Why that as a tag?
I should point out that I’m not an economist: a degree 25 years ago does not qualify me as such. But I am fascinated by the subject, call me an interested amateur perhaps. This blog (and it will be a blog, a commonplace book of what interests me rather than a series of essays or pronouncements) will be, as my personal blog has been for years, infused with my (mis) understandings of the subject.
About the business world, yes, in the larger sense, but often trying to look at that business world from the point of view of economics rather than, say, accounting or business management.
Which leads with a leap to my favourite story about economics. From the WTO site:
Nobel laureate Paul Samuelson (1969) was once challenged by the mathematician Stanislaw Ulam to “name me one proposition in all of the social sciences which is both true and non-trivial.” It was several years later than he thought of the correct response: comparative advantage. “That it is logically true need not be argued before a mathematician; that is is not trivial is attested by the thousands of important and intelligent men who have never been able to grasp the doctrine for themselves or to believe it after it was explained to them.
Over the years my misrememberings of this story have become that economics, well, “it’s all trivial or obvious except….”
Note that this does not mean unimportant or beneath worrying about. Trivial here means what it normally does, obvious something a little more. Not that the answers stare us in the face each and every day, but that when one answer is properly explained, the natural reaction is to say “yes, that’s obvious”. The mysteries of supply and demand are just that when we’re first confronted with those graphs but once explained, so, people buy less of something when it gets more expensive….well, yes, that is obvious*.
A good place for me to start then, misquoting a Nobel Laureate and not quite remembering the full story. There will be a lot of that.
* Unless it’s a Giffen Good which is the sort of level where the subject gets much more interesting. But as the only two of those so far identified are wheat noodles and rice in North and South China respectively, not something that needs to be considered at the basic level necessary to make sense of the world.
This was originally published in Forbes.
Of course, economics (including amateur economics) would be useless if it did not occasionally prove to us non-trivial things; foremost among these, the Law of Diminishing Returns, and the Laffer Curve, a refutation of the hypnotic notion that, if a government or a business is not getting enough cash, it is a remedy to simply jack up taxes on a disfavored group, or the prices on the menu.
Yes, the notion is obvious, likewise the refutation, which is why economics needs to be learned.
Samuelson- i mis-remember his foreword well. Something about having fair hair when he was a boy, then sandy then brown and presumably grey when he was old. (Obviously trivial because i’ve completely forgotten why this was being brought up in an economics book.) But also that he cited the often example of Manhattan island being sold for 2 beads and a feather (or whatever it was) to illustrate the non-trivial example of compound interest. i.e. (if you invested a trivial amount bucks at compound interest rates over 350 years, you could easily buy all the real estate in Manhattan)