Robert Whaples and the Modern Principles

A blog on my teaching with Modern Principles of Economics by Tyler Cowen and Alex Tabarrok

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First Day of Class!

Posted by Robert Whaples on September 2, 2009

On “Day One” I always open with a discussion of how to “Think Like an Economist,” which emphasizes decision making by rational individuals who weigh costs versus benefits, especially at the margin.  One example that we discuss at length is the decision we make every time we get on the highway about how fast to drive.  Every student admits to regularly breaking the speed limit (as do I) and we discuss the marginal benefits and marginal costs of clicking the old cruise control button up one more notch. Another discussion concerns whether the police should install cameras to nab people who go through red lights.  Again we discuss marginal costs and benefits — eventually getting around to the point that doing so changes incentives to individual drivers giving them an incentive to drive more carefully and vigilantly but also to floor it to get through the light in time or to slam on the brakes to avoid going through on red.  Empirical evidence shows that cameras at traffic lights often leads to higher accident rates.

Cowen and Tabarrok’s list of Ten Big Ideas meshes nicely with this discussion, especially the first four Big Ideas — that “Incentives Matter,” that “Good Institutions Align Self-Interest with the Social Interest,” that “Trade-offs Are Everywhere,” and that “Thinking on the Margin” is smart.

I’ve also created a new opportunity cost question based on the famous economists introduced in Chapter 1 — “James walks into the Econ Tee-Shirt Shop with $10 in his pocket.  Every tee-shirt in the store has a price of $10.  His favorite two shirts are one with Adam Smith showing his invisible hands and one with Milton Friedman foolishly taking a shower.  He’s willing to pay $20 for the Smith shirt and $15 for the Friedman shirt.  What’s his opportunity cost for the Smith shirt? What is his opportunity cost for the Friedman shirt?”  The question helps emphasize that the opportunity cost of something needn’t be its price and is best expressed in terms of things rather than dollars.

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