What is the purpose of economics and why do we bother studying it? What is capitalism? Is it good? How do we ensure social stability.

1. What is Economics?
The Purpose of an Economy

2. The Purpose of an Economy

4. Social Stability
• Social justice
• Social fairness
• Standard of Living
• Happiness

5. Hierarchy of Needs

6. Systems to Deliver Social Stability,
Justice, Fairness
• Socialism
– A political and economic theory of social organization that
advocates that the means of production, distribution, and
exchange should be owned or regulated by the community as a
whole.
• Communism
– A political theory derived from Karl Marx, advocating class war
and leading to a society in which all property is publicly owned
and each person works and is paid according to their abilities
and needs.
• Capitalism
– An economic and political system in which a country's trade and
industry are controlled by private owners for profit, rather than
by the state.

7. Capitalism is the worst economic
system, except for all the others

8. Capitalism is the worst economic
system, except for all the others

9. Capitalism relies on:
• Finance and Valuation:
• Time Value of Money
• Interest Rates
• Stability
• Predictability
• Reduce Uncertainty

10. Middle Class
• Balanced share of wealth is necessary for our
representative democracy to work.
• The middle class is the rudder that steers
American democracy and avoids extremes.

11. Power Extremes

12. Rich
If the rich have too much
power it can lead to
oligarchy.

13. Poor
If the poor have too much
power it can lead to
revolution.

14. Invisible Hand
Self interest, and the consumption and
innovation it inspires, can be an engine for social
and economic transformation.
“It is not from the benevolence of the butcher,
the brewer, or the baker that we expect our
dinner, but from their regard to their own
interest.”
• Adam Smith

15. Upward Spiral
Circular Flow

16. • Households offer resources and labor
• Companies offer goods and jobs
• Competition motivates the invention and
distribution of better offerings.
• The wheel goes round and round

17. The Paradox of Automation
An extraordinary anecdote about automation. The rivals in
the tale were two titans in the world of automobile
manufacturing who took a tour of a newly built and highly-
automated factory. The forceful executive, Henry Ford II,
and the leader of the automobile workers union, Walter
Reuther, both saw many examples of advanced machinery
operating at the plant. The words they exchanged brilliantly
encapsulated the paradox of automation:
• Henry Ford II: Walter, how are you going to get those
robots to pay your union dues?
• Walter Reuther: Henry, how are you going to get them to
buy your cars?

18. Productivity
well paying jobs and economic security

19. Scaling as Competitive Advantage
• Firms and investors are enamored with
companies that can replace humans with
technology.
• Enables rapid growth and big profit margins
• Huge profits attract cheap capital
• Old economy firms and fledgling startups have
no chance.
• Outpace competition with rapid scale

20. Winner Takes All
• The result is a winner takes all economy
– Google, Facebook, Amazon, Apple
• Both for companies and people.
• It’s a great time to be brilliant and a terrible
time to be average.
• Society is bifurcating.

21. Those who are part of the Innovation
Economy

22. And Those Who Aren’t

23. Concentration of Wealth
• Tech companies need less workers to support
revenues.
• Coming wave of automation, robotics, AI,
computational power
• Increased productivity; less jobs

24. The Invisible Hand has been Sticking It
to the Middle Class
• It’s never been easier to be a billionaire, or
harder to be a millionaire
• The biggest threat to our society
• Shifted the mission of the U.S. from producing
millions of millionaires to producing one
trillionaire.
• Siri, is this a good development?