10/12/11

• Unintended consequences
• identify parties who would respond
• changes incentives which results in push-back from all sides
• slave trader ex: british navy's attempt to stop this made the slave trade much more horrific such as drowning slaves or putting their heads on pikes in response
• simple rules trying to regulate society.. the problems
• limited info
• poor and mitigated incentives
• little feedback
• Trade is NOT Zero Sum "pie fallacy"
• pie fallacy- thinking that there is a fixed amount of wealth and someone is getting a bigger piece of the pie
• benefits both sides; if one's got more benefit than it's exploitation
•  notion that market is a necessary evil is false
• zero sum can stagnate economic growth
• wealth "stock" vs. income "flow measure"
• Recitation Sunk cost
• bidding game example: you should pay as much as you can because after you first bid you've incurred a sunk cost whether you bid more or not
• focus on marginal cost (increments) when making decisions 
• not sunk cost