I was reading Jane Galt's February 21, 2007 Assymetrical Information (link no longer operative) blog about behavioral economics. It was interesting, but one of the comments caught my attention because it reminded me of something I used to use when discussing price, incentives, and the role of government in the economy. It was borrowed from Milton Friedman, although I can't remember if it was in one of his books, articles or his TV program.
Regardless, I used to write this on the board and then ask students if they thought it was correct and whether it had relevance to discussing the role of government in the economy. I would get students who agreed and who disagreed. But it got them thinking. That was the key. Here's what would go on the board.
1. You spend your money on yourself. You care about price, but also about value.
2. You spend your money on a present for someone else. You care about price, but not so much about value.
3. You spend someone else's money on yourself. You really care a lot about value, but not so much about price.
4. You spend someone else's money on yet another person. You don't care about value or price.
I'd be interested in hearing from others on their experience with this.
Posted by TSchilling at February 21, 2007 11:38 AM
I have always been interested in price as a signal of utility, value, diminishing marginal utility, and market forces.I'll try this. Thanks for all of the excellent resources you mention, too...flad
Posted by: mike fladlien at March 10, 2007 6:11 AM