Some clarification from Wu Tang Finance on the ten key principles of economics…
“they ain’t no such thang as free lunch... if you haven’t figured that out yet in yo life, we is shaking our heads at ya…
PV=MV bitches. Velocity of money just not picking up boo. People been deleveraging up in here.”
THE TEN PRINCIPLES OF ECONOMICS, REVISITED
1.People Always Facing Tradeoffs.
They aint no such thang as free lunch. If you haven’t figured that out yet in yo life, I’m shaking my head at ya. To get yo hands on one thing, you gotta give up something else in return. Making decisions requires trading off one goal against another. Whether it be fo’ yo goals of wealth, fo’ shawties, drank or food, you gotta give up something in return.
2.The Cost of Something is What You Give Up to Get It.
Decision-makers gotta understand both the direct and indirect costs of their actions. Cash rules everything around you, but you best protect ya neck from negative externalities. Sometimes that paper clouds ya judgment. Yo Enron, shawty!! What did dat accounting scandal do to yo reputation? Company? U was chasin that short term gain now look atcha you took down an oil giant and a storied accounting firm with ya sorry ass.
3.Rational Dealers Think at the Margin.
True thugs live their lives at the margin (http://rapgenius.com/1148769). A rational gangsta ass banker takes action if and only if (“iff” for you math geeks out there, shoutout & respects to the QED crew) the marginal benefit of such action exceeds dat marginal cost. Don’t hold too much product on ya if the cost of carry be high. Whether if you slanging financial products or if u slanging other “high margin” goods.
4.People Respond to Incentives.
Behavior changes when costs or benefits change. This is truuuuuu in all aspects of life. Think bout thatshawty u chasin. Why u in hot pursuit tho? Incentives? Why u working them long nights? To get that cream? Simple shit bruh.
5.Trade Can Make Everyone Better Off.
Free trade of goods and services allow individuals to specialize skills, be rewarded economically and benefit others all at once, which gets me moderately turnt. That division of labor be some trill ish. Governments sometimes create disincentives that make people worse off.
6. Markets Are Usually a Good Way to Organize Economic Activity.
Watchout otherwise that invisible hand gonna slap you hard in the face. Households and firms that are interacting in the free market allocate resources efficiently.
THIS IS A HARD ONE TO COMPARE TO THE REAL WORLD THO. THE GOVERNMENT HAS ITS HANDS ALL UP IN MY PRIVATE MARKETS AND THAT’S NOT COOL DAWG SOME MARKETS IS UNDER 18 YEARS OLD. For real, look at markets where the government is less involved….technology for example. PRICES DECREASE OVER TIME AS RESOURCES ARE ALLOCATED EFFICIENTLY TOWARD PROFIT GENERATIN PRODUCTS. The opposite of this prosperous, tax revenue-generating, catalyst of economic activity is those markets organized by central planners within the government. Think higher education prices (ANNUAL PRICE INCREASES ARE HIGH AF) and healthcare costs (DAMN I GET FADED THINKING BOUT THOSE PRICES). Those markets are controlled by government whether it be credit monopolization or price oversight….
7.Governments Can Sometimes Improve Market Outcomes.
NAH JUST KIDDING DUDE WAS FADED WHEN HE THOUGHT OF THIS ONE LOL.
8. A Country’s Standard of Living Depends on Its Ability to Produce Goods and Services.
What explains these big-ass differences up in livin standardz among countries over time, biatch? Almost all variation in livin standardz be attributable to differences up in countries’ productivity (goods and services, yo). Productivitizzle is tha quantitizzle of skillz produced from each unit of a workers time. In *theory*, the growth rate of a nation’s productivity determines tha growth rate of average income.
9.Prices Rise When the Government Prints Too Much Money.
In a *simple* supply and demand relationship, if one increases the supply of a good like mad, then the price of that good will have to decrease.
This one trips me out when we consider the past few years of the dollar’s value, B. This is where I need some expert Atlantic-economist-journalist ta tell me why our crazy asses have peeped no “inflation” since embarkin up in all dat asset purchasing, or QE. Put a house up on that ass, that’s an ass-state.
While many worry that tha rapid rise up in tha Fed’s balance sheet (value of securities held at da Federal Resereve) will invariably result in a rapid rise up in tha money supply up in tha real economy, this hasn’t been the mf case. Most of tha purchases intended ta pump money tha fuck into tha real economizzle have straight-up sat idle wit tha Fed as excess reserves. Some shawties would argue that the government’s emasure of inflation is whats really trippin.
PV=MV bitches. Velocity of money just not picking up boo. People been deleveraging up in here.
10. Society Faces a Short-Run Tradeoff Between Inflation and Unemployment.
I AINT GONNA GET INTO THAT DUDE PHILLP’S CURVE AT ALL BRUH. All I gotta say is dat policymakers can and do exploit this tradeoff rockin various policy instruments, n u can take that all the way to yo bulge bracket bank. For example, by changin the amount it spends, the amount it taxes, n’ tha amount of cream it prints, Policymakers can influence the combination of inflation n’ unemployment tha economy experiences.
‘YELLEN HAVE A DREAMMMMM….. of maximal employment. She is from Brooklyn zoo too…RIP ODB…