1. Policy Pub College of Social Sciences and Public Policy
March 12, 2019
Joe Calhoun
Teaching Professor, Department of Economics and Director, Gus A. Stavros Center for the Advancement of Free Enterprise and Economic Education

3. Part I. Twelve Key Elements of Economics
1. Incentives matter.
2. There is no such thing as a free lunch.
3. Decisions are made at the margin.
4. Trade promotes economic progress.
5. Transaction costs are an obstacle to trade.
6.Prices bring the choices of buyers and sellers into balance.

4. Part I. Twelve Key Elements of Economics
7. Profits direct businesses toward activities that increase wealth. 8. People earn income by helping others. 9. Production of goods and services people value, not just jobs, provides the sources of high living standards.

5. Part I. Twelve Key Elements of Economics
10. Economic progress comes primarily through trade, investment, better ways of doing things, and sound economic institutions. 11. The “invisible hand” of market prices directs buyers and sellers toward activities that promote the general welfare. 12. Too often long-term consequences, or the secondary effects, of an action are ignored.

6. Part II. Seven Major Sources of Economic Progress
Legal System
Competitive Markets
Limits on Government Regulation
An Efficient Capital Market
Monetary Stability
Low Tax Rates
Free Trade

7. Per Capita Income: The last 1000 years
Income stagnated for the 800 years following year 1000, but growth has exploded during the last 200 years.
(Measured in 1990 dollars) world per capita income was $667 in 1820 – only about 50% higher than year By 2003, however, income had risen to $6,516 – 10 times the level of 1820.
During the past 200 years, the income growth of the high-income industrial countries (West) has grown even more – nearly 20 fold.
$25,000
GDP Per Capita
2003: $23,710
$20,000
West GDP per capita
$15,000
2003: $6,516
$10,000
World GDP per capita
1820: $1,202
$5,000
1820: $667
1000
1100
1200
1300
1400
1500
1600
1700
1800
1900
2003

8. Part III. Economic Progress and the Role of Government

9. Part IV. Twelve Key Elements of Practical Personal Finance

10. Applications and Myths

11. Businesses pay taxes
Simplified formula: Total Revenue - Total Cost = Profit x 21% = Taxes paid to government

12. Businesses do not pay taxes
Total Revenue to business = Price x Quantity Total Expenditure by consumer = Price x Quantity Business only gets revenue from consumers

13. Only people pay taxes
Simplified formula: Total Expenditure - Total Cost = Profit x 21% = Taxes paid to government by people

15. The minimum wage is both helpful and harmful
This is a classic case of “the seen versus the unseen”
Unfortunately, it’s also a case of the measurable versus the unmeasurable
Workers who have jobs versus jobs that don’t exist because of the minimum wage

16. The minimum wage will reduce poverty
This is dubious
Characteristics of minimum wage workers:
About 80% are in a household with incomes above the poverty level
50% are years old, most part-time
15% are the primary earner in the family
Nearly 60% of people below poverty level have zero work hours

17. Government spending creates jobs
Government has to take before it can give

18. Trade wars are good for the economy
War, what is it good for? Absolutely nothing (say it again)

19. A country cannot simultaneously reduce imports and increase exports for an extended period of time

20. Trade Openness, Income, and Growth
The income levels and growth rates of the ten most and ten least open economies (as measured by the Trade Openness Index – TOI) are displayed here.
Note that more open economies both achieved higher income levels and grew more rapidly.
Source: Derived from Economic Freedom of the World 2015 Dataset and World Bank, World Development Indicators. The purchasing power parity method was used to convert the per capita GDP figures into 2011 international dollars.

21. Total employment is positively related to exports and imports

22. Thank you for coming!
Joe Calhoun