Introduction to a new series of videos on the new One Lesson of economics!

Limited companies are an important part of the economy, but they can be confusing. What exactly is equity, and why does it appear on the liabilities side of a balance sheet, when high equity is a sign of a company's success? And what makes shares in a company valuable to the owners?

Once again, the one lesson cuts straight through the complexity, answering all these questions just by looking at everyone's net worth.

What is a firm? What is profit, and does it have to be at another person's expense? What is investment?

Many fallacies in economics are a result of people not understanding profit. Even as late as 2009, some academic economists admitted to being confused about how firms can make more money in profits than they pay out in wages. But thinking about the One Lesson clears up any confusion - we just need to stop being obsessed by money, and look at how everyone's *net worth* changes as a result of a firm's investment, production and sales.

Picture of F. A. Hayek from the Wikimedia Commons. Licensed under the Creative Commons Attribution-Share Alike 3.0 Unported license.

Modified by cropping and colouring.

https://en.wikipedia.org/wiki/File:Friedrich_Hayek_portrait.jpg
https://creativecommons.org/licenses/by-sa/3.0/deed.en

Russell Brand image and quote obtained from BBC Newsnight video on YouTube. Used under fair dealing copyright exception for criticism and review.

Modified by cropping.

https://www.youtube.com/watch?v=3YR4CseY9pk

Confusion about profits by economists:

http://www.economics-ejournal.org/economics/discussionpapers/2009-52

Most economic theories deal badly, if at all, with insolvency, but it is critical to understanding economics. Financial crises and many frauds can only be understood properly when debts are part of the economic model.

Insolvency is the silent killer of economies, and can lead to terrible injustice.

Money and banking have confused a lot of economists, not to mention other people, over the years. The One Lesson helps us to make sense of what's going on, by getting us to see how everyone's net worth changes at each stage in money's journey from its creation to its destruction.

Many of the complexities of economics go away when we consider how decisions and actions affect each person's net worth. The results are astonishingly simple and intuitive, allowing almost anyone to engage in economic debate, and to know when they are being deceived.

There is no fallacy of composition when it comes to net worth!

Gold coin image by Alexas_Fotos from Pixabay:

https://pixabay.com/photos/nickel-24-karat-coin-gold-bull-2815980/

"Money as Debt" film by Paul Grignon:

https://www.youtube.com/watch?v=6pW9rlOKuhk
https://www.youtube.com/watch?v=c62p6WFwtH4
https://www.youtube.com/watch?v=N2aQ9hk5fCE
https://www.youtube.com/watch?v=qoPsgRwdg6I

Is destruction really good for the economy, as many economists and pundits claim? Here is what the One Lesson tells us about Frederic Bastiat's Broken Window parable.

The analysis in this video is relevant to natural disasters and car scrappage schemes, as well as vandalism.

This video explains a single economic lesson, which lets you judge for yourself what other people are saying about economics.

Future videos apply the lesson to a series of questions and scenarios.