Economics for Leaders Incentives Innovation Economics for

Economics for Leaders Incentives & Innovation Economics for Leaders

Incentives, Innovation, & the Role of Institutions Economics for Leaders

Review: income of nations Economics for Leaders

Butterfingers Economics for Leaders

Review: income of nations Economics for Leaders

ERP-4: Institutions are the “rules of the game” that influence choices. Laws, customs, moral principles, superstitions, and cultural values influence people’s choices. These basic institutions controlling behavior set out and establish the incentive structure and the basic design of the economic system. Economics for Leaders

Review: Lesson from history: Economic growth is the answer to poverty. Why? Productivity Economics for Leaders ~1750

The Secret to Economic Growth: Productivity The output produced from a given set of resources in a given period of time. Increasing productivity means that greater output is produced from a given set of resources in a given period of time. Economics for Leaders

Who has greater productivity? Why? Economics for Leaders

ERP-3: People respond to incentives in predictable ways. Economics for Leaders

What are the incentives to increase productivity? Profits Economics for Leaders

Profit Defined Total Revenue -Total Cost = Profit Accountant: total cost = $ cost of production Economist: total cost = opportunity cost (cost of production Plus the next best alternative!) Economics for Leaders

Dan makes $75, 000 as teacher anticipates $100, 000 as sports card dealer Sports card revenues = $140, 000 Costs of doing business = $ 70, 000 Does Wendy make a profit? Economics for Leaders

Revenue - Cost = Profit $140, 000 – $70, 00 = $70, 000 What did Wendy give up? $75, 000 plus teaching job. Economics for Leaders

Who responds to the incentive of profit in markets? Entrepreneur Economics for Leaders

The Entrepreneur is the: Risk taker Undertaker Organizer Innovator Residual Claimant (they get what is left—positive or negative) Economics for Leaders

The Entrepreneur gets the owners of labor and resources to cooperate in the production of a good or service and meets the terms of their involvement Economics for Leaders

Necessary instiutions for profits to occur: Secure private property rights Stable rule of law Freedom to buy and sell in markets Uncertainty/Risk Economics for Leaders

Profits Draw a Crowd. . . P Price S 1 S 2 P 1 P 2 D 1 o Economics for Leaders Q 1 Q 2 Quantity Q

The result: Innovation Cost cutting Quality/product improvement Economics for Leaders

Economics for Leaders http: //www. livinghistoryfarm. org/farminginthe 50 s/life_11. html

http: //www. livinghistoryfarm. org/farminginthe 50 s/machines_plowing. html Economics for Leaders

Bottom Line – 40 Acres 4 Horse Team 1936 Farmall F 20 1956 Farmall 450 1997 Deere 8100 Economics for Leaders = = 55. 0 hours 25. 0 hours 16. 5 hours 1. 1 hours

Economics for Leaders

http: //www. youtube. com/watch? v=E Yg-c. He 79 h. I&feature=channel Economics for Leaders

http: //www. youtub e. com/watch? v=Yw zel. Mx. Vkr 0 Economics for Leaders

Innovation: Can be products OR processes Economics for Leaders

Top 25 (non-medical) Innovations of the Last 25 years 14. ATM 1. The Internet 15. Advanced 2. Cell phone batteries 3. Personal computers 16. Hybrid car 4. Fiber optics 17. OLEDs 5. E-mail 18. Display panels 6. Commercialized 19. HDTV GPS 20. Space shuttle 7. Portable computers 21. Nanotechnology 8. Memory storage 22. Flash memory discs 23. Voice mail 9. Consumer level 24. Modern hearing digital camera Economics for Leadershttp: //www. cnn. com/2005/TECH/01/03/cnn 25. top 25. innovations/ aids

Solar-powered light bulb is one Denver inventor's brilliant idea By Jason Blevins The Denver Post Economics for Leaders

. In his spartan Capitol Hill office, Katsaros explains how Nokero, the affordable, durable, sun-fueled light, can help the 1. 6 billion people worldwide without electricity and wean them from burning dangerous kerosene lamps. "We are so in need of light. Most people use candlelight or kerosene, " says Marshall, whose company, Africana Sun. Power, hopes to introduce solar power to West Africa. "This product takes us out of darkness. With light we could study, we could cook. It will change people's lives. And it's affordable. " Already Nokero bulbs are trickling into 33 countries, where tens of millions live without electricity. Bought in bulk, the bulbs cost about $6 each. Retail, they run about $15. "We are running a very, very lean operation to keep retail costs low enough so the 1. 2 billion people who live on $2 a day can afford the light, " Katsaros says. "So every penny matters. “ A quarter of the world still burns fuel for light. Those burning lamps emit about 190 million tons of carbon dioxide into the atmosphere every year, the equivalent of emissions from 30 million cars or 1. 3 million barrels of oil a day, Economics for Leaders

http: //www. engadget. com/2010/06/09/nokero-debuts-rugged-rainproof-n 100 solar-light-bulb-for-develo/ Economics for Leaders

ERP-4: Institutions are the “rules of the game” that influence choices. Economics for Leaders

Economics for Leaders

Ease of Doing Business Easiest Most Difficult Singapore Niger New Zealand Liberia United States Eritrea Hong Kong, China Venezuela Denmark Chad United Kingdom Burundi Canada Congo, Rep. Ireland Guinea-Bissau Economics for Leaders Australia Central African Republic Source: http: //www. doingbusiness. org/economyrankings/

Open Markets Benefit the Poor services available 1. They make more goods and at lower prices. 2. The presence of other competitors (actual or potential) provides incentives for innovation 3. Markets provides opportunities for the poor as workers. 4. Markets provides opportunities for the poor as entrepreneurs. Economics for Leaders

Solar lightbulb to shine on developing world Here's a bright idea for the planet. A Hong Kong-based company has introduced what it bills as the world's only solar-powered lightbulb with the hope of reaching millions of people with little or no access to electricity. http: //www. engadget. com/2010/06/09/nokero-debuts-ruggedrainproof-n 100 -solar-light-bulb-for-develo/ Economics for Leaders

http: //www. youtube. com/watch? v=Q Gj-Kkjw. XJY&feature=related Economics for Leaders