The Most Important Lesson Of Economics

Economics is a broad and vast field comprising intricate areas that would take years to master. This makes it very hard to summarise or reduce it to a simple point. However, if there was one simple lesson that I wished everyone knew about economics, one easy sentence or sound bite that could explain the essential core to people who know nothing else about economics, it would be: “My spending is your income”. This simple point, properly understood, explains everything you need to know about the important policy issues of the economy. It doesn’t explain everything, but it explains the important parts.

My Spending Is Your Income

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Should We Intervene In Syria?

As I write this conflict is raging in Syria. For the past two years a vicious war has been ongoing with 100,000 killed and 2 million refugees (half of whom are children) according to the United Nations. What began as part of the Arab Spring overthrowing dictators across the Arab world has turned into a bloody and relentless civil war. Now with reports of a massacre with chemical weapons, it seems increasingly likely that Western Powers will intervene in some form in the conflict. But is this the right decision? Are we compelled to fight on behalf of Syrian civilians or will it only make the problem worse?

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Government Did Not Cause The Recession

We are in the midst of the worst recession since the Great Depression. Economists and commentators alike are united in blaming the banks and the lack of restraint on them for driving us over the cliff. Yet there is a myth common on the internet that it was the government that caused the recession. Allegedly it was the government that forced the banks to lend extra and fueled the boom. There are three parts to this argument. It is claimed the government caused the recession by guaranteeing to bail out banks if they got in trouble, by forcing banks to lend more through the Community Reinvestment Act, Fannie Mae and Freddie Mac and by keeping interest rates artificially low. These arguments are unable to explain the timing of the crisis, its magnitude and the fact that it’s global effect. These claims simply do not stand up. Continue reading “Government Did Not Cause The Recession”

The Market Is Never Free

It is common to hear people call for the removal of the government from the market or launch defences of the ‘free’ market. It is asserted that governments always get things wrong and that regulations only make things worse. Conservatives proclaim that if the economy was only left in the hands of the free market everything would be better. However there is no such thing as the free market. It doesn’t exist and probably never did. Every market has some rules and regulations that even conservatives admit are necessary. We have grown so use to them that we don’t see them but they are still there. The market is never free. Continue reading “The Market Is Never Free”

War Is A Racket

It is a bold and engaging idea that we are manipulated into war by big business. It follows the view that the government is controlled by big business and made to serve their interests. It sees foreign policy as enforcing American economic dominance upon the world. The idea is that weapons manufacturers encourage war solely to make bigger profits. It is known as ‘The Devil Theory Of Imperialism’ or more simply in the statement that ‘War Is A Racket’. Continue reading “War Is A Racket”