## What is economics - It is about people - People are predictable - Adam Smith's notion of the Invisible Hand - Each individual's economic self interest can contribute to the greater economic good under certain market conditions #### 2 Principles - People take advantage of incentives - What you get is what you add to the economy - Every sale is a purchase - Balance of trade = Monetary Value of Exports - Imports - Trade Deficit is when Imports are more than exports - The Capitol Hill Babysitting Co-op - Employees short on money - Instead of hiring baby sitters they would baby-sit each others kids - How do you make sure that everyone does their fair share? - Put in place a self enforcing script system with coupons for 30 mins of baby sitting time - the babysitter would receive the appropriate no. of coupons from the babysittee each time - The problem was that everybody in this market wanted to acquire more coupons so they didn't want to go out - But you could only accumulate coupons if people go out as that is when there is an opportunity to babysit - This leads to a recession in the babysitting economy where there is just not enough demand, so they print more coupons to fix it - yes, your sale is my purchase ----- Tags: #economics #toWrite Links: [[[Paul Krugman]]] [[050 First Principles MOC]]