Saturday, October 04, 2008

The most important concepts in economics

Met with an old friend. His background is engineering and now he is an avid journalist who is thinking to start covering economic news. Damn they're interesting, he said about economic issues. Then we talked about economic news coverage in Indonesian media. The best econ journalists, the most common fallacies and so forth...

Then he asked my opinion of what constitutes the most important concept in economics. Frankly, that's a tough question. Usually, if I only had one shot, then it is "choice". But that would be unwise not to elaborate that vague concept to the friend. It's relation to opportunity cost being the prime implication, for example. So I said, I would put down a list...

Here's what I am thinking:

  1. Opportunity costs
  2. Comparative advantage
  3. Efficiency
  4. Externality
  5. Property rights
  6. Demand
  7. Supply
  8. Growth
  9. Inflation
  10. Interest rate

I so believe that a fair level of understanding the above ten basic concepts would do so much good to economic journalism -- and probably to op-ed economists, too. (My colleagues and I have mentioned some of them sporadically in Cafe Salemba).


Arya Gaduh said...

I'd just give your friend (or tell him to buy ;-)) Naked Economics by Charles Wheelan. It's available in the various bookstores in PS.

Arya Gaduh said...

Oh, and I think he also needs to know the difference between partial and general equilibrium.

Aco said...

Yes, of course, the Wheelan book! Thanks!

On partial and general equilibrium, yes, I think they would be the logical step after supply and demand...

Arya Gaduh said...

Oh, and he can now also access The Concise Encyclopedia of Economics for self-study.

Aco said...

Again, I second you on that, Arya. I've been recommending CEE to my students ("It's far better than Wikipedia, guys!")