# Economics > "All models are wrong, but some are useful". ### Thoughts * Most economics is speculation without stakes. * Observe the underlying incentives. * Who profits the most? * Who suffers the most consequences directly from one's actions? * How to (re)align the incentive structures? * There is always an opportunity cost (even if good things happen). Always ask: * "What is the trade-off?" * "Under what conditions would my idea be a bad idea?" * Politicians/bureaucrats are incentives to practice first-order thinking (anticipating the immediate results of their actions/policy). It's what gets them re-elected. * By "solving" one problem that way they create a bigger one down the road. They compound problems. * Solution: solve for the long term. Practice second-order and n-th order thinking. * "What are the consequences in 10 hours? 10 months? 10 Years? 100 years?" * The demand curve slopes downward: if something becomes more expensive you do less of it. * Markets work when both parties benefit from a trade. * Understanding the price system tell us what ends up where doing what. * The more growth you have, the bigger your margin of error. When in doubt optimize for growth. * "What actions can I take now that will produce compounding returns?" * "Am I on a track where my knowledge compounds?" * Leave small crises to resolve themselves. Step in for huge ones. * Debt is easy, but it's not the answer. Bureaucrats love it: no one gets fired for adding more debt. * Private debt shouldn't become public debt. Taxpayers shouldn't pay for bailouts. * Crony capitalism is rent-seeking as a service. Warning signs: * Wealth is seen as a zero-sum game. * Wanting economic gain without any real risk. * High positions are equated with wealth, prestige and status. * Competition is seen as inconvenient and battled with special permits, grants, tax breaks. * Decentralised systems withstand more than centralised systems. * Governments use taxes to create demand for their currency. After Adam Smith: > "A prince, who should enact that a certain proportion of his taxes should be paid in a paper money of a certain kind, might thereby give a certain value to this paper money" ### What I enjoyed reading * Adam Smith: [An Inquiry into the Nature and Causes of the Wealth of Nations](https://www.gutenberg.org/ebooks/38194) and [The Theory of Moral Sentiments](https://en.wikisource.org/wiki/The_Theory_of_Moral_Sentiments) * [The Law](http://bastiat.org/) by Frédéric Bastiat * [Economics in One Lesson](https://archive.org/details/HenryHazlittEconomicsInOneLesson) by Henry Hazlitt * [I, Pencil: My Family Tree](https://www.econlib.org/library/Essays/rdPncl.html) by Leonard E. Read * [The Use of Knowledge in Society"](https://www.econlib.org/library/Essays/hykKnw.html) by Friedrich A. Hayek * [Charlie Munger: Academic Economics — Strengths and Weaknesses, after Considering Interdisciplinary Needs](https://fs.blog/2015/03/charlie-munger-academic-economics/) * [More books I recommend](https://wiki.stojanow.com/books#economics). ## Links * [Economic podcasts I listen to](https://wiki.stojanow.com/podcasts#economics). * [Econlib](https://www.econlib.org/cee/) The Library of Economics and Liberty. * [The Economics of Seinfeld](http://yadayadayadaecon.com/) - using Seinfeld scenes to make economic concepts come alive. * [r/Economics](https://www.reddit.com/r/Economics) suggested [blogs](https://www.reddit.com/r/Economics/wiki/blogs) and [reading list](https://www.reddit.com/r/Economics/wiki/reading). * [r/BadEconomics](https://www.reddit.com/r/badeconomics/) - a repository for all of the woeful, antiquated, or plain old misguided notions Redditors post about how the economy works. * [Literary Works with Economic Insight](http://www.daviddfriedman.com/Academic/Fictional%20Economics/Embedded%20Economics.html) by David D. Friedman - economics in storytelling. --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://wiki.stojanow.com/economics.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.