COURSE OVERVIEW: Introduction to Political Economy is a self-contained and nontechnical overview of the intellectual history of political economy, the logic of microeconomics, and the definitions used in macroeconomics. It introduces the notion of a political economy, emphasizing the moral and ethical problems that markets solve, and fail to solve. LECTURE OVERVIEW: 1. Price signals scarcity, and organizes production through profit, and encourages innovation But…wait: If markets are so great, why are there firms? Firms, after all, are the explicit suppression of the market mechanism. “Make or buy”: For many firms, for many items, they choose to make the product. 2. Higher transactions costs in price system, larger firms If cost of using prices falls, firms get smaller (careful, though: network economies). 3. But there is a more interesting story: PIRATES! The way that pirate ships, and groups, were organized is an answer to the problem of transactions costs. A specialized kind of firm Individuals could not operate ships, or capture treasure, but they had no way to enforce contracts. The "Code" is more like "guidelines," because no directly enforceable. 4. Very flat structure, command divided between Quartermaster (mostly) and Captain (in times of battle). Both are elected. 5. First instances of insurance, pensions, and workplace democracy. 6. Key problem: must give quarter if asked. If resistance, fight fiercely. But if no resistance, treat captives well. Must maximize difference between resistance/no resistance, to improve net revenues and reduce risk.