EKIP– Expert Club for Economics and Politics A Different Opinion
When I tell someone that I work at the Foundation for Economic Education, I often get asked, “What are the economic ideas that people need to understand?” At FEE, we’ve been thinking about this question a lot in our articles, coursework, seminars, and videos. In general, we’ve synthesized “economic thought” into 12 key concepts. The list below has served as a guide for us for many years, and I think it’s time to share it with the world.
Key economic ideas:
Gains from trade: In any voluntary economic exchange, both parties involved in it benefit, at least from their subjective perspective.
Subjective value: The value of any good or service is determined individually by each individual according to their specific preferences.
Opportunity Cost / Opportunity Cost: Nothing is free, but the cost of anything is what you give up or give up as an alternative to get it.
Spontaneous order:Society does not arise from top-down intentions or planning, but as a result of the actions of individuals that lead to unplanned outcomes for the entire group.
Incentives: People act in such a way as to maximize their own rewards/benefits.
Comparative advantage: Cooperation between individuals creates value when a seller can produce a particular good or service at a lower cost than the buyer would spend if they produced it themselves.
The knowledge problem: No person or group of people has complete information to plan (or force) certain social outcomes, because the information necessary for social order is decentralized among its members and manifests itself only through human choice.
The visible and the invisible: In addition to tangible and measurable effects, there are often also invisible costs and unrealized opportunities for every action and/or policy undertaken.
Rules matter.:Institutions influence the choices individuals make. Example – Property rights are rooted in (the reality of) scarcity (of goods), which requires that property rights be granted to individuals, not to a collective, for example.
Human action is purposeful: Every person makes choices with their actions with the aim of improving their current state (otherwise, they would not take these actions).
Civil Society: Voluntary association allows people of all backgrounds to interact peacefully, create value, develop their personal character, and build mutual trust.
Entrepreneurship: Taking advantage of an opportunity to bring together resources/ideas that are currently unused, underutilized, or completely undiscovered to create something that has value and benefits for others in society.
You can think of all the ways and places where these twelve principles manifest themselves – as you shop, socialize, or plan your own future. As the saying goes – The economy is everywhere!
