Discover more from Economics with Dr. A
What we learned in class
I fell in love with economics because it helped me understand human behavior. I was a chemical engineering major for three years before I took my first econ class. My life changed forever that semester.
The concept of rationality helps me understand that we all have different preferences and taking on actions would require the evaluation of our own personal costs and benefits. It makes it hard to judge others, because each person is making the decision that is best for them.
I also fell in love with economics because rationality also means that with the right incentive design you can get people to change their behaviors. All that you need is help them change the equation to the following
We need to tip the scale so that the positives outweigh the negatives, benefits outweigh the costs. Simple!
Designing incentives is not an easy job. However, governments, businesses, parents….etc try to get you to change your behavior all the time.
Types of Incentives
Steven Levitt, in Freakonomics, explains that incentives can be
our behaviors can be influenced by any of these three types of incentives mechanisms. You can learn a lot about yourself by asking yourself
1- why did you take action? or why did you NOT take action?
2- Were there any incentives influencing your behavior?
Economics is a beautiful subject to learn, it teaches you a lot about yourself and the world around you.
Did you read this entire email? Why did you choose to do that?
How can I incentivize you to share this newsletter with someone else?