The Basics
From Henry Hazlitt’s book ECONOMICS IN ONE LESSON Chapter 1 comes this pearl,”… the whole of economics can be reduced to a single lesson, and that lesson can be reduced to a single sentence. The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.”
History
What is the history of economics (a very brief history please) and what are the major types of economies?
Click here for the History of economics and brief descriptions of Communism, Socialism, and Capitalism.
Rewards
Economics is the study of incentives. The bare essence of economics is that you will get more of what you reward and less of what you penalize.
A great example of this is a child’s allowance. Parents can give their children allowance and have the allowance tied to chores, school work, etc. If the child does all their chores they will receive all their allowance. If the allowance is reduced when the child does not perform all their chores (or does them poorly) the child will modify their actions to maximize their reward (unless they’re stubborn little cusses). On the other hand, if the child does the work poorly or not at all and still receives allowance you are rewarding them for that poor effort and you should expect more of the same from them. Few children who get allowance for not working will spontaneously become productive.
Let’s examine the Rewards that drove the mortgage crisis as it offers a great example of this concept. Keep Henry Hazlitt’s quote above in mind while reading this section.
Expectations
The other significant variable affecting economics, though rarely mentioned, is expectations.
Expectations are tricky things to control and what the media works at feverishly to accomplish. News outlets thrive on fear. Just watch the teasers for the nightly news (local or national) and you’ll see that nearly all are trying to get you to tune in out of fear. “Tonight, watch as our undercover team investigates whether chicken beaks are used in making baby rattles!” In most cases the resulting story isn’t nearly as dangerous sounding as the teaser.
We can review the role of Expectations and how, in particular, it impacts chronic inflation.
Taxation
One of the most misrepresented economic issues is taxation.
Taxation is misrepresented for two main reasons: news providers are clueless about economics in general and taxation specifically; and politicians want to hide the extent of taxation.
Let’s look at how Taxation is used as a reward/penalty.
Government Spending
How does the government get money and how does it manage to be so inefficient with that money?
The Government Spending page offers a brief overview and some common sense descriptions of our government in action (or should that be inaction?).
Income & Greed
A thought provoking section covering minimum wage and golden parachutes.
The Income & Greed page covers these and other topics in a common sense fashion without the hysteria normally associated with this topic.
Conclusions
Give it to me in a nutshell and show me your thoughts on the near future!
The Conclusions page provides a summary of the basic economic pages above and offers a glimpse into our near future.