Commentary
I teach this course as if itâs the only formal exposure my students will ever have to economics. This approach is realistic because most of the students in my course will take at most one other economics course during their collegiate careers. I see as my principal responsibility to instill in my students enough knowledge of basic economics so that they, when fully into adulthood, will take an adult stance when encountering economic arguments presented by politicians and pundits.
If I do my job well, each of my students will leave my course at the semesterâs end with an understanding of the following ten lessons.
1. Poverty has no causes; wealth has causes. No effort, sacrifice, risk-taking, or creativity is required to be mired in poverty. Following the reverse of Nikeâs famous mantra suffices to ensure poverty: Just donât do it. Poverty is simply the condition that humanity finds itself in if too little wealth is created.
2. Wealth is created, not âdistributedâ; therefore, in a market economy the âdistributionâ of income and of wealth has no policy relevance. To understand that wealth must be created is to understand the indispensable roles of individual human effort, sacrifice, risk-taking, and creativity. Wealth, being a human creationârather than being goodies created by nature and dispensed like manna from heavenâemerges only from the minds and hands of its creators. It belongs to them. And so in a market economy, those individuals who create more wealth have more wealth.
Iâm tempted to say that the âdistributionâ of wealth in such an economy thus has no more policy relevance than does the distribution of âAâ grades in a fairly taught-and-tested college classroom. Just as those students who are smartest and who study hardest tend to get the highest grades are entitled to keep their high gradesâjust as those high grades are not extracted from the grades or brains of students who are less smart or who study less diligentlyâthe wealth earned in markets by high-income earners is not extracted from those people who earn lower incomes. But this formulation doesnât do the market justice. While in a classroom, âAâ students donât seize their high marks from students who earn lower marks, nor do these âAâ students do much to help their less-talented or less-diligent classmates. But in a market economy, individuals who earn high incomes do so only by increasing the economic well-being of other human beings. In a market economy, the higher is Smithâs income relative to that of Jones, the more Smith has done, compared to Jones, to enrich his or her fellow human beings.
âEconomic outcomes are determined by general forces, like supply and demand, as opposed to the intentionsâgood or badâof individuals.â
âInflation does not rise because of a surge in greed. And it does not fall because greed recedes.â
âThe grocery store owner does not control the price of eggs. That price is determined by supply and demand.â
âMarket outcomes arenât intended by anyoneânot by God, government, or corporations.â
4. Itâs good that the economy is impersonal. In an impersonal, market economy you are treated like an adult. What you earn is due, above all, to your efforts and not to your personal connections (or lack thereof), or to the caprice of individuals who might hate you just as easily as might love you.
5. Tradeoffs are inescapable. Save for breathable air on the earthâs surface, every resource, good, or service is scarceâmeaning, there isnât enough of it naturally to satisfy every conceivable human desire that it might be used to satisfy. From this fact follows anotherânamely, to use a scarce good to satisfy one particular desire necessarily requires that some other desire or desires that could have been satisfied remain unsatisfied. That the market (or any other human institution) fails to satisfy some human desires is true, and will always be true. Good economists understand that this reality is no mark against the market.
6. Thereâs no objectively âbestâ pattern of tradeoffs. You are likely to choose differently than I would choose exactly how many bottles of beer are best to sacrifice to acquire a pair of jeans. Your particular tradeoff is right for you, as mine is for me. And being liberal adults, neither of us wishes to coerce the other into trading-off differently.
7. Exchange is mutually beneficial. The power to say ânoâ to an offer means that any and all exchanges that do occur are mutually beneficial. This reality holds even if one party to an exchange is a pauper and the other a multi-billionaire.
8. (Add your content here)
The economic benefits and costs of economic exchange are not affected by political borders. Tradersâ political citizenship is as economically relevant as their eye color or the first letter of their last name. Trades across borders have the same economic consequences as those within borders.
9. Jobs are costs, not benefits. A job is worthwhile because it provides spending power, not for its own sake. The value of a job lies in the goods and services it enables the jobholder to acquire. If a job doesn’t pay, no one will hold it for long.
10. The government is human, not divine. Governments are run by humans, not gods. Many political programs rely on government officials possessing divine knowledge, wisdom, and goodness to work as promised, which is unrealistic.
Every student who learns these propositions in an economics classroom gains a valuable lesson.
Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.