Lecciones de Economía - 2ª - 29/09/2009

Course Introduction and Requirements

Overview of the Course Structure

• The instructor emphasizes the importance of having the course syllabus ready, urging students to acquire it quickly.

• The program officially starts on Tuesday, 6th, with a reminder that students should read all assigned materials beforehand.

• Specific readings from "Foami 6" are required for the first class, including an introduction and pages 1 to 35.

Study Strategies and Expectations

• Students are advised to study daily by selecting key ideas and memorizing them; procrastination is highlighted as a path to failure.

• A photocopy of an article from "Expansión" has been distributed for further reading.

Class Delegates and Responsibilities

Selection of Class Delegates

• The instructor requests two class delegates (one male, one female), emphasizing the need for their mobile phones to be always on.

• Delegates will communicate any changes in representation back to the instructor.

Course Dynamics

• The course is described as dynamic and engaging, with practical sessions starting next Thursday.

Upcoming Events: Doctoral Thesis Presentation

Details of the Thesis Defense

• A doctoral thesis defense will take place at 6:30 PM in room 625, led by a former student now working at Banco de España.

• The thesis focuses on applying Austrian School economics principles to financial stability.

Student Participation

• Students are encouraged to observe the defense closely and take notes for their upcoming assignment due next Tuesday.

Practical Assignments and Communication Guidelines

First Assignment Overview

• Students must submit a one-page summary of both the thesis defense event and the provided article as their first practical exercise worth six credits.

Classroom Interaction Rules

• Questions during class are limited; students can only ask at designated times to avoid disrupting focus.

Program Insights: Master's Degree Information

Master’s Program Description

• The course titled "Economics for Audiovisual Studies" is part of a broader master's program recognized across Europe.

Encouragement for Engagement

Master's Program Overview and Expectations

Key Course Structure and Requirements

• The core subjects of the master's program are crucial, with key courses scheduled for the first and second semesters.

• Students will repeat certain subjects due to limited faculty resources; however, there are no issues with mixing classes for these subjects.

• All remaining courses in the master's program will commence next week, emphasizing concise communication from students.

Academic Standards and Expectations

• The academic level is set high; students are expected to achieve outstanding results as they have invested in their education.

• Students should read diligently and highlight important points in texts to facilitate understanding during class discussions.

Language Support and Resources

• International students are encouraged to read materials in Spanish but can use English or German versions if needed.

• A professor has translated significant texts into German, enhancing accessibility for non-Spanish speakers.

Course Content Introduction

Initial Class Structure

• The course begins with a preliminary study on "The Entrepreneurial Function," which is central to economic science.

• The instructor may spend varying amounts of time on topics, urging students to keep up with assigned readings despite potential shifts in class pacing.

Understanding Economic Concepts

• Emphasis is placed on understanding the entrepreneurial function as it relates directly to economic principles.

• Students must refer to specific pages in their textbooks that cover essential concepts like money, credit banking, socialism, and economic calculation.

The Nature of Entrepreneurship

Defining Entrepreneurial Function

• Economics studies how knowledge is created and communicated through human actions within market processes without centralized direction.

Importance of Human Action

• Understanding the entrepreneurial nature of humans is vital; every action aims at improving circumstances based on personal values and goals.

Engagement with Learning Materials

Understanding the Concept of Business Function

The Relationship Between Action and Business Function

• The initial classes may find it surprising to connect the concept of action with the broader idea of business function, as we often associate businesses strictly with market institutions.

• The discussion introduces a more expansive view of business functions, moving beyond familiar definitions tied to specific companies or services.

Etymology and Historical Context

• The term "empresa" originates from Latin "imprendo," which means to discover or perceive something previously unnoticed, highlighting its deep-rooted historical significance in language.

• This etymological background emphasizes that "emprender" (to undertake) relates closely to human action, suggesting a long-standing tradition in Spanish language regarding enterprise.

Evolution of the Term Across Languages

• In French, the term "entrepreneur" emerged during the Middle Ages for those managing significant military or public construction projects, such as cathedrals.

• These entrepreneurs were skilled builders who passed knowledge through generations, reflecting a blend of craftsmanship and leadership in monumental projects.

Cultural Significance of Construction Projects

• Historical examples include notable cathedrals across Spain that took decades or even centuries to complete, showcasing ambition and vision among their creators.

• Many individuals involved in these constructions did not live to see their completion; thus, they relied on successors to continue their work over generations.

Language and Communication in Business Context

• In Portuguese, "empresário" retains its original meaning related to construction workers today, indicating how language evolves while preserving historical roots.

• English has become the dominant international language for commerce and science today; however, Latin served a similar role during medieval times for scholarly communication across Europe.

Institutions Shaping Human Life

• Future discussions will explore how social institutions arise spontaneously across various domains—linguistic, legal, moral—and their impact on economic structures like money and property rights.

The Evolution of Language and Concepts in Business

The Superiority of Roman Law

• The speaker references Cicero's "Res Publica," highlighting that Roman law is superior to other legal systems because it was developed over generations rather than by a single individual, unlike laws in Athens or Sparta.

The Nature of the English Language

• The discussion shifts to the English language, described as fundamentally free due to its lack of a governing body like the Real Academia Española. It evolves through contributions from all who speak it.

Emergence of the Term "Entrepreneur"

• Historically, there was no specific term for "entrepreneur" in English; earlier economic texts referred to businesspeople using terms like "merchant" or "adventurer," indicating a gap in vocabulary.

• The term "entrepreneur" was adopted directly from French into English, illustrating how languages absorb words when lacking their own equivalents.

Spanish Language and Business Terminology

• In Spanish, despite state intervention and institutional oversight, the language maintains its richness. The term “empresa” (business) reflects an action-oriented definition recognized even in formal dictionaries.

Historical Context of Business Terms

• The speaker notes that historically, “empresa” referred to significant actions or commitments, such as those taken by knights during the Reconquista.

• In medieval Spain, “empresa” denoted important actions symbolized on coats of arms, linking historical valor with modern business concepts.

Cultural References and Required Readings

The Essence of Being a Knight Errant

Introduction to Don Quijote

• The speaker emphasizes the importance of reading "Don Quijote" in daily life, suggesting that it is a timeless work that everyone should appreciate.

• A reference is made to Chapter 2 of "Don Quijote," where the protagonist decides to become a knight errant, highlighting the romantic notion of chivalry.

The Life and Ideals of a Knight Errant

• The speaker encourages embracing the ideals of knighthood, such as helping the needy and fighting against windmills, which symbolizes facing challenges.

• Don Quijote's determination to become a knight errant is discussed; he sets out with his horse and makeshift armor, embodying the spirit of adventure.

Challenges Faced by Don Quijote

• Cervantes illustrates that despite his noble intentions, Don Quijote grapples with self-doubt about not being an officially recognized knight.

• The concept of "empresa" (enterprise or endeavor) is introduced; it refers to Don Quijote's courageous actions despite lacking formal recognition as a knight.

Symbolism in Knighthood

• The term "empresa" relates to insignias on shields indicating commitment to valorous actions; this reflects on personal honor and societal expectations.

Historical Context and Influence

• A discussion about Cervantes' biography leads into reflections on his life experiences, particularly referencing his time before or after the Battle of Lepanto.

• Recommendations for further reading include an extensive biography titled "Cristo Historia de la Vida Heroica de Miguel de Cervantes," emphasizing its depth and insight into Cervantes' character.

Understanding Entrepreneurial Action

Defining Entrepreneurial Function

• The speaker connects entrepreneurial function with human action, tracing its etymological roots back to Latin meanings related to discovery and creation.

Discovery vs. Creation in Economics

• It’s argued that from an economic perspective, discovering America was akin to creating it because it involved conceptualizing something previously unrecognized.

Essence of Entrepreneurship

• Entrepreneurship involves recognizing opportunities that were previously overlooked; this realization captures the core essence of entrepreneurial action.

Elements of Entrepreneurial Function

• An exploration into various elements constituting entrepreneurial function will follow; these elements are crucial for understanding how entrepreneurship operates in practice.

Human Action: A Scientific Perspective

Characteristics of Human Action

• Human action is defined scientifically as deliberate behavior conducted by humans; this distinguishes human agency from animal behavior.

Anthropological Insights

• While animals exhibit behaviors resembling human actions (e.g., dogs showing joy), they do not engage in entrepreneurial activities like humans do.

Understanding Human Action vs. Animal Behavior

The Distinction Between Animal and Human Actions

• The speaker highlights a fundamental difference between animal behavior, exemplified by dogs that have not changed their actions over thousands of years, and human innovation, which has led to monumental achievements like space travel and classical music compositions.

Defining Human Action

• The concept of human action is contrasted with behaviors such as sleepwalking, where individuals perform actions without conscious awareness, indicating that true human action requires deliberate intent.

• Reflexive actions (like a doctor tapping a knee with a hammer) are also not considered human actions since they lack conscious decision-making.

Observable Actions and Omissions

• Human action does not necessarily require observable movement; inaction can also be an act of agency. For example, choosing not to intervene when someone is about to fall into danger still constitutes an action.

• This perspective emphasizes the subjective nature of human actions, complicating empirical validation in fields like economics due to the inherent subjectivity involved.

Elements of Human Action

• The speaker introduces the essential elements that define human action within economic theory, starting with the concept of "ends" or objectives that individuals aim to achieve through their actions.

Understanding Ends and Objectives

• An "end" is defined as what an actor aims to accomplish; for instance, scoring a goal in soccer represents achieving one's objective.

• Humans pursue ends because they seek to achieve specific goals or desires, leading into discussions about value—how individuals assess the importance or worth of these ends.

Concept of Value in Economics

• Value is described as a subjective psychological appreciation assigned by actors towards their ends. This definition underscores the abstract nature of value in economic contexts.

Challenges in Economic Language

• The complexity of describing economic realities arises from language limitations; however, economists benefit from sharing common experiences with those they study—unlike scientists in other fields who observe phenomena detachedly.

Shared Nature Between Economists and Subjects

• Unlike physicists or chemists who do not embody the phenomena they study (e.g., atoms), economists share their humanity with subjects (other humans), providing them unique insights into economic behaviors through introspection.

Conclusion on Subjective Value

• Despite challenges articulating abstract concepts like value clearly due to language constraints, there exists a general understanding among people regarding what constitutes an end and its associated value.

Understanding Subjective Value in Human Action

The Nature of Subjective Value

• The speaker discusses the concept of subjective value, emphasizing that it is not a fixed definition but rather an appreciation that varies in intensity based on individual perspectives.

• An example illustrates how different values can be prioritized, such as a mother's willingness to do anything for her child compared to other less intense desires.

• Personal preferences are highlighted, showing how individuals can have varying degrees of affection or preference for different people or things.

• The speaker notes that subjective valuations are part of an individual's internal psychological world and cannot be quantified objectively; they exist in terms of intensities rather than numbers.

• It is emphasized that value is determined by the subject involved in the action, meaning it cannot be measured from an external perspective.

Key Elements of Human Action

• Two essential elements are identified: the objective end sought by the actor and the subjective value assigned to that end, which influences decision-making regarding actions taken to achieve it.

• The discussion introduces "means" as tools or resources perceived subjectively by actors as necessary to achieve their ends.

• Means are defined as anything believed by the actor to help reach their goals; this includes various strategies and techniques employed in pursuit of objectives.

Utility and Its Relationship with Value

• Utility is introduced as a critical economic concept linked closely with means; it refers to the subjective appreciation given to those means rather than the ends themselves.

• The relationship between utility and value is clarified: while value pertains to ends, utility relates specifically to means used for achieving those ends.

• A cycle is described where discovering valuable ends leads individuals to seek out means they believe will help them achieve those ends effectively.

Understanding Utility and Subjectivity in Economics

The Role of Money in Perception

• The speaker references a popular YouTube video where a professor tears a ten-euro bill, illustrating that money is merely paper with ink, provoking laughter and nervousness among students.

• The reactions of the audience highlight the subjective value placed on money; their nervousness reflects societal conditioning around currency.

Illustrating Economic Concepts

• The act of tearing the bill serves as an unforgettable lesson about utility, emphasizing how individuals assign different values to money based on personal circumstances.

• Each person perceives the utility of money differently, using it for various purposes such as transportation or leisure activities.

Subjective Value and Decision Making

• The discussion shifts to subjective decision-making; even if one believes spending money on social outings is frivolous, it can still be seen as valuable if it fulfills personal desires.

• An illustrative example involves a tribal chief choosing traditional healing over modern medicine for his sick child, showcasing differing perceptions of effective means to achieve desired ends.

Cultural Context and Beliefs

• The chief's preference for spiritual healing over antibiotics highlights how cultural beliefs shape decisions regarding what constitutes an effective means.

• This example emphasizes that perceived effectiveness varies greatly depending on individual beliefs and cultural context.

Scarcity and Economic Action

• The speaker discusses how subjective perceptions determine economic actions; even seemingly irrational beliefs can lead to significant economic behaviors like investment in beauty products.

• Understanding scarcity is crucial; resources are limited, which influences choices made by individuals based on their subjective valuations.

Language Nuances in Economics

• A brief exploration into language reveals differences in terminology across languages (e.g., "means" vs. "links"), indicating the complexity of conveying economic concepts universally.

• Emphasizing clarity in communication about economics is essential for understanding diverse perspectives within global contexts.

Conclusion: Importance of Subjectivity

Understanding Scarcity and Subjectivity in Economics

The Concept of Scarcity

• Scarcity is defined as a subjective concept where an actor perceives their available means as insufficient to achieve all desired ends.

• It emphasizes that scarcity cannot be measured or quantified externally; it is based on individual perception.

Illustrative Examples of Scarcity

• An example is presented with a gram of Japanese beach sand, illustrating how something can be perceived as scarce due to its limited availability.

• The discussion highlights that without subjective scarcity, there would be no human action; for instance, air is not considered scarce in normal circumstances.

Contextualizing Human Action and Perception

• In the classroom setting, students do not perceive air as scarce while they are engaged in taking notes, demonstrating how context influences perception.

• A humorous anecdote about digestion after eating fabada illustrates how perceptions of scarcity can change based on situational factors.

Historical Perspective on Scarcity

• The speaker references historical abundance in regions like Cantabria 50,000 years ago when resources were plentiful compared to today’s situation where resources are scarce.

• This shift from abundance to scarcity has driven human ingenuity and increased production and wealth over time.

Economic Implications of Scarcity

• As societies evolve, goods that were once abundant become scarce, prompting entrepreneurial attention and creativity.