Following are some of my notes the things I learned or found interesting after reading A Very Short Introduction to Economics by Partha Dasgupta. The book answered a lot of my questions about the world and how humans act amongst each other as a collective.
Economics is simply just applied human psychology.
Trade \iff Trust
- Two things needed for a trade (basically just trust):
- (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.
- 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
- There are 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.