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.



Tuesday, September 21, 2010

Could Have Fooled Me!!

Yesterday, the NBER officially declared that the recession ended in June of 2009. It may be difficult to convince people considering the lingering job shortage and plummeting household wealth being reported nationwide. But, anemic growth is still growth and unemployment is a lagging indicator. The problem will be in what shape the business cycle takes in the long-run; an elongated "U" or a faintly pitched "L"? Click on the title above to access the nation's prospects.
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