Intro To Eco Reasoning

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An introduction to economic reasoning. Thanks to Sally Adamson for this.

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Intro To Eco Reasoning

  1. 1. TO CHOOSE OR NOT TO CHOOSE Thanks to Sally Adamson of DHS for this one.
  2. 2. TO CHOOSE OR NOT TO CHOOSE That is NOT the question!
  3. 3. Misconceptions <ul><li>Economics is all about money </li></ul><ul><li>Economics is all about math, charts & graphs </li></ul>
  4. 4. Misconceptions <ul><li>Sometimes there is no choice </li></ul><ul><li>Bad choices have costs, but good choices do not. </li></ul><ul><li>Information is needed for wise choices </li></ul>
  5. 5. Misconceptions <ul><li>Seeking self satisfaction is selfish </li></ul><ul><li>Incentives are bribes </li></ul><ul><li>When there are winners, there must be losers </li></ul>
  6. 6. <ul><li>“ Homo economicus”, or economic man, is a rational, perfectly informed , and self-interested actor </li></ul>
  7. 7. <ul><li>Man seeks wealth, avoids unnecessary labor, and has the ability to make judgments toward those ends. </li></ul>
  8. 8. Economic Reasoning <ul><li>“ Economics is....a method rather than a doctrine, ..... A technique that helps the possessor to draw correct conclusions.” </li></ul><ul><li>– John Maynard Keynes </li></ul>
  9. 9. Economic Reasoning <ul><li>“ All social phenomena emerge from the choices that individuals make in response to expected benefits and costs to themselves.” -Paul Heyne </li></ul>
  10. 10. Economic Reasoning <ul><li>“ Economic principles help describe why people do what they do to get what they want.” </li></ul><ul><li>- Bob Reinke </li></ul>
  11. 11. Economic Reasoning <ul><li>People face tradeoffs </li></ul><ul><li>Scarcity exists everywhere </li></ul><ul><li>People MUST make choices </li></ul>
  12. 12. Economic Reasoning <ul><li>All choices involve costs vs. benefits </li></ul><ul><li>EVERY choice requires giving up something (costs) </li></ul>
  13. 13. Economic Reasoning <ul><li>People economize = make choices </li></ul><ul><li>People make the choice that they perceive will offer the most benefit over cost </li></ul>
  14. 14. Economic Reasoning <ul><li>The consequences of choice lie in the future </li></ul><ul><li>Decisions are based on “expectations” for an uncertain future </li></ul>
  15. 15. Economic Reasoning <ul><li>“ All or nothing” decisions are rare </li></ul><ul><li>Rational decisions occur at </li></ul><ul><li>“ the margin” and are based on the benefits & costs of the next increment </li></ul>
  16. 16. Economic Reasoning <ul><li>Decisions are influenced by incentives – rewards & punishments </li></ul><ul><li>Incentives cause behavior changes in predictable ways </li></ul>
  17. 17. Economic Reasoning <ul><li>Incentives are shaped by society’s rules of the game </li></ul><ul><li>Changing “prices” or costs results in new choices </li></ul>
  18. 18. Economic Reasoning <ul><li>Voluntary trade occurs when both parties expect to benefit </li></ul><ul><li>Trade benefits everyone </li></ul><ul><li>Trade creates wealth </li></ul>
  19. 19. Economic Reasoning <ul><li>Specializing in what YOU do best results in greater production </li></ul><ul><li>Society benefits when people specialize and trade </li></ul>
  20. 20. Economic Reasoning <ul><li>Understanding human behavior lies in identifying incentives </li></ul><ul><li>Economics is a social science that focuses on the choices all people make </li></ul><ul><li>Economic choices are EVERYWHERE </li></ul><ul><li>Even very young children instinctively use economic reasoning </li></ul>
  21. 21. The Six Core Principles <ul><li>People choose </li></ul><ul><li>People’s choices involve costs. </li></ul><ul><li>People respond to incentives in predictable ways. </li></ul><ul><li>People create systems that influence individual choices and incentives. </li></ul><ul><li>People gain when there is voluntary exchange. </li></ul><ul><li>People’s choices have consequences that lie in the future. </li></ul>

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