Economics and TOK
Economics and TOK
Economics and TOK
DiplomaProgramme
Economics
EconomicsandTheoryofKnowledge
(Forfirstteaching2011,firstexaminations2013)
Howcanweknowhowtodeterminethebalanceofgovernmentpolicybetweenpromoting
competitionintheinterestoftheconsumerandallowingprofitabilityintheinterestoffirms?
Section 2: Macroeconomics
Theoryofknowledge:potentialconnections
2.1Thelevelofoveralleconomicactivity
Whatistheempiricalevidencefortheexistenceofthebusinesscycle?Howdowedecide
whetherthisevidenceissufficient?
2.2Aggregatedemandandaggregatesupply
BusinessconfidenceisacontributingfactortothelevelofAD.Whatknowledgeissuesarise
inattemptingtomeasurebusinessconfidence?
TheKeynesianandMonetaristpositionsdifferontheshapeoftheAScurve.Whatisneeded
to settle this question: empirical evidence (if so, what should be measured?), strength of
theoreticalargument,orfactorsexternaltoeconomicssuchaspoliticalconviction?
2.3Macroeconomicobjectives
Whatcriteriacanbeusedtoordermacroeconomicobjectivesintermsofpriority?Aresuch
criteriaexternaltoeconomics(thatis,normative)?
Iseconomicgrowthalwaysbeneficial?Whatcouldbemeantbythewordbeneficial?
Istherealwaysacosttoeconomicgrowth?
The notion of fairness can be approached from a number of perspectivesequality of
opportunity, maximizing the income of the least welloff group, and absolute equality of
income.Whichofthesenotionsseemstobemostattractive?Why?Examinewhateachof
theseperspectivessuggestsisafairdistributionofincome.
Equality of opportunity implies correcting for social advantage (for example, government
might devote more resources to the education of a child brought up in less prosperous
circumstances than one brought up in a comfortable home whose parents are university
lecturers). How far should the state go in making such corrections? Should all parents be
forced to read to their children so that no child should be at a disadvantage? Should the
stateattempttocorrectfortheunevendistributionofnaturalabilitiessuchasIQ(intelligence
quotient)bydevotingproportionallymoreresourcestochildrenoflessthanaverageIQ?
2.4Fiscalpolicy
Inonesensetheimpositionoftaxesbygovernmentonindividualsamountstoarestrictionof
individual freedom. How can we know when such government interference in individual
freedomisjustified?
2.6Supplysidepolicies
How can we know whether government should support pure research, which might
contributetothesumtotalofhumanknowledgebutwhichmightneverhaveanimpacton
technology?Whatotherknowledgeissuesarerelevanttoinvestmentinpureresearch?
Investment in education and training is a common supplyside policy.What other reasons
couldtherebeforsupportingtheeducationofthepopulation?Whatknowledgeissuesarise
in answering the question as to whether government should shoulder this responsibility or
whetheritshouldbelefttothemarket?
4.7Theroleofinternationaldebt
For each factor, what would you consider to be sufficient evidence that it plays a role in
enhancingorinhibitingdevelopment?
4.8Thebalancebetweenmarketsandintervention
What criteria can economists use to decide on the balance between markets and
intervention?
Is development economics dependent upon external normative notions such as what
constitutesagoodorfulfilledlife?