Market Power

Musings by an academic economist on the power of markets and the power over markets.

Thursday, March 17, 2005

Teaching Principles

King at SCSU Scholars has chimed in on the teaching discussion (which he termed "delightful" :-) ) between John Palmer, John Chilton, and myself. King lists 3 items that econ profs would do well to teach to principles students:

Russell Roberts gave a lecture I heard once many years ago in which he summed up economics as three postulates, which he represented as acronyms:

1. SI -- people act as if motivated by their self interest.
2. NFL -- no free lunch, or more often known as TANSTAAFL.
3. MC=MB --marginal benefit = marginal cost, the notion that rational decision occurs at the margin. The corrolary I always teach is sunk costs or "don't cry over spilt milk", which is something Heyne does so well.
I would add one more corrolary: PRTI -- People respond to incentives.