Next Exam !

Exam 6 Thursday December 26

!

Chapters 18, 19, 20 and 21

Microeconomics Lecture 19

!

Earnings and Discrimination

Wage Gap

Education Experience Preferences

Discrimination is

Expensive

$0

$17,500

$35,000

$52,500

$70,000

Black White Asian Hispanic

Median Household Income

Compensating Differentials

95% of job-related deaths are men.

America’s 10 Most Dangerous Jobs

Per 100,000Average 3.3Fishing 200Logging 62

Pilot 57Farm & Ranch 36

Roofers 35Ironworkers 30Sanitation 25Machinist 19

Truck Driver 18Construction 18

Source: Bureau of Labor

bits and

atoms

atomsthe physical universe

mass and energy e = mc2

always with us cannot create or destroy

bitsdigital computer technology

ones and zeros binary digits or bits

software ideas intelligence intellectual

creativityhow we combine bits and atoms in new ways

!

adding more bits to atoms

ideas

inventions

innovations

human thought

inventors developing ideas

entrepreneurs successfully marketing inventions

China U.S.

Manufacturing 2.5 billion 2.0 billion

Workers 100 million 12 million

Output per worker $25,000 $167,000

$0

$45,000

$90,000

$135,000

$180,000

China U.S.

Output per Person

Innovation - Productivity

Continuous Innovation

ideas

inventions

innovations

People have ideas

Inventors convert ideas to

inventions

Entrepreneurs convert

inventions to innovations

inventions

go to market

$

Less than 10 percent of

inventions go to market

Less than 10 percent of

inventions that go to market are economically

successful

Less than one percent of

inventions are economically

successful

ideas

innovation

Intellectual

Financial Physical

Human

Culture

Entrepreneur

discover Experimenting

idea

create

observe

Cultural Capitaltrust values institutions infrastructure rules property rights rule of law taxes regulations stable currency mobility

Human Capitaltrust knowledge skills personality health relationships

growing human capital learning new things education reading watching listening doing

Physical Capitalnatural resources

atoms energy time

buildings equipment

tools

Intellectual Capitalideas

methods technology

recipes ways to do things

research and development publishing

Financial Capitalsavings = investment

connecting savers and borrowers investors and entrepreneurs

money and risk time is money

(1+r)n

limited liability corporations insurance  

Entrepreneurial Activity

looking for opportunity alert

capture value create value

take risk

“There are no entrepreneurs

without capital.”

Capitalism, Socialism and Democracy !

Creative Destruction !

Innovation and Entrepreneurship

Joseph Schumpeter (1883 - 1950)

Intellectual

Financial Physical

Human

Culture

Entrepreneur