that could be used for something else.
- 22. Understanding “opportunity cost” is a powerful tool that will be applied throughout your CSE text and this course. According to the CSE authors, what is the result of integrating this tool into your thought process?
- You start considering lost opportunities for every action you take, and you carefully consider what other actions are available and what is the best before taking one. Whether this be with spending money or time.
- 23. What is the cost of traveling the road taken?
- Not being able to travel the road not taken.
- 24. Why has economics often been referred to as the "dismal science"?
- Because it studies the most fundamental of all problems, scarcity.
The Road Not Taken by Robert Frost
Opportunities and Costs by Dwight Lee
Day 5 - Discovering Economic Principles in Everyday Life
Decision Making, Marginal Value and Trade
- 25. If we are going to get the most out of our resources, when should actions be undertaken?
- They should be undertaken when the marginal benefits, outweigh, or are greater than the marginal cost.
- 26. What one word works as a substitute for the word "marginal"?
- 27. As opposed to making "all-or-nothing" decisions, what does the concept of marginalism help us understand about how people make decisions?
- Rather than making decisions between whether to eat food or wear clothing, people make decisions about how much of each to do. People get more of each until the cost of getting more doesn't outweigh the benefits of getting more.
- 28. Fill in the blanks below:
- "The concept of marginalism reveals that it is the marginal costs and marginal benefits that are relevant to sound decision-making."
- 29. What do economists mean by the term “marginalism” and what does it allow us to see?
- Economists use the term marginalism for the concept of the effect of incremental or small changes. It lets us see how mundane, small adjustments are usually more effective than large attempts to solve problems, and, furthermore, the large attempts are often harmful.
- 30. The diamond-water paradox was resolved when Carl Menger and William Jevons recognized what fundamental truth regarding value and price?
- Value is how important an item is to have. Price is the value people put on owning one more of something, not its total value.
- 31. What is the foundation for trade?
- mutual gain
- 32. Why do people trade?
- They expect it improve their well being.
- 33. Fill in the blanks below:
- According to the CSE authors, there are three major sources of gains from trade. “First, trade moves goods from people who value them less to people who value them more. Second, trade makes larger production and consumption levels possible because it allows each of us to specialize more fully in the things that we do best relative to cost. Third, voluntary exchange allows firms to achieve lower per-unit costs by adopting large-scale production methods."
- 34. Why is the law of comparative advantage “just common sense”?
- If someone can provide something to you at a lower cost than you can produce it for yourself, you will obviously buy it from them. We all do that, so it is common sense.
- 35. Why is trade vitally important in our modern world?
- It makes it possible for us to consume more goods than we would be capable of producing for ourselves.
It’s the Margin that Counts by Dwight Lee
Day 6 - Critical Thinking Assignment
Why Learn Economics?
- Type essay below:
- Economics is the study of how incentives affect our choices in life. For instance, if the price of ice cream is higher, people are less likely to buy it, but if the price is lower, people are more likely to buy ice cream. It is important to know what your choices are doing and how they are affecting those in the word around you. You need to know how the things you buy are affecting the economy and prices. If you don't know what impact your having on the rest of the world, then you can't very well live for the Lord in a way that Christ would live. If you aren't paying attention to others, then you're not doing what a Christian ought to do. We also need to use what God has given us, our earthly resources for His glory.