Ezra Klein, one among the chattering classes recently posted a summary of graduation speech given by Thomas Sargent to Berkeley economics undergraduates in 2007. Sargent prefaced his remarks with these words:
I will economize on words.
Lets see how well he succeeded:
Economics is organized common sense. Here is a short list of valuable lessons that our beautiful subject teaches.
1. Many things that are desirable are not feasible.
2. Individuals and communities face trade-offs.
3. Other people have more information about their abilities, their efforts, and their preferences than you do.
4. Everyone responds to incentives, including people you want to help. That is why social safety nets don’t always end up working as intended.
Everything after the comma is superfluous. Why emphasize the bit about people you want to help? Why choose to emphasize the business of safety nets? He could just as well have said: That is why markets don’t always end up working as intended.
5. There are tradeoffs between equality and efficiency.
Redundant given items 1 and 2 above. It also implies a commonly accepted definition of equality and efficiency.
6. In an equilibrium of a game or an economy, people are satisfied with their choices. That is why it is difficult for well meaning outsiders to change things for better or worse.
Wrong. Within the constraints of the game they may be satisfied with the outcome. It does not follow they are satisfied with the game they were obliged to play.
7. In the future, you too will respond to incentives. That is why there are some promises that you’d like to make but can’t. No one will believe those promises because they know that later it will not be in your interest to deliver. The lesson here is this: before you make a promise, think about whether you will want to keep it if and when your circumstances change.
This is how you earn a reputation.
He garbled this one by confusing the desire to make promises and whether they are credible. Here is an edit with fewer words.
Promises about tomorrow are easy to make, but because you will respond to incentives in the future they are hard to keep. Its even harder to convince others that you will keep them. Before you make a promise, think about whether you will want to keep it if and when your circumstances change. This is how you earn a reputation.
8. Governments and voters respond to incentives too. That is why governments sometimes default on loans and other promises that they have made.
Redundant given item 4 above.
9. It is feasible for one generation to shift costs to subsequent ones. That is what national government debts and the U.S. social security system do (but not the social security system of Singapore).
Item in brackets clearly redundant, but what is a bully pulpit for unless one get one’s licks in!
10. When a government spends, its citizens eventually pay, either today or tomorrow, either through explicit taxes or implicit ones like inflation.
11. Most people want other people to pay for public goods and government transfers (especially transfers to themselves).
12. Because market prices aggregate traders’ information, it is difficult to forecast stock prices and interest rates and exchange rates.
Rests on a supposition that some might find arguable. Conclusion might still follow. Perhaps, a simple `you can’t beat the market without an unfair advantage’ might suffice.
Now compare with Yoram Baumann’s translation of Mankiw’s ten principles of economics:
#1. Choices are bad.
#2. Choices are really bad.
#3. People are stupid.
#4. People aren’t that stupid.
#5. Trade can make everyone worse off.
#6. Governments are stupid.
#7. Governments aren’t that stupid.
#8. Blah blah blah.
#9. Blah blah blah.
#10. Blah blah blah.