ECON 101: What Economics Is
Having a sound understanding of the basics of economics is important in order to understand what is going on in society and why Bitcoin is important. If we don't understand what makes people act we will be doomed to create models of the economy which are detached from reality. I recently re-read the book "How to Think about the Economy: A Primer" by Per L. Bylund. It is an excellent book for beginners. It shows up the basic axioms and mechanics of economics. It will help you develop the correct framework to understand how we act in an economy and how different actions affect the state of the economy. I want to give you guys a summary of that book chapter by chapter. The book is already short so I will try to not just repeat what the author has written in the book.
Chapter 1 - What Economics Is
The first chapter is a short introduction to the questions which economics deals with. He poses the question that Bastiat already tried to answer in his work "Economic Harmonies”, “How does Paris get fed” there is no central planning but through spontaneous order of the self-interested actors, the people of Paris had food and all other goods which they needed. Nobody told the farmers when to sow or when to harvest nobody told the farmers to sell to a certain wholesaler in order to bring the food to the Parisians. It just happened through the nature of acting men.
This quote is the essence of the first chapter:
We tend to think of the economy in terms of resources, machines, businesses, and perhaps jobs. But that is a simplification that is misleading. Those are important, but they are all means to ends. The economy is about using means to attain ends. To put it differently, it is how we act to satisfy our wants, to make us better off. Simply put, the economy is about creating value.
It is important to recognise that the economy is just a way for us to attain goals by utilizing scarce inputs. Time is the most scarce input we are unable to create more of it and everybody runs out of it. But considering our limited space and time we are currently also limited by our earth and all the resources we have available. Basically we have to economise the available inputs to create our desired outputs. These outputs fulfill our wants. The economy is there to create value for us humans and to fulfill our wants.
Bylund also discussses Adam Smith’s work “An Inquiry into the Nature and Causes of the Wealth of Nations”. He says that learning about what creates wealth – which is equal to prosperity –is the goal of any economist. An economist should investigate what wealth is and how it comes about. He closes the chapter with the following von Mises quote:
Economics deals with real man, weak and subject to error as he is, not with ideal beings, omniscient and perfect as only gods could be.
This chapter is just a short introduction. Let me close as always, stay humble and stack sats.
You can find the book here:
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