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.



Thursday, August 19, 2010

Downsizing Boomers Threaten Economic Recovery

The baby boom generation reflects anyone born between 1946 and 1964. Today there are around 80 million people in that category and the leading edge is in the process of retiring. This group's savings has been ravaged in recent years by the variety of bursting bubbles that has deflated the personal wealth of many. Though it is natural to downsize one's life as age creeps upon us, it is even more likely for today's boomers because of their recent hardships. This couldn't happen at a worse time as the nation attempts to crawl back from the depths of one of its worst recessions. This may make it very difficult for consumers to lead us to recovery.
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