"Common Sense Economics" subtitled as "What everyone should know about wealth and prosperity" is one of the masterpiece article by three famous economists James Gawrtney, Richard L.Stroup and Dwight R.Lee accounts economics as a simple subject of study and caters the bulks of information about the important aspects of economic progress, role of government and the know-hows of household and business finances. This book fills the gap that exists between the basic human psyche and the legendary economics theories. Enough justice has been done in order to illustrate the know-haws of basic economic principles along with the straight, simple and clear language which most of the trendy economists does not considers. The writers argue that the economic progress is possible only in the competitive free market economy with limited government interventions.
The book is divided into four parts in which the writers have tried to illustrate on the different aspects like key elements of economics, major sources of economic progress, role of government in economic development and the key elements of the practical personal fianances.With the ideas pursued in the book one will be able to make wiser political choices and benefit to be wealthy. The authors even argue that increase in the personal wealth results in the generation of the wealth of others too.
Incentives plays a vital role in the decision making of the individuals. The cost and value of each and everything that is available in our surrounding differs from individual to individual. Through the coarse of time human beings are selfish and greedy by nature. Incentives applies to all the socio-economic and political situations in which human being are an important part of.The resources available are limited whereas the human desires are unlimited. One should always give up something in order to obtain the other as there is always the involvement of opportunity cost. So, the decision of choosing and abandoning is done at margin.
Trade moves the goods and services from the people who have excess of something to the person who does not have the goods. The producer and the consumer go through the process of voluntary exchange for the collection of the goods they value the most.Transaction costs increases the cost of the goods so, one should always try to lesson the transactional costs in order to obtain the higher return.Profit works as an motivating factor which motivates the person to trade the goods and services and increase their wealth.People get paid for the services that they caters. The supplier of the service paid only when the consumer value the service.
Trade, investment, technological breakthrough and the sound economical institutions assists in the economic development. Investment in the machineries and the trainings enhance the capacity of production of goods and services and the technological breakthrough accelerates the economic development.Pricing system directs the sellers and the buyers towards the activities that promote the general welfare.Generally the long term consequences of a certain plans are ignored and the short term consequence are considered which results in the huge bad effects than the problems occurred by the short term problems.
Legal system acts as the foundation of the economic development as it provides security to the privately owned property .Private property motivates the people to work and earn for their own rather than the others. Private owners can work for the development as they have been guided by the strong incentive. Private owners exploit the available resources to the optimum and conserves them.Competition promotes the efficient and effective use of resources and provides a continuous stimulation for the innovative breakthroughs. Competition puts the pressure on the producer to operate efficiently. The firms who are not able to caters the services eventually gets driven out of the market. Competition forces the business to lower their operational cost and help to introduce innovations.
Improper rule and regulations that is enforced by the government retards the economical growth as it limit the entry of the newer business and the competitive businesses. The gains from trade gets lowered in coarse of establishing and operating the business. The business gets out of the market due to the unwanted interventions and the huge regulations by the government.Effective mechanism that channelizes the capital for wealth generation by attracting the saving and the investment opportunities should be setup.
Monetary stability is highly disturbed by the inflationary monetary policies that distorts the price signals which undermines the market economy.Higher tax rates discourages the people to work higher as the worth of their hard work is taken by others. People don't want others to be benefitted of the hard work they do. Higher taxation will reduce the level of efficiency and the production.A nation will progress if it is able to find out its space of comparative advantage and work on that that produces each and every stuffs that is necessary for the nation. So, the space of the comparative advantage should be sorted out, worked upon, exported and the items of disadvantages should be imported.
Part 3: Economic Progress And Role Of Government.
The role of government is to protect the right of individuals and to work out to supply the goods and services that the market cannot effectively provide. Government should not be involved in business as it has the huge responsibility to cater service to its citizens. Government gets all the money through taxation which the private sector pays. So, it will be better the government to just work for the protection of the rights of the citizens.
The cost of the government is not just the taxes as there is also the cost of the resources that is spent in the collection of taxes and the enforcement of the government mandates.When the constitutional rules is not in action, special interest groups will use the democratic political process to fleece taxpayers and the consumers. Such misuse of the political and democratic interest increases the level of corruption with massive manipulation of the laws.
The legislatures will run the budget deficit and excessively spend the resources when the constitutional rules are violated. Such massive spending is not as productive as the proper usage of the available resources.Economic process gets slower down when the government gets involved in the process of providing the unnecessary subsides to the others on the cost of somebody else's expense.The cost of the government income transfers are huge higher than the net gain to the intended beneficiaries. The increase in the government transfers will reduce the incentives of both the taxpayers and donor and the transfer recipient to earn the income which in turn ditches the economic growth.The role of the central planning replaces the role of the market with the politics which wastes the amount of the limited resources and retards the level of the economic progress. Central planning will ensure the active role of the political interventions in the development planning thus increasing the level of corruption.
Competition is very very important in government as important as it in the markets. Constitutional rules that brings the political process and the sound economics into harmony will promote the economic progress. Economic progress is possible in the context of proper rule of law else it will halt the progress.
Part 4:Elemets of practical personal finance.
Prosperity is possible when one is able to identify the space of their comparative advantage and work on that. Entrepreneurship ensures people through the modern tools of doing things by innovative ideas that helps the businesses with the technological breakthrough. Market is generated when there is the transfer of the goods which is excess with one and low with the other. Change in habit from higher spending to the lower spending ensures the saving which in turn increases the property. Diverse the fields of the work from the most important to the less important. The habit of spending less and non on the extravagance will ensure the savings.
In such way "Common Sense Economics" with various examples have tried to simplify the complexity of economics with the common sense of the people. Thus this books is the simplification of the complex economics in the way which one can easily understand.
Review by Aanam
The book is divided into four parts in which the writers have tried to illustrate on the different aspects like key elements of economics, major sources of economic progress, role of government in economic development and the key elements of the practical personal fianances.With the ideas pursued in the book one will be able to make wiser political choices and benefit to be wealthy. The authors even argue that increase in the personal wealth results in the generation of the wealth of others too.
Part 1: Key Elements of Economics.
Incentives plays a vital role in the decision making of the individuals. The cost and value of each and everything that is available in our surrounding differs from individual to individual. Through the coarse of time human beings are selfish and greedy by nature. Incentives applies to all the socio-economic and political situations in which human being are an important part of.The resources available are limited whereas the human desires are unlimited. One should always give up something in order to obtain the other as there is always the involvement of opportunity cost. So, the decision of choosing and abandoning is done at margin.
Trade moves the goods and services from the people who have excess of something to the person who does not have the goods. The producer and the consumer go through the process of voluntary exchange for the collection of the goods they value the most.Transaction costs increases the cost of the goods so, one should always try to lesson the transactional costs in order to obtain the higher return.Profit works as an motivating factor which motivates the person to trade the goods and services and increase their wealth.People get paid for the services that they caters. The supplier of the service paid only when the consumer value the service.
Trade, investment, technological breakthrough and the sound economical institutions assists in the economic development. Investment in the machineries and the trainings enhance the capacity of production of goods and services and the technological breakthrough accelerates the economic development.Pricing system directs the sellers and the buyers towards the activities that promote the general welfare.Generally the long term consequences of a certain plans are ignored and the short term consequence are considered which results in the huge bad effects than the problems occurred by the short term problems.
Part 2: Major Sources of Economic Progress.
Legal system acts as the foundation of the economic development as it provides security to the privately owned property .Private property motivates the people to work and earn for their own rather than the others. Private owners can work for the development as they have been guided by the strong incentive. Private owners exploit the available resources to the optimum and conserves them.Competition promotes the efficient and effective use of resources and provides a continuous stimulation for the innovative breakthroughs. Competition puts the pressure on the producer to operate efficiently. The firms who are not able to caters the services eventually gets driven out of the market. Competition forces the business to lower their operational cost and help to introduce innovations.
Improper rule and regulations that is enforced by the government retards the economical growth as it limit the entry of the newer business and the competitive businesses. The gains from trade gets lowered in coarse of establishing and operating the business. The business gets out of the market due to the unwanted interventions and the huge regulations by the government.Effective mechanism that channelizes the capital for wealth generation by attracting the saving and the investment opportunities should be setup.
Monetary stability is highly disturbed by the inflationary monetary policies that distorts the price signals which undermines the market economy.Higher tax rates discourages the people to work higher as the worth of their hard work is taken by others. People don't want others to be benefitted of the hard work they do. Higher taxation will reduce the level of efficiency and the production.A nation will progress if it is able to find out its space of comparative advantage and work on that that produces each and every stuffs that is necessary for the nation. So, the space of the comparative advantage should be sorted out, worked upon, exported and the items of disadvantages should be imported.
Part 3: Economic Progress And Role Of Government.
The role of government is to protect the right of individuals and to work out to supply the goods and services that the market cannot effectively provide. Government should not be involved in business as it has the huge responsibility to cater service to its citizens. Government gets all the money through taxation which the private sector pays. So, it will be better the government to just work for the protection of the rights of the citizens.
The cost of the government is not just the taxes as there is also the cost of the resources that is spent in the collection of taxes and the enforcement of the government mandates.When the constitutional rules is not in action, special interest groups will use the democratic political process to fleece taxpayers and the consumers. Such misuse of the political and democratic interest increases the level of corruption with massive manipulation of the laws.
The legislatures will run the budget deficit and excessively spend the resources when the constitutional rules are violated. Such massive spending is not as productive as the proper usage of the available resources.Economic process gets slower down when the government gets involved in the process of providing the unnecessary subsides to the others on the cost of somebody else's expense.The cost of the government income transfers are huge higher than the net gain to the intended beneficiaries. The increase in the government transfers will reduce the incentives of both the taxpayers and donor and the transfer recipient to earn the income which in turn ditches the economic growth.The role of the central planning replaces the role of the market with the politics which wastes the amount of the limited resources and retards the level of the economic progress. Central planning will ensure the active role of the political interventions in the development planning thus increasing the level of corruption.
Competition is very very important in government as important as it in the markets. Constitutional rules that brings the political process and the sound economics into harmony will promote the economic progress. Economic progress is possible in the context of proper rule of law else it will halt the progress.
Part 4:Elemets of practical personal finance.
Prosperity is possible when one is able to identify the space of their comparative advantage and work on that. Entrepreneurship ensures people through the modern tools of doing things by innovative ideas that helps the businesses with the technological breakthrough. Market is generated when there is the transfer of the goods which is excess with one and low with the other. Change in habit from higher spending to the lower spending ensures the saving which in turn increases the property. Diverse the fields of the work from the most important to the less important. The habit of spending less and non on the extravagance will ensure the savings.
In such way "Common Sense Economics" with various examples have tried to simplify the complexity of economics with the common sense of the people. Thus this books is the simplification of the complex economics in the way which one can easily understand.
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