Welcome to the general economics concepts, examples, debates and questions section.

It starts with the shortest course in economics I have been able to devise so far. It doesn’t take long but you may have to return to it more than once.

The rest of this area covers a multitude of bits and pieces traceable through the categories (left hand side bar), the search facility (upper left) and the Resources category in the Tools section.

If you are after economic statistics, macro economics or attempts at economic forecasting you are in the wrong place.

The Course

There are only three parts to the course and each one is to be found in the Categories in the sidebar:

1. Critical themes – a realistic way to approach the world, people and behaviour
2. Critical concepts – the ideas boiled down
3. Myths and Delusions – what the media, politicians and others get confused about.

There are then a series of examples which get added to all the time. Typically they illustrate points made above.

Use the Categories in the sidebar to access these in sequence.

All three should be mastered and applied – often.

Other material in various categories is also helpful - but will make more sense once the basics are familiar. Try them first....

For references and more information see the resources pages throughout the site.
For economics in action, i.e. the application of these ideas, see the economics section.

I set out below the gist of economics and the economics story, for it is a story, but a story which, if properly understood and thought about, is one of the most useful stories ever devised to explain human behaviour.

To follow the course go to the Categories in the side bar to the left, start with "1. Critical Themes" and work through...

The recently signed free trade deal between China and N.Z. is a great opportunity to remind ourselves of the sheer stupidity of tariffs, the inequitable transfer of wealth they involve from consumers to producers and the diminished wealth they bring for all.

N.Z. has got rid of most tariffs and the remainder are on their way. So far its been 28 years and we still haven't dumped them all. One remaining tariff is on whiteware. Its 7% so every washing machine, clothes dryer and other like appliance is 7% more expensive than it needs to be. Buy a Westinghouse - pay 7% more. Want a European import? Cough up 7%.


Gentle who ????

Where does the money go? Well apparently its to protect the good folks at Fisher and Paykel. N.Z. jobs don't you know. They have 1,000 of them there. There are of course more than 2.0 million other workers in the country who also consume whiteware - but hey they can afford it, can't they, at the margin?

Where on earth would the mandate for this come from? Who on earth would empower the state to use its coercive power to swipe your 7%?

Surprise, surprise your friendly Chief Executive from F&P was the dude being interviewed about what a shocking situation it was having to compete against the Chinese. F&P are good at it - I worked for one of their C.E.s in 1987 - a great guy as it turns out and an absolute expert lobbyist - that's why they still take 7% off consumers and sprinkle it on their shareholders, workers and suppliers.

From Tim Harford. This is an instructive piece about pricing, the importance of market differentiation and multiple strategies.

Apr 5, 2008 (yesterday)
Piracy’s hidden treasures
from Tim Harford by Sophy, for Tim

What should top record labels, software giants and other media companies do about digital piracy? There are two obvious options: get tough and defend intellectual property rights with every legal and technological trick in the book, or tolerate some illegal copying in the hope of generating buzz and making money in some other way.



This is a debate that generates strong opinions, and where you stand seems to depend on whether you’re an industry accountant or a new economy guru. (Chris Anderson, editor-in-chief, Wired magazine, coined the phrase “Freeconomics” to describe giving cheap things away for free in order to create buzz.)

But look closer.....

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I have written a primer on economic impact analysis which explains the concept and its limitations. Read it here (Browser back button to return).

This from David Friedman - since it is amongst the best descriptions of this critical concept. Sourced from his Website The article is quite long but a must....
(see also Coase for Policy)

The Swedes Get It Right

When the Swedish Academy awarded the Nobel Prize in Economics to Ronald Coase this year, it was a surprise for two different groups of people. The larger group consisted of people who had either never heard of Coase, or heard of him only as the author of something called the "Coase Theorem," generally presented as a theoretical curiosity of no practical importance. The second and much smaller group consisted of people who were familiar with the importance of Coase's work--and assumed that the Swedish Academy was not.

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This article is the best exposition I know from one of the best economists I know.
The Supreme Court concludes that most government agencies should be out of business.
By Steven E. Landsburg
June 4, 2002, Slate Magazine, www.msn.com

OK, it's official. The Supreme Court has declared that most local government activities are prohibitively expensive. The routine business of issuing building permits, investigating crimes, maintaining health codes, regulating land use—these are all unjustifiable luxuries. In a world of honest reckoners, there would be almost no government at all.

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This note discusses the time value of money - with a twist. TMV works in both directions.

With parliament considering "degree of murder" legislation and Ministers telling judges to use their "full sentencing powers" there is a little bit of financial economics we might draw from that seems to be ignored regularly. That relates to what I call here "the time value of sentences".



What is the value or utility of a gaol term? What is the disutility imposed on a criminal by a sentence of this or that amount of time spent in gaol.

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The essence of trade and negotiation:

In the film "Pretty Woman" Julia Roberts and Richard Gere are establishing what price will be paid for her to spend the night with him.

Julia: "Ok, $2,000."
Richard: "Ok, so its $2,000"

Julia: "Aha gotcha, I would have done it for $1,500."
Richard: "Yes, but I would have paid $2,500."

This is well worth thinking about carefully….

These definitions come from economist Steven Landsburg whose analysis of the economic implications of the law is especially piercing ( see http://landsburg.swcollege.com ). The economic implications of these legal concepts are important – particularly in respect of public policy. Lawyers (especially in English and colonial parent administrations) are likely to use different definitions. Legal definitions often obscure the economic impacts of what is occurring.

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THE KING’S LOAF
An Allegory on Congestion Pricing (thanks to David Haarmeyer)

Many years ago in the small kingdom of Rhodes, the King declared that henceforth everyone was to have free access to freshly baked bread. It became known as the “King’s Loaf” and the provision of free bread became part of the island’s tradition.

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