Trade and Exchange (October 19th, 2011)

Once we remove the circle where we started to know everyone, your decisions will be altered. Adding one more student to the class will not change our experience throughout the lecture.

Rizzo had to send legal documents to his mother. Why was he not worried? Well, as a FedEx worker, they are all strangers so the law of large numbers does not exist.

1. FedEx dies this all their time; they employ people to do this as their job.
2. There is no establishment of trust.
3. Faith. Past experience? Well if this is his first time in FedEx he would not know about the feedback loops.

If they fail, they have a negative effect to the company and the competition between the postal service and UPS will increase. This is based on the institutions of good things in society.

Trade & Exchange
Production process - Factors of Production

• Land
• Labor
• Capital
• Physical
• Human

Land: It is not an economic resource unless we put a value under it like Iron Ores.
Labor: Physical and mental abilities of the average body. Just the regular people with no particular skills.
Capital: Physical creation of what we have now with manipulation (iron ore melted to a iron crowbar to help break into things.) Human is augmentations that we can do to make us special such as a special ability or skill.
 
Factors of production is using resources that can obtain a value to it:

• Self sufficiency
• Specialization, Exchange, and Discovery

PSST - Patterns of Sustainable Specialization in Trade
If you do work on your own, you are not doing a economic activity because you are doing it on your own. ie. If Rizzo used three dollars to make a pizza and it cost 15 dollars to buy a pie of pizza, then it would not be beneficial for him to do that because it is not a economic activity. If everyone knew how to do it, they would spend less on buying it.

Specialization and Comparative Management:
Most trade, nothing new is created. So why do we do it? To acquire wealth? Then what is wealth?
Wealth is a subjective and the wealth of nations vary.
Growth occurs when input and stuff are further apart. The exchange only matters when there is something that is valued.

Rizzo sold cards that had more value to the market but had less value to him that the card he obtain from the trade. He obtain the card because the value of the exchange would benefit him in which he would make $7,000 dollars because he would have completed the set. in the long run, he gave someone 200 dollars but he also made a ton of extra money by getting a card that had no value but was important in reaching the profit.