Coming to lecture is a little like going to a football game. It is so much better to watch football with 110,000 people. A lecture hall is that way too! Things are more fun and interesting when everyone is participating!
Thinking Like An Economist - Seven Secrets, One Big Idea
INCENTIVESThe Big Idea andthe Seven Secretsfor Thinking Like anEconomist
INCENTIVESThe Big Idea • Positive and negative incentives: – grades • Direct and indirect incentives: – Unintended consequences (Born on the First of July) • Incentives and innovation • Incentives are everywhere
The Seven Secrets: Life is About Trade-Offs• Examples of trade-offs: – College versus working, or a little of both – Cleaner environment or more production
The Seven Secrets: Opportunity Cost• What is Opportunity Cost?
The Seven Secrets: Marginal Thinking• What is marginal thinking?
The Seven Secrets: Trade Creates Value• Trade and Comparative Advantage
The Seven Secrets: Markets Generally Work Well…..• The market economy: – eBay, craigslist, stock market, supermarkets – The role of prices• Adam Smith, the Father of Economic Thought – 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 own interest. – Wealth of Nations, 1776
The Seven Secrets: …But Markets Sometimes Need a Hand• Market failure – Poorly defined property rights – Externalities – Public goods – Market power
The Seven Secrets: Our Decisions Have ConsequencesNow and in the Future• Consumption and capital goods.• The business cycle
The Seven Secrets: There are No Free Lunches• “Free” is a four-letter word! – Who is paying?