Ten Key Principles of Economics

1. Everything has a cost. There is no free lunch. There is always a trade-off.
2. Cost is what you give up to get something. In particular, opportunity cost is cost of the tradeoff.
3. One More. Rational people make decisions on the basis of the cost of one more unit (of consumption, of investment, of labor hour, etc.).
4. Incentives work. People respond to incentives.
5. Open for trade. Trade can make all parties better off.
6. Markets Rock! Usually, markets are the best way to allocate scarce resources between producers and consumers.
7. Intervention in free markets is sometimes needed. (But watch out for the law of unintended effects!)
8. Concentrate on productivity. A country’s standard of living depends on how productive its economy is.
9. Sloshing in money leads to higher prices. Inflation is caused by excessive money supply.!!
10. Caution: In the short run, falling prices may lead to unemployment, and rising employment may lead to inflation.



Saturday, June 26, 2010

New Financial Regulations Sweeping But Not Game Changing


The new financial regulations expected to be signed into law will create a revenue rollback for the major banking firms like JP Morgan Chase. But no one is mistaking this legislation for the dramatic changes spawned by the Great Depression. This article addresses the policy modifications and the new expectations Congress has for the industry. JP Morgan Chase will be one of the most affected firms because they have significant interests in all areas of banking.
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