Saturday, August 18, 2007

My Top Three Economic Concepts

I'm sure you all are aware of my recent fascination with the work of Pat Toomey and Andrew Roth at The Club For Growth. Roth posted on Tuesday a summation of the "Top Three Economic Concepts" of Harvard Economics Professor Greg Mankiw. I was fascinated.

Greg Mankiw lists his "Top Three Economic Concepts". Mark Steckbeck offers his. As does Craig Newmark.

All of their concepts are appropriate. For me, the idea of voluntary trade being a positive-sum transaction (and not a winner-loser transaction) is tops for me. Once you accept that, I believe your whole economic world view changes for the better.

I encourage you to check out the links in Roth's post above - interesting stuff. Of course, I had to throw in mine. Here they are:

  1. The understanding of wealth transfer vs. wealth creation, and that the latter is applicable to the real world.
  2. Comparative advantage and the benefits of free trade.
  3. 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.

Its debatable whether or not items 1 and 2 are prioritized correctly. A rejection of Zero Sum economics cannot be overstated, in my opinion. Its ignorance of the first point that continues to empower a certain political party through class envy, that's why I kept it at number one.

Apologies to any of you hard core economists for my novice input.....