The Indian Economy Blog

September 23, 2005

Just Two Things

Filed under: Growth,Miscellaneous — Prashant @ 9:26 pm

As per Glen Whitman

Here’s the story of the Two Things. About three years ago, I was chatting with a stranger in a bar. When I told him I was an economist, he said, “Ah. So… what are the Two Things about economics?”

“Huh?” I cleverly replied.

“You know, the Two Things. For every subject, there are really only two things you really need to know. Everything else is the application of those two things, or just not important.”

“Oh,” I said. “Okay, here are the Two Things about economics.

One: Incentives matter.

Two: There’s no such thing as a free lunch.”

While simplistic, it’s amazing how often these two concepts form the underpinning of economic arguments. For instance, just read the posts on this blog.


  1. I think a lot of people have summarized the most essential lessons of economics to be 1) Incentives matter, and 2) Markets work. I have argued that the most important concept that underlies the lessons of economics is the notion of “opportunity costs” and that that is a fundamental feature of the universe which follows from the nature of time.

    Among the social sciences, economics appears to have great explanatory power. Economics has an explanation of pretty much any social phenomena. Once you know to how to reason economically (in all senses of that word), it all becomes obvious. Some way it becomes trivial as well. Is there anything in economics which is both non-obvious and true? That was the challenge to Paul Samuelson by Stanislaw Ulam.

    Samuelson took several years to arrive at the answer that it was “comparative advantage.” He said, “”That it is logically true need not be argued before a mathematician; that is is not trivial is attested by the thousands of important and intelligent men who have never been able to grasp the doctrine for themselves or to believe it after it was explained to them.” [Reference]

    Comment by Atanu Dey — September 23, 2005 @ 10:17 pm

  2. i feel this is right time we should float our own political party , and take things in hands , we have get in to gutter and clean this dirt.And never in future no political party will dare to play this kind of politics

    Comment by Sunil Anchan — May 27, 2006 @ 11:37 am

  3. reservations should not be given.dont kill merit in the name of reservations.

    Comment by deepthi — June 1, 2006 @ 12:16 pm

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