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.



Friday, September 3, 2010

A Man Like Putin


This is one of the rare times when a post will venture out of the obvious realm of Economics. This segment from a great PBS show called "Sound Tracks" left me scratching my head. Most people are aware of the heavy handed tactics employed by Vladimir Putin throughout his official and unofficial life in power. But, as you will see, he's adopted the idea of a cult of personality from the old Soviet Union with a dance hall twist. In the end, maybe the Russian people have deserved 800 years of whacked dictators.
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