James d. Gwartney

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Common Sense Economics
What Everyone Should Know About Personal
and National Prosperity
Revised for Central and Eastern Europe and the Former Soviet Union
JAMES D. GWARTNEY
Florida State University
RICHARD L. STROUP
North Carolina State University
DWIGHT R. LEE
Southern Methodist University
TAWNI H. FERRARINI
Northern Michigan University
JOSEPH P. CALHOUN
Florida State University
RANDALL K. FILER
Hunter College & the CUNY Graduate Center

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“Common Sense Economics: What Everyone Should Know About Personal and National
Prosperity” by James D. Gwartney, Richard L. Stroup, Dwight R. Lee, Tawni H. Ferrarini,
Joseph P. Calhoun and Randall K. Filer.
First published 2020.
Economic Fundamentals Initiative, 110 Jabez Street 1060, Newark, New Jersey NJ 07105,
USA.
Revised for Central and Eastern Europe and the Former Soviet Union from the third edition of
“Common Sense Economics: What Everyone Should Know About Wealth and Prosperity” by
James D. Gwartney, Richard L. Stroup, Dwight R. Lee, Tawni H. Ferrarini and Joseph P.
Calhoun.
Copyright © Economic Fundamentals Initiative
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives
4.0 International License (CC BY-NC-ND 4.0). The text of the license is available
at 
https://creativecommons.org/licenses/by-nc-nd/4.0/
ISBN 978-1-952729-06-5
www.econfun.org

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Contents
Preface
Part 1: Twelve Key Elements of Economics
Element 1.1: Incentives Matter
Element 1.2: There Is No Such Thing as a Free Lunch
Element 1.3: Decisions Are Made at the Margins
Element 1.4: Benefits of Trade
Element 1.5: Transaction Costs Matter
Element 1.6: Prices Create Balance
Element 1.7: Profits Are a Guide to Productivity
Element 1.8: Incomes Come From Usefulness
Element 1.9: Value Creates Income and Wealth
Element 1.10: There Are Multiple Sources of Progress
Element 1.11: The Usefulness of the “Invisible Hand”
Element 1.12: Unintended Consequences Create Problems
Part 2: Seven Major Sources of Economic Progress
Element 2.1: The Legal System
Element 2.2: Competitive Markets
Element 2.3: Sensible and Limited Regulation
Element 2.4: Efficient Capital Markets
Element 2.5: Monetary Stability
Element 2.6: Prudent Fiscal Policy
Element 2.7: Free Trade