Wednesday, August 22, 2007

It Appears I'm One Of Kevin Meyer's Favorite Economists.....

Kevin Meyer, blogger at the Evolving Excellence website, mentioned the discussion at Club For Growth that has been going on regarding Top Economic Concepts. His post at Evolving Excellence is entitled "Counting Economists". I like Kevin's writing style, seems to have a good sense of humor. Evolving Excellence is a lean manufacturing website.

This is the second paragraph of his post (bold emphasis mine):

Over the last few days some of my favorite economists (I'm honored) have posted their "top three economic concepts." Sort of a strange list, as how do you rank concepts? Favorites? Most impact? But in any case the lists are intriguing.

The discussion started with Harvard Economist Greg Mankiw listing "his top three economic concepts." The post at Mankiw's blog started with an email from an old student of Mankiw's, asking:

I thought I would write to ask you the following question: If you could teach every American teacher three economic concepts, what would they be?

So, I guess the answer to Kevin's question would be that Mankiw wanted to condense the most important economic concepts down to three and prioritize them. If you just had a short amount of time to teach young people the basic, most important principles of economics, what would they be?

The subsequent lists that Andrew Roth at CFG compiled were based on that original post of Mankiw's. Others such as Mark Steckbeck, and Craig Newmark, chimed in with theirs. And of course, the novice economist that I am, added my three.

My three (four if you count the honorable mention, which is vitally important to my purpose) were based on economic concepts that have, in my mind, them most policy impact. In other words, how the population understands these concepts can dictate how elected officials in Washington and State Capitals act. Put yet another way, what basic economic principles are misunderstood so much that Democrats stoke fires of anger over - fires of anger that are largely based on ignorance. Windfall profits taxes. Luxury taxes. Protectionism ("took er jobs!" for you South Park fans). "Gouging". "Tax Breaks For The Rich" (That one REALLY sticks in my crawl). "The President Fixes The Economy." So on and so on.

That's why my three (four).....
  • The understanding of wealth transfer vs. wealth creation, and that the latter is applicable to the real world.
  • Comparative advantage and the benefits of free trade.
  • Elasticity of Demand and its relationship to increase in price (especially artificial increases due to tax policy).

Honorable mention: What I call "The Laffer Effect" - finding the optimal point on the curve (tax rate) to maximize revenues to a treasury.

... were what they were. These are the concepts in economics that so many people across the country seem to have a very poor understanding of, and because of that ignorance, they look to the government to redistribute income (thinking all wealth is merely transferred, rather than created), push the government to erect trade barriers (not realizing that free trade and comparative advantage provide the best benefit for consumers - and especially developing, impoverished nations), call for taxes on everything from yachts to cigars (not realizing that people will consume less and thus, the revenue generated from the tax will decrease), and bemoan tax cuts as creating budget deficits and starving children. This ignorance makes me absolutely nuts. So, I chose my concepts and prioritized with those things in mind.

Kevin closes out his post with:

From a true lean perspective I'd also add the value of knowledge and creativity of people. Maybe some day that will hit the radarscope of a real economist.

I hear you, Kevin. An open, market economy flourishing in a society governed by a constitutional government with enough capital to sustain its growth: this is what rewards the creativity of people. Lower taxes, fight back class warfare, preserve free and open trade and the creativity of people will find its peak.