Jim Driver: ‘Twelve Real Economic Facts’
Many of the articles that I read in The Union’s opinion pages concern economic ideas. I am often amazed when I read the economic fallacies that are presented as if they were “absolute facts.” They are not.
So, for the record, I would like to offer “Twelve Real Economic Facts.” These facts come from The Foundation for Economic Education.
For more information about “FEE,” check out FEE.org. It is one of the few organizations that has tried to correct the economic misinformation that has been fed to the general public since the late 1940’s.
1. In any freely chosen economic exchange, both parties will, at least in their own minds, benefit from the exchange. This is called “Gains from Trade.”
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2. The value of any good or service can only be determined by the individual human mind. This is called “Subjective Value.”
3. Nothing is free. The cost of anything that you want is what you are willing to give up, to get what you want. This is called “Opportunity Cost.”
4. Economic wealth, in a free society, does not come from “a top down planned economy created by so called experts” but from individuals’ actions that result in unplanned outcomes for the whole society. This is called “Spontaneous Order.”
5. Individuals act to maximize their own reward. This is called “Incentives.”
6. Cooperation between individuals creates value when a seller can produce a given item or service at a lower cost than the buyer would spend to produce it himself. This is called “Comparative Advantage.”
7. No one person or group knows enough to plan (and force) social outcomes, because information necessary for social order is distributed among its members and revealed only in human action. This is a “Knowledge Problem.”
8. In addition to the tangible and quantifiable effects, there are quite often invisible costs and unmet opportunities to any action or policy. These are often called “Unintended Consequences.”
9. Institutions influence the decisions that individuals make. For example, property rights by definition can only exist when ownership is vested in the individual and not in the commons. This means that “Rules Matter.”
10. Each person makes choices with the intention of improving his or her condition. This means that “As Individuals, the Actions we make are Purposeful.”
11. Voluntary association permits people of all backgrounds to interact peaceably, create value, cultivate personal character and build mutual trust. This helps create “A Civil Society.”
12. Wealth is generated whenever someone, by acting on an opportunity to gather under-used, or misused, or undiscovered resources or ideas, creates value for others. This is called “Entrepreneurship.”
Jim Driver has been a student of economics since the mid 1950s. He lives in Rough and Ready.
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