Alfred Mill - Economics 101

Avon, Massachusetts

Do you have preconceived ideas about economics? Do you want to know how the economy works, but find yourself nodding off? Do you want to learn more but are turned off by the dry, technical language and all this talk about money?

In Economics 101, youll realize that economics doesnt have to boring. In fact, exploring this subject will make you look at the world in ways that you would have never considered before. Economics lets you make connections between seemingly disparate things like the rate of unemployment and dear old Dads tendency to replace his underwear. And youll understand the world better. When interest rates change, youll be able to predict the ramifications. A meaningful discussion of stocks, bonds, mutual funds, and collateralized debt obligations will no longer sound like some strange dialect of Portuguese. While this is not a personal finance book, the principles of economics it describes will help you keep your own financial house in order.

In economics, expectations become reality and money is just a social construct. Thats not boring, thats mind-blowing! After reading Economics 101, youll come to know and love concepts like diminishing marginal utility, and everyones new favorite, quantitative easing. Wrapping your mind around these ideas will help you make better sense of the economy around you and why people behave as they do in money matters (hint: its not always rationally!). You can even put the information to use by teaching your boss about controlling variable costs and maximizing profits. Exchange rates and savings flows will be like childs play for you, capital and investment will take on a whole new meaning, and constructing a CPI and deflating nominal GDP will be second nature to you. Your poet hippie cousin that lives in a van and plays guitar will be thrilled when you explain to him why he is technically not unemployed.

Economics isnt just about defining abstract terms like some of those Ive mentioned. Its actually an exercise in philosophy! By that I mean economics impacts every aspect of your life and influences everything that you do. And I mean everything! Economics teaches that nothing is free. Costs are involved with every choice, even if the choice doesnt seem to have any bearing on money matters at all.

Economics isnt something done by nameless groups somewhere far from home. All economic decisions are made by individuals. Individuals bear the cost of these decisions. Yes, that means you. Economics is personal. They do not set prices. We set prices.

After reading Economics 101, youll know why the world works as it does. Here, youll learn such things as:

• Why you can have too much of a good thing. (Utility is diminishing).
• Why unemployment by any other name is probably not unemployment.
• Why what is true in the long run might not be true in the short run.
• Why policymakers who manage expectations can manage reality.
• Why, if given a choice between inflation and deflation, you should choose inflation.
• Why individuals are better at managing their finances than are governments.

Ready to start exploring the mind-expanding world of economics? Lets go!

You open the door to your fridge and gaze at the food inside and declare, Theres nothing to eat in this house. Later, you walk into a closet full of clothes and then think, I have nothing to wear. You are faced with scarcity. You never have enough of what you need or want. The fact is, you have plenty to eat and many clothes to wear. You chose to ignore the options you faced then and there, but eventually you know you will relent and eat the apple next to the shriveled grapes at the bottom of the bin, and then put on the shirt and pants you hate. You are a creature of economics. Given scarcity, you look at the choices you face, evaluate, and then choose.

Economics is the study of how individuals, institutions, and society choose to deal with the condition of scarcity. It is fascinating to see how people react to scarcity. Some create complex plans and systems to make sure that everyone gets their fair share of scarce resources. Others make things up as they go along. Everybody practices economics on a daily basis. From a single individual to the largest society on earth, people are constantly engaged in the struggle to survive, make ends meet, and even thrive given the relative scarcity they face.