Class #16 10/7/11

Today in class we mostly did a review for the test. The first thing we talked about was that decisions are always about getting more or less, not all or nothing. There are also different answers for what is considered selfish. It is a subjective term with little meaning. It only means something when we have a margin to compare it too. A margin can apply to lazyness, stress, being studious ect. Tylonal is health care. By Bruce Springsteen waiting 3 years for new album, margin is higher. This is because there is more anticipation and excitement for the next album since theres a long time in between albums. If santa came every day, it wouldn't be as exciting.

Teachers make a fraction of what professional athletes make. This statement ignores margin. The scarcity of teachers is less than athletes. There is a more abundant amount of teachers than baseball players. We don't value the next teacher as much as we do the next baseball player. There would be no noticeable difference if we removed 200 teachers from teaching. If we removed 200 athletes we would see a noticeable difference. The total amount that teachers make is much greater than athletes. Teachers made more than athletes in 1912. Values arise from human interpretation. It is not objective. The ability to have water in the desert is why it costs $2.00 for water, not just the product itself.

Added costs are costs we incur from making decisions. Sunk costs are resources that aren't recoverable when you make decisions. Don't pay attention to these. The past dues of relationships are sunk costs. Staying with someone for another year doesn't get past dates back.

Decisions are made from benefits we incur by going to a sporting event, not the $200 we spent already on tickets. We also learned that trade offs for really scarce thing matter more than things that aren't scarce. Rizzo reiterated that humans act with purpose. Decisions are based on self interests. We do things to erase the burdens of our life. People respond to incentives. Behaviors change when benefits and costs change. Actions are from other costs. Money is not important in life. Our ability to get goods and services is what's important.

Law of unintended consequence- Decisions have effects that we couldn't predict in advance. Economics can't perfectly predict things but people have general behaviors that are observed. The seat belt law was made to help save lives, but the intended consequence of it is that there is more of an incentive to drive crazier since there is less risk of getting hurt in an accident. The opposite effect happened from what the law was intended for. A better way to save lives over making seat belts would be to use that money for public health.