Class Five

Class Five:

Continue the three reasons why study economics:

Why getting facts right important? Economics help you understand certain facts, make a base line and then make better judgments (Have we spend enough on environmental protection?)

*It’s good to have different opinions, but you need to at least get close. You need to at least get some basic things right.

1. Economics is not complex, economic systems are.

*One reason we have trouble with the data and cannot engage in the debate:

We like to put drama or intentions in where it just doesn’t exist. (The wealth distribution is not done by any specific man.)

Drama and intentions are interesting, but it’s not where you start you economic analysis. Your need a starting point first.

*People have two types of brains:

i.                     Type M: more analytical, think about the consequence of things. “Why?”

ii.                   Type C: “What happened?”

Sometimes you need to apply both.

2. Social cooperation and “ORDER”.

Case. Coffee (full aspects of the process of getting me the coffee)

i.                     Impersonal (I don’t know any guy’s name, although millions engaged)

ii.                   Self-interests (Why they do it)

iii.                  Cognitive issues (Nobody know what they are actually doing)

iv.                  Nobody directed (no mastermind)

This whole process is what we mean by “Order”

The story illustrates two things:

i.                     “Invisible Hand” not always works, but help us understand which it works

ii.                   “Tacit Knowledge” something that other people will never get it right

*What’s allowing this process to work?

Price system, the only way that we can make the society unorganized in this organized way.