test upload

1. Economics in
One Lesson
Basic Economics for Extemp
Gregory F. Rehmke
Economic Thinking / Foundation for Economic Education
www.EconomicThinking.org/extemp / fee.org/homeschool

2. A few principles...
Economics is built upon a few principles.
“Economics is an easy subject to teach,
but a hard one to take.” Paul Heyne
The teaching of economics suffers from
trying to teach far too many techniques,
graphs and formulas.
Examples better explain key principles...

3. Economics Origins

4. Economics Origins
Adam Smith’s Inquiry into the Nature
and Causes of the Wealth of Nations.

5. Economics Origins
Adam Smith’s Inquiry into the Nature
and Causes of the Wealth of Nations.
From the Scottish Enlightenment to
questions of Development Economics.

6. Economics Origins
Adam Smith’s Inquiry into the Nature
and Causes of the Wealth of Nations.
From the Scottish Enlightenment to
questions of Development Economics.
From History to Political Economy, to
Political Science and Economics, to
Micro, Macro, and Malarky economics.

7. The Economic Way of Thinking
Economics is a way of thinking
about the world.
All societies face the problems of scarcity.
Tribal, command, and market societies.
Scarcity, Choice, Opportunity Cost.
The Laws of Supply and Demand

8. From Mankiw to Hazlitt
Henry Hazlitt suggests just one
principle... (opportunity cost)
The Broken Window Fallacy
The principle applied...
(i.e. whose cash... for clunkers?)
America’s founders embedded
these insights into the Constitution
but it was broken by the New Deal).

9. From the Founder’s Factions...

10. From the Founder’s Factions...
✦ America’s Founders spoke of factions.

11. From the Founder’s Factions...
✦ America’s Founders spoke of factions.
✦ Government interventions in the economy
would excite factions which would corrupt
politics in the fight for power and subsidies.

12. From the Founder’s Factions...
✦ America’s Founders spoke of factions.
✦ Government interventions in the economy
would excite factions which would corrupt
politics in the fight for power and subsidies.
✦ A long train of abuses (and a long abuse of trains
as well as canals, roads, airports, and light rail...)

13. From the Founder’s Factions...
✦ America’s Founders spoke of factions.
✦ Government interventions in the economy
would excite factions which would corrupt
politics in the fight for power and subsidies.
✦ A long train of abuses (and a long abuse of trains
as well as canals, roads, airports, and light rail...)
✦ And special interests today corrupt most of
politics and drive the ever increasing size and
scope of state and federal government power.

14. Economics and Government
❖ Economics is the study of human action in
response to scarcity (Mises, Human Action).
❖ Study of incentives and information problems.
❖ Government officials and agencies respond to
incentives, much as people and companies do.
But with different results.
❖ Open up any newspaper or magazine. How do
the stories get there? Every “crisis” awakens
special interests clamoring to create or expand
funding for their industries and associations.

15. The nature of the State

16. The nature of the State
❖ Government is not reason, it is not eloquence, it is force.
Like fire, it is a dangerous servant and a fearful master.
- George Washington

17. The nature of the State
❖ Government is not reason, it is not eloquence, it is force.
Like fire, it is a dangerous servant and a fearful master.
- George Washington
❖ Origin of a State: compact or conquest?

18. The nature of the State
❖ Government is not reason, it is not eloquence, it is force.
Like fire, it is a dangerous servant and a fearful master.
- George Washington
❖ Origin of a State: compact or conquest?
❖ The Predatory State: from roving bandits to
stationary bandits.

19. The nature of the State
❖ Government is not reason, it is not eloquence, it is force.
Like fire, it is a dangerous servant and a fearful master.
- George Washington
❖ Origin of a State: compact or conquest?
❖ The Predatory State: from roving bandits to
stationary bandits.
❖ Open societies depend upon voluntary institutions
and are more just, productive, and prosperous.

20. So... what is the USA?
❖ What kind of society and economy is the USA?
Market? Socialist? Collectivist? Oligopolistic?
❖ U.S. has a mixed economy and a mixed political
system (part republic and part democracy).
❖ When crisis hits (such as the recent financial crisis).
Socialist blame the market and market-advocates
blame big government regulation and socialism.
❖ Ten Thousand Commandments CEI, 2009.

21. Regulatory Costs
❖ Estimates show U.S. regulatory compliance
costs hit $1.172 trillion in 2008.
❖ CBO now projects 2009 federal spending
to hit $4.004 trillion and the deficit to soar to $1.845 trillion.
❖ Regulatory costs are equivalent to 65 percent of 2006 corporate pretax
profits of $1.8 trillion. Regulatory costs rival estimated 2008 individual
income taxes of $1.2 trillion.
❖ Combining regulatory costs with federal FY 2008 outlays of $2.978
trillion implies that the federal government’s share of the economy now
reaches 29 percent.
❖ The Weidenbaum Center & Mercatus Center estimate agencies spent
$49.1 billion to administer and police the 2008 regulatory enterprise.
Adding the $1.172 trillion in off-budget compliance costs brings the total
regulatory burden to $1.221 trillion.
http://cei.org/issue-analysis/2009/05/28/ten-thousand-commandments

22. James Madison, Federalist Papers
• The sober people of America are weary of...
sudden changes and legislative interferences
[that]... become jobs in the hands of enter-
prising and influential speculators, and snares to the
more-industrious and less-informed [in] the community.
• They have seen, too, that one legislative interference is
but the first link in a long chain of [interventions each
produced by effects of the preceding].
--James Madison, Federalist #44, pp. 289-297

23. The Lesson Applied
• Broken Windows across the American political
landscape. Local, state and federal policies.
• Policy roundup: Health care, endangered
species, pollution, education, energy, auto, space,
transportation, medical research, foreign policy...
• Incentive problems, information problems,
special interests, asymmetric reporting.
• Good reporting and quality policy studies
require expertise and funding.
• Always ask: Who benefits? and, Who funded?