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December 22, 2012

"The 10 Things In Economics That Everybody Should Know"

This list gets about 2.5 out of 10 correct. A better list:

1. People want far more at zero prices than they can possibly produce: goods and services have been, are, and almost surely always will be scarce.

2. People respond to incentives.

3. The cost of doing something is the value of the next best alternative foregone. (On the list.)

4. Sunk costs are sunk. (Or, sunk costs should be ignored in making decisions.)

5. Voluntary trade is mutually beneficial. (On the list.)

6. Markets are least-cost allocation mechanisms.

7. Future cash flows are worth less than nomimally equivalent current cash.

8. Inflation is, everywhere and always, caused by excessively high money growth. 

Comments

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Mike Sproul

Read up on the real bills doctrine, and scratch #8.

kyle8

Good list, and similar to number 5, "When my trading partner gains wealth it does not make me poorer.

Also: Prices are valuable information. Anything that artificially disturbs prices is like electrical static on a radio.

foxmarks

#9: A person recommending an economic policy is not practicing economics.

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