Thinking like an Economist: A Guide to Rational Decision Making

Complete your tool kit for economic thinking with three key concepts. Learn what an economist means by rational decision making; how marginal analysis is used to solve complex problems; and how you combine these first two concepts to understand optimization.

Put your new tools to work by examining a central conclusion in economic thinking: that rational individual choices can - even though they might not always - produce socially efficient results, where no person can be made better off without harming another.

How do economists think about the rights and rules that govern human interactions? Using real-life examples and classic problems like the Prisoner's Dilemma, plunge into questions of ownership, trade, and compensation and how ideas like incentives and responsibilities are intimately connected to them.

Two case studies involving tragic fires help you grasp two classic economic situations-the Tragedy of the Commons and the difficulties of providing a public good. Then, apply what you have learned to see how an economist would think about the even larger problem of global climate change.

In the first of three lectures examining how economists approach situations where information is incomplete, imperfect, or inaccurate, learn that there can indeed be an optimal level of ignorance. Also, explore some cost-efficient ways to reduce uncertainty.