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, July 31, 2010

Will You Be Able To Compensate?


It's inevitable that the Congress will one day modify Social Security as we know it. Many are increasingly skeptical that the system will survive under its present form yet no one seems to be in a hurry to adapt. The burden will undoubtedly grow on an individual's savings if the trust fund is releaseing a diminishing amount to retirees. The sooner a worker starts saving and the more pessimistic an individual is on Social Security's supplemental powers the better off he will be.
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