The Economic Way of Thinking 13th Edition CH1 Notes

The Economic Way of Thinking CH1 Once Over Lightly Developed by social theorists to explain how order and cooperation emerge from the interactions of individuals perusing their own interests in substantial ignorance of the interests of those with whom they are cooperating. Economics is a theory of choice and its unintended consequences Economics assumes that all social phenomena emerge from the actions and interactions of individuals who are choosing in response to expected benefits and costs to themselves. Individuals make choices. Those individuals can be part of a group and can make choices for the group, but in the end, individuals make choices. Economics is choice Economizing behavior is behavior in which people analyze the expected benefits and costs. While this is a biased and limited way of looking at things, you need to form some kind of theory in order to understand social life Rules influence choices Property rights are a key element to rules in the game Social property rights assign ownership to society in general, and therefore nobody in particular, but society never makes choices (individuals do) A system of private property rights assigns rights to specific individuals, and these rights can be voluntarily traded. Private property rights help clarify our options and opportunities and form the foundation of the market-exchange economy. Introduction Many don’t understand what a well-functioning economic system is supposed to look like. The study of economics can begin with the complexity of everyday interactions Recognizing Order We notice failures and take success so much for granted that we aren’t aware of it Rush hour traffic is a feat of social cooperation The Importance of Social Cooperation We depend on processes of cooperation more than we realize Without the benefits of social cooperation, we would not have the benefits of civilization Thomas Hobbs believed that people were so committed to self-preservation and personal satisfaction that only force (or the threat of force) could keep them from constantly assaulting one another According to Hobbs, the foremost form of social cooperation is the abstaining from violence and robbery Once we abstain from violence and robbery, Hobbs believes that we will self-regulate ourselves into positive cooperation How Does it Happen?