Why do people talk about "basic economics"?

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Okay, it seems quite common on political forums for people to use the buzzword "basic economics" when opposing or supporting a variety of policies. Why the hell is this? Basic, perfectly competitive, demand/supply economics is pretty false and doesn't lend itself to that many useful predictions. Whenever anyone describes a useful, insightful, and advancing prediction of economics, it usually comes from a study using a monopsonically or monopolistically competitive model, which (while alluded to in First year economics textbooks) most people wouldn't consider "basic economics".

But... but ...basic economics are the ones I get!

M_P, you're being obtuse. "Basic economics" is "basic economics", it isn't an "advancing prediction" it's more like "Don't do this or you screw everything up, idiot".

So, is "basic economics" overused? Yes. Is it wrong in every detail? Most would not say so, as the basic economics is usually good enough at capturing the basic economic logic governing things, thus I can say "basic economics says X". This is very useful for bludgeoning out ideas, because it basically forces an opponent to admit they don't know what they are talking about. In fact, I like to use "basic economics" to talk about the monetary equation MV=PY, or Y=C+I+G+NX or even just the most simplistic relationships between supply and demand. (Y'know, like if demand goes up, then quantity demanded and price will go up, all else equal) In this, it is a heterodox view that these simple ideas do not hold, but they are basic economics.

Actually, I think it is safe to say I never [well, hardly ever] talk about basic economics.

To the contrary, in a free market economy, basic economics is enough to dispell 90% of peoples' misconceptions. You know, like the idea that "the only reason the car I really want costs twice as much as I can afford is because every single automaker in the world is run by greedy people who conspire to keep me from buying their products", which seems to be an extremely common belief - even among those who know advanced economics but fail to know basic economics.

I want to reply to AG, but I haven't been able to find a source I wanted to and am feeling a bit too lazy to argue the most persistent debater on WP, so I'll take the easy way out and just debunk Psychohist.

Psychohist, you're wrong. The "simple notions" of basic economics contradict some of the insights of advanced economics. So, someone versed in advanced economics could make a reasonable case that automanufacturers are price makers, but someone stunted in the neoclassical fantasy world of basic economics would have to accept that automanufacturers are price-takers, given that all firms are price-takers in a perfectly competitive market filled with millions of tiny firms (what basic economics assumes).

Price makers to the extent of doubling the price of automobiles over a market clearing price for that exact auto? I think it's you that's living in a fantasy world here.

Well, the big issue is that you are going to get involved in a very contentious argument, likely taking a relatively heterodox stance. I mean, after all, I'm pushing you to a much stronger position than I think is easy to defend, as I am pushing you to claim that basic econ abjectly fails rather than just is an oversimplification.


..... you do realize that introductory college level economics courses DO have markets that are not perfectly competitive, and that the automotive market would be a clear example of a market that is not a perfectly competitive market and instead is a monopolistic competition due to the variety of competition as well as the variation in product, which does allow for variation in marketing in "basic economics". Even further, between the basic econ and the no econ, I'd also have to say that the basic economics person is likely closer to correct, as the ultimate price will be determined by a market condition and not something as basic as "greed".

That being said, if you really want a better example of "basic economics" going wrong, you're better off with supply side economics and the supply of labor given the income effect. Basic economics often leads people to only consider the substitution effect, and thus think that if people get more money for their work, they will work more all else equal. However, the income effect makes this intuition unclear, but it is not taught in basic micro on the level useful for labor economics. So, that's actually a better example. (In fact, if you were going to point to a field where variance occurs, you'd be best off pointing to labor economics, period. In fact, I think most people making your kind of argument DO point to labor economics.)