Thinking like an economist hapter 2
Thinking Like an Economist Chapter 2
Outline e The economist as scientist o The economist as policy adviser Why Economists disagree
Outline • The Economist as Scientist • The Economist as Policy Adviser • Why Economists disagree
Every field of study has its own terminology Mathematics e integrals axioms vector spaces Psychology ego冷id冷 cognitive dissonance Law promissory o estoppel torts venues Economics supply o opportunity cost elasticity g consumer surplus令 demand冷 comparative advantage deadweight loss
Every field of study has its own terminology ▪ Mathematics •integrals ❖ axioms ❖ vector spaces ▪ Psychology •ego ❖ id ❖ cognitive dissonance ▪ Law •promissory ❖ estoppel ❖ torts ❖ venues ▪ Economics •supply ❖ opportunity cost ❖ elasticity ❖ consumer surplus ❖ demand ❖ comparative advantage ❖ deadweight loss
Economics trains you to Think in terms of alternatives Evaluate the cost of individual and social choices e Examine and understand how certain events and issues are related
Economics trains you to. . . . • Think in terms of alternatives. • Evaluate the cost of individual and social choices. • Examine and understand how certain events and issues are related
The economic way of thinking o Involves thinking analytically and objectively Makes use of the scientific method Uses abstract models to help explain how a complex real world operates Develops theories, collects and analyzes data to evaluate the theories
The economic way of thinking . . . • Involves thinking analytically and objectively. • Makes use of the scientific method. • Uses abstract models to help explain how a complex, real world operates. • Develops theories, collects and analyzes data to evaluate the theories
The economic way of Thinkir ng Yingyi Qian(2002) o Perspective e Reference or benchmark o Analytic Tools
The Economic Way of Thinking Yingyi Qian (2002) • Perspective • Reference or Benchmark • Analytic Tools
The Economic perspective about the individual behavior Self-interest economic agent Scarcity ° Opportunity Cost ● Tradeoff
The Economic Perspective About the Individual Behavior • Self-interest economic agent • Scarcity • Opportunity Cost • Tradeoff
The Economic perspective About Multi-Person Decisionmaking E uilibriui q ° Efficiency ●Win-Win
The Economic Perspective About Multi-Person Decisionmaking • Equilibrium • Efficiency • Win-Win
Reference/benchmark General Equilibrium(arrow-Debreu) Coase Theorem o Modigliani-Miller Theorem o Monetary Neutrality Theorem
Reference/Benchmark • General Equilibrium (Arrow-Debreu) • Coase Theorem • Modigliani-Miller Theorem • Monetary Neutrality Theorem
Economic Analvtic Tools Economic models The economic way of thinking includes developing abstract models from theories and the analysis of the models ° Uses two approaches >Descriptive(reporting facts, etc. Analytical (abstract reasonin
Economic Analytic Tools: Economic Models • The Economic way of thinking includes developing abstract models from theories and the analysis of the models. • Uses two approaches ➢ Descriptive (reporting facts, etc.) ➢ Analytical (abstract reasoning)
