Introduction to Economics | Marginal Revolution University (MRU)

Introduction to Economics | Marginal Revolution University (MRU)

October 21, 2019 65 By Stanley Isaacs


– [Professor Tyler Cowen] I love economics. I began
studying economics when I was 13 and I haven’t stopped yet. Economics really has
changed my life and the whole way I see the world. What’s so powerful about the
discipline is just how much it shapes how you understand everything around you. – [Professor Alex Tabarrok] But perhaps you’re
asking, what’s my incentive to learn economics? Well, that’s a great question.
You’ve already hit on a key economic insight, incentives. For example, why is
the service at a local restaurant typically so much better than from the
cable company? – Or why do laws which
supposedly protect endangered species, sometimes end up with more of those
animals being killed? – Or why do big toy companies
sometimes advocate for regulations which raise their costs?
Incentives are the key. – Another example might help
us explain. Way back in 1787, the British government hired sea captains to ship
convicted felons to Australia. The conditions on those ships were just awful.
On one voyage, more than one-third of the men died and the rest arrived beaten,
starved and sick. The public was outraged, newspapers called for better conditions,
the clergy appealed to the captain’s sense of humanity, and British Parliament passed
regulations requiring better treatment of these prisoners. Unfortunately, those
attempted solutions simply didn’t work. The death rate remained shockingly high. – So Tyler, as a good economist.
How would you solve this problem? – Well, there was one economist at
the time who came up with a novel solution. It was implemented and it
basically worked. Instead of paying the captains for each prisoner who embarked to
Australia, the government would pay the captains only for the prisoners who
arrived alive. Overnight, the incentives of the sea captains changed. The survival
rate of the prisoners shot up to 99%. As one observer put it, economy beat
sentiment and benevolence. – So what’s your incentive
to learn economics? People hear that I’m an economist and they ask me about
managing their money. And economics does have some lessons for investing in the
stock market, but economics is much broader than that. It’s the study of human
action, how people make choices and how they should make choices under scarcity.
Economics will help you with your choices, whether picking a career, parenting a
child, or deciding how much education is a truly worthwhile investment. Overall,
economics will give you a deeper understanding of the key issues
of our time. – Economics can be hard.
Retraining your brain to look at the world in a different way isn’t always easy. – But the reward is a new
set of eyes to see the world. So are you ready to begin?