1. Basic Assumptions in Economics Presentation copyright © 1999 by Barry Brownstein

2. Self-Interested l People are self-interested but not selfish –volunteer worker –economics assumes nothing about the scope of things that individuals ought to be concerned about, nor does it proscribe this scope

3. Are Individuals Rational? l Individuals are only rational in the sense that they do the best they can, but they can and do frequently make errors. l Individuals are very irrational and fallible beings whose individual errors are corrected only in the course of a social process.

4. It is Important To Understand That Errors Are Made l If one has consciousness on the limitations of the individual mind ‘ this induces an attitude of humility toward the impersonal and anonymous social processes by which individuals help to create things greater than they know.’ If one has no understanding that man makes pervasive errors then one may have ‘an exaggerated belief in the powers of individual reason and of a consequent contempt for anything which has not been consciously designed by it or is not fully intelligible to it.”

5. Scarcity l In the sense that mankind has to choose scarcity is a fundamental law –time and thus human attention is the ultimate scarce resource l The old assumption of scarcity is based upon limited resources that decrease when shared –technology is reshaping how we think about scarcity

6. How Technology is Reshaping Scarcity l Knowledge and information can be shared without decreasing its availability l In a network economy value comes from plentitude- (e.g. fax, e-mail) –every additional fax, e-mail increases the value of all others l For a business the question to ask is- can your business thrive if the product is ubiquitous and copies plentiful?

7. Substitutes For Everything? l “Intelligent choice- choice that obtains the most of what is wanted from what is available, economizing choice- requires comparing the additional costs of using alternative means against the additional benefits of doing so.” l Fire safety requires two exits from each apartment unit? l “Health care is a right of everyone.”?

8. The Law of Unintended Consequences l Because economic systems are complex outcomes are frequently emergent, unpredictable and thus our decisions cause unintended consequences l In our example about fire safety how could a second exit increase fire fatalities even if the exits are well-designed? l What would free universal health care do for health and safety consciousness?