Ten Key Ideas: Opening the Door to the Economic Way of Thinking

Introduction

Here are ten fundamental ideas to help you explore and understand the world around us using the economic way of thinking. I’ve written an essay on each idea and listed some reading and listening suggestions if you want to learn more. The essays are all written for a beginner but some of the ideas are subtle and will be of interest to much more experienced readers. The suggestions for further learning include classic works of economics, podcasts, entries from the Concise Encyclopedia of Economics and other resources from this site and elsewhere. Enjoy.

The Ideas

Incentives Matter

• “Incentives Matter”, by Russell Roberts

Learn more:

• • “Demand”, by David R. Henderson from the Concise Encyclopedia of Economics.
  • “Slavery, Snakes, and Switching: The Role of Incentives in Creating Unintended Consequences”, by Glen Whitman.

Understanding Costs

• “Getting the Most Out of Life: The Concept of Opportunity Cost”, by Russell Roberts

Learn more:

• • “Opportunity Cost”, by David R. Henderson, from the Concise Encyclopedia of Economics
  • Ticket Scalping and Opportunity Cost. Podcast with Mike Munger on EconTalk.

How Markets Work

• “The Reality of Markets”, by Russell Roberts

Learn more:

• • “Unintended Consequences”, by Rob Norton, from the Concise Encyclopedia of Economics

How Prices Emerge

• “Where Do Prices Come From?”, by Russell Roberts

Learn more:

• • Vernon Smith on Markets and Experimental Economics. Podcast on EconTalk.

Comparative Advantage

• “Treasure Island: The Power of Trade Part I. The Seemingly Simple Story of Comparative Advantage”, by Russell Roberts

Learn more:

• • “Comparative Advantage”, by Lauren Landsburg
  • “A Brief History of the Concept of Comparative Advantage”, by Morgan Rose

The Division of Labor

• “Treasure Island: The Power of Trade. Part II. How Trade Transforms Our Standard of Living”, by Russell Roberts

Learn more:

• • Mike Munger on the Division of Labor. Podcast on EconTalk.
  • Don Boudreaux on the Economics of “Buy Local”. Podcast on EconTalk.

The Extended Order of Cooperation

• “A Marvel of Cooperation: How Order Emerges without a Conscious Planner”, by Russell Roberts

Learn more:

• • “The Ultimate Chain Letter”, by Russell Roberts
  • “I, Pencil”, by Leonard Read
  • “The Use of Knowledge in Society”, by Friedrich A. Hayek
  • “Rinkonomics: A Window on Spontaneous Order”, by Daniel B. Klein

Externalities

• Coming soon.

Learn more:

• • “Napsternomics: What’s the Most Effective Way to Protect Intellectual Property?”, by Russell Roberts.

How Politicians Behave

• “Pigs Don’t Fly: The Economic Way of Thinking about Politics”, by Russell Roberts

Learn more:

• • Bruce Yandle on Bootleggers and Baptists. Podcast on EconTalk.
  • Giving Away Money: An Economist’s Guide to Political Life. Podcast with Mike Munger on EconTalk.

What Politicians Can and Cannot Do

• “Presidential Economics: What Leaders Can and Cannot Do about the State of the Economy”, by Russell Roberts.

Learn more:

• • “What is Seen and What is Not Seen”, by Frédéric Bastiat