Basic Economics: A Common Sense Guide to the Economy
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Basic Economics, which has now been translated into six languages, has grown so much that a large amount of material in the back of the book in previous editions has now been put online instead, so the book itself and its price will not have to expand. The central idea of Basic Economics, however, remains the same: that the fundamental facts and principles of economics do not require jargon, graphs, or equations, and can be learned in a relaxed and even enjoyable way.
truck that was throwing so much water or mud onto his windshield as to dangerously obscure vision. Even if everyone agrees that the benefits of mud flaps greatly exceed their costs, there is no feasible way of buying these benefits in a free market, since you receive no benefits from the mud flaps that you buy and put on your own car, but only from mud flaps that other people buy and put on their cars and trucks. These are “external benefits.” Here again, it is possible to obtain collectively
making.” Another way of saying the same thing is that political time horizons tend to be much shorter than economic time horizons. Before the full negative economic consequences of the wage and price control policies became widely apparent, Nixon had been re-elected with a landslide victory at the polls. There is no “present value” factor to force political decision-makers to take into account the long-run consequences of their current decisions. One of the important fields neglected as a
assets. They are simply promises to pay money collected from future taxpayers. The country as a whole is not one dollar richer because these bonds were printed, so there is no analogy with private investments that create tangible wealth. If there were no such bonds, then future taxpayers would still have to make up the difference when future Social Security premiums are insufficient to pay pensions to future retirees. That is exactly the same as what will have to happen when there are bonds.
foresaw, it would take time for his economic analysis to become widely accepted among economists, so it was not put to the test during the Great Depression itself. While writing his magnum opus, Keynes said in a letter to George Bernard Shaw: “I believe myself to be writing a book on economic theory which will largely revolutionize—not, I suppose, at once but in the course of the next ten years—the way the world thinks about economic problems.” Both predictions proved to be accurate. The New Deal
neighborhoods, as compared to the interest rates charged by banks in middle-class communities. Indeed, companies that charge for cashing checks usually operate in low-income neighborhoods, while people in middle-class neighborhoods usually get their checks cashed free of charge at their local banks. Yet studies show that profit rates are generally no higher in inner city businesses than elsewhere, and the fact that many businesses are leaving such neighborhoods—and others, such as supermarket