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, November 21, 2010

Following Japan's Path

This article illustrates the disturbing trend the U.S. is following into Japanese style deflation. The graphic that accompanies the article tells us the Fed is going to have work a lot harder to generate a heartbeat out of the CPI.

Thursday, November 11, 2010

Fantasy Land

The President's bi-partisan debt crisis committee has released their prescription for reversing the tailspin our country's finances have taken. Click on the link to access the tough remedies and then imagine all of the excuses they'll be for why we can't implement them.

Wednesday, November 10, 2010

A Return To The Gold Standard?


The head of the World Bank intimated his support for a return to some form of gold standard the other day. In the wake of a flood of money in the global economy and the seemingly reckless fiscal policies of many nations, there is a call for the bygone safety he perceives in gold. Click on the link to access five economists sounding off on the prospect of this move.

Here Comes Inflation


The spike in commodity prices on Tuesday announced the arrival of an inflation that has been plaguing the economy in heretofore unrecognized ways. Click on the link above and then access the graphics to see the year to date increases in agriculture, gold and oil prices. It was only a matter of time before the expansion of liquidity would impact resource prices. Wholesale prices jumped last month, can retail be far behind?

Monday, November 8, 2010

The U-6 Paints The True Unemployment Picture


Click on the link above and you'll access an article describing the more comprehensive U-6 unemployment indicator, a broader measurement. In addition, you'll find an intelligent graphic which will display unemployment data dating back to 1948.