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PaperclipPerfector  7mo ago (text post)   3615 thread views

Small-Scale Question Sunday for April 7, 2024

Do you have a dumb question that you're kind of embarrassed to ask in the main thread? Is there something you're just not sure about?

This is your opportunity to ask questions. No question too simple or too silly.

Culture war topics are accepted, and proposals for a better intro post are appreciated.

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Hey friends, I have recently started to read nrx blogs and hanging out on this corner of the internet. I realized I need to understand economics better to be able to make sense of the world around me. It seems overwhelming to start from scratch, what do you recommend would be the highest ROI way to understand the major principles and events in economics? as that is closely intertwined with the history of states

I recommend Khan Academy as an intro. They have video lessons, and built in problems for their website. And being able to actually solve some problems is necessary to really understand economics, stuff like macroeconomics can be pretty unintuitive to think about.

Reading economics is like reading politics or history, there are many opposing schools of thought. Comparative advantage vs industrial policy and so on.

I'd just be wary of reading one book and thinking 'that's it, whew, I've got my economics'. Like politics or history, there's a great deal of it floating around, you're most likely to only find the orthodox versions. Yet orthodoxy changes! Tariffs and protection used to be despised and derided, yet they're coming back into fashion. Game theory is related and something to consider as well.

Reading Polanyi’s Great Transformation was one of the most mind opening experiences ever for me when it comes to economic history.

Thanks for realizing this. In general, people don't know enough economics.

When I took a class on microeconomics, which was one of my favorite classes, we covered, among other things, the following. I think these are worth knowing:

  • supply and demand (and graphs thereof)
  • opportunity cost
  • a good sense of just how much economic growth we've had, and the ways that has improved our lives
  • A robust sense of how the price system reflects the availability of goods and acts as a signalling mechanism for when resource usage is economically productive and incentivises innovation and entrepreneurship
  • Why "price gouging" can be good, actually. (Very brief answer: we operate in a world of scarcity, and when prices reflect that accurately, resources can be allocated more to those who need them, and incentivize mitigating that scarcity)
  • the effects of price controls, or cost-imposing regulation, including how minimum wage could reduce employment, or how rent control is "the most efficient technique presently known to destroy a city—except for bombing"
  • deadweight loss (in taxation of goods, subsidies, and in monopolies, among other things)
  • how competition will force long-term-risk-and-opportunity-cost-adjusted profits to zero (in a sufficiently abstracted case: in practice, a bunch of things allow some, but not too much, profit to continue to be made, like economies of scale)
  • monopolies and cartels, why these are inefficient, why these are still better than the monopolists in question not existing, why cartels are better than monopolies
  • Pigouvian taxation
  • Coase theorem (keeping in mind also when it doesn't apply)

Public choice economics, and how incentives cause governments to fail, and how we often can't just trust them to solve any problems markets lead to. Some, among other government failures that happen are:

  • in general, politicians' incentives are not necessarily to produce whatever the optimal set of policies may be for the people
  • interest groups that would benefit policies that produce concentrated benefits to them, but impose diffuse costs on most others often can get those policies passed when it's inefficient
  • money spent on lobbying is wasteful: they'll spend up to the benefit of the good, increasing the cost to society
  • regulatory capture, and lobbying and weaponization of laws against competition

Also, read Bastiat's candlemaker's petition; it's hilarious.

I'm sure there's also macroeconomic things worth learning, but I, unfortunately, haven't really learned macroeconomics.

(Though I did watch one video from marginal revolution on the Solow model, which was definitely a useful concept)

It's probably also worth being aware of the whole situation with the US debt, and worth having a sense of some of the consequences of when we actually basically run out of money.

And that the ultra-wealthy usually have their wealth in the form of ownership of companies (and is exaggerated, as prices would fall as their stock sold), not giant vaults of cash.

The class I had used Gwartney et al's "public and private choice" as our textbook, so I assume that would be good, though it's possible that you might not want to spend money, and I don't know what the most efficient way to learn is.

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