Professional Documents
Culture Documents
[Source]
i
Contents
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8.10.2 Why do people charge for things they sell? ................................................................................ 20
8.11 IF PRICES OF SOMETHING GO UP LESS OF THE THING IS BOUGHT.......................................................................... 21
9. WHAT IS THE GOVERNMENT AND WHAT DOES IT DO? ......................................................................... 22
9.1 SOMETIMES PEOPLE MAY NEED A GOVERNMENT TO MAKE RULES ....................................................................... 22
9.2 SOMETIMES MARKETS MAY NOT BE ABLE TO SUPPLY THINGS WE NEED ................................................................. 22
9.3 SOMETIMES PEOPLE DONT BOTHER ABOUT THE HARM THEY CAUSE .................................................................... 22
9.4 THAT DOESNT MEAN THE GOVERNMENT CAN DO THINGS BETTER THAN THE PEOPLE .............................................. 22
9.5 WE LEARNT EARLIER HOW WE EARN MONEY, BUT WHO CREATES MONEY? ........................................................... 22
9.6 PRICES RISE WHEN THE GOVERNMENT PRINTS TOO MUCH MONEY ...................................................................... 23
9.7 WE MUST REMEMBER THAT GOVERNMENTS CANT SPEND OUR MONEY BETTER THAN WE CAN ................................. 23
10. CHAPTER 4: CONGRATULATIONS! ..................................................................................................... 24
10.1 WELL DONE! ........................................................................................................................................... 24
10.2 SO YOU WANT TO BECOME RICH .................................................................................................................. 24
BOOK 2: FOR AGE 12-18 ................................................................................................................................ 25
11. BOOK 2 TOPICS ................................................................................................................................. 26
11.1 HUMAN BEHAVIOUR ................................................................................................................................. 26
11.2 BIASES ................................................................................................................................................... 26
11.2.1 Anti-market bias ......................................................................................................................... 26
11.2.2 Make-work bias .......................................................................................................................... 26
11.2.3 Anti-foreign bias ......................................................................................................................... 26
11.2.4 Pessimistic bias ........................................................................................................................... 26
11.3 VALUE .................................................................................................................................................... 26
11.4 SCARCITY ................................................................................................................................................ 26
11.5 MAGIC OF THE MARKET AND PRICE SYSTEM.................................................................................................... 26
11.6 MARKET ................................................................................................................................................. 26
11.6.1 Are markets immoral? ................................................................................................................ 27
11.7 RULE OF LAW ........................................................................................................................................... 27
11.8 TRADE .................................................................................................................................................... 27
11.9 CREATIVE DESTRUCTION AND INNOVATION .................................................................................................... 27
11.10 THE MAGIC OF PROFIT ........................................................................................................................... 27
11.10.1 Just producing machines does not make a nation wealthy ........................................................ 27
11.11 PRODUCTIVITY ..................................................................................................................................... 28
11.11.1 Why are wages in third world countries like India so low? ......................................................... 28
11.12 SEEN/ UNSEEN..................................................................................................................................... 28
11.12.1 Bastiat's broken window fallacy ................................................................................................. 28
11.12.2 The more animals you eat, the more animals are produced. ..................................................... 28
11.12.3 Price controls (rent control, minimum wage, maximum support price, etc) do more harm than
good. 28
11.12.4 Jobs are created by people, not by governments. ...................................................................... 28
11.12.5 Criminalization of vice only serves to create a black market that benefits criminal elements and
promotes disregard for the law. ................................................................................................................... 28
11.13 SAVINGS............................................................................................................................................. 28
11.14 COMPARATIVE ADVANTAGE.................................................................................................................... 28
11.15 ROLE OF THE GOVERNMENT ................................................................................................................... 28
11.16 TOOLKIT ............................................................................................................................................. 28
11.16.1 Measuring the economy ............................................................................................................. 28
11.16.2 Game theory ............................................................................................................................... 29
11.16.3 Public choice theory .................................................................................................................... 29
11.16.4 Cost Benefit analysis ................................................................................................................... 29
11.16.5 Moral hazard .............................................................................................................................. 29
11.17 MONEY .............................................................................................................................................. 29
11.17.1 Central banking........................................................................................................................... 29
12. BAD IDEAS TO BE ADDRESSED .......................................................................................................... 30
12.1 ECONOMIC EQUALITY IS MEANINGLESS AND IRRELEVANT .................................................................................. 30
12.1.1 Are we getting more unequal as we become richer?.................................................................. 30
12.2 WELFARE ................................................................................................................................................ 30
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12.2.1 Welfarenomics as propounded by Bernie Sanders. .................................................................... 30
12.3 SOCIAL JUSTICE ........................................................................................................................................ 30
12.4 MISUSE OF "MARKET FAILURE" ARGUMENT................................................................................................... 30
12.5 SOCIALISM.............................................................................................................................................. 30
12.6 POPULATION 'PROBLEM' ........................................................................................................................... 31
12.7 EXCESSIVE TAXES...................................................................................................................................... 31
12.8 PROTECTIONISM ...................................................................................................................................... 31
12.9 MINIMUM WAGE ..................................................................................................................................... 31
12.10 CENTRAL PLANNING ............................................................................................................................. 31
12.11 BUSINESS CYCLES: NOT CRISES OF CAPITALISM BUT GOVERNMENT INTERVENTION ............................................. 31
12.11.1 Asset Bubbles ............................................................................................................................. 31
12.12 THE SCANDINAVIAN MODEL / SOCIAL DEMOCRACY .................................................................................... 31
12.13 KEYNESS IDEAS ................................................................................................................................... 31
12.14 MARXIAN........................................................................................................................................... 32
12.15 BEHAVIOURAL ECONOMICS .................................................................................................................... 32
12.16 MIXED ECONOMY ................................................................................................................................ 32
12.17 THE PROBLEM WITH MACROECONOMICS .................................................................................................. 32
13. SUGGESTIONS RECEIVED................................................................................................................... 33
13.1 CAPITALISM ............................................................................................................................................ 33
13.2 THE FUTURE............................................................................................................................................ 33
13.3 DEFLATION ............................................................................................................................................. 33
13.3.1 Fears of deflation are unfounded ............................................................................................... 33
13.4 NATIONAL RESOURCES ARE NOT FINITE. ........................................................................................................ 33
13.5 TRADE AND WEALTH PRODUCTION .............................................................................................................. 34
13.6 ROLE OF MIDDLEMEN ............................................................................................................................... 34
13.7 FUNCTION OF PRICES ................................................................................................................................ 35
13.8 ALTERNATIVE TO PRICES: RATIONING............................................................................................................ 35
13.9 EXTERNALITIES ........................................................................................................................................ 35
13.10 PRICE SIGNALS .................................................................................................................................... 35
13.10.1 Price ceilings ............................................................................................................................... 35
13.10.2 Price floors .................................................................................................................................. 35
13.11 TRAGEDY OF THE COMMONS.................................................................................................................. 36
13.12 COMPARATIVE ADVANTAGE ................................................................................................................... 37
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1. Background, and need for such a book
When you first grasp the explanatory power of economic ideas, youll feel like the movie hero who
suddenly grasps The Matrix and realizes he can pull bullets out of the air. [Source]
1
The question is how can one explain this to the ordinary person (including highly competent physicists)
who are not used to looking at a vast series of actions/ interactions. In the physics lab scientists looks at a
particular event, and then it is over. What happens further, and then further, etc. is converted into
general laws of entropy.
In economics, however, any action (even the most modest) has a direct effect on the **entire** world
economy. Its effects ricochet across the whole world, and not just in one generation: in multiple
generations (like the effects of Indian socialism in driving out its best talent from India).
It is truly hard to get people to think about these hidden effects. The fact that amazingly brilliant people
like Adam Smith, Bastiat and Hayek have been explaining this for hundreds of years but there is almost
zero awareness of these hidden mechanisms and effects of economics action even today, suggests that
that challenge to get the ordinary, untrained person to understand the economy is Herculean, close to
impossible.
Yes, this little book project would be a tiny drop in the ocean, but we need a widespread concerted effort
to simplify the key elements of economics so every child can begin to see through the confounding fog of
the price system, and stop railing against the only system that has taken mankind from a short, brutish
life of misery, to health, wealth and abundance.
There is a simple truth in it which a boy ten years old can master; and I know this because I
have seen one of them do it. As he sits by a dining-table a child of ten is able to see that he
wants a first slice of bread more than he wants a second one, and still more than he wants a
third. It is not necessary to call this fact a "law of diminishing utility of successive increments of
consumers' goods," although after a time the boy would get the meaning of that formula. The
simple possibility of gradually satiating wants, by supplying more and more of the thing
wanted, is all that it is at first necessary to see.
The child can be made to perceive that if in the butler's pantry there were a given amount of
bread, which must be disposed of that day or go altogether to waste, and if the waitress were a
bread-merchant who owned this supply, there would be a limit to the price she could ask and
still dispose of the whole quantity. No one would want the last remnant of this commodity
enough to pay very much for it, and this fact, for the time being, would suffice to make bread
cheap. If, moreover, the supply every day were likely to be what it is on this particular day, the
bread would remain cheap.
This is one of the score of principles which, when stated technically and in abstract terms,
appear to most people strange and complex, though in simple terms they appear nearly self-
evident. It is entirely possible to strip of technicalities a very large number of economic
principles and make them simpler than the problems of mathematics with which a child of ten
years is expected to grapple.
To secure this result it is, in my judgment, best to impart the knowledge first in a
conversational way and with an abundance of questioning, which will enlist the pupil's interest
and set his reasoning powers at work. After such a preparation a very simple textbook is useful.
This plan exacts from the teacher something which may not always be supplied, but it would be
strange if in any large school it were not possible to find some teacher capable of supplying it.
The extent in the United States to which economics is now taught is all in favor of the plan.
John B. Clark Columbia University
1.2.1 Plan
I propose two books, one for ages 9-12 and the other (advanced) for ages 12-18. The children's book will
avoid jargon and any unnecessary concept/s. Concepts that are not critical will be excluded (e.g.
opportunity cost, sunk costs, most market and government failures).
3
Economics in One Lesson: The Shortest and Surest Way to Understand Basic Economics by Henry
Hazlitt (Free)
Economic Sophisms by Bastiat (free)
Principles of Economics (MR university)
Free Market Economics: A Basic Reader (free)
Economics Made Easy by Les Livingstone (free)
Economics: The Remarkable Story of How the Economy Works by Ben Mathew ($3)
Connor has written these three books for children: http://tuttletwins.com/
5
2. Do you want to be a smart detective?
This book is a story about how people make things, from where they get their money, how they become
rich, and, in fact, how you can become rich.
Everyone wants to become rich. But some people are not rich, and some countries are poorer than
others.
By the time you finish this book you would have become an economist. Anyone can become an
economist if they understand the economic way of thinking; just like anyone can become a scientist if
they understand the scientific way of thinking.
An economist understands how the whole society cooperates to produce the things we need. That
includes understanding what happens after something happens. For example, if you buy an ice-cream,
she understands what happens to prices of everything as a result, and to the total number of things that
are produced in the world. And how more ice-creams could get produced as a result particularly if the
ice-cream producer and seller are able to make a reasonable profit.
In fact, it would be fair to say that the more the paper that people consume, the more the trees that are
produced. The more the chicken that people eat, the more the chicken that are produced.
All this is really strange. Like Alice in Wonderland. But it is true.
And it is impossible to understand without being an economist.
The economist is a very smart detective who is able to piece together a complex jigsaw puzzle that most
people will never be able to bring together in their mind.
Do you want to be a very smart detective?
[This chapter shows that the biggest miracle in the world is the vast number of things and services we see
today. This is something entirely new and unprecedented. Knowing this basic fact and being able to
explain it holds the key to understanding economics]
Human beings, as we know them, evolved nearly 100,000 years ago. Before that some creatures
resembled humans, but were not humans.
The main thing is that humans have been as smart as modern man from for a very long time, but for most
of mankinds history, most people remained very poor. Mankind has struggled for most of its history.
Something crucial was missing, even though people were smart.
They chased and hunted animals or picked plants to eat. They drank water from the open river or pond
and had no shelter except when they learnt to make huts. They used animal skin as clothes, till they
learnt to make a crude kind of cloth. Mankind could barely to grow enough food for survival. There was
great scarcity. Children barely had a few toys. They played with sticks and stones, and climbed trees. And
half the children who were born died before the age of five, mainly from starvation or disease.
Only kings managed to get a few things and a somewhat decent house, but even these were of a poor
quality. You must have heard about the seven wonders of the ancient world. But these were built by
enslaving people. Many people died during the construction of these wonders.
Later, priests came on the scene and people created religions. But religions could not save the children,
and people, from dying.
7
than their ancestors. It is fair to say that the world has become hundreds of times richer than it was in the
past.
This is nothing short of a miracle. There has never been a greater miracle in the entire history of the
Earth.
3.2.2 We need our kings, priests, and governments to let us think for ourselves
Till today, many kings and priests today dont allow other people to become more important than them.
But if the king (or government) stops the people from thinking new ideas and producing things, how can
they possibly become rich?
9
4. How individuals produce wealth
[This chapter focuses on the actual dynamics of wealth creation. It focuses on property rights.]
4.2 The wealth of a country is the sum of the wealth produced by its
individuals.
But it is very important to remember that all the wealth is owned by those who produce it, not by anyone
else.
4.4 Producing more things that people want is how the world gets rich
Some people worry that if more things are produced by fewer people, then jobs will be lost and some
people will become poor.
11
5. Specialise! Only then can you produce a lot of
things
6.2 Most of what we produce for our own needs comes from shopping
But Im sure youve observed that they dont really produce everything from scratch by themselves.
In most cases they use their time to go shopping, and buy your shoes and toys. That is also production. It
doesnt matter how they get you the things you need: they are producers. They have produced the shoe
very efficiently, by saving their time.
Why dont they produce everything from scratch? The answer to this question is important. It holds the
key to wealth we see in this world.
If we had enough time to learn everything that mankind knows, and we had enough time to produce the
things we find in the market, then we could produce everything ourselves from scratch.
But no human being has the time in one lifetime to learn everything. It takes billions of people to know
everything. And it takes billions of peoples entire lifetime to produce these things.
We are the only animal on Earth that is not limited by instinct. Unlike pigs, we are able to store
knowledge in books. Most importantly, we can specialise. Each of us can do a small part of the work
necessary to produce a small part of a big thing. Each of us can produce a lot of a that small thing. This
way the world produces a billion different things, none of which is found in nature.
We have created an entirely new universe from what nature gave us. And that does not come from
producing everything ourselves. It comes from intense knowledge and intense specialisation. The more
the people on Earth, the better, so we can have even more knowledge and deeper specialisation.
Two things are therefore very good for all of mankind: more people to specialise, and trade. Without
trade all this specialisation will go waste.
13
6.3 Traders are also producers
Some people think that production is only about factories. But production is also through trade. If you
want a particular brand name shoe, then you dont go to the factory to get it. You go to the local shop.
Because that shop provides you with the shoe you want, it can be said that it produces the shoe.
This is the proper way of thinking about trade: that the trader produces things that people want. Traders
and producers are part of the same system that produces wealth. Without traders there will be no
production of wealth.
6.4 What would happen if people could produce but not trade?
Imagine someone has produced a lot of bananas at a very low cost. If he is now unable to send the
bananas to the people who will pay the most, either because of natural obstacles like a damaged road or
a barrier created by the king (government), then his bananas will rot. People who would have liked to get
bananas (at a price) will not get them, and the man who has produced bananas will go bankrupt since the
people in his village can only eat so many bananas.
It doesnt matter how much we specialise. If we then cant trade, humanity is sunk.
Trade is the lifeblood of mankind.
If there is any fundamental role for the king (government), it is twofold: to facilitate specialisation and to
facilitate trade. To achieve that a government may have to provide for defence, police, justice and some
infrastructure, but these are all means to the end: of greater specialisation and greater trade.
15
7. How are your parents able to get the things
you have in your house?
7.2 Some people dont like us to become rich. Lets watch out for them.
Luckily for most of us today, the common man has a chance to work hard and become rich. You have a
very good chance of succeeding today because everyone is respected if they produce things that other
people want.
In a few cases the king (the government) is bad and doesn't let people produce. Such kings should be
thrown out.
17
8. People have choices
19
Remember, your teacher has to run her house and manage the costs of food, clothes, house, and
travel to the school
Your teacher can, of course, grow her own food, make her own clothes, build her own house,
treat her own illnesses. But if your teacher has to do all these things, she wont have much time
left in her busy day to teach you.
Of course, your parents can decide to teach you and not send you to school. But then how would
your parents earn the money they need to look after their needs? After all, time can only be used
in one way. Either your parents can spend their time teaching you or they can use it to earn
money for the house. They can't do both.
Time is money. Your teacher cannot teach for free. Your parents therefore pay the teacher in one
of two ways: directly through school fees or indirectly, through taxes to the government.
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9. What is the government and what does it do?
23
10. Chapter 4: Congratulations!
The second volume (stand-alone) will include concepts that are bit more complex, as well as more
examples.
25
11. Book 2 topics
11.2 Biases
Four major biases that the general public has:
11.3 Value
Negating Marx's Exploitation labour theory/ explaining the subjective value theory
The money prices established in a market are not measurements of value. They are historical facts,
recording the ratio at which two items (the money good and some other good or service) exchanged in
the past.
11.4 Scarcity
The first lesson of economics is scarcity. There is never enough of everything to fully satisfy all those who
want it. - Thomas Sowell
If there was an unlimited supply of any particular good, everyone could have as much as they wanted,
and there would be no-one willing to pay even a penny for that good. For example, generally we have all
the air that we need to breathe. So air is free. But that changes if air becomes scarce. Imagine providing
air to an astronaut on the moon. That is very costly because it is scarce.
11.6 Market
On entering Paris, which I had come to visit, I said to myselfhere are a million human beings
who would all die in a short time if provisions of every kind ceased to flow toward this great
metropolis. Imagination is baffled when it tries to appreciate the vast multiplicity of commodities
that must enter tomorrow through the barriers in order to preserve the inhabitants from falling a
prey to the convulsions of famine, rebellion and pillage. And yet all sleep at this moment, and
their peaceful slumbers are not disturbed for a single instant by the prospect of such a frightful
catastrophe.
On the other hand, eighty departments have been laboring today, without concert, without any
mutual understanding, for the provisioning of Paris.
11.8 Trade
We succeed by producing values and trading them with other producers, in exchanges where
both sides winand the more others have to offer, the easier our success becomes.
The desire for profits is the reason why we trade, innovate, and produce things.
The economy is not a fixed pie and not a zero-sum game.
The necessity of free trade with minimal regulations and no tariffs.
Globalization
27
11.11 Productivity
11.11.1 Why are wages in third world countries like India so low?
The reason is because they are low productivity countries. The wages represent the productivity of the
workers. Workers receive a wage reflecting their value in the production process. These low productivity
countries tend to produce products of low marginal quality.
11.12.3 Price controls (rent control, minimum wage, maximum support price, etc) do
more harm than good.
11.12.4 Jobs are created by people, not by governments.
11.12.5 Criminalization of vice only serves to create a black market that benefits
criminal elements and promotes disregard for the law.
11.13 Savings
Savings is the driving force of the economy.
11.16 Toolkit
11.16.1 Measuring the economy
The GDP is how you measure the wealth of nations. GDP is not an indicator of economic growth, but
merely a measurement of the market value of final goods and services produced within a particular
geographic area over a specific period. What is meant by "economic growth" is not the production of
11.17 Money
Money has no intrinsic value.
29
12. Bad ideas to be addressed
12.2 Welfare
Social security is a fraud.
Subsidies (agricultural subsidies, student loans, etc) are both morally wrong and inefficient.
Welfarism entrenches poverty, creates inter-generational dependency, and engenders ever-
expanding parasitism, Poverty is empirically reduced by economic freedom.
Governmental redistribution of wealth is legalized theft'
People conflate welfarism with socialism. It is important to clarify the differences, and why 'Social
Democracy' and 'Democratic Socialism' are not Socialism.
12.5 Socialism
Reduces incentive to work.
Creates an underground economy.
The Economic Calculation argument of Socialism.
12.8 Protectionism
Protectionism is bad for the economy, hurts job growth, and negatively affects consumers (restriction of
choices, lower quality, and higher prices).
31
12.14 Marxian
13.1 Capitalism
Capitalism is a natural system. Humans will trade and exchange goods and services after all. Every
country's economy, including the socialist ones, is built on capital, so every country is capitalist at its core.
There can be no alternatives. Socialism attempts to create an alternative system by subverting this
natural system of capitalism to cater to its unfounded and disproven unscientific dogmas. A mixed
economy which purports to combine the 'best' of both worlds cannot be an alternative, since socialism
has nothing of any validity to offer.
13.3 Deflation
13.3.1 Fears of deflation are unfounded
This following quote by Robert Zubrin points out that apart from factual misconceptions, it is
antihumanism that is the ideological driving force behind environmentalist's vendettas against population
growth, consumerism, nuclear energy, GMO crops, etc.
<<<< Ive been working on this book for more than thirty years, over which period Ive seen time and
again how important innovations that could advance the human condition have been repeatedly blocked.
Take nuclear power, for example, which is the field of my university degree. In the 1970s, the
antihumanists argued that economic growth must stop because fossil fuels are too polluting, and,
besides, we are running out of them. We responded that we have enough nuclear fuel to last for millions
of years, and it produces no smoke. They werent interested, and, in fact, they became increasingly
militant in their view that nuclear energy must be ruled out.
Antihumanists also said that population must be limited because there isnt enough food, although
militantly opposing the development or even deployment of higher yielding and more nutritious crops.
In every area it became clear that the antihumanists wanted the problem, not the solution, and
ultimately the question had to be asked: Why? As I delved into the matter, it became clear that there was
a longer history to all this, and an ideology, which conceived of humans as destroyers, rather than
creators, and which therefore justified all forms of oppression and tyranny.
If humans are fundamentally destroyers, or, what amounts to the same thing, only consumers of
natural resources, then their numbers, activities, and liberties must be severely constrained, and
someone must be empowered to do the constraining. If, on the other hand, humans are fundamentally
creators, then their freedom must be protected at all costs, because freedom is essential to the exercise
of creativity. >>>>
https://www.theobjectivestandard.com/issues/2012-fall/robert-zubrin/
33
resource scarcity muddle public discussion and bring about wrongheaded policy decisions. A definition of
resource quantity nlust be operational to be useful. It must tell us how the quantity of the resource that
might be available in the future could be calculated. But the future quantities of a natural resource such
as copper cannot be calculated even in principle, because of new lodes, new methods of mining copper,
and variations in grades of copper lodes; because copper can be made from other metals; and because of
the vagueness of the boundaries within which copper might be found-including the sea, and other
planets. Even less possible is a reasonable calculation of the amount of future services of the sort we are
now accustomed to get from copper, because of recycling and because of the substitution of other
materials for copper, as in the case of the communications satellite. Even the total weight of the earth is
not a theoretical limit to the amount of copper that might be available to earth. Only the total weight of
the universe-if that term has a useful meaning here-would be such a theoretical limit, and I don't think
anyone would like to argue the meaningfulness of "finite" in that context. With respect to energy, it is
particularly obvious that the earth does not bound the quantity available to us; our sun (and perhaps
other suns) is our basic source of energy in the long run, from vegetation (including fossilized vegetation)
as well as from solar energy. As to the practical finiteness and scarcity of resources-that brings us back to
cost and price, and by these measures history shows progressively decreasing rather than increasing
scarcity. Why does the word "finite" catch us up? That is an interesting question in psychology,
education, and philosophy; unfortunately there is no space to explore it here. In summary, because we
find new lodes, invent better production methods, and discover new substitutes, the ultimate constraint
upon our capacity to enjoy unlimited raw materials at acceptable prices is knowledge. And the source of
knowledge is the human mind. Ultimately, then, the key constraint is human imagination and the
exercise of educated skills. Hence an increase of human beings constitutes an addition to the crucial stock
of resources, along with causing additional consumption of resources.
http://www.ce.cmu.edu/~gdrg/readings/2007/09/27/Simon.pdf
A section on the fruits of Capitalism that we are beneficiaries of since the Industrial Revolution would be
great.
Six killer apps of prosperity by Niall Ferguson
https://www.youtube.com/watch?v=xpnFeyMGUs8
==
It is through respecting the son of a barber who produces wealth that the world started getting rich.
The social dignifying or honouring of those who contributed as industrialist made everyone an innovator.
Innovation was respectable, for the first time in human history.
13.9 Externalities
what if the steel mill that produced the steel for the cutlery polluted the air with sulphuric acid that
caused acid rain, and polluted the water table with chemicals used in the process. That pollution harms
people in the area who breathe the air, while acid rain damages nearby agricultural crops, and chemicals
in the water table seep into neighborhood wells used for drinking water, causing cancer in local residents.
The cost of the pollution falls on people in the area who suffer illness, premature death and expensive
medical treatment.
These unfortunate people in the area bear part of the cost of producing the steel, and the steel mill
escapes paying for those costs that are inherent in making steel. Economists call this an externality
because part of the cost of making the steel is paid by parties external to the steel mill.
35
the increase in the minimum wage now makes it more expensive to hire unskilled workers. So employers
cut back on hiring, fire less productive employees who are no longer worth their increased pay, and
search out substitutes for unskilled labor, such as outsourcing jobs to developing countries where labor is
less expensive, or hiring illegal immigrants, or purchasing machines that can do the work more cheaply.
As a result, the lowest-skilled workers lose their jobs, and go from low pay to no pay. The very lowest-
skilled workers that the minimum wage was supposed to help, end up unemployed and unemployable. In
some countries where the minimum wage is relatively high, such as France, youth unemployment is as
high as 405, and there are no baggers in the supermarkets. The French have to bag and carry their own
groceries because the high minimum wage has rendered baggers unemployable and unaffordable.
Another form of price floor is agricultural price supports. Farmers are subsidized to grow certain crops.
These subsidies on top of market prices cause farmers to increase their crop production, resulting in
agricultural surpluses. These cannot be sold, and are left to rot in government storage, or burned, or
otherwise inefficiently wasted.
37
This is a good resource for your work.
http://www.economicshelp.org/economics-a-z/
Limitations of Democratic Institutions - Democracy is seen as a process where voters express their
choices via the ballot box. Now, there is a huge difference between voting in the ballot box and voting in
the market. While voting via prices in the market, a person who might want to have a villa along with a
Rolls Royce Car is immediately constrained by the prices and he has to reveal his relative preferences but
while voting via the ballot box, a lot of voters might simultaneously vote for a strong military, massive
welfare programs, balanced budgets and Tax cuts all in one. Democracy simply lacks a feedback
mechanism of communicating back to the voter the relative costs and benefits of the choices he has to
make. Thus there are severe limitations to Democratic Institutions and what they can do.
https://www.youtube.com/watch?v=Q1EOZ8Qn_Xc
Why can't we just print money to pay off debt?
https://www.youtube.com/watch?v=EobPnLZiOo8
Each society choose its future each day
"You have to choose between two roads, and one of them leads necessarily to poverty." - Bastiat
- EVEN THE SLIGHTEST TRACE OF SOCIALISM/ STATISM/ PROTECTIONISM IS POISON.
==
The confusion begins with the term "trade deficit".
Self sufficiency is a antediluvian concept that precedes the industrial age with which mass production,
break through in transportation etc. ushered in concept of core competence, collaboration and trade,
antiquating "self-sufficiency" tribalism.
After "independence" Indian politicians starting with Nehru got doped by this stupid concept of "self
reliance" which was never fundamentally disputed or debated by anyone and cultural/religious
organizations like Swadeshi Jagaran Manch with their band of ignorant zealots latched on, funded by
domestic companies that feared competition and relied heavily on patent violations.
==
It is difficult to free fools from the chains they revere Voltaire
This has always remained true. In Voltaire's time, in Bastiat's time, in our time.
I claim that people are rational, and they actually behave very rationally in matters of pure (direct) self-
interest. Which is very good, indeed.
But their brains become jelly when anything complex, such as the effects of various people's self-interest
on society. Then they imagine the worst, and fail to understand how individual self-interests check each
other and neutralise any ill-effects on each other. Each time they exchange/ trade, this neutralisation is
on display. Both parties gain. Both parties don't get as much as they want. But hard to understand this, it
would seem.
And so there is a plaintive cry for God and Government. For chains to enslave everyone.
Natural sciences like physics are easy to understand in general because of one to one direct effect of
action and taxation and it's authentic proof (posteriori). Whereas economics is a social science based on
logical deduction (a priori) with little in terms of direct one to one effect because purposeful human action
is much more complex than natural events.
WHY ECONOMICS TRIPS EVERYONE: Its conclusions are vastly counter-intuitive.
- selfishness and self-interest create the best results for society
- good intentions almost always create bad results in public policy
- minimum wages harm the poorest of the poor
]- government regulation to prevent monopoly creates monopolies
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Economics is like chess - only more complex by an order of magnitude.
It involves working through an initial action, then reaction - not just by one person but reactions of
potentially tens of other people; then once again, their further actions and reactions. And so on.
It is not just a two person game. It is potentially a hundreds of persons game.
The greatest charitable activity anyone can undertake is to teach liberty and reason.
I encourage everyone to undertake this charitable work. It requires your time and knowledge; not
money.
the failure of modern economic training to teach young economists to ask, always to ask,
why. [excellent article by Don Bourdeaux]
monopoly : https://www.facebook.com/groups/fahayek/permalink/10153164450875848/
free trade: https://www.facebook.com/sabhlok/posts/10153724964413767
Never look at prices. Think of them as equivalent time. So, if an aluminium staircase costs $100, think
how many hour of your time that costs. Then think if you had to make it on your own how much it
would cost. You will see clearly that you are getting excellent value through the market system.
The only question then is whether you could get it even cheaper. And that's what the market system
does: it drives down all super-normal profit.
I challenge those who complain about the market system to produce ALL the things they consume in
their own, and see if that's even feasible.
The free market system of exchange is critical to human progress.
The Economic Way of Thinking by the late Paul Heyne, Peter Boettke, and David Prychitko.
MYTHS
http://cafehayek.com/2015/11/some-economic-myths-slain-by-alchian-
allen.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+CafeHayek+%28Ca
fe+Hayek%29
Key problems of economics
- cooordination problem
- information sharing (price system) problem
- innovation problem (mccloskey)
- productivity problem (related to innovation)
Marginal Revolution University is a good youtube channel you could use as a reference.
https://www.youtube.com/user/MrUniversity/playlists
(4) What are the causes of inflation and what can be done to contain it?
(5) Discuss the effects of a class warfare tax policy (high progressive income taxes and high corporate
taxes) on the economy.
(6) What are the factors that account for the strength of a currency?
(7) China which is more corrupt than India and ranks lower on economic freedom is progressing at a
much faster rate than India. They rank much higher in the Human Development Index, and by the rate at
which they are progressing, should be a developed country in another 20 years. China has a larger
government than India. Doesn't this negate your assertion that small governments and free markets is
the best path for a country to follow?
(Note: I don't believe in the Chinese social market economy nonsense, but this is a question that can arise
among ignorant people.)
(8) Do trade deficits between countries really matter? Why does it matter that we import more from
China than we export to them?
(9) Why don't countries print more money to pay off their debts?
(10) Why has Indian rupee devalued from around 5 per $1 at independence to around 60 per $1
today?
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(12) Minimum wage and its effects on employment
(14) Why do we need regulations? Aren't regulations a barrier to economic freedom? Isn't it true that the
market will self-correct as a company's reputation will suffer if it harms its customers?
(16) Effects of "positive discrimination" (affirmative action programmes and reservations) on human
freedom and the economy
(17) Why shouldn't the government run healthcare and education? Isn't free education and free
healthcare a fundamental right? It's true that public hospitals and schools are in shambles, but the
answer might be to fix them and make them function well.
(18) Shouldn't India pursue a mixed economy that combines the best features of both socialism and
capitalism?
(20) Our local industries and companies may not be able to survive under the pressures of international
competition. As such, wouldn't it be a good idea to protect them through tariffs and encourage them
with subsidies? Some degree of protectionism is followed in many advanced economies, such as US,
Japan, and South Korea.
(21) What's wrong with corporate bailouts? Rescuing a company may preserve thousands of jobs and
rescuing a bank will save the deposits of customers? Some companies are too big to fail.
(22) What is the recipe for rapid economic growth and prosperity?
(23) Why anarchism is an impossibility! We need a strong state to preserve our economic freedoms,
enable prosperity and civilization itself.
Sone Ki Chidiya Total Reform Agenda
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(24) Keynesianism
It violates freedom of contract by infringing on the rights of employees and employers to entering into a
contract with mutually agreed terms. It entails coercion by forcing workers to pay dues to a union he
doesn't want to be a part of, and by forcing employers to abide by the demands of labour unions.
(29) Income inequality is meaningless and the ideal of economic equality is a dangerous delusion
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