Need That Money

Lessons from Legendary Economists and Thinkers

Economics is the study of how individuals, businesses, and governments allocate scarce resources to meet unlimited wants and needs. Over the years, various economists have developed theories and provided insights that have influenced the practice of economics.

In this article, we will look at the lessons we can learn from two of the most influential economists of all time: Adam Smith and John Maynard Keynes.

Lesson from Adam Smith:

Adam Smith is considered the father of modern economics.

His most famous work, “The Wealth of Nations,” outlines the principles of free markets and division of labor. One of the essential lessons from Smith’s work is the relationship between self-interest and the promotion of the public interest.

Smith famously said, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their self-interest.” This statement epitomizes his belief that individuals acting in their self-interest can inadvertently benefit society as a whole.

The bakers mentioned by Smith are a perfect example of how the market operates.

Suppose there is a higher demand for bread. In that case, the baker, acting in his self-interest, will increase the production of bread to meet the demand, resulting in more bread being available to the public.

However, if the demand for bread decreases, the baker will reduce production, ensuring that resources are used efficiently. The market mechanism, therefore, ensures that resources are allocated efficiently and effectively without government intervention.

Lessons from John Maynard Keynes:

Unlike Smith, Keynes believed that free markets did not always lead to the full employment of resources. In his view, there were circumstances where government intervention was necessary.

Keynes believed that during a recession, the government needed to spend money to stimulate economic growth and reduce unemployment. This intervention could take the form of investment in infrastructure, tax reductions, or subsidies to businesses.

One of the most famous examples of Keynesian economics in action was the New Deal, introduced by President Franklin D. Roosevelt in the 1930s.

The New Deal aimed to stimulate the economy by investing in infrastructure, creating jobs, and providing social welfare programs. The government also implemented regulations to prevent another economic depression from occurring.

The lesson that we can learn from Keynes is that even in a free market, the government has a role to play in ensuring economic stability. However, this intervention should be necessary and used in times of crisis rather than on a regular basis.


In conclusion, the lessons we can learn from Adam Smith and John Maynard Keynes are still relevant today. The concept of self-interest and market mechanisms can ensure efficient allocation of resources while government intervention may be necessary during a recession to prevent economic collapse.

As we continue to navigate the complexities of the global economy, it is essential to keep these principles in mind to create a prosperous society for all. Lesson from Warren Buffett:

Warren Buffett is considered one of the most successful investors in history.

His investment philosophy is rooted in the principle of investing in what is understood. Buffett believes that investors should focus on companies and industries they understand and avoid complex investments that they cannot fully comprehend.

In his view, investing in simple and straightforward businesses that generate cash flow is the key to long-term success in the stock market. One of the critical lessons that we can learn from Buffett’s investment style is to avoid making emotional decisions during economic dips.

Many investors panic during economic downturns and sell off their investments, thinking that the market will continue to decline indefinitely. However, as Buffett has shown, this is not a sound strategy.

Instead, he advises investors to focus on the long term and invest in quality companies that can weather economic storms. Buffett’s investment style also emphasizes the importance of patience.

He does not make investment decisions based on short-term market trends but rather focuses on the long-term potential of a company. In his view, the best time to buy stock in a company is when it is undervalued.

By taking a long-term view of investing, Buffett has been able to build a diverse portfolio of successful businesses that have consistently generated returns for his investors. Lesson from Alfred Marshall:

Alfred Marshall, another influential economist, developed the concept of supply and demand.

Simply put, Marshall believed that the price of a commodity is determined by the interaction of supply and demand. When demand exceeds supply, the price of the commodity will increase until the market reaches an equilibrium.

Conversely, when supply exceeds demand, the price of the commodity will decrease until the market reaches an equilibrium. This concept can be illustrated with the example of Apple and Amazon.

Apple products are in high demand, and the company has been able to charge a premium price for its products. The high demand for Apple products has allowed the company to generate significant profits and command a dominant market share.

Amazon, on the other hand, operates in a highly competitive market with many suppliers. As a result, the prices of Amazon products are relatively low, reflecting the lower costs of production and distribution.

The implication of Marshall’s theory is that the market will determine the fair price of a commodity. In other words, prices are not arbitrary but are determined by supply and demand.

This concept is fundamental to the functioning of a free market economy, where prices are allowed to fluctuate based on market forces. Conclusion:

The lessons we can learn from Warren Buffet and Alfred Marshall demonstrate that investing and economics are not complicated fields. Instead, they are founded on fundamental principles that can be understood and applied to generate solid returns in the stock market.

By focusing on what is understood, avoiding complex investments, holding a long-term view, and recognizing the importance of supply and demand in determining prices, investors and economists alike can navigate what can otherwise be complex and confusing fields. Lesson from Muhammad Yunus:

Muhammad Yunus is a Bangladeshi economist who developed the concept of microcredit.

Microcredit involves providing small loans to people who lack access to traditional banking services. These loans are typically used to start small businesses or to fund entrepreneurial ventures.

The impact of microcredit can be outsized, as it allows people to break the cycle of poverty and build new enterprises. One of the essential lessons we can learn from Yunus is that small loans can have a significant impact on people’s lives.

The success of microcredit has led to the development of platforms like Kickstarter and Patreon, which allow people to fund artistic and entrepreneurial ventures through small donations. These platforms demonstrate the power of small contributions that can amplify in impact to create something much more significant.

The principle of microcredit also highlights the importance of providing access to financial services to everyone, regardless of their socioeconomic status. By providing people with the means to fund their ventures, microcredit can create opportunities and empower people to take control of their own lives.

This principle is especially important in developing countries, where traditional banking services may be lacking or inaccessible. Lesson from John Nash:

John Nash was a mathematician and economist who developed the theory of game theory, which examines the dynamics of competition and cooperation between individuals and groups.

In game theory, participants must consider others’ intentions and strategies to make decisions that will maximize their chances of success. One of the most critical lessons we can learn from Nash is the importance of considering the other players’ strategies in a game.

In Nash’s two-person game, both players must make a decision that results in the most significant possible payoff for themselves, given the other player’s choice. This principle is also evident in business negotiations, where each party must consider the other’s position before making a decision that will result in the most advantageous outcome.

Another important lesson is the potential for failure in game theory. In Nash’s work, he demonstrated that it is possible for both players to make decisions that result in a sub-optimal outcome for both parties.

This is known as a Nash equilibrium, where neither player can improve their position by changing their strategy. This principle is important in understanding the limitations of strategic thinking and recognizing that there is always a potential for failure, even when all parties are acting rationally.


The lessons we can learn from Muhammad Yunus and John Nash highlight the importance of considering the impact of small actions and considering others’ strategies to make decisions that will lead to the most desirable outcomes. By recognizing the potential for outsized impact, whether it is through small loans or small strategic decisions, we can create opportunities and empower individuals and organizations to achieve greater success.

These principles can be applied to both the world of business and personal finance, as they can lead to greater awareness and more strategic decision making in all aspects of life. Lesson from Friedrich Hayek:

Friedrich Hayek was an Austrian economist who emphasized the importance of the market in making economic decisions.

However, he also recognized that the market is not perfect. One of the essential lessons that we can learn from Hayek is that limited information leads to imperfect decisions.

In a market economy, no individual or organization has complete information about the market. As a result, economic decisions are frequently made without perfect knowledge of the market.

Hayek argued that the market is a dynamic process that is constantly changing. This changing process affects the price and availability of goods and services.

The price mechanism helps to allocate resources to where they are most needed. However, when the information available at any given time is incomplete, it can lead to inefficiencies in the market.

This is particularly true when there are significant changes in the market, such as during periods of inflation or economic recession. One solution to this problem, according to Hayek, is to allow the market to operate freely.

The market mechanism can quickly adjust to changing conditions and allocate resources where they are most needed. Centralized planning, on the other hand, does not have the same flexibility and is unable to respond quickly to changing market conditions.

Lesson from Max Weber:

Max Weber was a German sociologist who believed that successful organizations depended on clearly defined roles, chains of command, and hiring based on skills and qualifications. Weber was interested in bureaucratic organizations and how they could be structured to be efficient and effective.

Weber believed that successful organizations needed to have a clear hierarchy, with individuals having defined roles within the organization. This hierarchy would allow for clear communication and decision-making processes.

Each person in the organization would have a specific role and would be responsible for its execution. Weber also emphasized that hiring should be based on qualifications and skills rather than social connections or other criteria.

Another critical lesson from Weber is the importance of clear rules and regulations. To be successful, organizations need to have clear rules and guidelines for behavior.

This would allow for a consistent application of policies and procedures throughout the organization. This consistency would help to ensure a fair and equitable treatment of employees and would help to prevent misunderstandings and conflicts.

Weber’s approach emphasizes the importance of structure and organization in the success of an enterprise. A clear hierarchy and well-defined roles allow for efficient communication and decision-making.

Hiring based on skills and qualifications helps to ensure that individuals are qualified for their positions. Clear rules and regulations promote consistency and fairness in the organization.


The lessons we can learn from Friedrich Hayek and Max Weber highlight the importance of understanding the limitations of knowledge in decision-making and the importance of clear structure and organization in building successful enterprises. Limited information can lead to imperfect decisions, and market economies must be allowed to operate freely to respond to changing market conditions.

Clear rules, regulations, and hiring based on qualifications and skills are essential to building strong organizations. By applying these lessons, individuals and organizations can make better decisions and build strong, successful enterprises.

Lesson from Milton Friedman:

Milton Friedman was a Nobel Prize-winning economist and one of the most influential thinkers in modern economics. One of the essential lessons we can learn from Friedman is his permanent income hypothesis.

This hypothesis asserts that people’s spending habits are not based solely on their current income but on their expected income over the long term. Friedman argued that people adjust their spending habits based on their expected long-term income rather than their current income.

This is because people tend to prefer stable income increases rather than short-term fluctuations in their income. As a result, changes in income, such as those caused by income taxes or fluctuations in 401k contributions, do not have a significant impact on people’s spending habits.

The permanent income hypothesis has significant implications for economic policy. For example, policies aimed at increasing income in the short term, such as tax cuts, may not have the desired effect on consumer spending.

Instead, policies that focus on improving long-term income stability may be more effective at increasing consumer spending and stimulating economic growth. Lesson from Burton Gordon Malkiel:

Burton Gordon Malkiel is an economist and author best known for his work on efficient markets.

Malkiel believes that the markets tend to be efficient, meaning that prices reflect all available information about a security at any given time. Malkiel’s work has led to the development of the efficient market hypothesis (EMH), which states that it is impossible to consistently outperform the market by using any public information.

In other words, the market incorporates all available information in its pricing, making it impossible to consistently beat the market by using any public information. The implication of the EMH is that index investing is a more effective strategy than actively managed investing.

Index investing involves investing in a broad-based portfolio of securities to match the returns of a particular market. This strategy is based on the belief that the markets tend to be efficient and that it is difficult to consistently outperform the market.

Malkiel’s work has also highlighted the importance of low-cost investing, which involves minimizing expenses such as brokerage fees and management fees. Low-cost investing has been shown to be an effective way to maximize returns and minimize risk.


The lessons we can learn from economists Milton Friedman and Burton Gordon Malkiel emphasize the importance of understanding economic trends and making informed investment decisions. Friedman’s permanent income hypothesis asserts that spending habits are not based solely on current income, while the efficient market hypothesis developed by Malkiel emphasizes the importance of low-cost investing and index investing.

By understanding these concepts, individuals can make better investment and economic decisions, maximizing their returns and minimizing their risk. Lesson from Elinor Ostrom:

Elinor Ostrom was a political economist who dedicated her career to studying how groups of people can manage common-pool resources sustainably.

Common-pool resources are resources like water, forests, and fish stocks, which are collectively owned but individually used. One of the key lessons from Ostrom’s work is the importance of workable rules and the development of Ostrom’s Law.

Ostrom’s Law states that those closest to a resource are the ones best equipped to manage it sustainably. This means that regulations and policies should be developed at the local level, with input from those who use the resource on a daily basis.

By developing rules and policies that are specific to local conditions, it is possible to manage common-pool resources sustainably and avoid overuse or depletion. For business owners, this lesson has significant implications.

Successful business strategies need to consider the sustainable management of resources. In the case of common-pool resources utilized by the business, it is essential to consult with local communities to understand their needs and develop workable rules and regulations that benefit all parties involved.

Lesson from Herbert A. Simon:

Herbert A.

Simon was an economist and psychologist who believed that decision-making was a process that involved intelligence gathering, design, and choice. According to Simon, individuals make decisions not by trying to maximize a single goal but by considering multiple goals and interests.

Simon argued that individuals have limited cognitive resources and are unable to consider and evaluate all possible options and outcomes. This led him to develop the concept of bounded rationality, which argues that decision-making is based on a limited set of choices and rules of thumb.

The implications of Simon’s work extend beyond the field of economics and into business strategy. Businesses need to consider multiple goals when making decisions.

Sometimes the goals of different stakeholders may conflict with each other, and a successful business strategy must navigate these conflicts effectively. For example, a business may need to prioritize profit-making as well as environmental sustainability.

These two goals may conflict with each other, and a successful business strategy must consider both to develop an appropriate plan of action. This concept is essential for business leaders to understand to develop balanced, successful strategies that consider the interests of all stakeholders.


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