Property Rights Economics

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					  WELCOME TO ARE 012
Introduction to Agricultural Economics
                 With
          Herman Sampson




                                         1
Microeconomics: ( the “trees”)
  Studies economic behavior of individual
    decision making units such as,
  u Consumers
  u Resource Owners
  u Business Firms (producers)


  in a market economy
  At times, micro will study economic
    behavior at the industry level          2
Macroeconomics: (the “forest”)
  Studies the aggregate level of economic
    activity,
  u Economic system’s value of total
     output:      GDP
  u Level of National Income
  u Total Level of Unemployment
  u General Price Level of the Economy:
       Inflation
                                            3
4
5
6
7
8
Macroeconomics: (the “forest”)
  we will deal with some macroeconomic
   topics first, then concentrate on
   microeconomics




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Normative Economics:
  Normative: subjective, value laden,
   emotional

  “What ought to be” economics

  Rx and/or Policy oriented

  Hear a bunch of normative economic
   statements during political elections   10
Positive Economics:
  Positive: Objective, without emotion or
   value judgment!

  “What is, What was, What will be”
   economics

  Based on probability and statistical
   methods
                                            11
Microeconomics
    Normative microeconomics
    Positive microeconomics

Macroeconomics
    Normative macroeconomics
    Positive macroeconomics

                               12
Macroeconomics
   1. Fiscal Policy:
       Govt. tax and spend policies

   2. Monetary Policy
       Manipulation of the money supply by
   the Federal Reserve system to affect
   short-term interest rates and control
   inflation
                                             13
Private Property Rights
  “Negative Externality”:

  When you produce or consume a
   commodity or service within your
   private property rights that imposes a
   cost on a third party not directly
   involved in the market transaction.


                                            14
Private Property Rights
  The cost imposed on the third party is
   very difficult (expensive) for the third
   party to recover

  AKA a “Spillover Cost”




                                              15
Private Property Rights
  Laws are often enacted by legislative
   bodies that constrain private property
   rights in order to rectify negative
   externalities, or at least reduce the cost
   to third parties in recovering damages




                                                16
  Negative Externalities
Some Examples:

 Seat Belt Crack Down in N.C. (Click It
 or Ticket)

 California Helmet Law for Motorcyclists




                                           17
   Negative Externalities
Possible Solutions:

  –   Pass Laws

  –   Post Bond to assure financial responsibility




                                                     18
   Negative Externalities
Some Examples:

Imperial Foods of Hamlet, N.C. vs.
  Imperial Sandwich Co. of Goldsboro,
  N.C.




                                        19
    Positive Externalities
When you produce or consume a
 commodity or service within your
 private property rights that bestows a
 benefit on a third party not directly
 involved in the market transaction.




                                          20
     Positive Externalties
The benefit bestowed on the third party is
 very difficult (expensive) for the third
 party to recover

AKA a “Spillover benefit”




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