Which Of The Following Statements Is An Important Principle Of Economics

What are the most important theorems in economics?

The first and second welfare theorems. Existence of Arrow-Debreu equilibrium. Arrow's impossibility theorem. Nash's equilibrium existence theorem. Nash's bargaining solution. The Revelation Principle. Revenue equivalence theorem for auctions. The fundamental theorems of asset pricing (ie the connection of no arbitrage and completeness to existence and uniqueness of pricing measures).At a more fundamental level, all of the work on revealed preferences and the connection of preferences with demand. For example the weak and strong axioms of revealed preferences. If you learned math through economics the you would say the envelope theorem is another big one, but as a mathematician doing economics, I don't really consider this to be worth calling a theorem.

What's your favorite economic principle?

Market PricingPeople go around assigning arbitrary value to items all the time. People talk about what their house is worth, their car, their clothes, their business, etc. It’s all just made up.Conversely people constantly complain about prices for things that they believe should be inexpensive but a highly valuable. For example in recent years Iphones have gone from $300 to now over $1000. The reason for this drastic price jump is that the market demanded it. Anytime there is a huge price increase, in this case 3–4 times in three years, we think we are getting ripped off. The reality though is that most people would be willing to pay far more than $1000 if Apple demanded it. If Apple raised the price of an Iphone to $2,500, most people would still buy it. They likely replace them less often and there would be greater demand in the used market, but for most people, they could still justify paying the $2,500 if they had too. This is an example of the market pricing, the Iphone, regardless of what it cost to produce, is worth whatever someone is willing to pay.I hear constantly about people who are mad that teachers, military, police, etc don’t get paid well enough. Athletes and celebrities make money money in a day than teachers make in a year. The reality though is that this is what the market dictates.Kendall Jenner can get paid more to take one picture than a teach will make in the next decade.Let’s face it, Kendall was the reason you and thousands of other people read this answer. She provided value to a market place. Deep down, not very many people really care what a teacher gets paid, at least not enough to do something about it.Market pricing dictates that something is only worth what someone is willing to pay for it. Don’t listen to what people say they care about, look at how they spend their money.

What is the importance of principles?

Q. What is the importance of principles?(1) Thanks for the A2A.(2) This answer is framed around an entity such as a company, or civil society organization, that operates by a set of published principles.But, it can just as well apply to principles at the personal level.(3a) Compels Thought and RationalizationThe act of framing, pondering, mulling, agonizing over, defining, wording a set of principles forces the framers to think, rationalize, debate and validate their ideas.It’s one thing to bandy ideas. It’s quite another when you document them as sustaining and enduring signposts for the world to see.(3b) The Forest From the TreesPrinciples are overarching statements, the forest. They help to give a sense of arcing frameset to the entity members, as they busy themselves with the micro activities of the entity.(3c) Bonds Like-minded PeopleA rallying unifying platform, a trumpet call.This is particularly useful when there is a need to drum up publicity, awareness, membership, support, funding, resources.(3d) A Guiding SourcepointAs people are involved in the willy nilly reality of routine operations of the entity, they’ll often encounter complex situations where they’ve to take uncomfortable positions, calibrate inconvenient trade-offs, make difficult decisions.They can go back to first principles to guide them, to self-validate, staying faithful to the founding spirit of the entity.(3e) Why are we doing this?There’s a saying: “Fanaticism is redoubling your efforts long after the cause is forgotten”.Well-intentioned revolutionaries bring about tumultuous change, only to do exactly what the rogues they overthrew did.In the hot swirl of passion, we forget our going-in principles.Principles provide a reality check.(3f) ChangePrinciples are living and breathing. They need to be revisited, reviewed, recalibrated over time.An established set of principles facilitates, if not drives, the change management process.The entity may also be shutdown if its principles are too far removed from current reality. The entity has served its purpose. Move on.

In economics, how can one identify if a statement is positive or normative?

This is a theoretical question bordering on philosophy. The terms positive and normative are used in philosophy. Positive statement has some underlying reason. It seeks to find out “why” aspect of any statement. Such “why’ is found either in empirical evidence or through a theory backed by proof with adequate mathematical rigour in case of economics. On the other hand, normative statement is something which is either a rule in itself or strictly rule based without seeking to find underlying “why”. In economics, statements are generally positive. But in accounting statements are normative. The subject is rule based one. For example accounting records only those transactions that can be measured by money as a rule. Similarly principle of prudence implying - ‘anticipate no profit but provide for all losses' in recording transaction is another normative statement in accounting, though it is changing a little these days. But economic theories and statements are positive with reasoning including counter views based on reasons. Scope for arguments and counter arguments is much more in economics as you can't stop a person by saying 'rule says so' , if you have empirical evidence or theoretical backing otherwise.

What's the most important economic concept?

That Adam Smith’s “invisible hand” exists, and despite whatever certain schools of thoughts say about it, Smith’s invisible hand will be having the last laugh.Smith used the phrase to signify the unintended side effects of social welfare policies, but I think we can extend it to signalling the side effects of almost any policies. For example, Dan Ariely has mentioned a very stark example of what policies which are thought for one particular incident can do.In 1970s, the SEC passed a regulation that made it obligatory for companies to mention on their public filings of how much their CEOs were making. Up until then the onus to do so was at company’s discretion. But the SEC considered that the CEOs were making very large sums of money and that ideally their pay should be something that the shareholders had a right to know and then if they felt like it was too high, take it up with the management. Fair stuff, right?Except that after the regulation was passed, the CEO pay grew at a massive rate and diverged at an even faster rate than what the other employees were making. The reason Ariely mentions is that once every company was mandated to disclose the pay, it allowed the CEOs to use the publicly available pays of their competitor to finagle a higher pay for themselves. This dog eat dog competition fueled the exploding pay differences between the CEOs and the regular workers.Despite the fact that we honor truly gifted minds in the economic academia, none of us truly understand the utter complexities of how economies function. Not even the Nobel laureates. Because as it is with the other sciences, the models are a representation of our understanding of how economies work not a true picture of how they actually work. We are limited in how we see and comprehend they work.And I also consider the parable of the “invisible hand” to be very important also because I wish there were more of an humble acceptance that we, humans are not as clever as we seem to think as we are, so it would be prudent to always keep thinking of what we might have gotten wrong.

What are some examples of positive and normative statements?

Generally, a normative statement is usually more of a value judgment, opinion, or recommendation which can be disagreed with, but not really proven one way or the other. A positive statement is one that shows some relationship or makes a data-based observation that can be proven - or disproven.Something to keep in mind is that a positive statement doesn’t have to be true: it can be factually incorrect and still be a positive statement. Being wrong doesn’t make it less positive.Positive statement: Taxes in a particular country are above the average for similar countries.Normative statement: Taxes in a particular country are too high and should be lowered.Positive statement: This car's listed price is $35,000.Normative statement: Only suckers pay the sticker price.Positive statement: The United States spends more money on its military than any other country.Normative statement: [endless debates about whether that is a good thing or not]Positive statement: The correlation between the full moon and increased crime and wild animal attacks suggests werewolves are a concern in some areas.Normative statement: I should probably watch fewer movies.

What is the purpose of the OECD Principles (Organization for Economic Cooperation and Development Principles)?

The OECD Principles are basically a set of recommendations that are intended to serve as a “benchmark” for international corporate governance policies. Corporate governance refers to the rights and responsibilities of the members that make up an organization - management, shareholders, board members, et cetera.The recommendations include the following main chapters, summarized here:Governments should have institutional and legal framework that supports “good corporate governance practice”.Shareholders have rights, such as the right to be accurately informed about the financial condition of a company, and must be able to exercise those rights. Without them, both companies and economies will suffer dysfunction, and at increased cost to the individuals in those economies.Shareholders must be treated equally regardless of whether they are minority or domestic vs. foreign.Stakeholders have an important role in a corporation that must be recognized.Disclosure of material documents, such as financial statements, must be “timely, accurate, and transparent.”