Essential Economics

"Economics is what economists do."
-Jacob Viner-Leading 20th century economist

"The study of how society uses it's scarce resources."

"The science of choices."

Every opportunity has a cost, what are you giving up to do this?
When talking about opportunity cost, take a hard look at the downside of any choice to ensure, before going ahead, that the upside is as desirable as it seems.

True, sometimes economist make the mistake of tlaking about money and welfare as if they are the same thing. This may be because changes in the amount of money and individual or society has are easy to measure, and changes in financial wealth do in fact often move in step with changes in welfare. Welfare is an economic jargon for happiness or satisfaction.

Economic strategies are less concrete than other scientific practices. The best macro economic theories may be more like "soft" scientific theories such as the big bang and evolution- which are plausible explanations, but not proven beyond reasonable doubt- than the "hard" scientific theories people are happy to trust with their lives when they step into an aircraft or have a hip replacement.

Market Virtue.

Challenges for economists

Does it make sense for companies to spend so much money on advertising and brand building?

ABSOLUTE ADVANTAGE
If one person, firm or country can produce more of something with the same amount of effort and resources,they have an absolute advantage over other producers. The question of what to specialize in- and how to maximise the benefits from international trade- is best decided according to COMPARATIVE ADVANTAGE.

ADAPTIVE EXPECTATIONS
A theory of how people form their views about the future that assumes they do so using past trends and the errors in their own earlier predictions.

ADVERSE SELECTION
When you do business with peple you would be better off avoiding.

ADVERTISING
Many FIRMS advertise their goods or SERVICES, but are they wasting economic resources? Some economists reckon that advertising merely manipulates consumer tastes and creates desires that would not otherwise exist. By increasing product differentiation and encouraging BRAND loyalty, advertising may make consumers less PRICE sensitive,moving the market further from PERFECT COMPETITION towards imperfect competition (see MONOPOLISTIC COMPETITION) and increasing the ability of firms to change more than MARGINAL cost. Heavy spending on advertsement may also create a BARRIER TO ENTRY, as a firm entering the market would have to spend a lot on adProxy-Connection: keep-alive
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rtisement too.
However economists argue that advertising is economically valuable because it increases the flow of INFORMATION in the economy and reduces the ASYMMETRIC INFORMATION between the seller and the consumer. This intensifies competition, as consumers can be made aware quickly when there is a better deal on offer.

ARBITRAGE
Buying an asset in one market and simultaneously selling an identical asset in another market at a higher PRICE. This is a rarity because of the GLOBALIZATION of FINANCIAL MARKETS

AUSTRALIAN ECONOMICS
A brand of NEO-CLASSICAL ECONOMICS established in Vienna during the late 19th century and the first half of the 20th century. It was strongly opposed to Marxism and, more broadly, to the use of economic theories to justify the GIVERNMENT intervention in the economy. Prominent members included Friedrich HAYEK, Joseph SCHUMPETER and Ludwig von Mises. It gave birth to the definition of economics as the science of studying human behavior as a relationship between ends and scare means that have alternative uses. Australian economic thinking was characterized by apparently impersonal institutions, to the wishes and actions of individuals. It did this by examining choices in the termsof their OPPORTUNITYT COST(that is, what is the nest best use of resources t that which is being considered?) and byu analysing the impact of timing on decision making.
Hayek correctly predicted the failure of Soviet Style central planning. His ideas are said to have inspired many of the free-market reforms carried out during the 1980s in the united states under Ronald Reagon and in the UK under Margaret Thatcher. Schumpter developed a theory of INNOVATION and economic change characterized by the phrase creative destruction.

TBC...