A Critique Paper of the Book:

COMMON SENSE ECONOMICS:

WHAT EVERYONE SHOULD KNOW
ABOUT WEALTH AND PROSPERITY

Submitted By:

Magbago, Jonard N.
&
Manahan, Jane Myca

Submitted To:

Mr. Mario Andrew Ustaris

December 2019
 INTRODUCTION

The book was published in New York: St. Martin's Press, 2016. James
Gwartney, Richard L. Stroup, and Dwight R. Lee are three of the most prominent
economists today, and in "Common Sense Economics" they show us why
economic understanding is an essential ingredient for life in today's society, a
key element that empowers those who possess it to better take charge of their
own lives and their own responsibilities to their society. In clear, powerful
language free of any hint of jargon or obscurity, they illuminate the basic
principles of supply and demand, private ownership, trade, and more. The
authors tell us what everyone should know about economics in language we can
all understand. In a world where free trade, taxes, and government spending are
issues everyone needs to understand, "Common Sense Economics" is a lucid,
simple explanation of how and why our economy and our world work the way
they do, and how and why individuals and nations prosper.

With the global economy recovering from a steep recession, and with that
recovery challenging our long-held ideas about what careers and the market can
be, learning the basics of economics has never been more essential. Principles
such as gains from trade, the role of profit and loss, and the secondary effects of
government spending, taxes, and borrowing risk continue to be critically
important to the way America's economy functions, and critically important to
understand for those hoping to further their professional lives - even their
personal lives. Common Sense Economics discusses key points and theories,
using them to show how any reader can make wiser personal choices and form
more informed positions on policy. Now in its third edition, this fully updated
classic from the authors reflects on the recession and the progress that's been
made since the crash; it offers insight into political processes and the many ways
in which economics informs policy, illuminating our world and what might be
done to make it better.
 “Genius ain't anything more than
elegant common sense.”
~Josh Billings

History and Overview of Common Sense Economics and Learning Tools

For over a decade, the Stavros Center for Economic Education of Florida
State University has collaborated with a team of master teachers and leading
economic educators to develop materials that focus on what students really need
to know about economic reasoning. The Common Sense Economics textbook
and the accompanying course shell are the products of this project.

Common Sense Economics explains the key principles of economics and

illustrates their application to markets, the political process, and personal
finance. It is written in a lively style, well organized, and easily understandable. It
will help readers make purposeful choices and enhance their understanding of
the real world and what might be done to improve it. Common Sense Economics
highlights the wisdom of both Adam Smith and the American founding fathers.

Part 1 focuses on 12 key elements of economics, including the power of

incentives, gains from trade, demand and supply, the role of profit and loss, the
operation of markets, and the importance of unintended secondary effects.
These concepts are then used in the other three parts of the book to explain why
some nations prosper while others stagnate.

While in Part 2, it talks about the potential of productive action through

government and why the political process is often dominated by interest groups,
government favoritism, and unsustainable debt and in Part 3, on how individuals
can improve their personal financial decision-making and live a financially
secure, personally rewarding life (Part 4).

The accompanying course shell for the third edition has been fully updated in
Canvas, and Blackboard. It includes standard learning objectives, videos,
exercises, audios, excel spreadsheet activities, PowerPoint slides, creative
homework assignments, and other assessment materials. These tools will
directly engage students in the learning process and meet them in the preferred
multimedia spaces. The electronic package provides instructors with all of the
resources needed to successfully motivate their students and make learning fun,
and it is available free of charge to textbook adopters.

Purpose of the Book

This book is designed for beginners, specialists in the subject of economics

as well as policy makers who are responsible for bringing ‘actual’ concrete
changes in the economy. For policy makers, this book gives an insight of the
‘larger picture’ which entails political rules and policy. It highlights how people’s
‘economic illiteracy’ in a Democratic society can result disastrous for the
economy of the country.

This books aims at explaining why some nations prosper which usually
depends on the common people’ understanding of good economic
arrangements. The link between good political choices and prosperity is highly
interlinked. The wonders of understanding common economic principles are very
often underestimated.

The importance of understanding how specified principles that govern

developed countries can be replicated anywhere is explained in the book. This
book shows in what ways politics and economics are intertwined. The question
of whether taxes hurt more than they benefit an economy is answered.
Content of the Book
 After reading Common Sense Economics: What Everyone Should Know
About Wealth and Prosperity. This book is an introduction to the key
fundamentals of Economics, as well as a bit of Personal Finance. It’s a relatively
small book too, one you can easily read in a day. Common Sense Economics is
a great book to read if you are new to Economics, haven’t studied Economics for
a long time, or if you are currently clueless about your money and/or the
Economy. This book is divided into three parts. The first two deal with
Economics and Government. The last part deals with Personal Finance. The
inclusion of the Personal Finance part can either make this book the perfect fit
for you or it may leave you wanting more. If your personal financial life is already
under control, you won’t gain anything from this third part. If you have yet to take
control of that part of your life, this chapter provides you an excellent outline for
how to get started.

The reality of life on our planet is that productive resources are limited, while
the human desire for goods and services is virtually unlimited. Because there is
“no free lunch,” we must sacrifice something we value in order to get something
else. Politicians often speak of “free education,” “free medical care,” or “free
housing.” This terminology is deceptive. These things are not free. Scarce
resources are required to produce each of them. Governments may be able to
shift costs, but they cannot avoid them. Nearly all choices are made at the
margin. That means that they almost always involve additions to, or subtractions
from, current conditions, rather than “all-or-nothing” decisions. The word
“additional” is a substitute for “marginal.” We don’t make “all-or-nothing”
decisions, such as choosing between eating or wearing clothes—dining in the
nude so that we can afford food. The foundation of trade is mutual gain. The
motivation for trade is summed up in the statement: “If you do something good
for me, I will do something good for you.” Trade is productive because it permits
each of the trading partners to get more of what he or she wants. An increase in
government transfers will reduce the incentive of both the taxpayer-donor and
the transfer recipient to earn income. Economic growth will thereby be retarded.
Competition for transfers will erode most of the long-term gain of the intended
beneficiaries. Programs that protect potential recipients against adversity arising
from their imprudent decisions encourage them to make choices that increase
the likelihood of the adversity. Providing others with goods and services that are
highly valued compared to their cost is the key to financial success.

Common Sense Economics is a highly readable book. It is written for those

individuals wanting to understand how the economy works, what can be done to
generate wealth, and how to make sound economic choices and financial
decisions. This book covers the basic concepts of economics and applies them
to both political and personal decision-making. It is divided into four parts: (1)
Twelve Key Elements of Economics, (2) Seven Major Sources of Economic
Progress, (3) Economic Progress and the Role of Government, and (4) Twelve
Key Elements of Practical Personal Finance. Key concepts such as scarcity,
gains from trade, marginal decision-making, profits and losses, the sources of
income growth, and the invisible hand are highlighted and discussed in Part 1.
Part 2 applies the basic concepts to wealth creation and highlights the
importance of private ownership, competition, monetary stability, low taxes, and
open trade. Part 3 explains how the political process works, considers why it
often goes awry, and makes suggestions for improvement. Part 4 focuses on
personal decision-making and provides readers with ideas and resources on
how to make strategic career and financial choices. This book covers what
people really need to know in order to be savvy consumers, sophisticated
investors, and dynamic citizens.
 About the Authors

 James D. Gwartney

James holds the Gus A. Stavros Eminent Scholar Chair at Florida State
University, where he directs the Stavros Center for the Advancement of Free
Enterprise and Economic Education. He is the coauthor of Economics:
Private and Public Choice, (Cengage South-Western Press, 2015), a widely
used principles of economics text now in its 16th edition. He is also the
coauthor of the annual report, Economic Freedom of the World, which
provides information on the consistency of institutions and policies with
economic freedom for more than 150 countries. His publications have
appeared in scholarly journals, including the American Economic Review,
Journal of Political Economy, Journal of Economic Education, Southern
Economic Journal, and Journal of Institutional and Theoretical Economics.
During 1999-2000, he served as Chief Economist of the Joint Economic
Committee of the U. S. Congress. He is a past President of the Southern
Economic Association and the Association of Private Enterprise Education.
His Ph.D. in economics is from the University of Washington.

 Richard L. Stroup

Richard is Professor Emeritus of economics at Montana State University

and Professor Emeritus of economics at North Carolina State University. His
Ph.D. is from the University of Washington. From 1982 to 1984 he served as
director of the Office of Policy Analysis at the U.S. Department of the Interior.
Stroup has published and spoken on global warming, land use regulation,
 archaeology, and about needed environmental policy improvements. His
research helped to develop the approach known as free market
environmentalism. He is coauthor of a leading economics principles text,
Economics: Private and Public Choice, now in its fifteenth edition. His book
Eco-nomics: What Everyone Should Know About Economics and the
Environment (Washington: Cato Institute, 2003), was sponsored by the
Property and Environment Research Center, of which he is a co-founder.

 Dwight R. Lee

Dwight received his Ph.D from the University of California, San Diego in
1972. Since that time he has served on the faculty at the University of
Colorado, Virginia Tech University, George Mason University, and the
University of Georgia where he was the Ramsey Professor of Economics
and Private Enterprise from 1985-2008. He was the William J. O’Neil
Professor of Global Markets and Freedom at Southern Methodist University
in Dallas from 2008-14. He is currently a senior fellow at SMU. Professor
Lee’s research has covered a variety of areas including the Economics of the
Environment and Natural Resources, the Economics of Political Decision
Making, Public Finance, Law and Economics, and Labor Economics. During
his career Professor Lee has published over 160 articles in academic
journals, nearly 300 articles and commentaries in magazines and
newspapers, coauthored 14 books and been the contributing editor of 5
others. He has lectured at universities and conferences throughout the
United States as well as in Europe, Central America, South America, Asia
and Africa. He was president of the Association of Private Enterprise
Education in 1994-95 and president of the Southern Economic Association in
1997-98.
 Tawni H. Ferrarini

Tawni is the Sam M. Cohodas Professor at Northern Michigan

University. She is the 2015 president of the National Association of
Economic Educators, the inaugural recipient of the National Association of
Economic Educator’s Abbejean Kehler Award, beneficiary of the 2009
Michigan Economic Educator of the Year Award and a 2009 Distinguished
Faculty at Northern Michigan University. Her work for the Council on
Economic Education and reputation as a dynamic workshop leader on both
the use of technology in the classroom and the integration of economics and
American history helped her earn these awards. She was instrumental in
helping formerly establish the Council on Economic Education – Japan and
consults for the Korea Development Institute in Seoul. Dr. Ferrarini publishes
in economic education, technology, and education journals. She earned her
doctorate in economics from Washington University, where she studied
under the 1993 Nobel Laureate Douglass C. North.
 Analysis and Implications

Common Sense Economics makes economic principles as obvious and

simple as they can be. By weaving careful reasoning with memorable examples
and clear writing, the authors explain how economies grow (or don’t grow); how
prices coordinate economic activity; and how governments promote or deter
economic progress. This is an extraordinary contribution to economic education.
It teaches the ideas of macroeconomics but in a way that people can use to
understand and evaluate the process of our economy and the government’s
impact. It is not a textbook with charts, graphs, and formulas which allowed us to
be able to read it and understand what the authors were explaining.

The main point of the book is that to have economic success comes from
low interference from the government, the motivation of individuals, and
competitive markets. The authors explained that: “Changes in incentives
influence human behavior in predictable ways”. The main point of this concept is
that the more attractive an option is the more likely an individual to choose it.
Another point that they also focused on was the fact that if a particular product
more costly, the more unappealing it will become to the consumer. They used
examples such as employees will work harder if they feel that they will be greatly
rewarded or a student will study material that they feel will be on an exam. This
concept also can be correlated with political process as well. It is explained that
citizens will vote for candidates will benefit them in their own personal lives.

The second important concept was “There is no such thing as a free

lunch”. This concept is built based upon human desire for good being unlimited
and the limited resources to match that could not possible match those
resources. This is relates to the theme of opportunity costs. This means that the
choice of one thing, but you must sacrifice the opportunity to do another thing.
There are opportunity costs with producers with the cost of outputting quality
goods and adhering to regulations put on by the government. The next concept
is “Decisions are made at the margin” this meant that individuals wanted to get
the most out their resources. You want to have most benefits out your actions.

Common Sense Economics helps a lot to our economy and this book may
use as an eye opener. To the people in our society on how to prevent a steep
recession on a country. What are principle and theories must do and follow, what
choices must be chosen and how to generate wealth from trading. It enhances
the critical thinking of those people especially the investors the players in our
economy.
 Conclusion

Common Sense Economics reinforces nothing but what one faces

everyday on the economic front. It is a must read to understand how the
"science" of economics functions. It is observed that one tends to undermine
things that generally governs the daily life. This book is a reminder that it is not a
herculean task to be wise on the economic vanguard, all you got to have is a
little common sense about economics.

“This book provides the ABCs of how the world creates wealth without
anyone having to be in charge because of market incentives-people are free to
specialize, and by focusing on what they can do best for themselves, do
unintended good for the rest of us. There is no other route to human betterment
and poverty reduction.” – Vernon L. Smith, 2002 Nobel Prize Winner

This book forms a bridge between common sense and the basic principles of
economics. It is a guide to sound economic reasoning for everyone. Its language
is relatively simple, clear and straightforward without being oversimplified and
without sacrificing the really important insights and conclusions. It is a book with
a strong message – economic progress is the result of competitive markets, of
individual initiatives and of the limited role of the government.

The book also concludes that to a large degree success in life is about
setting goals, working hard to achieve them, figuring out how to make your
services useful to others, saving for a specific purpose, and spending money
wisely. These are the key ingredients for success. Economics provides the
recipe for how to live a more fulfilling life. It is our hope that today you will start
on a new journey – that you will earnestly resolve to take control of your life and
choose options more consistent with success.
 References

Franklin Thoreau (2008), Common Sense Economics Book Review, Retrieved

from:https://www.financeandfat.com/common-sense-economics-book-review/?
fbclid=IwAR26U9pNSAcaLS8a94EmGCJJGbmKAFtMRm9NDui6TB5JPmHG2X
V7vQEgcP0

Joseph Calhoun (2016), Common Sense Economics, Retrieved from:

https://commonsenseeconomics.com/about-common-sense-economics/?
fbclid=IwAR19eswfZNCc8s2ph4gCOG7RINuRqWlRcqX15pbbTmfYJyXXIfh0Rt7
N4ZA