Economics 0,1,2? – Illustrating the Core Insights of Economic Analysis*

Abstract

Economists generally agree that economic analysis constitutes a unique worldview, but there seems to be no consensus about the worldview itself. This paper attempts to outline a possible configuration of the worldview by proposing four fundamental insights of economics. The insights satisfy two criteria: they should be compatible with the mainstream of economics, and they should correspond to the daily experiences of the general public and be useful to them. The four insights can be represented by the numbers of 0, 1, and 2:

(1) O > 0;

(2) 1+1<2;

(3) 1+1>2;

(4) 0 ~ 0.

First, O > 0 means that man is rational and self-interested. Secondly, 1+1<2 suggests that whatever is, is not necessarily efficient, but there is a reason for it. Third, 1+1>2 argues that for something good to occur, the supporting conditions must be in place. Fourth, 0 ~ 0 implies that the meanings of something are fulfilled by other, relevant things. Abstractly speaking, the first insight is the starting point of economic analysis. The second and third insights represent respectively an unsatisfactory and a satisfactory situation; for either situation, economic analysis can try to advance an explanation. Finally, the fourth insight illustrates on the one hand the core concept of opportunity cost and on the other hand how meanings of things are determined in general. It also implies that given the status quo, a potentially better alternative can and should be looked for consciously.

JEL classification: A2, B0.