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.



Sunday, July 18, 2010

The Evolution Of Economic Policy In The U.S.


History Now. The Historians PerspectiveThis is a thoughtful essay on the tangle over the years between Classical and Keynesian Economics. The origins of both are discussed as well as the favor for each that's been passed back and forth throughout the twentieth century. In the midst of the recent crisis a debate rages again as some perceive a failure in the markets and the need for government intervention. As the worst seems past, the balance in our economy between the two theories continues to be a contentious issue.
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