Monday, June 16, 2008

The 10 Principles of Economics

Mankiw boils economics down to ten principles in his Essentials of Economics textbook which he views as the central, unifying ideas that drive the economy and economic decisions.

He defines these principles as:

1: People face trade-offs.
2: The Cost of Something is What You Give Up to Get It
3: Rational People Think At the Margin
4: People Respond to Incentives
5: Trade Can Make Everyone Better Off
6: Markets Are Usually a Good Way to Organize Economic Activity
7: Governments can Sometimes Improve Market Outcomes
8: A Country's Standard of Living Depends on Its Ability to Product Goods and Services
9: Prices Rise When the Government Prints Too Much Money
10: Society Faces a Short-Term Trade-off between Inflation and Unemployment

Over the next several posts I'm going to provide my views on each of these principles.

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