1.6 Conclusion
You’ve come a great distance in just a few pages. You’ve learned about scarcity, opportunity cost, incentives, and the nature of collective action problems. This leaves you in a terrific position to begin studying social issues. As you work your way through the book, pay particular attention to these general ideas:
People face trade-offs, which means they have choices.
Choices that look attractive to individuals often look less attractive to society as a whole.
If carefully crafted, a government policy is often capable of altering private incentives to more accurately align them with social goals.
You will soon discover that you can apply these powerful ideas to describe both the causes of and solutions to many social problems. As mentioned earlier, we’re going to discover that the problems we focus on, once stripped of their context, look very much alike. But stripping away the context is difficult. To help with that difficult job, we’re going to develop a few simple tools that economists often use to analyze problems. Chapter 3 “Supply and Demand” is devoted to the supply and demand model of markets, which economists use to understand the motivations of buyers and sellers of pickles, health care services, movie tickets, and more. Chapter 4 “Basic Game Theory: Exploring Strategic Interactions” develops a second useful tool—a simple but powerful analytical framework called game theory. With these two workhorses in our economist’s toolkit, we’ll be prepared to dig into some of society’s biggest problems.