Success with a Little Knowledge of Economics

A new way of thinking: 2 x 2 = 7

The advantage of economics is that it is a discipline in which a few ideas can take you a long way. You can’t say that about, for example, the study of physics or Japanese.

Economics has virtues of both politics and science. It is truly a social science. “Its subject is society, that is, how individuals choose to live and how they interrelate. And it brings the subject matter into focus with the dispassion of a science, applying the scientific method to policy issues, in order to make advances in the fundamental challenges facing any society.”

A worldwide reference manual exists, the book Principles of Economics by Gregory Mankiw. A special published by the Spanish newspaper El Pais in January 2005, to mark the thousandth edition of its Sunday Supplement on Economics, included a section entitled “Ten Titles for Two Decades.” The first edition of this book was published in 1998 to coincide with the fiftieth anniversary of the most popular college textbook ever written, Economics, by Paul Samuelson, one of those rare scientists who can easily communicate with the lay public.

The publisher commissioned a new textbook from Mankiw with the aim of making it the “Samuelson” of the coming decades. Mankiw is described as a “neo-Keynesian” for his “new Keynesian” or “new monetarist” economics.

In the preface to his book Mankiw recounts that he grew up in a family where politics was often discussed at dinner. “The pros and cons of the various solutions for solving the problems of society aroused fervent debates. But in school I leaned toward the sciences. Politics always seemed to me vague, speculative, and lost in subjectivity, while science was analytical, systematic, and objective. As political debates were continuing without reaching any conclusion, science was advancing.” His first course, Introduction to Economics, opened his eyes to a new way of thinking.

Mankiw’s “Ten Principles of Economics”:

People face tradeoffs.

The cost of something is what you give up to get it.

—Rational people think at the margin.

—People respond to incentives.

—Trade can make everyone better off.

—Markets are usually a good way to organize economic activity.

—The state can sometimes improve market outcomes.

—A country’s standard of living depends on its ability to produce goods and services.

—Prices rise when the government prints too much money.

—Society faces a short-run tradeoff between inflation and unemployment.

Note: This post is dedicated to Professor Gilberto Lugo Rodríguez of the Interamerican University of Puerto Rico and to Abel Mirabal, the best colleague in the Microeconomics course. Havana, May 1, 2015.

Excerpts from the article “Principles Generally Accepted in Economics” by Juan Francisco García Aranda. Extoikos No. 7, page 81. Available here

Posted on May 5, 2015, in Dora Leonor Mesa. Bookmark the permalink. Leave a comment.

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