Transcript L5 macro and gnp

Ecological Macro-economics:
GNP
Policy paper
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Comments on all proposals will be done
today (sorry for delay)
1000 word introduction to problem due on
9/26
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Begin with relevant chapters from textbook. I
provided additional suggestions for most of you.
Headlines
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Wall St. Exploits Ethanol Credits, and Prices
Spike
Why Janet Yellen, Not Larry Summers,
Should Lead the Fed
Inequality in America - The Data Is Sobering
Can the Government Actually Do Anything
About Inequality
Questions for Next Few Classes
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Why is macroeconomics important, and how
is it different from microeconomics?
What is ecological macroeconomics?
Is GNP a measure of value? (brief)
What is money and how does it work?
What is the role of speculation, and how has
it contributed to the current crisis?
What can we do about the current ‘crisis’? (a
question for the next several weeks)
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Read about the crisis daily! We have done
nothing to solve it. It has not gone away.
Microeconomics
What is Macroeconomics?
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Focus on economy as whole
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Aggregate demand, GDP
Unemployment
Growth rate
Price levels (inflation)
Goals of Conventional
Macroeconomics
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Continual economic growth
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To provide for ever-increasing numbers of
people
To improve the environment
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To end poverty and distribution problems
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Environmental Kuznets Curve
Conventional Kuznets Curve
To provide enough jobs
Goals of Conventional
Macroeconomics
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Stabilize prices
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Why do we want stable prices?
Provide full employment
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What is full employment?
What Does Microeconomics
Say about the Macroeconomy?
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The invisible hand
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Allocative function of prices
Say's law
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Supply creates it's own demand
Why Do we Need
Macroeconomics?
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Great depression
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What happened?
What happens when there's too much
aggregate demand?
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Inflation
Ecological degradation (ignored by conventional
macro)
Emergence of Macroeconomics
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Response to crisis
Created new indicators
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GNP
Unemployment
Inflation
New policy tools (or at least new
understanding)
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Monetary policy
Fiscal policy
Emergence of Macroeconomics
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New Institutions
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New activism of fed
Social security
Social welfare
IMF
World Bank
ITO--> GATT -->WTO
How does this relate to emergence of
ecological economics?
Ecological Macroeconomics
• An end to growth
• 'optimal stopping rule' for the economy
 Efficient allocation between market and nonmarket goods
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Fair distribution
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Fair distribution of the commons
Fair return to labor and capital
Job and income stability
Price stability means to above ends
The Real(?) Economy: GDP
What is GNP?
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Market value of final goods and services
purchased by households, government and
foreigners (net) in a given year
Returns to labor (wages), capital (interest),
and natural resources (rent)
GNP: based on ownership
GDP: based on physical location
Real vs. nominal
What is opportunity cost of increasing GNP?
What are flaws with GNP?
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Depends on what it is intended to measure
Defensive expenditures
Depletion of natural capital
Changing costs, e.g. computers
Uneconomic Growth:
Essential Resources and GNP
How do we
maximize
contribution of
food to GNP?.
i.e. who should
get it?
What are alternatives to GNP?
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Income based
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MEW
ISEW
GPI
Ends based
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GNH
Quality of life
GNP: Benefit or cost?
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US healthcare system
Technological advance (e.g. computers)
Defensive expenditures