1. Next Exam
!
Exam 6
Thursday December 26
!
Chapters 18, 19, 20 and 21

2. Microeconomics
Lecture 19
!
Earnings and
Discrimination

3. Wage Gap
Education
Experience
Preferences

4. Discrimination
is
Expensive

5. Median Household Income
$70,000
$52,500
$35,000
$17,500
$0
Black
White
Asian
Hispanic

6. Compensating
Differentials
95% of job-related
deaths are men.

7. America’s 10 Most Dangerous Jobs
Average
Fishing
Logging
Pilot
Farm & Ranch
Roofers
Ironworkers
Sanitation
Machinist
Truck Driver
Construction
Per 100,000
3.3
200
62
57
36
35
30
25
19
18
18
Source: Bureau of Labor

8. bits
and
atoms

9. atoms
the physical universe
mass and energy
2
e = mc
always with us
cannot create or destroy

10. bits
digital computer technology
ones and zeros
binary digits or bits
software
ideas intelligence intellectual

11. creativity
how we combine
bits and atoms
in new ways
!
adding more bits to atoms

12. ideas
human thought
inventions
inventors developing ideas
innovations
entrepreneurs successfully
marketing inventions

14. China
U.S.
Manufacturing
2.5 billion
2.0 billion
Workers
100 million
12 million
Output per worker
$25,000
$167,000

15. Output per Person
$180,000
$135,000
$90,000
$45,000
$0
China
U.S.

16. Innovation - Productivity

17. Continuous Innovation

18. ideas
People have
ideas
inventions
innovations
Inventors
convert
ideas to
inventions
Entrepreneurs
convert
inventions to
innovations

19. inventions
Less than 10
percent of
inventions go to
market
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

20. ideas
innovation

21. Intellectual
Human
Entrepreneur
Culture
Financial
Physical

22. idea
discover Experimenting create
observe

23. Cultural Capital
trust
values
institutions
infrastructure
rules
property rights
rule of law
taxes
regulations
stable currency
mobility

24. Human Capital
trust
knowledge
skills
personality
health
relationships
growing human capital
learning new things
education
reading
watching
listening
doing

25. Physical Capital
natural resources
atoms
energy
time
buildings
equipment
tools

26. Intellectual Capital
ideas
methods
technology
recipes
ways to do things
research and development
publishing

27. Financial Capital
savings = investment
connecting savers and borrowers
investors and entrepreneurs
money and risk
time is money
n
(1+r)
limited liability corporations
insurance

28. Entrepreneurial Activity
looking for opportunity
alert
capture value
create value
take risk

29. “There are no
entrepreneurs
without capital.”
Capitalism, Socialism and Democracy
!
Joseph Schumpeter
(1883 - 1950)
Creative Destruction
!
Innovation and Entrepreneurship

30. Intellectual
Human
Entrepreneur
Culture
Financial
Physical