Class Summary 10/3

Three Basic Economic Principles:
1. How People Make Choices
2. How People Interact
3. How "Economics" Works

What follows Scarcity?
-People make trade offs
-Opportunity costs
-Thinking at the margin
-People respond to incentives

MAIN EXAMPLE:

If the FDA spends a lot of money testing drugs and a lot of time testing drugs, the longer the process takes the more lives are taken.  The fact that life saving drugs are still being tested and are not in use are causing deaths. For every $50 million we get 20 new drugs, 10 of which are probably life saving. What is the incentive structure of the FDA? They do not let a drug out if there is even a very small chance that a drug is dangerous. However, FDA makes more money when they make bad decisions than when they make good ones...