THE ECONOMICS OF HUMAN BEHAVIOR

Economists try to understand and explain the world by assuming that the phenomena they observe are the outcomes of people's purposeful decisions.

• Individuals try to achieve their objectives given their limitations - limited time, money, and energy. They optimize.
• Individuals reacting with each other will eventually achieve market equilibrium. Government intervention alters that equilibrium.
• For economists, goods are just things we want to obtain; tangibles such as oil and cars, or intangibles such as esteem and peace.
• The full price people pay is a composite of the time, money, and effort they must give to obtain the good.
• Criminals respond negatively to costs and positively to benefits.
• There is a direct relationship between education and human capital. As people invest in themselves, purchasing education and training in order to earn more later in life allows them to build skillsets; which in turn increases their rate of return on the investment.
• General training will be paid for by the worker in the form of lower wages while training, but the costs and benefits of specific training will be split between the worker and the firm.
• The way in which a household accomplishes its goals is inextricably related to the members' abilities in the market and household, and whether specialization in either of these sectors is profitable.

Semper Fi