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God wants you to be rich Increases in Wealth for the individual is almost always an increase much greater for the world in general Ancient times people didn't improve things they believed life was fixed and predestined Until C4 BC the stars were thought to gods wondering about the heavens with lamps. Resources are not scarce its not a zero sum game The reason we are more wealthy now it not because we have found more resources In ST the technology continually increases the supply of existing resources In the LT technology changes our definition of physical resources So wealth doesn't come from taking from others. 95% of our economy produces goods and services that didnt exist 20 years ago 1960 5% of meals eaten out, 1980s 50% Growth in restaurant employment replaced all lost manufacturing jobs Pc at $150 billion (of which $80 bil software) = car industry Forecasts of doom- whaling industry, coal shortages etc never come true Since 1750 world gdp has risen 1700 times and population 6 times Price of a house adjusted for PPP and size has fallen steadily OPEC in 1973 caused short term problems but then enhanced recovery methods for oil, fuel injection (which broke up the cartel eventually). Real oil prices fell from $40 to $7 (nominal 40->15) Food prices fell by 70% so people bought packaged for the same price GNP doesnt take into account such improvements All the Club of Rome estimates of gold., silver, bauxite, reserves were the opposite of what happened Samuelsons economics textbooks popularised Keynes JFK and successors tried Keynes but it didnt work Inequality of income more to do with technology than tax cuts When tax rates came down to 28% top , Keynes would have said that people would have saved most of it leading to stagnation but people spent In offices the PC increased information processing by as much as 500% ( absorbed increasing of quality of info and further productivity) Dealing with changes in busines now the issue rather than existing business 1990 50% of Americans change career every 6.5 years Now, because of rate of change, resources aren't scarce even in the shortest of time periods. Rate of change makes effective management of the economy impossible Majority of fish consumed in US now grown inland in desert fish farms The jobs for next generation are in industries not even thought of For the past few decades we have had a backlog of unimplemented technological advances Expanding number of retail outlets used to work best, now with real time information systems it is easy to expand sales per square foot Its now as easy to customise equipment to employees as train them in new equipment Now better to license technology rather than keep patent (Betamax, Apple) Land wasn't a resource until farming replaced hunting gathering Distribution was 50% of product cost, now its 80% of product cost. In the past two decades more fortunes made in distribution than anything else. Tomorrows luxuries aren't yet invented When quantity DD has grown , quality demand kick in GM didn't move upwards in quality Quality increases are so prevalent most people don't realise how much their lives have improved Radial tyres have almost eliminated flats (this is a decrease on GNP stats) No point in geting into a business unless you have a better , cheaper , faster way of doing it. Look at whether a business in using the most advanced technology in each area Need to study the industry to see if there is a technology gap to exploit Yet most people dont feel rich Coase- nature of the firm- companies exist because it reduces transaction costs - dont need to find a secretary every time you need a letter typed As size increases, inefficiency can outweigh this. , as this has increased the transaction costs have decreased Immigrants :US 1863 "Act to encourage imigration", Europes governments hated it NY times Italian immigrants "perhaps hopeless to think about civilising them" companies change location to get rid of employees ( only accceble way) JC Penney only replaced 50% of staff in move Vertical integration was to insure reliable supplies ( esp raw materials) but this is no longer a problem Schrumpeters creative destruction implies anyone starting from scratch is at an advantage because they have all the newest equipment. Its profitable to retool move often than companies are psychologically prepared for Prior to 80s most world trade was raw materials, industrial countries each did their own manufacturing By 1960s stock so widely held that no one controlled effectively and managements seldom replaced, leveraged buyouts changed that. Many companies needed "new technological advanced" which meant "too many employees were doing so little work". Corporate raiders raised funds in high yield or "junk" bonds , being debt not equity there was no corporation tax, so big savings for virtually any company. Guilds abolished in France by Turgot 1776, in Germany beg C19, in UK1814,35 In the great depression GDP fell from $85 billion to $40 billion Midwest firm with 960 employees in 1980 and sales of $100 million trebled sales with a staff of 25 people. Outsourced ( a division of labour phenomenon), able to drop price 50% causing a 6 times rise in sales, took on 3 experts to keep in touch with all the new suppliers Health insurance: excess fo $1000 saves a lot because it costs insurers $1000 per claim in paperwork to reimburse doctors, nurses, pharmacies ,hospitals , all for small amounts Most americans dont even ask prices when going to the doctor GE abandoned Citibank in 70s for not dropping its rate and thus corporate lending was born ( at 1/2 the bank rate in the 90s) GM carloans borrows in the bond market and lends Some retails make more in lending than retailing Better too because no distribution costs for the loan and the repossessed items are more easily resold there is a reduced demand for expansion capital - more programs or videos have a virtually zero marginal cost Abundance of outside suppliers means you can grow without capital( he already does the same job for other people so it doesn't take much to add another line) In 1980 a department store sales of $100/ sq ft , turnover every 4.5 weeks. Now sales 3 times as high return of capital (store cost ) in 60c on the $1 When interest rates are low sellers can get a higher price for their property DD for property very interest rate elastic, DD for commercial property very inelastic Most new products are the same price but better quality, RPI doesnt capture that Almost all nations have money supply problems Editor: Any form of debt (even non bank ) could expand the money supply if it means that the borrower doesn't need to withdraw deposits from the banking system (thus contracting the MS) US constitution gave congress the fatal right "to promote the general welfare" "establish post offices, regulate commerce, coin money" But tariffs were banned $330 billion per year on prim and sec education : $7500 per student pa on K12 education financed through property taxes More Ł for education doesn't work because it simply means more for teachers salaries 10 men on an island , pole fishing, develop a net, now there is 80% unemployment on the island but still the same wealth level- number of fish. More wealth if the 8 ex -fishers can now use their time doing things the other fishermen want. Economic Alchemy (1) Main constant on technological growth is our ability to process information (2) Technology determines what a resource is (3) Quantity technology: determines available quantity pre defined resources (4) Use technology: determines efficiency of use of pre defined resources (5) Supply technology: determine ability to find,obtain distribute and store (6) Information processing technology New supply means we redefine what need is and what quality is demanded.