Intro To Eco Reasoning

TO CHOOSE OR TO CHOOSE OR NOT TO NOT TO CHOOSECHOOSEThanks to Sally Adamson of DHS for this one.

TO CHOOSE OR TO CHOOSE OR

NOT TO NOT TO CHOOSECHOOSEThat is NOT the

question!

MisconceptionsMisconceptions

• Economics is all about money

• Economics is all about math, charts & graphs


• Sometimes there is no choice

• Bad choices have costs, but good choices do not.

• Information is needed for wise choices


• Seeking self satisfaction is selfish

• Incentives are bribes

• When there are winners, there must be losers

• “Homo economicus”, or economic man, is a rational, perfectly informed, and self-interested actor

• Man seeks wealth, avoids unnecessary labor, and has the ability to make judgments toward those ends.

Economic ReasoningEconomic Reasoning“Economics is....a method rather

than a doctrine, ..... A technique that helps the possessor to draw correct conclusions.”

– John Maynard Keynes

Economic ReasoningEconomic Reasoning“All social phenomena emerge

from the choices that individuals make in response to expected benefits and costs to themselves.” -Paul Heyne

Economic ReasoningEconomic Reasoning “Economic principles help

describe why people do what they do to get what they want.”

- Bob Reinke

Economic ReasoningEconomic Reasoning

• People face tradeoffs

• Scarcity exists everywhere

• People MUST make choices


• All choices involve costs vs. benefits

• EVERY choice requires giving up something (costs)


• People economize = make choices

• People make the choice that they perceive will offer the most benefit over cost


• The consequences of choice lie in the future

• Decisions are based on “expectations” for an uncertain future

Economic ReasoningEconomic Reasoning• “All or nothing” decisions

are rare• Rational decisions occur at “the margin” and are based

on the benefits & costs of the next increment

Economic ReasoningEconomic Reasoning• Decisions are influenced by

incentives – rewards & punishments

• Incentives cause behavior changes in predictable ways


• Incentives are shaped by society’s rules of the game

• Changing “prices” or costs results in new choices


• Voluntary trade occurs when both parties expect to benefit

• Trade benefits everyone

• Trade creates wealth


• Specializing in what YOU do best results in greater production

• Society benefits when people specialize and trade

Economic ReasoningEconomic Reasoning• Understanding human behavior lies in

identifying incentives

• Economics is a social science that focuses on the choices all people make

• Economic choices are EVERYWHERE

• Even very young children instinctively use economic reasoning

The Six Core PrinciplesThe Six Core Principles

1. People choose2. People’s choices involve costs.3. People respond to incentives in predictable

ways.4. People create systems that influence

individual choices and incentives.5. People gain when there is voluntary

exchange.6. People’s choices have consequences that lie

in the future.

Education

Intro To Eco Reasoning