Thinking like an Economist:
A Guide to Rational Decision Making
Professor Randall Bartlett Ph.D.
Smith College
12 Lectures
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Economic forces are everywhere around you. You\'re made aware of that whenever you reach for your wallet, apply for a loan, shop for health care, or try to figure out the best credit card to carry. But that doesn\'t mean you need to passively accept whatever outcome those forces might press upon you. Instead, you can learn how to use a small handful of basic nuts-and-bolts principles to turn those same forces to your own advantage.$

Making a few simple adjustments to the way you see things and act on them—learning to \"think like an economist\"—can give you newfound power and confidence in a surprising range of financial and personal situations that make up your daily life. You can find yourself making better decisions that not only save time and money, but also produce optimum results in other ways important to you. And you can also sharpen your understanding of world and national events.

In the 12 fast-moving and crystal-clear lectures ofThinking like an Economist: A Guide to Rational Decision Making, award-winning Professor Randall Bartlett of Smith College presents some of the fundamental principles and concepts that shape the lenses through which economists view the world. He then shows you how to use these simple analytical tools to understand what you see through those lenses.

By learning to identify the many varied situations in which economics affects your life and how to wield the tools that can help you make the wisest choices in those situations, you\'ll enhance not only your understanding of daily life but your own success inlivingit.

A Tool Kit for Changing How You Look at Daily Life

Many of the concepts in Professor Bartlett\'s tool kit may be familiar.

• People respond to incentives.
• There\'s no such thing as a \"free lunch.\"
• There are at least two sides to every interaction.
• Everything affects everything else.
• Any action can bring with it significant unintended consequences.
• In this world of complex interrelationships, no one is really in control.

However, when used in the context of three core concepts of economic rationality, marginal analysis, and optimization that Professor Bartlett clearly lays out, his tool kit can make this perhaps the most practical, life-enhancing economics course you\'ll ever take.

It\'s an approach that makesThinking like an Economista real-life how-to guide that sets aside those often-dry economics textbooks and reveals just how often the seemingly remote forces discussed in their pages are in fact at play in your own life—often in situations in which you may never have dreamed they\'d be present.

While most of us can readily appreciate the role those forces play in expected areas—the ones in which monetary values are obviously at work—many of us often give little notice to the full reach of those economic principles into almost every other aspect of our lives, from the safety of our environment to the amount of candidate information we really need in order to cast a wise vote.

After a dozen lectures with Professor Bartlett, things will look very different. You\'ll see how basic economic ideas like incentives, risks, rewards, and rationality are not just the province of professional economists, government policymakers, or your local bank\'s loan officer, but instead lie at the root of nearly every decision you must make in your daily life.

Those decisions can include

• choosing wine from a restaurant menu,
• buying an extended warranty on that new television set,
• deciding how to get to work each morning, or
• nearly anything else you might imagine.

Real-Life Examples Clarify Each Key Idea

Using examples drawn from his own life and likely echoing yours, Professor Bartlett shows you how to

• see the world as an economist sees it,
• examine the rationality of individual decisions, and
• evaluate the outcome of those decisions in terms of both personal benefit and social efficiency, which can sometimes differ.

Professor Bartlett has designedThinking like an Economistto require no previous economics education. And he has scaled his examples to include not only those situations common to us all, but also to those felt across entire countries and even the world, such as the 2008 financial crisis or the debate about global warming and the most practical ways to respond to it.

An engaging and remarkably clear teacher, Professor Bartlett has for years attracted a widespread audience—from both on and off campus—for his annual lecture series on financial literacy. This course will help you grasp why those lectures are so popular, and why the lessons taught in them are so valuable to you.

12 Lectures: 1. The Economist\'s Tool Kit—6 Principles
Assemble the intellectual tool kit that will be used throughout the course to help you see the world from an economist\'s perspective. The first tools in your kit are six principles of human behavior accepted by nearly all economists as fundamental.
2. The Economist\'s Tool Kit—3 Core Concepts
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.
3. The Myth of \"True Value\"
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.4. Incentives and Optimal Choice
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.
5. False Incentives, Real Harm
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.
6. The Economics of Ignorance
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.7. Playing the Odds—Reason in a Risky World
People can strategically use information—selectively controlling, hiding, or subsidizing it—to influence the decisions of others. Examine concepts like the informational blind date and information asymmetry and see how they can lead to consequences like adverse selection and even the 2008 financial crisis.
8. The Economics of Information
Safety, like everything, has a cost; at some point, being a little safer costs more than it is worth. By studying how economists evaluate risk, learn how the concept of expected value permits rational decision making in situations with risk, but also brings its own set of dangers.
9. A Matter of Time—Predicting Future Values
Time can be one of the most important factors in economic thought; when events occur matters. This lecture looks at how economists deal with this critical factor, introducing you to concepts such as nominal versus real value and present versus future value.10. Think Again—Evaluating Risk in Purchasing
Apply several of the new tools you\'ve been working with to learn how an economist might confront one complex choice you have likely faced yourself: whether to purchase that extended warranty on an expensive consumer item like a big-screen television.
11. Behavioral Economics—What Are We Thinking?
Despite the predictive power of conventional economic presumptions about fundamental rationality, behavioral economists are showing that we sometimes do things that indeed seem irrational. Delve into several examples of this and possible means of overcoming these behaviors.
12. Acting like an Economist
Apply what you\'ve learned by thinking like an economist about three different issues: doing a cost-benefit analysis of crime from a criminal\'s perspective; altering our own structure of incentives to motivate healthier behaviors; and finding policy solutions to traffic congestion and its resulting pollution.
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