Setting the Stage
N Gregory Mankiw is an economics professor at Harvard and former economic adviser to President Bush. His “favorite textbook” lays out 10 fundamental principles of economics, which shape and explain the way people act and react in the marketplace.Economics is on my mind lately, in part because we have Sam Kahan coming to Detroit this Wednesday to speak at our regional branch of the Federal Reserve. One thing I want to make clear is that I’m not a professional economist. I invent enterprise IT strategies and lead software teams to build awesome value for businesses. With that out of the way, let’s get started.
The Ten Principles, “un-translated“
People are often cynical in saying that “everyone is an economist”… I similarly accept “Bentley’s 2nd Law of Economics”, and I think it applies to all of us. As you’ll see in the ten principles laid out, many relate to decisions each of us makes every day without thinking about it. Those that don’t apply to us individually still apply socially.
- People face tradeoffs
- The cost of something is what you give up to get it
- Rational people think at the margin
- People respond to incentives
- Trade can make everyone better off
- Markets are usually a good way to organize economic activity
- Governments can sometimes improve market outcomes
- A country’s standard of living depends on its ability to produce goods and services
- Prices rise when the government prints too much money
- Society faces a short-run tradeoff between inflation and unemployment
The Notion of “Economy” Applied to IT and Software
There are many ways to define “economy“, some that are telling of issues we face in the information technology domain, such as “thrifty management; frugality in the expenditure or consumption of money, materials, etc.“
For the purposes of this series, however, we can adopt a broader definition of “economy” as referring to “the management of the resources of a community, country, etc., especially with a view to its productivity.” So more simply (in my words), an economy is a space in which we transact, and economics is the study of how we do so.Information technology and software teams are all about managing resources, especially with a view to productivity. Oh, one last thing… here’s a note from the American Heritage version of the definition that we’ll come back to during this series:
“Economics is generally understood to concern behavior that, given the scarcity of means, arises to achieve certain ends. When scarcity ceases, conventional economic theory may no longer be applicable.”
Thanks for joining me on this journey. I want it to be fun and insightful for everybody.Post comments below to help me steer the conversation to thoughts you have about this series!