Readings on Cooperation

Readings for the Economic Way of thinking

For the text I am using, it is chapter 1. But if you are using some other text or doing the research
yourself, Here is the outline of things to study:

1. Cooperation
1. Economic way of thinking as a State of Mind.
2. Commercial Society as defined by Adam Smith
3. Interaction by Exchange
4. Cooperation through Mutual Adjustment
5. Rules of the Game
6. Property Rights as Rules of the Game
7. Biases of Economic Theory
1. People make choices – do they really? Economists think they do.
2. Only individuals make choices, organizations do not.
3. When we choice, we weigh the benefits and costs. Our decision is a math
formula: Benefits – costs = our decision.
4. Understanding the differences between biases versus conclusions.
5. No Theory = Bad Theory. All behavior is founded on some theory. If you
don’t consider the theory, you will operate on bad theory.

Enjoy
Cooperation
Lecture 1; Cooperation
Greetings folks,
I presume you have read the First Module which deals with the way the course is organized, the
Econ Lab instructions, and some stuff on how I grade. I hope you find those helpful. If you have
questions, there is a Discussion Forum for YOUR QUESTIONS and I encourage you to ask as often
as you would in class.

But now, we turn to our text and the discovery of Economics. Isn’t it interesting how he starts the
discussion, with Co-operation? Economics is about why we decide to do the things we do, and one
of the principle observations is that we cooperate. Think of going into your favorite store – such as
Starbucks. Who gets served first? Children often think that they should and might scream if they
don’t get their way. But we teach them to wait their turn. Bullies think they can push their way. But,
for the most part, we cooperate. Why is that? That isn’t just a nice question. It is meant to penetrate
your thinking… WHY?

One of the more interesting experiences I had with that question was while watching my grandson
learn to skateboard. We were at a skateboard park in Southern California. It was crowded. I am
guessing somewhere close to 100 skaters where in the park. There were multiple skills represented;
beginner to pro. There were different things to do; one called the Bowl where the kids stood on the
edge and went swooping down and around. Each took their turns. There were jumps and curves
and all sort of things to test one’s skills. Skaters were going left to right, right to left, here to there
and there to here. It was a congestion of skaters. Of course, I am there marveling at the skills of my
grandson, no better skater was ever born! And I was thinking economically. There were no
crashes. Kids took turns at the bowl. No bullies, no one demanding their “rights” at certain
things. Rather, it was impressive. They gave way to others. Remember, this was in Southern
California were greed and avarice flourishes. Different age groups, different races, some kids with
uniforms showing their professional status, some kids with near rags, most wearing proper gear,
others wearing home-made things. Yet, there was this sense of cooperation between
everyone. And, here is a surprise….no government employee directing traffic or ensuring
“rights.” WHY?
Why is generally answered by seeing that everyone wants to play and to have the most play there
must be cooperation. So the big kids gave way to little kids so that the game wouldn’t
stop. Everyone got more by cooperation.
In the same way, lines at grocery stories tend to even out so that we all get through as fast as we
can. If a new register opens, the long line doesn’t stay long. No, people operating in their own self-
interest merge into the open lane until the new line is as long as the old long line, they even out in a
generally orderly way. What fun to watch!

I hope you will enjoy the adventure as we watch how people cooperate. Oh yes, you will hear of the
greedy people taking advantage, exploiting this group or that group, but that sort of thing generally
finds itself as the exception and not the rule. The rule is, all over the world, we cooperate. We will
start out our discussion together talking of this in the Forum that follows. Enjoy.

Tom
Lecture Property Rights
Rules of the game
In order to play any game, there must be rules by which we all expect each other to follow. One rule,
for instance, of the Stock Market is that those people who are inside a firm can’t buy or sell that
stock based on their privileged information. That would give them an unfair advantage. If we allowed
that, only winners would trade and it would end up destroying the game. In business, and even our
personal lives, there is this theory that what is mine is mine and not yours. It is the Rule of Property
Rights.
Some people criticize us for our passion to uphold property rights. If you take my stuff you can be
sure I will get it back from you. I don’t need to be stronger, I just need to go tell the police and they’ll
come get you. I get my stuff and you go to jail. In short, we enforce property rights. If you don’t
believe it, think of what would happen if someone decided today that they wanted to live in the house
you bought. It wouldn’t take long and the ne’er-do-well would be out. We will enforce property
rights.

There is a great economist name Hernandez de Soto. He is a Peruvian economist but Harvard
trained. He wrote a book called “Why capitalism works in the West and nowhere else.” He
concluded it was Property Rights. You might be interested in reading the book and getting to know
that man. He nearly gave his life for writing that book as there was a terrorist group called The
Shining Path. He said that the reason Peruvians didn’t have great wealth was not because of the
evil capitalists but because Peru did not enforce Property Rights. The Shining Path, on the other
hand, wanted to blame the mean capitalist and weren’t interested in a cooperative dialogue.
Here is an example: Outside of Mexico City, there are hillsides that have been taken over by
squatters. Thousands come in and takeover some land in mass. The police have not been willing to
pick them out. It would, in fact, take the size of a small army to do so. What would happen in the
US? We would take what force was needed and remove them. We would enforce the property
rights. As an example, you might do some reading about the Wounded Knee event in 1973. Yes,
there were multiple issues but it all ended by armed conflict over property rights. There was another
event in San Francisco where Alcatraz was ‘taken over.” Property Rights will be enforced.

I am somewhat conflicted. In Miami, Florida, there is a man who teaches people how to take over
foreclosed homes or those about to be foreclosed. Banks own these homes. But this man is
teaching people how to break in, turn on the utilities, and use the home at the property rights of
those who own it. His opinion is that there are families living out in the weather and it makes no
sense to have homeless at the same time there are vacant homes. Human Rights should be higher
than property rights. Yet, property rights have given more opportunities to more people than any
other rule in history. I’m conflicted. Check this out: http://takebacktheland.org/ (Links to an external
site.)

There is a game called the Tragedy of the Commons which explains who, working in our own self-
interest, that when we all own the property in common none own it at all. Here is a Youtube attempt
at explaining:

In Mexico, the banks won’t loan money to the owners of that property on which squatters are
squatting. If there is no opportunity to make loans, it lowers the prices and makes it so that wealth is
NOT created.

Property rights protect your rights so that you will care for your stuff. Property rights gives rise to
wealth.
1st readings
Intro stuff
Read Chapters 1, 2, and 3 if you have Miller and Jentz text, 9th ed.

Chapter 1 Historical and Constitutional Foundations

 Business Activities and the Legal Environment

 Sources of American Law
 The Common Law Tradition
 Classifications of Law
 The Constitutional Powers of Government.
 Business and the Bill of Rights
 Due Process and Equal Protection
 Privacy Rights

Chapter 2: Ethics and Business Decision Making

 Business Ethics
 Ethical Transgressions by Financial Institutions
 Approaches to Ethical Reasoning
 Making Ethical Business Decisions
 Practical Solutions to Corporate Ethics Questions...
 Business Ethics on a Global Level

Chapter 3: Courts and Alternative Dispute Resolutions.

 Basic Judicial Requirements

 The State and Federal Court Systems
 Following a State Court Case
 The Courts Adapt to the Online World
 Alternative Dispute Resolution

I must repeat, you MUST get a text. It really is not reasonable to find this stuff on your own without a
text. You can, but it is way more difficult. If you can't afford a text, you can do a GOOGLE search
for all these topics, you can go to our library database and look into Business Source Elite and find
all this stuff,, way more than you might want to know. But it is all there. Or, get a text and find the
topics there.

===========================================================================
Tom’s notes of important stuff:

HISTORICAL FOUNDATION

Our Legal system is nothing short of extraordinary. It has roots that go back to the Norman
Conquest. The fight for freedom FROM government intrusion into our lives has been long and hard
fought. You are the benefactor of many men and women who gave their lives for, what you might
consider, and obscure legal principles; like the right to Habeas Corpus. Take this time to savor the
history of how we got here.
Of note are things like YOUR right to privacy, the extent of Federal authority, and YOUR
constitutional rights, like the right not to testify against yourself. These are things which are still
being debated this very day.

Some cases on Federalism:

Obamacare

http://www.law.cornell.edu/supremecourt/text/11-393 (Links to an external site.)

Judicial
Review http://www.law.cornell.edu/supct/html/historics/USSC_CR_0005_0137_ZS.html (Lin
ks to an external site.)
(marbury v Madiso)

Federal Power over commerce

http://www.law.cornell.edu/supct/html/03-1454.ZS.html (Links to an external site.) (famous pot

case)
http://www.law.cornell.edu/supct/html/historics/USSC_CR_0317_0111_ZO.html (Links to an
external site.) (crops)

Jurisdiction:
International Shoe v State of Washington
http://supreme.justia.com/us/326/310/case.html (Links to an external site.)

Roe V Wade (look it up)

ETHICS and BUSINESS
Ethics, Economics, and Law are intertwined. What is ethical might not be legal and what is legal
might not be ethical. But, there is a relationship. Ethics is the highest values, the line of behavior to
which we want to achieve. Then there is that line of behavior that sinks so low we, society, just
won’t tolerate it. The moral line is the goal; the legal line is the minimum behavior line. The one is
concerned with our behavior and our thoughts; the other is just about behavior.
METHODS FOR SOLVING DISPUTES
One of the most interesting thing, I think, about how people think about our legal system is how
unfair they tend to think of it. It is fraught with silly lawsuits, with the rich getting to buy rights, and
the system bent to NOT help the helpless. There is some truth in all that. But one thing strikes
me….. we solve our disputes more peacefully than anywhere on the planet. We do a great job in
minding the rules, behaving peacefully, even if resentfully. So many places solve their disputes by
shooting each other, by taking the law into their own hands and doing harm to their neighbor.

Some years ago, we had a President who was about to be impeached. He resigned. On the night
of his resignation, there was a news broadcast I will never forget. The national news had the
commentator outside, on the street, of the White House. He had the camera pan down the street
and commented on how sad it was, how vacant it was, near eerie in quietness he said. He repeated
the sadness of it all and how our system was to be shamed by it all. I, on the other hand, took pride.
Here we were in the midst of a historic event, the government RESIGNING and flying away. There
was no army shooting another, there was no rebel group firing machine guns into the air or at
someone. IT WAS PEACEFUL. We find ways to solve our disputes peacefully.
Read the methods of the process of dispute resolution. It is remarkable as we follow that system,
time after time, day after day -----Peacefully.
Intro Lecture
First week’s reading
This first week of class is always rather funny as we get acquainted and get to know the map of the
class. This week, we have only some intro material. This is important foundational stuff. We will
see this stuff come up time and time again. But, here is a map of things you should really
concentrate on as we start the class:

 The history of our Legal System. Ours is unique, we’ll talk more about it in class.
There is a great author, a Peruvian Economist called Hernandez De Soto, who
wrote a book called “the Mysteries of Capitalism, Why it exists in the West and No
Where Else.” In it, he describes that the reason our economy does so much better
than most others is that we have a system of laws, and we will enforce them. We
will enforce them against other countries, invade other countries, and destroy
governments, if they offend our legal system. In case you didn’t know, we invaded
a country called Panama. We captured their President, killed some of their
soldiers, brought the man back to stand trial, and he is in a US prison as we
speak. There is a little town in Texas were some thought they could hold off the
government. We bombed them, including women and children. We will enforce
our laws.
 There is this knowledge of our system you should have, the Common Law. Have
some idea of where we get our system, it is important. We will discuss it, just
briefly, in class.
 You should discern the difference between ethics and law. Ethics is our highest
sense of what we think is right versus wrong. But, we don’t expect everyone to live
up to the highest standards we want; we don’t even do that ourselves. Individually,
if you are honest with yourself, you know you don’t keep your own code of ethics
all the time. Law is the Minimum Behavior Line, below which we won’t tolerate. If
you behave below that line we will deal with you. You might break some moral
codes and we won’t always throw you in the big house. You can be rude, fail to
honor common decency rules of fashion, eat with your mouth open or text during
class and we won’t hang you. But, fail to follow the law and we will get you, make
you an example, and display your name publically in the tabloids. You should know
that there is a difference between Ethics and Law. Read a bit about it.
 You MUST know about Jurisdiction. Jurisdiction is critically important; you'll
need to apply the concept of Jurisdiction a great deal, so study. I'll post some
cases for you to study and discuss. After you read the text, study the cases: why
the court hearing the case had the power to decide the case. All throughout the
course, Jurisdiction will ALWAYS be at issue.
 You must get a handle on is this concept of Stare Decisis and Common
Law. We are really one unique country in this world. Yes, it springs from England
and 1066 but we developed a tradition differently due to this concept of Rugged
Individualism. We must chat about why Stare Decisis is so important and it will be
of extreme importance all throughout the course.
 The Supreme Law of our land is the US Constitution. You should have a
working knowledge of the rules of our Constitution. As we are taking this class
there is a great debate beginning in our country: gun control. Read the Second
Amendment. Remember that the power to ignore one Amendment is the power to
ignore all of them. As governments (state and federal) have tried to limit the effect
of the 2nd Amendment, the Supreme Court has regularly declared them
Unconstitutional. We will have a good discussion on this on-line.
  One of the significant areas of the US Constitution is Article One, section Eight –
the Commerce Clause. The feds have all the power they need to regulate
commerce between the states. And where they have power, they have exclusive
power. I will post more on this later, but before our week starts. You should have a
great handle on the Commerce Clause.

I write this to you so you won't feel so overwhelmed by the amount of reading. Read all the chapters
covered this week but you only need to study the topics I have highlighted. That should help you to
focus on what is important. But, please don’t disregard all the other stuff. There is just so much time
we have and I want to ask you to focus on what is the most important; I’ll try to help you so you don't
spend time studying things which you only need to skim. I hope this helps. I will try to explain why I
think subjects are important so you can decide for yourself.
My best to you, I look forward to working with you soon.

Tom

Files For Intro week

In the FILES area of our website you will find some cases to help your studies. Please visit there
and find the cases for the Intro Week. Specifically, they will cover things like:
Judicial review
Jurisdiction

Federal vs State Supremacy

In the Course Documents you will also find some helpful files on how to analyze a case.

As business People, WHY STUDY LAW?

1 1 unread reply. 2 2 replies.

Think a bit about why we should have this course about Business Law. You should be able to
understand why a business person should know Accounting and Finance. A business person
should probably know a bit about Economics. And, one should know about motivation and how
people behave. But why should we study law? Let's have a brisk discussion and see if we can't
unravel a bit of the reasons why we spend the time.

Enjoy