Economics
"All models are wrong, but some are useful".
- 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"
- r/BadEconomics - a repository for all of the woeful, antiquated, or plain old misguided notions Redditors post about how the economy works.
Last modified 2yr ago