For all the attention given to economics by mainstream media and political pundits, our economic literacy as a society still leaves much to be desired. We opine on economic issues constantly, we deliver passionate soliloquies defending our partisan viewpoints, but rare is the occasion when we sit down and actually try to learn economics.

The result of this disparity between attention and education has been the emergence of a number of economic fallacies, misunderstandings, and leaps of logic. People repeat economic ideas because they sound like common sense, even when these ideas have been debunked time and again by those who have thought about them a bit more carefully.

Many volumes could be written on the common economic misunderstandings that plague our society. But for the sake of, well, economy, we will have to pick only the most prevalent of these missteps for the following analysis. To that end, here is my selection for the top five most misunderstood concepts in economics.

1) Scarcity

The concept of scarcity seems pretty straightforward: we have virtually unlimited wants, and yet we live in a world where the means for satisfying these wants are limited. There are only so many cars, computers, homes, factories, doctors, and so on. Devoting more of these resources to one end means devoting fewer of these resources to other ends.

Simple as this may seem, there are many who maintain that scarcity is only a fact of life because of the economic system we live under. If we had a better economic system, they say, scarcity would no longer be a problem.

The economist Ludwig von Mises drew attention to this view in his 1949 economic treatise Human Action:

He who contests the existence of economics virtually denies that man's well-being is disturbed by any scarcity of external factors. Everybody, he implies, could enjoy the perfect satisfaction of all his wishes, provided a reform succeeds in overcoming certain obstacles brought about by inappropriate man-made institutions. Nature is open-handed, it lavishly loads mankind with presents. Conditions could be paradisiac for an indefinite number of people. Scarcity is an artificial product of established practices. The abolition of such practices would result in abundance.