A deeper understanding of economics and its value
Economists and the economy are often thought of as sad and boring. In his book, Charles Wheelan shows us that it does not have to be that way. Economics can be undressed of its complex and obscure language, of its complicated concepts and stand naked in front of anyone who has never studied it, nor understood it completely. Naked Economics guides us to a gradual understanding that economics as a science is not exact, and yet is of great importance in the lives of people and countries.
Many useful tips to:
- For anyone who has not studied economics, but is curious to understand this subject and the implications it has on our everyday lives.
- To consider human capital as our most precious asset that we cannot be denied.
- To help remember that money has no intrinsic value, and that it is only a means to facilitate exchange.
The economy keeps turning because of people’s desire to pursue their own interests
The economy is based on several assumptions, the first of which is that each person’s goal is to get the most out of their life. Since the most precious resource we have is time - which is limited - the question of its use becomes fundamental. Therefore, in our lives, we are constantly calculating the costs and benefits, of what we have to sacrifice and the advantages we can obtain from doing so. The second assumption is the idea that companies want to maximize profits, that is, earn as much as possible. An "entrepreneur" is someone who takes a thing (product or service) and works to increase its value. An entrepreneur uses his business to create new value. Another important concept we need to be clear about is the market economy, which means that all available resources are used in the most productive way possible. So companies, just like people, have to answer the following question on a daily basis: how can I get the most out of what I do? One way to think about profits is to think about prices, a company has to decide the best price for their product or service to enable them to get the maximum benefit. On the one hand, there are consumers who want to obtain as much as they can, and to enjoy the highest level of well-being available to them, and on the other there are companies who need to be productive, and make a profit. They are simple concepts, but they can reveal many dynamics that speak volumes about how the world works.
The market economy is a powerful force in improving people's lives; companies can only make profits if they offer products that really interest people, and this assumption drives them to do better and better. Unfortunately, however, the market is amoral, because it rewards scarcity and not the intrinsic value of an object or service; just think of the fact that water is free, while diamonds are very expensive (or think of medical insurance, which is not sold to those who need it, but only to those who can afford it).
The key ideas of "Naked Economics"
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