"People respond to incentives; all the rest is commentary"
- Steven Landsburg, The Armchair
Macroeconomics, as the
name suggests, is the study of the big picture of the economy. It's the
stuff of unemployment and inflation rates, the standard of living, of
tax rates and interest rates, monetary policy, and payment balances.
Because it is all this and
more, it is the subject of public discourse by politicians, commentators
and citizens. That's not necessarily a good thing.
The first lesson of
economics is scarcity:
There is never enough of anything to satisfy all those who want it.
The first lesson of politics is to disregard the first lesson of
The American economy
is the eighth wonder of the world;
the ninth is the economic ignorance of the American people.
Levitt, former chairman of the New York Stock Exchange
So even before our first
lesson, dear students, let's keep in mind yet another economist's
admonition: "It ain't [sic] what
people don't know that does the most damage. It's that they know so
danged much that just ain't [sic] so." (the late Frank Knight,
University of Chicago)
Anyone who tells you that
all will be set right by changing the incumbent political regime (or by
keeping it another cycle), absent any other analysis, you may disregard.
If anyone tells you that war is good for the economy, please run away.
When a news commentator declares that a reduction in the balance of
trade deficit is good news, again absent any further analysis, please
With these cautions,
students, let's get started. And let's remember Dr. Landsburg's dicta at
the top of this page as we go.
here for a table of contents. [This is useful if the navigation
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©2002 by Gary Nelson. All rights reserved.