# 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.