Thinking Like An Economist - Seven Secrets, One Big Idea
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The document outlines key economic principles centered around incentives, trade-offs, and market dynamics, emphasizing that incentives can be both positive and negative. It discusses concepts such as opportunity cost, marginal thinking, and the role of markets, including potential market failures and their implications. Additionally, it highlights the notion that every decision has consequences, framing the idea that there are no free lunches in economics.
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Thinking Like An Economist - Seven Secrets, One Big Idea
- 2. INCENTIVES The Big Idea and the Seven Secrets for Thinking Like an Economist
- 3. INCENTIVES The 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
- 4. The Seven Secrets: 油 Life is About Trade-Offs ≒ Examples of trade-offs: College versus working, or a little of both Cleaner environment or more production
- 5. The Seven Secrets: 油 Opportunity Cost ≒ What is Opportunity Cost?
- 6. The Seven Secrets: 油 Marginal Thinking ≒ What is marginal thinking?
- 7. The Seven Secrets: 油 Trade Creates Value ≒ Trade and Comparative Advantage
- 8. The Seven Secrets: 油 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
- 9. The Seven Secrets: 油 But Markets Sometimes Need a Hand ≒ Market failure Poorly defined property rights Externalities Public goods Market power
- 10. The Seven Secrets: 油 Our Decisions Have Consequences Now and in the Future ≒ Consumption and capital goods. ≒ The business cycle
- 11. The Seven Secrets: 油 There are No Free Lunches ≒ Free is a four-letter word! Who is paying?