ECON-2110 Lecture Notes - Lecture 1: Malaria, Urology, Money Supply
27 Sep 2016
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Only when the captains began to get paid by every prisoner that walked off the boat, did they raise the survival rate of the prisoners. Incentives: rewards and penalties that motivate behavior. People respond to incentives in predictable ways. Self-interest is an important incentive in econ. Big idea #2: good institutions align self-interest with the social interest. Markets magically align your self-interest with social interest. Example: because the cheese-monger wants profit, you get your cheese. Invisible hand: if you have markets who are working well, those who think about their own interests actually help out their market more. (not always true) Adam smith saw the invisible handfather of econ. Opportunity cost: the value of the opportunities lost. For every choice something is gained, something lost. People respond to changes in opportunity costs. Yesresearch takes time and money for the drugs which means it takes a longer time for people to be able to use these drugs.
