Why Layconomics? Part II

For an effective democracy, informed populace is an essential ingredient. The direction the country takes and the policies that a government adopts are to a large extent dictated by the popular viewpoint held by the citizens. Hence, basic understanding of economics is essential to ensure proper policy enactment (and oh yes, to make the right call on long-term individual investment decisions). Just like people have a basic understanding of Physics, Biology and Mathematics, so should they of Economics. We believe people should be able to answer the following questions themselves without relying on experts.

1. Why is Gold valuable?
2. Why was there a real-estate bubble?
3. Is it austerity or deficit spending that is the reason for Europe's troubles?
4. Is the US dollar going to crash? Should the US dollar go back to a gold standard?
5. Is China in a bubble or in continued economic ascendancy?
6. How should the US tackle the fiscal cliff?
7. Should we adopt top-down or middle-out economic policies?
8. Is money creation good for the economy?
9. And many many more.

We have multiple vocal players debating each other on the questions listed above and calling each other out. Are we competent enough to understand the validity of a viewpoint or do we rely on other experts to tell us? Here are some of the multiple battles taking place in the media.

1. Robert Murphy vs Paul Krugman
2. Mike Shedlock vs Paul Krugman
3. Paul Krugman vs Ben Bernanke
4. Mike Shedlock vs Peter Schiff
5. Paul Krugman vs Peter Schiff
6. Austrian economists vs Keynesian economists
7. Keynesians vs Monetarists

Most of the debates use econo jargon which makes it very difficult for the lay person to understand what the experts are really talking about. Just look at some of the terms that are bandied about by experts to make their point.

1. Liquidity trap
2. Velocity of money
3. M1/M2 money supply
4. Capital theory
5. Surplus account
6. Current account
7. Debt-neutrality
8. Supply-side economics

Do we really need to familiarize ourselves with these terms to make some sense out of media "noise"? We believe that the current debate in the media between "experts" on economic concepts should not be esoteric and should be made understandable to people with exposure only to high school level economics. (By the way, here is a primer which starts people off in the right direction -http://www.econlib.org/library/Topics/HighSchool/HighSchoolTopics.html)

The goal of this blog is to simplify the prominent debates to layman terms and to hopefully provide the necessary information for readers to extrapolate the discussion to questions that they themselves find interesting. We would like to end this post with what we believe are appropriate definitions in the context of this blog.

Economics - Economics is the study of:

1. how a society organizes itself via co-operation and specialization of individual members' roles in production to be more effective in meeting the needs and desires of its members and,
2. the influence of various environmental, technological, political and pyschological factors on above mentioned effectiveness via any changes in the structure, specialization and co-operation within the society.

Layconomics - Layconomics is Economics as defined above with the added restriction of keeping econoSpeak to a minimum while explaining economic trends and without losing sight of the forest for trees.