Economics Archives

The 2 Types of Inequality: Static vs. Dynamic

What are the two types of inequality? How does the free market help reduce economic disparity between classes? According to Nassim Taleb, there are two types of wealth and two types of inequality: static and dynamic. Static inequality refers to the wealth disparity of a population at any given single point in time. On the other hand, dynamic inequality refers to the inability of a given individual to rise in economic class across a lifetime. In this article, we’ll explore the difference between Taleb’s two types of inequality. Then, we’ll examine Taleb’s argument that the free market does the most

Economies of Scale: Advantages and Flaws

The Advantages of Economies of Scale and Its Flaws

What are the advantages of economies of scale? Does scale come with its own disadvantages? The advantages of economies of scale include greater cost efficiency from increased product volume, competitive advantages due to size, and more sales because of brand ubiquity. Scale can also be disadvantageous because it can lead to bureaucracy and corruption. Read on to learn more about the advantages of economies of scale and its possible drawbacks.

How and Why to Build a Financial Safety Net

Why is it important to have a financial safety net? How many months’ worth of living expenses should your safety net cover? No matter how much money you earn, it’s important to have a financial safety net—a savings account with money you can use for emergencies—to prepare for worst-case scenarios. To start building your safety net, figure out how much you need to save to cover your living expenses so that you can decide how much money to set aside each month. In this article, we’ll explore how to automate contributions toward your safety net to ensure that you’re prepared

Nudge: Book Review, Context, and Reception

Are you considering reading Nudge by Richard H. Thaler and Cass R. Sunstein? Do you want to read a Nudge book review before you make the purchase? In Nudge, the authors explain that people are not the eminently rational beings that appear in most economic theories—so-called homo economicus—but instead, are fallible and often irrational economic actors prone to all sorts of biases. This book was revolutionary and even influenced policymakers when it came out in 2008. Keep reading for a full Nudge review with commentary on its approach and context.

Investment Biases and Loss Aversion Psychology

What are the most common investment biases? How do the authors of Nudge suggest overcoming those biases? In the book Nudge, authors Thaler and Sunstein note that the main reason people are nervous about investing and about defined contribution retirement benefits is because of the loss aversion bias. The authors discuss the nuances of loss aversion and some tips to overcome it. Continue below for advice on how to avoid investment biases, according to the authors of Nudge.

The Shock Doctrine: Quotes by Naomi Klein

Are you looking for The Shock Doctrine quotes by Naomi Klein? What are some of the most noteworthy passages worth revisiting? The Shock Doctrine discusses how economic shock therapy gave rise to “the disaster capitalism complex”—a privatized system of destruction and economic reconstruction. Klein argues this economic plan doesn’t improve an economy, as its proponents claim. Instead, it invariably leads to mass unemployment, increased poverty, and widespread starvation, while a few select people become extremely rich. Here is a selection of The Shock Doctrine quotes with explanations.

Jeffrey Sachs: Bolivia’s Shock Therapist

Who was Jeffrey Sachs? What was the role of Jeffrey Sachs in Bolivia’s shock therapy? Economist Jeffrey Sachs played a major role in implementing economic shock therapy in Bolivia under president Paz. Upon re-election, Paz set out to correct Bolivia’s spiraling economy with policies based on Jeffery Sachs’s recommendations. In this article, you’ll learn about Bolivia’s shock therapy, how it was implemented, and what happened in its aftermath.

Milton Friedman’s Capitalism Philosophy—Explained

Who was Milton Friedman? What was his economic philosophy? Milton Friedman was an American economist who was best known for his devotion to the ideology of free-market capitalism. Friedman believed in the power of the market to regulate itself, was strongly against government intervention, and was in favor of privatization and maximization of corporate profits. Keep reading to learn about Milton Friedman’s capitalism philosophy, and his efforts to realize his vision of perfect-market capitalism—efforts that would, in time, lead to the modern disaster capitalism complex.

The Economics of Shock Therapy

What is shock therapy in the context of economics? What measures does economic shock therapy entail? In economics, shock therapy is a way to quickly improve a country’s economy through rapid privatization, deregulation, and severe cuts in government spending. It imposes strict free-market policies on the country in question as quickly as possible. In this article, you’ll learn about the concept of shock therapy, and how it relates to economics.

What Is Free-Market Capitalism? Definition & Examples

What is free-market capitalism? How are resources distributed in a free-market economy? Free-market capitalism is an economic system where factors of production are controlled by private entities (individuals and firms) with little to no government intervention. Firms charge the highest price consumers are willing to pay and workers earn the highest wages firms are willing to pay for their labor. In a free-market capitalist economy, firms are motivated to operate as efficiently as possible to keep their market share. In this article, we’ll discuss the ideology of free-market capitalism and what happens when it’s realized in practice.