Description
This book is for Everyman and Everywoman: Economics is for everyone. It is for people like you—educated, intelligent, and aware—who want to understand the world better and want to make the best decisions in their daily lives. That is why the book is called Everyday Economics. Many people think of economics as a dry, scholarly subject. But that is not the economics of this book. If life is exciting, then economics is exciting. If you want a better life, then economics is for you. You don’t have to be an economist to understand how economics affects you. You don’t have to be an economist to use economics to improve your life. Everyday Economics gives you an engaging way of looking at the world, and gives you practical advice on making financial decisions. If you believe the reputation of economics as being a boring subject to people who are not economists; if you think that economics deals only with events that are beyond your daily experiences, you are in for a pleasant surprise as you read this book.
Certainly a lot of reporting and talk in the media and blogs on the Internet have economics as a topic, often as the main topic. There is now so much “economic†information available that processing the information has become an important skill. One tends to forget that economics is primarily a technique, a way of thinking, rather than merely an accumulation of facts. Understanding economics, and especially knowing how to apply economics, would be to your advantage. The point of the book is to be useful to you, by helping you think though financial, consumer, national, and even global concerns. While this book may not drastically change your life, it can enhance your life. Everyday Economics will give you more control over your life, both in thought and deed, by changing your attitude and your behavior.
Knowledge is an intellectual and emotional power. There are economic forces all around you. Right now, you have either too much or too little concern about these forces. When should you worry about them? When should you relax? Sometimes you are worrying too much. This book will change your thinking about the economic environment so that you don’t dwell on things unnecessarily. At other times you are not worried enough: You think that everything economic will turn out well.
Everyday Economics shows you how to put your current economic concerns into proper perspective: The book explains how to address the economic challenges that you face so the outcome is more to your advantage. You will gain greater confidence with the knowledge that you are legitimately concerned only about economic matters that warrant such attention, and that you are not wasting mental and emotional energy on economic fears that have no basis in reality.
There are two opposite kinds of illusions that people have. First, people think that the government usually makes the correct decisions in economic matters; that the government can be trusted to do the right thing economically; that the government at the very least has good intentions; and that, if the economic outcome is poor, then the government was up against economic forces beyond its control. Many parts of the book will show that assuming government is good in intentions, in actions, and in results is unrealistic. So swallow the right pill: It is time to break that illusion!
Sometimes the government adopts economic policies with the intention of helping only a small group in the economy. One example of this is the restrictions on the imports of sugar, set up purely to help the U.S. sugar industry, regardless of whether the rest of us suffer for it. Sometimes the government’s intention is good, but the outcome is bad—for example, rent control in New York City. Both of these issues are considered and explained later in the book.
The second kind of illusion that people have is that there will be an “economic meltdown.†Many people fear that the entire economy will go to pot and that their standard of living, if not civilization itself, will be driven down to an unacceptably low level. Could a depression of the magnitude of the Great Depression of the 1930s happen again? Could the stock market bust to zero? Will it be impossible for me (or my child) to find a job?
While each of these events is not logically impossible, they are all so unlikely that they are not worth worrying about. The Great Depression is not likely to recur, because governments and central banks have learned a lot about what went wrong during the Great Depression and also know much more about economics. Undoubtedly, they would act vigorously to prevent a depression from happening again. The stock market could not approach even close to zero, because stock prices are fundamentally based on the expected economic performance of the companies whose stocks are traded. And ultimately that performance comes from the country’s resources—natural resources, physical capital (factories, office buildings, farms, machinery, equipment), technology, labor, and human capital (trained and educated labor) of the domestic economy—and from the productivity of these resources. For the American economy, these resources are strong, growing, and cemented by technological improvement. As far as job availability is concerned, a growing economy, combined with your own education, training, and motivation, is your ultimate guarantee. True, recessions mess things up, but only temporarily. All of these scary issues are treated in later chapters.
Economics is a guide for you to make the best decisions. That means the best decisions for you. Economics tells you how to use opportunities to your best advantage. An advantage means an achievement toward a goal. The economics way is the efficient way: You get the most advantage for a given cost, or you incur the least cost for a given advantage. For example, you want to buy the best possible flat-panel TV at a cost of $1,000, or you want to obtain a flat-panel TV with specific characteristics (for example, the screen size and resolution that you determine before you shop) for the lowest possible price……………………..