[NOISE] Welcome back. This first week, what we're going to try to do is to answer a couple of basic questions, and introduce a bas, some basic principles. The first basic question we need to answer, in an economics course, is what is economics? So in order to answer this question let's, let's try to answer it with an application or with a question. Should this class be free? Should we be offering... This is the best way of distributing the limited resource, which in this case is me. So let's try to answer this question by comparing 3 different option, alright, this is one way let's compare it 3 other ways. So, one way of distributing this limited resource, which is me, in this case, right? My time is limited. There's only one of me, right? So there's only one person who can give this, great, economics classes. so, one way of distributing this is like, I am my time is going to be given for free, for all of you guys, right? So this is me a limited resource is given free to all of you. Which is kind of the way we're doing it now. All of you know I'm not paying any money for, for taking this class. Now another way of doing this would be, well that would be one option right, the one we have right now. Another option would be that instead of just giving my time for free to everyone I would just simply give my time to whoever pays the most. So I would pick, I would bid I would say who wants to pay money or for, for taking this econ class. And whoever are the people who pay the most, I would just give them the my class, and give them all my time and personal attention. So that's a bidding option that will be the second option. Now the third option is what if I just randomly choose people who apply for the class and I just generate a random generator that picks randomly for the thousands of people out there who want to take the class. And pick one or two of you and then I'll give all my time to those two people, or to those three people or to the one person that, that is chosen randomly. So we have three of, three ways of choosing. We have. The way we have right now which is my time for free to thousands of you out there. We have the bidding option in which a couple of you bid and whoever pays the most I'll give my time to them, all my personal attention. Or we have the random option in which we randomly choose from the people who want to take the class and I give all my time and attention to those one or two people. So, I want you to meditate on this. Because if you spend some time thinking about this, you will actually be able to understand a lot of what we're going to do afterwards. So, what I want you to think about is two things. One, choose the option that you think is the best. And don't be biased. Don't choose the ones that are free, right? Just really, really think about the three, and two, think about the pros and cons, the benefits and the, and the costs of each different option. Okay, so let's go over each one. So the one we have right now, what are the benefits of offering my time for free? Well the benefit is that I will, I'm reaching most of you, right. Anyone who wants to take a class can actually take this class for free. So that's definitely a benefits, right. Because a lot more people are actually getting benefits from knowing economics and that's a good thing. Now what are, what are the cons? What are the, the not so good things. Well one of the problems is that I cannot, my time is very limited. It's only 24 hours in a day and I actually because I have to sleep and I have to do other things. So not everyone's going to get individual attention. In fact when thousands of students are taking this class, one could make the argument that very little of you, there's going to be very little attention to each individual person. I can probably give you feedback in the discussions and so forth, but my time is going to be limited. So each of you are going to are going to be receiving less individual attention from. Now in the second option, they're watch and people bid, that's not a, that doesn't occur because, if I just simply give my time to one or two of you, who actually pay me the most, then those one or two people actually get the very, very, a lot of individual attention from me, right? So in that case, they're getting a lot more than each individual person, individual you're paying for free. Now, at the same time, when people the main argument that we could have, I guess, as a second option is that, well, it might not be fair that the only people who can pay are the only ones who can get economics, right? That's a lot of discussions about that, in which only let's say, rich people, will be the only people with the knowledge of economics. But at the same time, I could make the argument that, well money is a way of valuing things and if they're willing to pay more it means that they value the class and you know, and that, in that case that's an efficient allocation. But there, I mean, you clearly see that there's differences in the ethics perhaps and the efficiency of version 1 versus option 3, versus option 2. Now how about option, option 3, I pick people at random. Now there's no ethical problem right, because, this is everyone has the same chance, and the 2 or the 3 people that I choose will get a lot of limited, individual attention from me and there's no ethics issue. But that's an efficiency problem, because what if I pick the 2 people who probably are thinking of dropping the class in the first place. Well that would be very inefficient, right? If I pick at random I pick John and I don't pick Sarah, and Sarah was a really dedicated person who was, which she really wanted to take the class, she's going to do all the, all the stuff in the class throughout the 8 weeks. And John really registered at the last minute, and he really is not even sure. If I pick John, and and I give him a lot of individual attention in the second week. And he says, Nah this is not really my thing, I'm going to do something else. Well, that's a waste resource. Look, I wasted my time on John, when Sarah was actually a lot value in this class a lot more. So we can say that at least at the outset, we can say that regardless of the ethics, a good effecient allocation will be at least one which, the people who value their class the most, actually get the class. But the point that I want to make here, I mean and hopefully this will be one question that I expect you guys to discuss in the discussion in the discussion forums this week. But regardless of what the main answer is or which one is the best, what I wanted to demonstrate to you is that there is more than one way of, of distributing my limited time. If there was only one way of doing it, I mean it was clear, which one was the best, then, we wouldn't really need economics. But we need economics, because, when you have a limited resource, there's always going to be more than one way of distributing that resource amongst people who want it. And economics is the science, or the field study that's going to tell you or you going to try to eliminate the the answer of which one is the best. Now so you can imagine that every time you have a limited resource economics will have something to say, because you will have to find a way to distribute those resources and there's more than one way. And what are the res, is which resources are limited? Well, anything. All resources are limited, right? Because when you think about oil water but also husbands, wife, relationships, time that you have to study for a class. Every, everything in life, everything that you have to use to produce something is limited. And since it's limited, economics will have something to say about it. Now one thing that you have to remember [INAUDIBLE] a limitation of resources is that even if you can give everyone the same, that is still not a, necessarily a good option. Suppose that you can break me apart, and you can break apart. There's actually a way to give all of you out there, there's thousands of you out there, right? Suppose that there is a way pf cloning myself, and give each of you the same amount of individual attention. Would that be a good distribution of the, of the research? I would still argue that it, it wouldn't. Because there's still different, it's still different valuations. So it would still be unfair, or let's say ineficient if let's say John and Sarah. Get exactly the same, if Sarah actually values the economic class more. The, again the research should go to those people who value it the most. So this econo, this is a problem in economics right to, to achieve that in the best way and there's definitely many different ways of doing that. So therefore, we [UNKNOWN] and economics, field in order to answer that question. And you can apply the same logic to an, any kind of limited research you have. Now the next principle we're going to introduce is the principle of opportunity cause, which is probably the central main principle of economics. [MUSIC] Produced by OCE Atlas digital media at the University of Illinois, Urbana-Champaign.
