Ten Key Economic Principles

[Big Fitz]

Greg Mankiw's Blog: ECONOMICS!!

Everything has a cost. There is no free lunch. There is always a trade-off.

Cost is what you give up to get something. In particular, opportunity cost is cost of the tradeoff.

One More. Rational people make decisions on the basis of the cost of one more unit (of consumption, of investment, of labor hour, etc.).

iNcentives work. People respond to incentives.

Open for trade. Trade can make all parties better off.

Markets Rock! Usually, markets are the best way to allocate scarce resources between producers and consumers.

Intervention in free markets is sometimes needed. (But watch out for the law of unintended effects!)

Concentrate on productivity. A country’s standard of living depends on how productive its economy is.

Sloshing in money leads to higher prices. Inflation is caused by excessive money supply.

!! Caution: In the short run, falling prices may lead to unemployment, and rising employment may lead to inflation.

Words to live by.

Can we get this put into a School House Rock song or find some way to drive these principles in to the noggin of every flipping child in this nation till they repeat it in their sleep?

 

[Neubarth]

Stockpile about fifty to a hundred good throwing rocks. Never waste a good brick.

 

[eagleseven]

Can we get this put into a School House Rock song or find some way to drive these principles in to the noggin of every flipping child in this nation till they repeat it in their sleep?

It is sad that we don't teach this material save in college economics classes...

 

[☭proletarian☭]

What is price gouging?

._.;;


YOu're in a thread about economics and don't know what price gouging is?

Yes, everything has a cost. Doesn't matter how you were born.

If I find $100 dollars on the sidewalk, I have lost nothing to get that $100 dollars.

 

[☭proletarian☭]

I strongly advocate civil disobedience. When a chain grocery store starts to rip off the public, it is time to start throwing rocks through the front windows. [/quotes]

That's not civil disobedience. That's rioting.

 

[The Rabbi]

What is price gouging?

._.;;


YOu're in a thread about economics and don't know what price gouging is?

Yes, everything has a cost. Doesn't matter how you were born.

If I find $100 dollars on the sidewalk, I have lost nothing to get that $100 dollars.

You're right. I don't know what price gouging is. Why don't you go ahead and define it for me.
You have lost opportunity doing something else by walking in the street. And the person who lost it has lost the spending power it represents.
SOmeone asked Milton Friedman to sum up his views of economics. He answered "There's no such thing as a free lunch."

 

[Big Fitz]

I just heard a quote on my copy of Civilization 4 the other day about this. Amazing how accurate it was. It was from some economic philosopher from a long way back. Paraphrasing:

"Everything is worth precisely what the buyer is willing to pay."

 

[☭proletarian☭]

What is price gouging?

._.;;


YOu're in a thread about economics and don't know what price gouging is?

Yes, everything has a cost. Doesn't matter how you were born.

If I find $100 dollars on the sidewalk, I have lost nothing to get that $100 dollars.

You're right. I don't know what price gouging is. Why don't you go ahead and define it for me.

S: (n) price gouging (pricing above the market price when no alternative retailer is available)

It's also used to refer to multiple companies conspiring to artificially raise the retail cost of goods.

You have lost opportunity doing something else by walking in the street.

You assume I stop walking?

And the person who lost it has lost the spending power it represents.

You insisted it cost me something.

What if it were a lump of gold ore that fell from the side of a mountain. Nobody has lost anything.

 

[☭proletarian☭]

I just heard a quote on my copy of Civilization 4 the other day about this. Amazing how accurate it was. It was from some economic philosopher from a long way back. Paraphrasing:

"Everything is worth precisely what the buyer is willing to pay."

Subjective value theory.

 

[Paulie]

A dictionary?

Sorry, but that's insufficient for the subject matter.

The Austrian School has consistently argued that a "traditionalist" approach to inflation yields the most accurate understanding of the causes (and the cure) for inflation. Austrian economists maintain that inflation is by definition always and everywhere simply an increase in the money supply (i.e. units of currency or means of exchange), which in turn leads to a higher nominal price level for assets (such as housing) and other goods and services in demand, as the real value of each monetary unit is eroded, loses purchasing power and thus buys fewer goods and services.

Austrian School - Wikipedia, the free encyclopedia

Obviously, their definition is wrong. Here we have had a tremendous increase in the money supply and we are seeing deflation. I think we should use my definition instead.
"When the price of everything is going up, more than likely it is inflation."

Most of the increase has been bank reserves from Federal Reserve securities purchasing over the past ~18 months.

Until that money actually starts chasing goods and services, prices will not necessarily rise all that much. We are still seeing a lot of deflationary pressures because the banks are not lending that money, and instead are sitting on it to keep their balance sheets appearing stronger.

There is lag between fed money creation, and price increase. It all depends on the amount of lending, and the velocity of the money.

But the "definition" of something as vague as inflation is really a subjective one, because one can easily argue that increasing the amount of money in existence is "inflating" the supply, thus referring to such a thing as inflation is not at all wrong.

There is money supply inflation, and there is price inflation. Price inflation is the direct result of the increase of money supply, or rather, the INFLATION of the money supply.

 

[The Rabbi]

._.;;


YOu're in a thread about economics and don't know what price gouging is?


If I find $100 dollars on the sidewalk, I have lost nothing to get that $100 dollars.

You're right. I don't know what price gouging is. Why don't you go ahead and define it for me.

S: (n) price gouging (pricing above the market price when no alternative retailer is available)

It's also used to refer to multiple companies conspiring to artificially raise the retail cost of goods.

You have lost opportunity doing something else by walking in the street.

You assume I stop walking?

And the person who lost it has lost the spending power it represents.

You insisted it cost me something.

What if it were a lump of gold ore that fell from the side of a mountain. Nobody has lost anything.

Your definition is absurd. If there is one seller then by definition whatever he sets is the price because he is the marketplace.
And if retailers artificially set a high price then others will come and undercut it. We saw this with OPEC.
No, I did not insist it cost you something. You are reading into that. Just like there is no free lunch even if someone else pays for it. Because it is not free to the person paying for it.
Look, you are clearly out of your depth here. Go and look at Sowell's book on Economics for the Citizens and then come back to the discussion. Going over ABC of economics really isn't my job description.

 

[☭proletarian☭]

Who lost the gold nugget that fell from the cliff and landed at my feet?

And if retailers artificially set a high price then others will come and undercut it

Not if the coorpoation can prevent other businesses from being allowed.


We've seen it all before, dude. Crack open that tome that says 'history' on it.

 

[The Rabbi]

Then you're not talking about a free market anymore.

You have gotten to the absurdum part of reduction ad absurdum. I'd suggest cracking a book that says "economics for dummies" before resuming this debate.

 

[☭proletarian☭]

Your sad ad homs demonstrate you inability to defend your assertion.

 

[Zander]

The big mistake most people make with inflation is forgetting to factor in "Credit" as part of the equation.

 

[The Rabbi]

Your sad ad homs demonstrate you inability to defend your assertion.

Your pathetic ill-informed responses tell me I have. You just don't get it.

 

[☭proletarian☭]

You said everything costs something. I proved that assertion false.

 

[Big Fitz]

I just heard a quote on my copy of Civilization 4 the other day about this. Amazing how accurate it was. It was from some economic philosopher from a long way back. Paraphrasing:

"Everything is worth precisely what the buyer is willing to pay."

Subjective value theory.

Yes, but it's amazing how true it still is. A widget is worth whatever someone will pay for it. You can ask anything you want for it, but have to decide whether to settle on the purchaser's evaluation of it's real worth. To one person, it may be worth only a buck fifty. To another a million bucks. It's not really subjective as much as it is 'individual'. The measurable standards are the same, it's just what the perceived cost benefit is that varies.

Now, some suck at this, others are brilliant. Most just pay what the price tag is worth.

 

[☭proletarian☭]

I happen to subscribe to Subjective Value Theory because it's true.

An ipod is worth less than a comforter when you're lost in the cold, but the ipod costs more at Wal-mart because the people buying them don't need the comforter.

 

[The Rabbi]

You said everything costs something. I proved that assertion false.

No, you said that.
So congratulations on refuting yourself.

You are clearly at sea when it comes to economics. It isn't your fault. It is the fault of American education that won't provide high schoolers with tools like econ that they will need to function in society.
Frankly I suspect it is intentional as if voters understood the idea that there is no free lunch then a lot fo proposed policies would never even pass the laugh test.