*Common Sense Economics*

The third edition is now out, and the authors are James D. Gwartney, Richard L. Stroup, Dwight R. Lee, Tawni H. Ferrarini, and Joseph P. Calhoun.

Self-recommending, this is a very good introduction to economics for say a smart high school student who reads books.  Sadly, more and more politicians and indeed professional Ph.d. economists need this wisdom too.


Wow, TC was right in his previous post on crowding out. Check this out, there *is* a tradeoff, it's quite graphic (Fig 3):


The Cold War Economy
Opportunity Costs, Ideology, and the Politics of Crisis By Robert Higgs | Posted: Fri. July 1, 1994Also published in Explorations in Economic History

An increase of the share of G-M in GNP can occur at the expense of either the share of P or the share of G-NM or of both. For expositional convenience let us employ the usual terms, calling G-M “guns” and P “butter.” G-NM will be called “roads.” A distinction may be drawn between “butter-sacrificing” mobilizations, when the P share declines, and “roads-sacrificing” mobilizations, when the G-NM share declines. Demobilizations may be viewed in parallel terms as “butter-enhancing” or “roads-enhancing.”

The behavior of the private share was quite different. Changes in the G-M and P shares were almost exactly offsetting. A trade-off equation fitted to the annual changes during 1948-1989 has a tight fit (R2 = 0.814) and shows that the implicit cost of a one-percentage-point increase in the military share was a reduction of one percentage point in the private share: the regression slope coefficient is -1.004 with a standard error of 0.077; hence one cannot reject the hypothesis that the slope equals one at any customary level of Type I error. (Deletion of the years 1948-1950 from the data set has no effect on this conclusion.) Figure 3 plainly shows the two offsetting changes to be deviations from a horizontal line representing a zero sum of the two changes. In short, during the Cold War the private sector alone bore the full cost of annual increases in the military share of total output as conventionally defined.

Ok, don't invest in things that mainly happen in other countries then.

'Wow, TC was right in his previous post on crowding out.'

In which case, then, he was clearly wrong in his Upshot column, arguing that planning/preparation for war is a reliable (and apparently desirable) source of economic growth, one lacking in our more peaceful times.

The Fig. 3 chart shows military spending as percent of GDP, and since, unlike non-military private sector spending, since it does not get cut during a downturn, it "shoots up" as percent of GDP compared to the latter. That's the way I interpret this chart. If you want to call that crowding out, so be it, though I'm not sure that's the case. And I guess having a steady job in the military-industrial complex is worth something maybe to some people, though I don't like defense spending and being the world's policeman for the USA.

"smart high school student who reads books." Such a thing doesn't exist. Stop lying.

They do exist. They will return to reading books after watching the Olympics. Va Brasil!

It's a myth. And we have no time for reading. We are too busy building the future. A new Brazil, as glorious as the Rio Games, slouches towards Bethlehem to be born. Brazil shall rise again!

It never rose the first time.

Smart high school students are busy taking college class, not reading books.


For the record - in my country, I guess that 10 percent of lawyers think that an overwhelming percent of other lawyers are clearly incompetent. 20 percent of poets think almost all other poets are phonies. 30 percent of physicists think the vast majority of other physicists are crackpot-level worthless. Double or triple those numbers for economists. In that context, to say a book is a good book for a bright community college student is perhaps the highest compliment a lawyer, a poet, a physicist, or an economist, can give to another.

So what? To Hell with them, I say.

In high-school I bought a 101 level Planetary Science textbook, took a free study period and worked through it. Later on I happened across the author at a science conference, had the book with me and asked him to sign it. Turns out he was also an artist and drew a Titan-scape on the inside cover at a speed that would impress Bob Ross. He wasn't all that surprised so I must not have been the first to ask. He's still responsible for the leading theory on the moons formation, so I figure if it holds, in a few more generations my grandchildren might have something of value.

It's a niche market but its out there.

My thought exactly.

The authors of an article entitled "Mysticism in Literature" (by H.C. Gardiner and E. Larkin) were surprisingly dismissive of Blake, an "I-It" enthusiast (like Wordsworth and fantasy novel world-builders); apparently the real success in the "Mysticism in Literature" world is in the "I-Thou" (Carmelite poets, very generous people, that sort of thing) area. I have long thought that JM Keynes - whose General Theory is in places as well written as Finnegans Wake, as I once read somewhere on this blog - was to his brother Geoffrey (the Blake specialist) what the fictional Sherlock was to Mycroft; a very bright sibling but clearly the exponentially less capable of the two. Economics, though, is often just common sense reiterated and refined with the mistakes thrown out; it seems almost comical to associate something that takes such a long time with young students. I read my first economics book, with a banana-yellow cover, in high school (bought at a Waldenbooks at a Bay Area shopping mall, long vanished; at the same mall, I was in line behind a young woman, now in her 70s, who bought a cassette recording of Rachmaninoff's 24 variations on a theme of some long-forgotten fiddler. I still remember the shy happy smile on her face - the money she spent must have meant something to her - and how well she was dressed, as if she believed one had to dress elegantly to buy a Rachmaninoff cassette. Writing a comment on this almost (or completely) male-only comment thread, all I can say is she was as likely to be right about the necessity of elegance as me, if not more so. If she is reading this, I don't remember the town, but it was somewhere just north of Pleasanton).

It is for comments like this that I continue to read MR for more than a decade.

Agreed....(and at 430 in the morning)

In India in some colleges and universities it is very difficult to find teachers who read books. If you suggest purchasing books they will think you escaped from a lunatic asylum

What a stupid thing to say. This is a good book and is mostly true. If everyone who ever studied economics forgot everything they'd learned and replaced it with the simple truths in this book, the world would be a much, much better place.

Oh yes, if only everyone had the 'common sense' of folks like you. What a goddamn nightmare.

Anyone who thinks that economics is "just common sense!" is either lying or an idiot.

TC deleting comments pointing out that he is promoting more Koch influence. Ironic that they're all parasites at public universities. Anyone who thinks that economics is "just common sense!" is lying or an idiot.

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