Why Economics is Good for You

1
Why Economics is Good for You

• Econ. 1015
• Winter 2007

2
The Big Picture

• Incentives Matter
• e.g., 1 earnings tax

3
The Big Picture

• Prices and markets make effective use of
  decentralized information
• Hayek. The Use of Information in Society.
  American Economic Review. Vol. 35 (Sept. 1946)
• Example pollution
• Example school choice
• Example medical care (3rd party payment)

4
The Big Picture

• Markets usually work better than planning.
• But if they dont fix them so they do work
• Externalities - getting prices right
• Means testing (income transfers)

5
The Big Picture

• You Cant Repeal the Law of Supply and Demand.
• If prices dont clear the market, something else
  will
• Market for used cars
• Minimum wage
• Housing prices

6
Summer Reading

• M. Friedman Capitalism and Freedom
• M. Friedman Free to Choose
• S. Levitt S. Dubner Freaknomics
• L. Kotlikoff S. Burns. The Coming Generational
  Storm
• Hernando de Soto. The Mystery of Capital.
• J. Surowiecki. The Wisdom of Crowds.
• Ayn Rand. Atlas Shrugged.