David,
I thought of you recently and I just typed the phrase “Though I had only one class with him and he was my thesis advisor, I learned more from him than [from] any man I know.” The context was instruction for my niece, who is graduating with a Master of Science in Applied Nutrition, and is entering the world without a single course in any type of economics. In addition to a lot of other nuggets, examples, and calculators, I have included your Ten Pillars of Economic Wisdom, as I use the first seven almost every day in one way or another. (Honestly, I had to look the others up!) Though I was your student for a relatively small portion of my life, it remains true that what you taught me has so many applications that it is likely the most valuable knowledge I possess. And I am getting old enough to drop people a note whenever I think of them! Best, Gill
I received this note as a private message on Facebook yesterday from a former student whom I taught at the Naval Postgraduate School. He gave me permission to give his name: Miguel O’Hara.
Here are the 10 Pillars of Economic Wisdom, with which I opened each course I taught at NPS for about the last 20 to 25 years of my teaching there:
1. TANSTAAFL: There ain’t no such thing as a free lunch.
2. Incentives matter; incentives affect behavior.
3. Economic thinking is thinking on the margin.
4. The only way to create wealth is to move resources from a lower-valued to a higher-valued use. Corollary: Both sides gain from exchange.
5. Information is valuable and costly, and most information that’s valuable is inherently decentralized.
6. Every action has unintended consequences; you can never do only one thing.
7. The value of a good or a service is subjective.
8. Creating jobs is not the same as creating wealth.
9. The only way to increase a nation’s real income is to increase its real output.
10. Competition is a hardy weed, not a delicate flower.
It’s heartening to receive appreciative notes from students I had taught between 5 and 20 years ago. It’s even more heartening to see that they’re applying some of the most important things I taught.
Note on picture above: Liberty Fund encourages bloggers to include pictures or illustrations with each post. I couldn’t find a good picture of a pillar and I couldn’t find a picture of me teaching. So I used the cover of my book The Joy of Freedom: An Economist’s Odyssey because Chapter 2 of that book contains an early version of the 10 Pillars of Economic Wisdom.
READER COMMENTS
Jon Murphy
Dec 20 2021 at 12:44pm
I use the 10 Pillars in the first lecture of every econ class (regardless of level) I teach. Consistently, students report in their evaluations that it’s one of two lessons they remember and enjoy.
Although, they do like to attribute it to me even though the slide says “Henderson’s 10 Pillars” and links to the book. So, sorry about that if I start getting credit for your idea 🙂
rsm
Dec 20 2021 at 11:47pm
Where does dark energy come from? Is the universe itself the ultimate free lunch? When the Fed deposits reserves in banks, whom does it debit? Are these all examples of free lunches?
Daniel B
Dec 21 2021 at 1:35am
All of these are excellent but #10 is probably my favorite. I remember the first time I read Thomas Sowell’s section on anti-trust in Basic Economics a few years ago. In that chapter he quotes George Stigler (“Competition is not easily suppressed even when there are only a few independent firms. . . competition is a tough weed, not a delicate flower”). I was shocked at how many anti-trust actions were against businesses lowering prices, and how many anti-trust actions thought they were “protecting competition” when they were actually protecting competitors.
I don’t think I’ve fully internalized all the lessons and applications of Stigler’s quote, but after reading Basic Economics and many blog posts here at EconLib, I can attest it’s accurate and wise. It applies not only to anti-trust but also to the labor market (e.g., see this post on paid leave).
It’s a shame that many economics courses simply don’t expose students to #10, at least in my experience. The two economics courses I took – one in high school and an intro to economics class at the University of California, Irvine – certainly didn’t (and they didn’t ignite a love of economics in me either; it was Economics in One Lesson that did that).
Daniel B
Dec 21 2021 at 1:39am
Just to clarify for skeptical readers: I’m aware of the idea of predatory pricing. I’m also aware – as discussed in Basic Economics as well as here at EconLib – that it’s a pretty silly idea.
Jon Murphy
Dec 21 2021 at 10:03am
Agreed. Competition is treated very glibly in modern economics (outside of a few schools of thought).
Vernon Smith
Dec 21 2021 at 8:57am
Ten very nice elaborations of Adam Smith’s two: Beneficence and Justice.
Ken Costello
Dec 21 2021 at 11:28am
Here is a #11 to think about (or as a replacement for one of the tens): “Imperfect markets do not imply the need for government intervention.” So much social harm has occurred because of government actions justified by claims of so-called market failures — actions that fail a cost-benefit test.
David Henderson
Dec 22 2021 at 12:27pm
Good one.
Bill Drissel
Dec 21 2021 at 4:00pm
Dr Henderson,
> graduating with a Master of Science in Applied Nutrition, and is entering the world without a single course in any type of economics.
I graduated from engineering school in 1954. I had to take a course in English and one in Social Relations … but not one single course in Economics nor Accounting. I had no notion for years how my employers managed to pay me.
Merry Christmas and Happy New Year
Bill Drissel
David Henderson
Dec 22 2021 at 12:27pm
Thanks, Bill. Same to you.
Comments are closed.