Learning Economics

The following are notes and ideas that could be considered a general introduction to economics. By no means is this a complete introduction and my economics knowledge is limited to reading two books on the topic, speaking with friends and being a function member of rich country. A lot of the ideas listed below I’ve read or thought up directly after reading A Very Short Introduction to Economics by Partha Dasgupta. The book answered a lot of my questions about the world and the following notes are things I found interesting and want to expand upon.

What is Economics Really?

• Economics is simply applied human psychology

Trade <==> Trust

• Two things needed for a trade (basically just trust):
  1. (Nash equilibrium) At every stage of the agreed course of actions, it would be in the interest of each party to plan to keep their word if all others were to plan to keep their word.
  2. At every stage of the agreed course of actions, each party believes that all others would keep their word.
• Enforced punishment for betrayal increases trust (think robbing a store lands you in jail, so store owners feel more comfortable leaving a stand of post cards outside of their store)
• As soon as 65% do something, everybody does it. This is known as critical mass (meaning 50% is usually not enough)

Human Prosperity

(three needs)

• Knowledge is a public good par excellence.

• T.H. Marshall’s three-way classification of freedom can be read as saying that the enjoyment of civil liberties, the ability to participate int he political sphere, and access to commodities (food, clothing, shelter, health care, education - more generally, wealth) are necessary if people are to flourish.

• In 125 years, the world population grew by over 5 times its size in the beginning of the 20th century from 1.6B to 8.25B.

• Things like insurance simply remove a human dependence on luck for things like survival.

• Science embodies a set of cultural values in need of constant protection from the thread posed by its rival, Technology. That threat has proved to be so real, that in recent decades the two institutions have begun to blur into each other. Scientists increasingly behave like technologists, while technologists enjoy both the pecuniary rewards of Technology and the medals and scrolls that Science has to offer.

  • Institutional innovations in Science and Technology took place in Europe and emerged during the period historians refer to as the Age of Enlightenment.

• Intellectuals and commentators use the term ‘globalization’ to imply that location per se doesn’t matter. This optimistic view emphasizes the potential of capital accumulation and technological improvements to compensate for environmental degradation.

A Nations Fertility Rates

• Fertility rates:
  • Reproductive behaviour is conformist.
  • Demographers have noted that educated women are among the first to make moves towards smaller families.
  • A possibly even stronger pathway is the influence newspapers, radio, television, and the internet exert by transmitting information about lifestyles elsewhere.

The Role of the Government

• One way to interpret the need for fiscal and monetary policies during severe slumps (taxes and subsidies, public investment, interest rates, credit facilities) is that they help to change the expectations the people hold about the future.
• The outcome of a decision depends on the order in which pairs of alternatives are presented to voters: the agenda matters. (very real)

Some Good-to-Know/Interesting Facts

• A country’s GDP is the value of all final goods produced by it’s residents in a single year
  • GDP is a flow (ex. Dollar per year), where as wealth (dollars - period) is a stock
• Human capitol consists of education and health.
• If the personal benefits from betraying one’s conscience are large enough, almost all of us would betray it.
• The EU’s GDP expenditure is roughly 37%. wow!
• A government is an agency of its nation’s citizens.
• The world not working on reducing human induced climate change is simply an economic problem.
• A durable commodity: the stream of resources it is expected to provide over time.