Today’s Quote of the Day…

…is from my GMU professor Robin Hanson, as quoted in Quora:

Quora: What is the most important little known economic fact or idea?

Hanson: Honestly, supply and demand. It is the part of economics with which more people have a passing familiarity, yet where even so a deeper fuller understanding would bring big gains. Someone who deeply understands just supply and demand understands a great deal.

For example, understanding all of the many ways in which the real world deviates from a supply and demand world can give one a deep understanding of the likely places to expect both market failures and useful innovations.

JMM: Exactly.

3 thoughts on “Today’s Quote of the Day…

  1. I would add an addendum to this. The least known subset of Supply & Demand is that when you punish something (e.g. earning money) you will get less of it. When you subsidize something (e.g. not working) you will get more of it.

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  2. I think the concept of opportunity cost is much more neglected than supply and demand.

    Almost everyone understands that, if they are buying, it’s good for them if there are a lot of sellers and if they are selling it’s good for them if there are a lot of buyers and few sellers.

    But few people understand that almost every decision has an opportunity cost.

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    • Opportunity cost is a huge issue. The “opportunity cost” of a resource is the value of the next-highest-valued alternative use of that resource. Thus, the cost of going to school is much higher than tuition and books. It is also the money you could have made instead of attending school. It is also the cost of time that you could use to enjoy your life with other activities.

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