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Blink 3 of 8 - The 5 AM Club
by Robin Sharma
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Basic Economics summary
Thomas Sowell
A Common Sense Guide to the Economy
20 mins
Brief summary
Basic Economics by Thomas Sowell is an introductory book on economics that explains how various economic systems work and how to evaluate them. It covers topics such as supply and demand, pricing, and competition.
Table of Contents
Basic Economics
Summary of 4 key ideas
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Key idea 1 of 4
Economics studies the use of scarce resources that have alternative uses
The basic principles of economics are universal. They operate in feudal, socialist, and capitalist societies, and they apply to all peoples, cultures, and governments.
These principles are unchanging. Policies that caused the price of grain to rise in ancient Rome will have the same impact if you implement them in today’s India or European Union.
Before we get into (some of) these principles, we need to begin by defining our terms. First off: what is an economy, anyway? One answer goes something like this: an economy is a system for producing and distributing the goods and services we require in everyday life.
That’s a good start – but there’s something missing. Per this definition, the Garden of Eden, which, among other things, was a system for distributing goods and services, was an economy. But few economists would classify it that way because those goods and services were abundantly available: there was as much of everything as anyone desired. Without scarcity, there’s no need to economize – and thus no economics. Put differently, economics studies the choices societies make about the use of scarce resources that have alternative uses.
Let’s break that down. Scarcity means that there isn’t enough of everything to satisfy everyone’s needs completely. What people want adds up to more than there is. In short, some needs will go unmet. The impossibility of satisfying all wants and desires is a constant in human history. At this level, feudal, socialist, and capitalist societies are just different institutional ways of thinking about the trade-offs that must be made due to scarcity.
That brings us to production. Economics doesn’t just deal with existing goods and services – it’s also more fundamentally about producing new output from scarce resources, or inputs.
As we’ve said, scarce resources have alternative uses. Water can be used to produce ice or steam, but it can also be used to cool power plants or dye jeans. If you have petroleum, you can produce gasoline and heating oil – or you can make plastics or asphalt or Vaseline. You can turn iron ore into paper clips, automobile parts, or the frameworks for skyscrapers.
Every economy, then, has to decide how much of each resource to use for which purpose. These decisions – rather than the existence of natural resources – ultimately determine a country’s standard of living. There are, after all, resource-rich countries with relatively low standards of living, and resource-poor countries with high standards of living. The value of natural resources per capita in Uruguay, for example, is several times higher than in Japan, but real income per capita in Japan is more than double that of Uruguay.
The difference-maker here is efficiency in production – that is, the rate at which inputs are turned into output. Efficient economies maximize output by minimizing waste and getting the most out of scarce resources; inefficient economies don’t. If you want to visualize this process, it helps to think about real things – the iron ore, wood, and petroleum that go into the production process rather than the cars, furniture, and gasoline that come out at the other end. Although economics is often conflated with money, currencies and cash are secondary. Money is an artificial device to get real things done. It’s the volume of goods and services, as well as the efficiency of their production, that determine how rich or poor a country is.
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What is Basic Economics about?
Basic Economics (2000) provides a broad yet comprehensive introduction to economic principles, without requiring a background in the subject. Avoiding complicated jargon, it explains core economic concepts in plain English, with the help of real-life examples.
Basic Economics Review
Basic Economics by Thomas Sowell (2010) is a valuable resource for anyone looking to understand the fundamental principles of economics and their impact on our daily lives. Here's why this book is worth reading:
- Explains complex economic concepts using practical, real-world examples, making it accessible and relevant for readers.
- Guides readers through the economic decision-making process and highlights the consequences of different choices, empowering readers to make informed decisions.
- Engages readers with its clear and concise explanations of economic concepts, keeping the subject matter interesting and far from boring.
Who should read Basic Economics?
- Those looking for an introduction to key economic topics
- Savers wondering what banks do with their money
- Anyone who’s asked themselves how dams and highways get built
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Basic Economics FAQs
What is the main message of Basic Economics?
The main message of Basic Economics is to understand the principles and impact of economics in everyday life.
How long does it take to read Basic Economics?
The reading time for Basic Economics may vary, but it typically takes several hours. The Blinkist summary can be read in just 15 minutes.
Is Basic Economics a good book? Is it worth reading?
Basic Economics is a valuable read for gaining insights into economic principles. It is worth reading for anyone interested in understanding how economics affects our world.
Who is the author of Basic Economics?
The author of Basic Economics is Thomas Sowell.
What to read after Basic Economics?
If you're wondering what to read next after Basic Economics, here are some recommendations we suggest:
- Economic Facts and Fallacies by Thomas Sowell
- How the World Really Works by Vaclav Smil
- Understanding Artificial Intelligence by Nicolas Sabouret
- Social Justice Fallacies by Thomas Sowell
- How to Day Trade for a Living by Andrew Aziz
- Doughnut Economics by Kate Raworth
- Profit Over People by Noam Chomsky
- A Little History of Economics by Niall Kishtainy
- Energy by Vaclav Smil
- The 5 AM Club by Robin Sharma