9/12 Class5

Characteristics of I pencil
(1)Impersonality: people don't know who provide them the product,so the workers just work,consumers get the products yet have no idea say thanks to whom.
(2)Self interest:Workers exchange their expertise to profits,so maybe they don't care about what they are producing;instead, they take profit into consideration.
(3)Cognitive issue (I'm confused with this)
(4)Who gives the order? People can cooperate even they hate or don't know each other.There's no coercion,the market runs well under freedom and creativity.
Reasons of the characteristics:
(1)Invisible hand:possibility of people to cooperate without coercion
(2)Tacit knowledge:knowledge others don't know or the one you can use uniquely.

Central planning:government plan stuff and ask people to finish the task
Drawbacks:
(1)The government needs to be omnipotent.It must know all the details and take natural elements(disasters, for example)into consideration,which is almost impossible.Besides,the world is changing so fast that it's hard for planner to predict precisely.
(2)Central planning will make state-owned companies into existence,which may squeeze the profit of private-owned ones and cause inner corruption.

How does the free market work: Price system. No one can set the price.It's determined by the market.

Shortcomings of GDP:
(1)If one spends more time with his family,taking care of his kids rather than hiring a babysitter,the nation will become poorer because there will be no improvement in GDP.
(2)If one has a second child,the per capita of this family will be lowered,but if this family buy a cow rather than breed a child,the per capita of this family will be increased because they can profit from the cow.GDP just cares about growth of production
(3)It doesn't take people's sense of felicity into consideration.People work longer,become more prone to get sick,and spend more money on medical treatment ,thus enhancing GDP,but is this a happy society?
(4)It somewhat neglects the cost in environmental damage.
(5)A lot of fallacy and bad policy will come out.