Today's class will be about the basics of economic theory: how individuals respond to incentives. Economists believe that they do so in predictable ways. A more nuanced statement might allow for many personal idiosyncrasies but that on average people tend to behave like economic theory predicts.
I will start the class with a discussion of a paper by a friend of mine, Stacy Dickert-Conlin, who found a (surprisingly?) large response from the financial incentives to have a baby before midnight on December 31 from the US tax code and EITC.
With this as background we will go over the basics of preference theory, optimal choice and utility maximization.
Then, we will examine things that affect choice: changes in income (new Oregon income taxes), prices (tax on gasoline) and new technologies that alter costs like hybrid cars. We will also look at policies like food stamps which change the shape of the budget constraint.
Finally we will review the most fundamental concept in economics in my opinion: the concept of Marginal Benefit = Marginal Cost (MB=MC).
My class is overstuffed - literally - apparently there were jokes about calling the fire marshal in the first class (covered by a colleague), so no more can join this term. But the class will be offered again next year if anyone is interested.