The Importance of Institutions

by on February 4, 2016 at 7:34 am in Economics, Education | Permalink

So far, in our Principles of Macroeconomics class at MRUniversity we’ve covered GDP (how it is calculated, nominal versus real, GDP as a measure of the standard of living etc.). We have also covered the basic facts about differences in income both across countries and over time, the importance of growth rates, and the presence of growth miracles and growth disasters, among other topics.

In our latest video, Tyler covers the Importance of Institutions. Next up geography and growth and shortly after that on to the Solow model!

As always, these videos are freely available for non-commercial use. They can be used with any textbook but why would you want any but the best?

1 JK Brown February 4, 2016 at 1:06 pm

The individual liberty to better ones condition through the retention of earnings over subsistence, i.e., surplus (private property) and the conversion of those earnings into productive capital (control over private property) to create additional earnings by providing goods and services desired by others (the liberty to enter into contracts, long term and fleeting).

Either the institutions support this individual liberty or one is in various stages of slavery.

“First, what is the best the socialists, in their writings, can offer us? What do the most optimistic of them say? That our subsistence will be guaranteed, while we work; that some of us, the best of us, may earn a surplus above what is actually necessary for our subsistence; and that surplus, like a good child, we may “keep to spend.” We may not use it to better our condition, we may not, if a fisherman, buy another boat with it, if a farmer, another field ; we may not invest it, or use it productively ; but we can spend it like the good child, on candy — on something we consume, or waste it, or throw it away.

“Could not the African slave do as much? In fact, is not this whole position exactly that of the negro slave? He, too, was guaranteed his sustenance; he, too, was allowed to keep and spend the extra money he made by working overtime; but he was not allowed to better his condition, to engage in trade, to invest it, to change his lot in life. Precisely what makes a slave is that he is allowed no use of productive capital to make wealth on his own account. The only difference is that under socialism, I may not be compelled to labor (I don’t even know as to that — socialists differ on the point), actually compelled, by the lash, or any other force than hunger. And the only other difference is that the negro slave was under the orders of one man, while the subject of socialism will be under the orders of a committee of ward heelers. You will say, the slave could not choose his master, but we shall elect the ward politician. So we do now. Will that help much? Suppose the man with a grievance didn’t vote for him?”
— “Socialism; a speech delivered in Faneuil hall, February 7th, 1903, by Frederic J. Stimson

2 Ajay February 7, 2016 at 8:20 pm

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