Basic Economics -- Thomas Sowell

What is Economics

Economics is more than just a way to see patterns or to unreal puzzling anomalies. Its fundamental concern is with the material standard of living of society as a whole and how that is affected by particular decisions made by individuals decisions made by individuals and institutions.

Consequences matter more than intentions. Not just the immediate consequences, but also the longer run repercussions of decisions, policies, and institutions.

The Garden of Eden was a system for the production and distribution of goods and services, but it was not an economy, because everything was available in unlimited abundance.

Lionel Robbins defined:

Economics is the study of the use of scarce resources which have alternative uses.

In other words, economics studies the consequences of decisions that are made about the use of land, labor, capital and other resources that go into producing the volume of output which determines a country's standard of living.

It is crucial to keep in mind at all times that the resources being used are both scarce and have alternative uses. When a politician promises that his policies will increase the supply of some desirable goods or services, the questions to be asked is: At the cost of less of what other goods and services?

What does "scarce" mean? It means that what everybody wants adds up to more than there is. What this implies is that there are no easy "win-win" solutions but only serious and sometimes painful trade-offs.

Not only scarcity but also "alternative uses" are at the heart of economics.

Although the word "economics" suggests money to some people, for a society as a whole, money is just an artificial device t o get real things done. Otherwise, the government could make us all rich by simply printing more money. It is not money but the volume of goods and services which determines whether a country is poverty stricken or prosperous.

When economists analyze prices, wages, profits, or the international balance of trade, for example, it is from the standpoint of how decisions in various parts of the economy affect the allocation of scarce resources in a way that raises or lowers the material standard of living of the people as a whole.

Economics is a tool of analysis and a body of tested knowledge -- and of principles derived from that knowledge.

Life does not ask us what we want. It presents us with options. Economics is one of the ways of trying to make the most of those options.