A handful of essential ideas from economics

Inspired by this year's Edge question ("What scientific term or concept ought to be more widely known?"), Bloomberg columnist Noah Smith enumerates five economic concepts that we would be well-served to familiarize ourselves with: "Endogeneity" (when you don't know whether something is a cause or effect); "Marginal versus average" (something can be good on average, but so bad at the margins that it's a net negative); "Present value and discounting" (how much would you sacrifice today for the promise of something great tomorrow?); "Conditional versus unconditional" (you can hedge a prediction by adding a condition: "Assuming Donald Trump loses the election, the biggest crisis we'll face is a continued transfer of wealth from the poor to the rich"); "Aggregate" (differentiating global effects from local ones: borrowing money reduces your personal net worth, but increases some one else's, so you're getting poorer, they're getting richer and in the aggregate, it's a wash -- governments need to think in aggregate, voters need to think in particular). (more…)