Download ECON 432-001 Public Choice

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University of Colorado at Boulder
Department of Economics
Spring Semester 1981
Mini-Course No. 432
UNEMPLOYMENT AND BUSINESS CYCLES :
PRIME CAUSES AND PREVENTIVE MEASURES
Eric D. Bovet, Ph.D.
Starts Wednesday, January 21, 9:00 - 9:50 , Economics, Room 119
1.
Introduction: overview of the course . Definitions of unemployment and business
cycles, and other fonns of rrodern economic ills. The concept of economic
integration, and econanic efficiency. Pseudo-concepts : Disequilibrium; nonclearing markets; econcmic growth; quantity rationing. The objective function
of econanics: efficient consumer service .
2.
Unemployment and cycle Theory fran Smith to Keynes : Adam Smith , Malthus, Wicksell,
Hawtrey, Hayek, Spiethoff, Pigou, Schumpeter, Wesley Mitchell, Jolm Maynard Keynes.
3.
Macroeconomic Theory Since Keynes : National ·Accounts. The Multiplier; the
Accelerator; the Quantity Theory. Economic growth . Inventory cycles . Harrod
and Hicks. The GNP gap. The output gap.
4.
Econanic Stabilization: The stabilization concept. The
band. Fiscal measures. The autanatic stabilizers : The
program; r,ersonal and corporate income tax. The federal
Reserve ratios, rediscount rate , open-market operations .
management, and economic stabilization. Direct wage and
rationing, and materials allocation.
5.
Test: Unemployment and cycle theories of the past.
final grade.)
6.
The Profit-Motivation Theory of Unemployment and Business Cycles: Assumptions.
The Industrial Revolution , and the advent of vertical specialization and
anticipatory production and distribution. The price mechanism and its three
basic functions . Requisites for , and impediments to, its efficient operation.
7.
The Allocation of Profit Margins to Successive Enterprises: The free operation
of the price mechanism ensures the equilibrated allocation of profit margins.
Impediments cause profit margins to becane distorted . .Distorted profit margins
preclude the equation of supply and demand. Static and dynamic S & D equation.
The concept of velocities and synchronization. Chronic S & D disparities i.rrpair
the efficiency of consumer service . The businessman's dilerrma: Profit
maximization Vs . s & D equation.
8.
Chronics & D Mismatches , Economic Stagnation, and Unemployment: The corrmercial
assembly line. Conflicting S & D velocities, by reducing the volume of consumer
goods, waste purchasing power; and by increasing unit costs, generate sales
resistance. Hence , an underlying tendency t<:Mard economic stagnation. This is
aggravated by amplifying elements into mass unemployment.
ideal stabilization
unemployment compensation
budget. :f'.bnetary policy;
The public debt, its
price controls; consumer
(Counts for one-third of the
-29.
Chronic S
D Mismatches, Ec:x:manic Instability, and Business Cycles: Conflicting
could continue indefinitely were inventories infinitely elastic.
Inventory constraints convert conflicting speeds into inflationary or deflationary
price movements. Hence, an underlying tendency toward econanic instability. This
is aggravated by amplifying elements into business cycles.
&
s & D velocities
10 .
Test: The profit-m::>tivation theory of unerrployment and business cycles .
for one-third of the final grade . )
(Counts
11.
Recapitulation: The law of business zrotivation. Clues toward prevention. The
theory provides ~ clues: (a) Prarote vertical integration; or (b) Prarote
production and distribution to order. ·Since, however, both would mean a return
to the past and are scarcely practical, measures m::>re in keeping with nodem
mass production and distribution methods, need to be designed. ~ basic preventive
principles .
12.
Vertical Integration and Production to Order: Partial vertical integration for
certain products or at certain stages. Vertical rnergers. Autanation. Partial
production to order for certain products or at certain stages.
13.
The Advance Order Service, and Production for Replacement : New opportunity for
the consumer to place an order in advance at a saving. Under production for
replacernent, simple method, the consuirer no longer has to wait for future delivery .
He pays for a unit ordered in replacement of that which he receives. Under the
COITifX)und rnethod, this stratagen is repeated at all stages; permitting a nonnal
flCM of goods.
14.
The Synchronized Pricing Policy, and the Open Price Contract:
The synchronized
pricing policy consists of selling goods at prices based on replacement costs,
and of inereasing the frequency of reorders. The latter is facilitated by the
use of the open price contract. It canprises a pennanent-type instrument spelling
out general contractual provisions, plus a succession of purchase orders specifying
quantities, delivery dates, and prices.
15.
Final Test:
Preventive measures.
(Counts for one-third of the final grade.)