ECON 262

In Class Exercise Two - Introduction (cont.) - Institutions, etc.

 

1.  In general, what do economists do in order to deal with the two basic economic problems we discussed (this question relates to rules or institutions)?

 

 

 

   

           a.  With respect to the fact that we must make choices because of scarcity - explain why (and what) intended consequence might occur (why would anyone want this rule?), and then a negative unintended consequence that might occur if the following rule was put in place:  All scarce resources must be shared equally among everyone.

 

Use the Model:

 

Rule:  All scarce resources must be shared equally among everyone.

Intended Outcome: 

Rule or Institution Change

Incentives (cost or benefit change)

Actions

Intended Outcome

All scarce resources must be shared equally among everyone.

 

 

 

 

Unintended Outcome:

Rule or Institution Change

Incentives (cost or benefit change)

Actions

Unintended Outcome

All scarce resources must be shared equally among everyone.

 

 

 

 

2.  Sometimes people think that rules need to be imposed upon us for order to emerge -- but there is evidence this isn't true.  Explain why an order would emerge without an imposed rule.

 

 

 

 

 

 

 

 

3.  What is the underlying axiom regarding human behavior that economists use (which relates to #2 – by the way, how does it relate to #2?)

 

 

 

 

 

 

4.  What questions do you still have about this material?