Ten Key Economic Principles

[eagleseven]

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.

 

[☭proletarian☭]

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

Unless you're born rich you experience serendipity

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

Most people do not act rationally most of the time. People are emotional creatures. Just look at bank runs or the growing debt.

iNcentives work. People respond to incentives.

Punishment works better. Classical studies in conditioning show that negative consequences (especially pain) leave stronger impressions that most rewards.
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Open for trade. Trade can make all rties better off.

Not always. Consider Japan upon Western encroachment or the US-China trade relationship today.

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

Wrong. They're the most effective way of ensuring the rich get everything and the poor get nothing.

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

'INtervention' is usually a bad thing. Regulation is another matter.

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

In part. They most produce that which they need or something that can be readily traded for what they need.

Of course, it doesn't matter how much you produce if little or none of the surplus value translates into increased wealth for the labourer. a nations standard of living is largely determined by the Proletariat's ability to benefit from its own labour instead of being exploited by the bourgeoisie

Inflation is caused by excessive money supply.

Not quite. Iflation is excessive money supply.

The value of the currency determined by the ratio between marketable wealth (eg: iron, steel, cotton) which can be put on the market (not subject to embargo etc) and the money supply.

Devaluation of the means of exchange occurs when the money supply is too high in relation to marketable wealth.

Words to live by.

I disagree. They're rather ignorant words, in several regards.

 

[eagleseven]

Unless you're born rich you experience serendipity

And this has what to do with opportunity cost?

Most people do not act rationally most of the time. People are emotional creatures. Just look at bank runs or the growing debt.

And where did the statement address irrational people?

Punishment works better. Classical studies in conditioning show that negative consequences (especially pain) leave stronger impressions that most rewards.

This is why our prisons are empty and nobody works to improve their condition?

Not always. Consider Japan upon Western encroachment or the US-China trade relationship today.

Japan went from a warlord-ruled rural backwater to a world-conquering industrial empire?

Wrong. They're the most effective way of ensuring the rich get everything and the poor get nothing.

Spoken like a true socialist.

'INtervention' is usually a bad thing. Regulation is another matter.

One and the same.

In part. They most produce that which they need or something that can be readily traded for what they need.

If the people aren't working, there will be nothing to trade, and nothing to consume.

Of course, it doesn't matter how much you produce if little or none of the surplus value translates into increased wealth for the labourer. a nations standard of living is largely determined by the Proletariat's ability to benefit from its own labour instead of being exploited by the bourgeoisie.

This is a self-defeating argument, in that the bourgeoisie needs to sell to the proletariat in order to maintain a profit. Henry Ford demonstrated as much.

Not quite. Iflation is excessive money supply.

Inflation is an increase in prices. It can (most often) be caused by an increase in the money supply, but also by other factors (sudden reduction in production due to war, for example).

The value of the currency determined by the ratio between marketable wealth (eg: iron, steel, cotton) which can be put on the market (not subject to embargo etc) and the money supply.

Of course.

I disagree. They're rather ignorant words, in several regards.

I wouldn't expect you to follow them.

 

[☭proletarian☭]

Unless you're born rich you experience serendipity

And this has what to do with opportunity cost?

You said everything always has a cost.

I have shown that to not be true.

This is why our prisons are empty and nobody works to improve their condition?

Many prisons nowadays are too easy on hard criminals. Why reward them with a lifetime of free food and board?

Japan went from a warlord-ruled rural backwater to a world-conquering industrial empire?

That was later. Loo at the times of the Opium Wars.

Or look at the effect on China when the West moved in and started exploiting the Chinese people. You know, the whole series of events that led to the war between the Communists, the KMT, and the foreigners? You know, setting the stage for Mao's rise to power?

Wrong. They're the most effective way of ensuring the rich get everything and the poor get nothing.

Spoken like a true socialist.

Ever heard of robber barons?

The result of laisse faire and the unrestricted market

[ame=http://www.amazon.com/Condition-Working-England-Oxford-Classics/dp/0192836889]Amazon.com: The Condition of the Working Class in England (Oxford World's Classics) (9780192836885): Friedrich Engels, David McLellan: Books[/ame]

You support the exploitation of the poor and what amounts to pseudo-slavery

One and the same.

not really. Laws requiring transparency are not the same as artificially lowering interests rates or any other moronic Keynesian 'quick fixes'.

If the people aren't working, there will be nothing to trade, and nothing to consume.

Working does not mean the people have much of anything, as I've pointed out.

This is a self-defeating argument, in that the bourgeoisie needs to sell to the proletariat in order to maintain a profit. Henry Ford demonstrated as much.

They need not sell to the labouring proletariat. They exploit the proletariat in China or india to sell in America, where social democracy (the grandchild of reformist communism) has created a middle class with protections from the exploitation inherent in capitalism.

Inflation is an increase in prices

Inflation is the increase in the money supply (in relation to the wealth represented).

Higher prices are a result of inflation.


Moron.


Read Mises or something and become less foolish.

I disagree. They're rather ignorant words, in several regards.

I wouldn't expect you to follow them.[/quote]


Because I'm an Austrian? Or because they're the idiotic ramblings of a fool?

 

[☭proletarian☭]

Start here for an introduction into honest and intelligent economics.

Ludwig von Mises Institute - Homepage

 

[☭proletarian☭]

Austrian School - Wikipedia, the free encyclopedia

 

[☭proletarian☭]

In the early 20th century, however, a number of socialist parties rejected revolution and other traditional ideas of Marxism such as class struggle, and went on to take more moderate positions. These moderate positions included a belief that reformism was a desirable way to achieve socialism.

Social democracy - Wikipedia, the free encyclopedia

 

[eagleseven]

Inflation | Definition of Inflation at Dictionary.com:

1. Economics. a persistent, substantial rise in the general level of prices related to an increase in the volume of money and resulting in the loss of value of currency

 

[☭proletarian☭]

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

 

[☭proletarian☭]

Austrian business cycle theory - Wikipedia, the free encyclopedia

 

[pinqy]

The Austrian school are the ONLY people who define inflatin that way. Which makes it a non-standard definition. In other words, don't try to assert that as what inflation is when almost nobody you talk to will be using the same definition. It's like you're going to England and telling everyone they're wrong for saying you can't use your hands in football.

 

[Kevin_Kennedy]

The Austrian school are the ONLY people who define inflatin that way. Which makes it a non-standard definition. In other words, don't try to assert that as what inflation is when almost nobody you talk to will be using the same definition. It's like you're going to England and telling everyone they're wrong for saying you can't use your hands in football.

Yes, but unlike football the definition of inflation was essentially hijacked because it allows those who are responsible for inflation, the Federal Reserve here in the U.S., to blame others for the increase in prices.

 

[Big Black Dog]

Here are 10 key economic realities according to the Big Black Dog:

(1) Never break a $50.00 or $100.00 bill. Once you do, it's gone forever.
(2) Never let the wife know you have a $50.00 or $100.00 bill. If you do, it's gone forever.
(3) To save the most amount of money, don't take the wife to Wal-mart. Stay home.
(4) Insist that the wife pay the bills. That way, you don't spend any of your money.
(5) Never tell the wife you have your money in a sock hidden under the bed.
(6) If you have agreed to take the wife out to dinner, take her to McDonald's. Don't take her anyplace that has real flowers in a vase on the table. You can save big money this way.
(7) If you save your pennies, the dollars will take care of themself.
(8) There is a distinct art to being cheap. Not everbody can pull it off.
(9) When you go out to dinner with friends, if you're real slow about picking up the bill to have a look, in most cases somebody else will pay the bill.
(10) Pay your wife her allowance on time that way you don't have to pay her any interest.

These 10 economic policies seem to work real well for me...

 

[Neubarth]

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."

 

[Kevin_Kennedy]

Well there can't be deflation with an increase in the money supply, because deflation is defined as a decrease in the money supply.

 

[Toro]

The Austrian school are the ONLY people who define inflatin that way. Which makes it a non-standard definition. In other words, don't try to assert that as what inflation is when almost nobody you talk to will be using the same definition. It's like you're going to England and telling everyone they're wrong for saying you can't use your hands in football.

I do agree with this sentiment, but ...

The excess creation of money has unintended consequences, and relying solely on consumer price levels as a measure of price stability can be disastrous.

There is little doubt in my mind that the Austrian school describes well what has happened over the past two decades, at least in terms of asset bubbles, which is inflation in another form. The exogenous shocks of the commercialization and mass adoption of the Internet and the opening of China shifted supply curves downward, which is deflationary. Because central banks focused on price stability, excess creation of money offset these deflationary forces. This excess creation of money found its way into asset markets, which has created the mess that we are now in.

The Austrian School hasn't made any intellectual advances since 1930, and its adherents are no different than dogmatic Marxists, but I do think that inflation as defined by the Austrians - along with Minsky's theories of asset prices - best describes what has happened.

As for the OP, I don't see much wrong in it.

 

[☭proletarian☭]

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."

Are you talking about real price or merely the size of the numbers?
The Austrians use the only honest and useful definition of inflation.

What you're talking about is merely a rise in consumer prices. It an easily be the result of mere price gouging.

 

[The Rabbi]

What is "mere price gouging"?? What is price gouging?
I'll take your answers with a grain of salt because you've already shown you have no understanding of the subject matter.

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

I like Neubarth's definition of inflation.
We have had massive money creation but deflation. But Friedman didnt posit a one for one correspondence. Only that increasing the rate of money creation leads to inflation.
We will see what happens 2 years down the road.

 

[Neubarth]

What is "mere price gouging"?? What is price gouging?
I'll take your answers with a grain of salt because you've already shown you have no understanding of the subject matter.

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

I like Neubarth's definition of inflation.
We have had massive money creation but deflation. But Friedman didnt posit a one for one correspondence. Only that increasing the rate of money creation leads to inflation.
We will see what happens 2 years down the road.

Oh learned man of the Sacred Scrolls, It might be a little less than two years, but that is a good approximation. I think we will be seeing inflation by the end of the year.

 

[Neubarth]

To answer another question, "How do we know that it is not price gouging?" the answer is we do not know with any certainty, but one thing is standard, Price Gouging always accompanies inflation. The owners of the mega stores can not withstand the temptation.

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. That is a sure fire indicator to management that the people of the local neighborhood are getting fed up with the price gouging.

If you want to give them an earlier warning, I say throw the rock a few weeks earlier than your neighbor does. At least you both will be working for a common cause. Amen.