3 Instructions and Incentives

3 Instructions and Incentives
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How can specialization be coordinated?
Note:IL PROBLEMA

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Your father’s occupation became your occupation.
Note:COORDINAMENTO ANCIENT REGIME

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family name,
Note:VEDI COGNOME

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the caste system was a detailed, rigid social order
Note:ANCORA OGGI

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specialization is coordinated by instructions.
Note:ALL INTERNO DI UN IMPRESA

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coordinated by prices and profits.
Note:FUORI DALL IMPRESA

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system of incentives

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Prices serve as signals
Note:FUNZIONE DEI PREZZI...NN SOLO INCENTIVO

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what determines the boundaries of a firm?
Note:IL PROB.

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when the value of different tasks can be isolated, specialization will tend to take place
Note:CONDIZIONE APPALTO

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The surgeon who is very fast at mowing lawns
Note:TAGLIARE O NN TAGLIARE?

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Profits are another important incentive.
Note:UN INCENTIVO PARTICOLARE

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Patterns of specialization and trade evolve because of two mechanisms: substitution and innovation.
Note:MOTORI DEL CAMBIAMENTO

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When corn becomes more expensive than wheat, consumers will respond to the price change
Note:SOSTITUZIONE

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most of the solutions to market imperfections are launched by private entrepreneurs,
Note:FALLIMENTI DI MERCATO...E NNOVAZIONE

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First is “experimentation,”
Note:LE DUE FASI DELL INNOVAZIONE

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Second is “evaluation,”

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Third is “evolution,” in which successful business models
Note:CAMBIO DEL MODELLO

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The prospect of profits encourages entrepreneurs to attempt experiments.

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Profits are a measure of the sustainability of patterns of specialization.
Note:SOSTENIBILITÀ

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We tend to want to discuss cost as if it were an objective concept,
Note:I COSTI SONO SOGGETTIVI

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cost of output depends on market conditions and individual judgments
Note:RELATIVISMO

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Those factors are not directly observable, and they are constantly changing.
Note:MISIRARE I COSTI... IMPOSSIBILE

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a distant observer is not in a position to evaluate economic performance with certainty.
Note:OSSERVATORE ESTERNO

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if one method uses more water but requires less of the farmer’s time, then we cannot tell which method is more efficient. It depends on how farmers value their time relative to the cost of water.
ESEMPIO