10 Economic Principles Everyone Should Know
Economics can be a difficult subject to learn, so it’s no surprise that many students are intimidated by economics classes in high school and college. But at it’s core, economics is the study of how humans interact with value. Economics studies what people value and how their values influence their actions.
To really break down economics, it’s important to look at the underlying principles that are foundational to the field. This list is adapted from “Modern Principles of Economics” by Tyler Cowen and Alex Tabarrok.
1. Incentives Matter
The first economic principle is that incentives matter. People will make choices based upon the incentives that exist.
We often think of monetary incentives as primary drivers of decision-making, but other incentives matter too. Fame, power, love, reputation, and sex are all important incentives that shape how people act.
2. People are Self-Interested
People are self-interested and will act in ways that are most beneficial to them. This doesn’t mean that people are always selfish; in fact, one of the common misinterpretations of this principle is that we forget the distinction between being self-interested and selfish.
