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Lecture 3
Macroeconomics
Opening
Prayer
What is worth the most?
How many keys?
How to play?
How many ways to order the 88 keys?
88!
1.85 x 10134
185,000,000,000,000,000,000,000,000,000,0
00,000,000,000,000,000,000,000,000,000,00
0,000,000,000,000,000,000,000,000,000,000,
000,000,000,000,000,000,000,000,000,000,0
00,000,000,000,000
Optimize
Tradeoffs
Tradeoffs
Mileage Safety
A 2001 National Academy of Sciences study estimated that the traffic
death toll attributable to past downsizing was approximately 2,000
lives per year.
Economic Models
Simplified Version of
Reality
Value in Prediction
Incentives Matter
Change Incentives

Change Behavior
Incentives are
more important
than goals
Consequences
matter more than
intentions
Unintended
Consequences
Macro Micro
U.S. Farmers

1800 - 90 percent
U.S. Farmers

1900 - 45 percent
Gasoline engines

replaced horses
U.S. Farmers

2012 - 2 percent
What happened to those 88 people?
Get wealthy 

by making 

others happy
Every person
has the power
to create
wealth
Because every
person has the
power to make
someone happy
Learning English
Access to the worldโ€™s
knowledge
What if
Steve Jobs
had been
born in
Syria like
his father?
Scriptures Economics
Spirit
10 Questions
1. What is GDP?
2. What is GDP per Capita?
3. What is the Average GDP per capita on earth?
4. What is the GDP per capita in your country?
5. What is innovation?
6. Are all inventors also entrepreneurs?
7. What are the capitals of innovation?
8. What is the source of wealth?
9. What is the Magic Machine of economics?
10. Will a hurricane increase GDP?
Magic Machine
Trade is a
Magic Machine
Ideas
Inventions
Innovations
Ideas - Everybody
Inventions - Inventors
Innovations - Entrepreneurs
Innovations
are market-tested
successful inventions
ideas
inventions
innovations
3%
Production
Innovation
Continuous Innovation
1978
China Changed Worldview
Deng Xiaoping
Mao Zedong
1976
Dies

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