Keystone Economic Principles

When some teachers and students think about economics they focus on money or they get a mental image that causes flashbacks to their college days to a bundle of jargon or graphs that looks like this:

Or, they feel like Congressman Dick Armey, who once described economics as "the science of telling you things you've known all your life, but in a language you can't understand."

Seeing how economic thinking applies to everyday life helps us to juggle these conflicting images and preconceptions. At its most basic, economics studies the way societies and individuals organize themselves to use their limited resources to satisfy their unlimited wants. Economics answers the questions of what, how, and for whom. The nine basic principles explained in this brochure should give you a solid foundation for understanding economic concepts and becoming economic thinkers.

Economic thinking answers questions by describing “what is” (a positive statement) rather than “what ought to be” (a normative statement). We can better answer “What ought to be” questions according to individual value systems and by grasping “what is.” These Keystone Economic principles ought not be a list of principles to memorize. Rather, we hope you apply and own these principles and re-work and re-word them to USE with others you talk with and teach.

Why Keystone Economics?

Just as an architectural keystone is the central wedge in the top of an arch, our Keystone Economic Principles provide the stable center necessary to build an economic understanding. A “keystone” can help fill in the blanks and explain why things have happened in the past and why they will happen in the future.

While specific situations and applications constantly change, the approach involved in these nine principles remains constant. By understanding and using the principles, you will teach economic decision-making to your students. This process has implications for all endeavors, not just economics. Using these Keystone Principles can help you understand the significance of your choices and how your choices affect your ability to reach your potential.

Keystone Economics is grounded in nine principles about which economists universally agree—despite the fact that they don’t agree on much else.

For a detailed explanation of each principle, click on the link below:

1. We ALL make choices.
2. There Ain't No Such Thing as a Free Lunch.
3. All choices have Consequences.
4. Economic Systems Influence Choices.
5. Incentives produce "predictable" responses.
6. Do what you do best, trade for the rest.
7. Economic thinking is Marginal Thinking.
8. Quantity and Quality of available resources impact living standards
9. Prices are determined by the market forces of supply and demand… and are constantly changing.

You may find a similar version of this in the early chapters of most introductory high school and college economics textbooks or as part of the National Council on Economic Education’s Handy Dandy Guide to Economic Thinking in most of its publications. This is the thinking of the Powell Center for Economic Literacy and our language on these issues. Some of the phrases will be similar or identical to those found in textbooks, and in some cases we part company with the textbooks or other authors. This is designed to be our own “Chapter 1” of your studies. We encourage you to dig deeper and go further with any or all of these principles where you see relevance for your own life and the lives of your students.

Because the Powell Center for Economic Literacy started as the E. Angus Powell Endowment for American Enterprise, these principles are rooted in market economics and you'll find most of the applications of these Keystone principles work best in a market system.