(SOUNDBITE OF BRICE MONTESSUIT AND CHARLES CASTE-BALLEREAU'S "LOST SITUATION")
ROBERT SMITH, HOST:
Hello, and welcome to PLANET MONEY's Summer School - the economics education you always dreamed of but never quite got around to. This is class No. 1 - decisions and dating.
(SOUNDBITE OF CHALK TAPPING)
SMITH: I know, I know. You thought you'd have the whole summer off, riding bikes, going to the beach, staring at the clouds and doing nothing. Well, the good news is you can still do that while simultaneously exploring the world of economics. I'm Robert Smith. Every Wednesday till Labor Day, we are going to meet here in your ears to learn the essential principles of Econ 101. Each lesson will feature stories from some of our favorite PLANET MONEY episodes. And, yes, it is going to be on the test. At the end of the series, if you can pass our online final exam, you'll be eligible for a PLANET MONEY diploma - not a real diploma - suitable for framing. Today on the show, how to think like an economist.
This has been the greatest thing that I've picked up hosting PLANET MONEY over the years. Every problem, every decision you face can benefit from stepping back and looking at it like an economist would. In order to help us with this superpower, we've brought in two economists in residence this summer. I'm going to allow them to give a short and lively introduction.
JUSTIN WOLFERS: I'm Justin Wolf - you go first, Betsey.
BETSEY STEVENSON: Oh, Justin was pointing at me to go first, and then you said short and lively, and so then he realized he needed to take over (laughter).
SMITH: I can do it. Professor Justin Wolfers and Professor Betsey Stevenson are collaborators. They wrote a textbook together, "Principles Of Economics." They've charmed introductory econ students at the University of Michigan.
WOLFERS: We're sort of a couple, too.
SMITH: They are a couple. They have two amazing children, hopefully busy and quiet in the next room. Hey, Professors.
STEVENSON: Hi.
WOLFERS: Good to be here, mate.
SMITH: So when I took my very first course in economics - and we're talking high school here, 30 years ago - the way it started was pretty grim. The teacher at the time would say, you know, economics is all about scarcity. There's not enough stuff in the world, and economists figure out who gets which stuff. And once we were properly scared, we moved into supply and demand. But when you teach economics, how do you start the class?
WOLFERS: Every year, my first sentence is, economics is not about money. I tell them I think it's a lens of great power and beauty and it can help them understand everything from the stock market to marriage and divorce to crime to elections to the decisions you make in your everyday life.
STEVENSON: That explanation you heard 30 years ago, Robert, I think it's a very glass-half-empty way of thinking about economics. It's an idea that there's not enough stuff in the world, and so how are we going to fight to the death to get our share? There's a glass-half-full vision that I like to start with, which is how can we allocate what we have in a way that makes as many people happy as possible? How can we make decisions in life that let us live our best possible life?
SMITH: The first economic principle we'll touch on in today's class is thinking about the world in terms of costs and benefits. For every choice you make, there is the joy you get from that choice. We call it the utility. And then there is the cost of the thing you didn't choose, the road not taken. Economists have fancy names for these things, like opportunity cost and thinking at the margins, which we'll go over today, along with how to apply that economic advice to your everyday life, to your personal decisions, even who you date. Because in economics, it is all about choices.
WOLFERS: Individual choices to economists are like atoms are to physicists.
SMITH: Ah.
WOLFERS: It's the base on which everything is built. That's what the economy is; it's a whole lot of individuals making choices.
SMITH: All right. Today, we're going to fire up the particle accelerator, we're going to aim it at individual choice, and we're going to see what makes up the very atomic structure of economics.
(SOUNDBITE OF MUSIC)
SMITH: So here's the way PLANET MONEY Summer School is going to work. In each class, we will play one of our favorite episodes, or excerpts from episodes, and we'll look for the big economic ideas in each one, and we'll talk it out with our in-house economists, Justin and Betsey. First up, a selection from our 2014 episode "Dear Economist, I Need A Date." It was hosted by Lisa Chow and Chana Joffe-Walt.
(SOUNDBITE OF ARCHIVED NPR BROADCAST)
CHANA JOFFE-WALT: When Lisa signed up for Match.com, she was at this point in her dating life where she'd been feeling like she needed a whole new approach.
LISA CHOW: I had to be kind of more aggressive about it. I had to be more diligent, and I had to be focused.
JOFFE-WALT: Lisa was 31 years old. She'd just moved back to New York City, and she'd basically spent her 20s in a series of long-term relationships.
CHOW: I kind of decided at 31 that I didn't have that luxury anymore. I couldn't do that anymore. And so I was much more efficient. I did make an Excel file, and I started just writing down their names.
JOFFE-WALT: Lisa needed this spreadsheet because in a year and a half, Lisa Chow went on 50 dates - 50 first dates.
CHOW: Twenty-two of the 50 I went on second dates with.
JOFFE-WALT: Was it fun?
CHOW: Oh, it was so much fun.
JOFFE-WALT: Really?
CHOW: Yeah, I really loved it. I mean, you know, it's so funny. I was actually really pleasantly surprised. I mean, there are some really nice guys.
JOFFE-WALT: That is literally the first time I've ever heard that...
CHOW: (Laughter).
JOFFE-WALT: ...From a woman who dates online. Wow, really?
CHOW: Yeah, yeah - like, pleasantly surprised how many really great guys there are.
JOFFE-WALT: My colleague Lisa is a secret dating genius. I had no idea. She went on 50 first dates, and she never once felt sad or stressed or demoralized. She thoroughly enjoyed the entire experience. Here's what she did. She went on 50 dates. And each time, she went home after the date and she would record month, year, time, location, name and one memorable detail.
CHOW: Pothead, touchy, boring. Oh, this guy had four gym memberships.
JOFFE-WALT: What was the one that I just saw that I loved? Here, for this person, you have bobs his head a bit too much. This guy - way West Coast but super cute dude.
CHOW: (Laughter).
JOFFE-WALT: At the time, Lisa had lots of friends who were also dating online, and they would all complain all the time about, you know, I wrote five guys and only one of them wrote me back.
CHOW: When I was doing online dating, I never wrote people emails. I mean, some people might call that a cop-out. But I just said, I'm going to lower my transaction costs and purely just wink. And if they're really interested, they'll write back. I remember, actually, I'd be sitting, like, watching some HBO show and just, like, sitting back on my computer and going click, click, click, you know, wink, wink, wink, you know, and not even thinking twice about it.
JOFFE-WALT: The date needed to happen very soon after first contact. Lisa didn't want to build up some idea of the guy before meeting him and then have an opportunity to be disappointed. Similarly, no dates on Friday or Saturday nights. She told me it's depressing to come home after a bad date on a weekend, so she just never let that happen. And if Lisa went on a third date with someone, she would always take them to a social gathering that included some casual friends of hers. That way, she could observe them in a social setting.
In other words, Lisa took something that's normally mysterious and squishy - human attraction - and she tried to strip it of all of the messy emotions. I really think that's what made her so successful. She made this thing that most people find so stressful and tedious that just sucks your time and self-confidence and hope, and she made that fun. And she did it using data and statistics. And she applied the principles of economics to her love life, and it worked.
CHOW: There was one guy - hold on - No. 45, right? And we were seeing each other for about six weeks. And I just at one point just decided, OK, this is not going to work out, so I cut the cord. And I thought, like, did I make a mistake? Like, you know, we did have so many kind of things in common. And then the next week, I went on a date with Kevin. And instantly, I knew I didn't make a mistake, you know? And I was thinking, if I had stayed with that guy, you know, I wouldn't have had that opportunity to meet, like, the Kevin. It kind of crystallized right there. Like, oh, OK, that's what an opportunity cost feels like, right? It's like when you stay with that guy you're kind of feeling iffy about and you're missing out on, you know, Kevin.
(SOUNDBITE OF MUSIC)
SMITH: Kevin, as you may have guessed, is Lisa Chow's husband. They got married. So economics to the rescue.
WOLFERS: Aw.
STEVENSON: Ah.
SMITH: And Lisa grabbed this - like, this really big concept is the first one we want to start with, this opportunity cost, that any time you decide to do something, there is something else you are not doing. There are many things you're not doing. What's the more formal definition?
WOLFERS: We think of it as the true cost of doing something is the next best alternative you've got to give up to get it.
STEVENSON: What would you do in place of this thing you're doing? That's what you're going to give up.
WOLFERS: It's not just about time, though, right? There's an opportunity cost to eating a doughnut. If I'm trying to limit my calories, a hundred calories on a doughnut means I don't have a hundred calories left for a beer later that night. The opportunity cost of the doughnut is the beer.
STEVENSON: And I think what's so beautiful about that episode is, you know, she really sort of fundamentally understood that even though she didn't know she was going to meet Kevin, but she understood that the opportunity cost of continuing in a relationship that didn't quite feel right was that she would give up the opportunity to meet someone who might be better. And what you have to do is take a gamble.
WOLFERS: Not a gamble - a calculated risk.
SMITH: But isn't this paralyzing to go through life as an economist and constantly think with every choice, well, I could do this and I could do this and I could do this, and what is this worth and what is that worth and what is that worth?
STEVENSON: No, it's incredibly freeing.
WOLFERS: It's empowering.
SMITH: Really?
WOLFERS: People won't waste your time if you know, you're keeping track of and you're thinking about what you could be doing otherwise.
STEVENSON: It's quite useful to know what you're giving up. Sometimes you'll say, maybe I should get out of bed and go on that date. In fact, actually...
WOLFERS: There's a certain reason Betsey's saying this.
STEVENSON: I was going to say that's, in fact, how I met Justin.
WOLFERS: It was a Halloween about 400 years ago, and Betsey was at her home.
STEVENSON: Passing out candy to children.
WOLFERS: But do you remember who called you?
STEVENSON: My mother.
WOLFERS: Yeah. And what did she say?
STEVENSON: She said, you're not going to meet anybody staying at home passing out candy to children.
SMITH: (Laughter).
WOLFERS: So she got dressed up, went to a party, stole one of my beers, and we've been inseparable since.
STEVENSON: So she said staying home means you're giving up the opportunity to go somewhere where you might meet some exciting people or you might have more fun.
WOLFERS: What - and some exciting people - that's how she describes me, some exciting people.
STEVENSON: (Laughter).
WOLFERS: Not Mr. Right, not the love of my life, but, you know, good enough, where the marginal benefit of search no longer exceeds the marginal cost.
STEVENSON: A quarter-century later, Justin.
WOLFERS: She still hasn't found a better option.
SMITH: (Laughter) You know what...
WOLFERS: See what I mean? It's romantic and empowering.
SMITH: Now, as we're talking about opportunity cost and we're feeling overwhelmed - all these other costs we have to think of whenever we make decisions - there is, we should mention, one cost you should not be thinking about. And this has the fun name of sunk cost. How does sunk cost fit into this whole opportunity cost?
STEVENSON: Sunk costs are costs that cannot be reversed. You cannot undo them, even if you quit your project.
WOLFERS: You can't get your money back.
STEVENSON: You just can't get your money back. I'll give you a great example. You walk into a movie, and you've paid for the ticket and you're sitting there, and the acting is horrible, the plotline is weak, and you're bored out of your mind. And you think, I'd be better off going for a run right now.
SMITH: Yeah, but you think to yourself, like, I paid $16 for this movie ticket. I should stay until the credits roll. And economists, you're saying, would say, get out of there. You should not stay.
STEVENSON: Get up and walk out. Doesn't matter how much you paid for the movie. That's a sunk cost. It's done.
WOLFERS: It's sunk because you can't get the money back.
STEVENSON: You can't get it back. But what you can do is not waste the rest of your time.
WOLFERS: Let bygones be bygones. Just move on.
SMITH: Sunk costs - that is freeing. If opportunity cost makes me anxiety-ridden, then sunk cost is a freeing concept.
WOLFERS: You know, we've all got that friend who's been in a relationship with Mr. Not Very Good for maybe two years, maybe three years. And she calls you or he calls you and says, you know, should I continue with this person? And time and again, our friend says, you know, I've invested so much in this relationship. What you've invested is a sunk cost. You can't get it back. You should ignore it. The fact that you've spent a lot of time being miserable with someone is not a reason to continue to be miserable with them.
STEVENSON: So let me make the connection for you between sunk costs and opportunity costs, 'cause they're really the same idea. It's that the opportunity cost principle asked you to compare the consequences of your choice with the next best alternative. So when you're thinking about your relationship - should you stay in it? - what you're going to be thinking about is, well, what will I get out of this relationship if I stay in it, say, another month versus what would I get if I left and was doing something different? None of those considerations consider whether you've invested three years or three weeks or three days. So the opportunity cost when you're thinking about that movie and saying, should I walk out, the only thing that matters is what's the best way to spend the next hour of my life? Is it staying in this movie, or is it doing something else? The fact that you bought a movie ticket - not relevant. It's in the past. It's all about the future.
(SOUNDBITE OF JACOPO TITTARELLI RUBBOLI SONG, "WELCOME TO CALIFORNIA")
SMITH: It's like this episode of PLANET MONEY. You should not keep listening because you've already invested precious minutes of your life. That is a sunk cost. Instead, you should think about the next best alternative. You could click on over and listen to Joe Rogan. Compare that option to the amazing things coming up in this episode. You will learn to identify exactly when you should stop wolfing down Chicken McNuggets using the magic of marginal thinking after the break.
(SOUNDBITE OF JACOPO TITTARELLI RUBBOLI SONG, "WELCOME TO CALIFORNIA")
SMITH: I want to tell this story from the big economics convention. AEA in 2017 was in Chicago. You were both there, yes?
WOLFERS: We were.
STEVENSON: Yes.
SMITH: It was freezing. It was zero degrees. The wind was brutal. We were all trapped in this hotel. And I was reporting, and I was so hungry. And the only place that wasn't crowded to eat was in the basement, and it was a McDonald's. And I'm like, fine, I am going to have the smallest thing they offer. I'm going to save room for dinner. And I ordered a six-piece Chicken McNugget for $3.99. And the guy behind the counter says, well, you know, we have a special. For the same price, you can get 10 instead of six.
STEVENSON: Is this a trick?
SMITH: Is Steven Levitt over in the corner from the University of Chicago taking notes on my decision?
STEVENSON: I mean, because there is free disposal, you know?
SMITH: It's free to get the extra four Chicken McNuggets. I was like, well, wait a minute here. On average, of course, the 10 McNuggets are cheaper - obviously, right? But that's not how I should make the decision. I only wanted six McNuggets. So what's the cost of No. 7, No. 8, No. 9, No. 10 - the Chicken McNuggets? Like, it didn't cost me any more money, but honestly, I probably couldn't bring myself to throw the extra ones away. I would almost certainly eat them. I'd spoil my dinner. I'd gain weight. I'd increase my unhealthy intake by, like, 66%. That's...
STEVENSON: Oh, so your fear was that you would eat them if you got them.
SMITH: Yeah. So I'm faced with this dilemma of the extra Chicken McNuggets. And in economics, there is a name for this concept, this choice, this decision about whether I should have one more of something.
STEVENSON: So economists call this thinking on the margin.
SMITH: On the margin.
STEVENSON: So we want to make decisions incrementally. It's easier to think incrementally to break a how-many decision down into a series of smaller or marginal decisions, like should I have one more?
SMITH: So did I properly think on the margin there, the value of each additional Chicken McNugget?
STEVENSON: Yeah, because the price, in terms of dollars, was zero.
WOLFERS: Which we call it the marginal cost. How much extra do those four extra McNuggets cost?
STEVENSON: But when we think about the marginal benefit to you, it's actually negative because you'd have to use self-control to either force yourself to throw them away...
SMITH: Yes, could just throw them away.
STEVENSON: ...Or you would fail to use the self-control and you would spend calories that you would've rather spent having a delicious dinner more delicious than the seventh McNugget.
SMITH: All right, so I'm starting to think on the margin. I'm thinking the cost of one more thing, the benefit, the utility, the joy I get from one more thing - I'm balancing these two. How do we add this all together for decisions?
STEVENSON: So the key idea of the marginal principle is it just provides a simple rule of thumb to help you think through getting the most you can out of life.
SMITH: I like that.
STEVENSON: And it really comes down to the idea that if something's worth doing, you should keep doing it until your marginal benefits from doing more of it are just equal to your marginal costs from doing more of it. And that tells you when it's time to stop.
WOLFERS: Economists call this the rational rule. You might say, why would I do something until the marginal benefit's equal? Well, the answer is you want to make any choice where the marginal benefit exceeds the marginal cost. If you take every opportunity where marginal benefit exceeds marginal cost, the very last opportunity that's left is the one where the marginal benefit equals marginal cost.
STEVENSON: See, you know that from the cost-benefit principle that if the benefits exceed the costs, it's a good choice. And so when you apply that marginal principle, you think, you know, incrementally on the margin, it allows you to really narrow in and say, what are the marginal benefits I'm going to get from this decision? What are the marginal costs I'm going to face? And am I going to be better off if I say yes?
(SOUNDBITE OF GUIDO SPUMANTE, JUNIOR DI LUCA AND PEPE SPUMANTE'S "ORGAN GRINDER")
SMITH: We're going to take a quick break, and then we're going to put all of our concepts - opportunity cost, thinking at the margins - to work by taking a very, very expensive car ride across Manhattan. Do you want one more chunk of PLANET MONEY? We'll be waiting for your decision.
(SOUNDBITE OF GUIDO SPUMANTE, JUNIOR DI LUCA AND PEPE SPUMANTE'S "ORGAN GRINDER")
SMITH: Our last story today features economics playing out in real time before your very eyes on the streets of Manhattan. The story is from 2014, when we were obsessed with what was at the time a pretty new company, Uber. The Uber app features something that we don't often see in economics - prices changing by the minute, before your eyes - surge pricing. I'm sure you've seen this. When a lot of people are calling an Uber on the app, the price for the ride goes up two times the regular rate, 2.4 times the regular rate, three times, six times the regular rate. Needless to say, this pisses people off. It feels unfair. It could feel like only people with money can get where they're going, and the poor have to wait in line to hail an old-fashioned cab or even walk. But from an economic perspective, something quite remarkable is happening during an Uber surge. This is the topic of our episode from 2014. Zoe Chace and Lisa Chow hit the streets for our story.
(SOUNDBITE OF ARCHIVED NPR BROADCAST)
ANNE TURNACOFF: I'm going all the way downtown.
CHOW: I met Anne Turnacoff (ph) in a line of people waiting for taxis outside of Penn Station. It's 20 degrees outside, snowing. Everyone wants a cab, and there aren't many cabs, so the wait is long - about 30 minutes.
ZOE CHACE: And economists would say people like Anne, they may not be paying a higher-than-usual cab fare if they're waiting just in the taxi line, but they're still paying. They're just paying with their time, time spent waiting here on this line in the cold. And Uber is giving them this other option that instead of paying with time, they could just pay with their money.
CHOW: Would you pay double?
TURNACOFF: Yeah.
CHOW: Would you pay triple?
TURNACOFF: Maybe (laughter). It depends. If the cabs keep coming this slowly, it gets more likely. Maybe.
CHOW: So the argument for Uber is people like Anne would benefit - people willing to pay with money instead of their time - and other people would benefit, too, specifically Uber drivers, like Ara Hatatrian (ph). He tells me the story of December 14 here in New York City.
ARA HATATRIAN: It was rain, snow, sleet, freezing weather. So we were not driving; we were more like sliding on the streets. On top of that, it was also the day of SantaCon. That's where people dress up as Santa Clauses and go get wasted.
CHACE: I remember that day of SantaCon. It was bad. I was actually in Penn Station, and I was surrounded by drunk Santas singing Christmas carols. And I took the subway.
CHOW: It was almost impossible to get a cab that day. Uber prices surged to seven, eight, nine times their usual rates. Ara told me about this one couple he picked up that day at seven times the usual rate.
HATATRIAN: When I picked them up, I felt very bad that I'm picking them up at that rate. And I apologized. I even offered to do some extra stuff for them like, you know, get them a cup of coffee or something just to make them feel better. But...
CHOW: Can you describe the couple for me?
HATATRIAN: Sure. There was a young couple, about 25 years old. The girl was wearing a very short skirt in that, you know, chilly weather, and the guy told me that, actually, he doesn't mind paying the surge price because they were waiting for a cab for about an hour and a half outside. They called some car services. Nobody had cars available. And his girlfriend was so frozen that she said if he doesn't get her a cab, she's just dumping him.
CHACE: I guess, yeah, in that case, saving their relationship is worth paying seven times the regular price.
CHOW: Ara told me the final bill for this couple was $145. The couple decided their time was worth $145, and the guy that benefited from that was Ara. Without a service like Uber, that $145 would have gone uncollected. Nobody would have made that money where there was money to be made.
CHACE: And that idea that there's money left on the table, that drives economists crazy.
(SOUNDBITE OF LAETITIA FRENOD SONG, "DIAMONDS AND PEARLS")
SMITH: That was Lisa Chow and Zoe Chace from a PLANET MONEY episode in 2014. Now, listening along to this episode are professors Justin and Betsey. Let's take the economic thinking that we've just learned and apply it to this situation, this Uber situation we just heard about.
STEVENSON: So I think the most interesting thing about a snowstorm and taxis is think about what happens on each side of the market.
WOLFERS: So the snowstorm means lots of customers, not many cabs - lots of demand, not much supply. How do we fix that? If we want more cars on the road, each of these drivers is thinking, should I work one more hour? They're thinking about the marginal benefit relative to the marginal cost. The marginal cost of being on the road in a snowstorm is it's miserable - it's super high. The marginal benefit of being on the road is how much extra money I'm going to make. That is the price that they can charge for their rides. So the way to get them to want - more drivers to want to be on the road is for the price to rise.
SMITH: So surge pricing, yeah.
STEVENSON: Surge pricing actually tries to bring out more drivers.
WOLFERS: This is a thing of price as an incentive. If we want more drivers on the road, a high price is an incentive for them to stay out on the road or to get up off the couch and get onto the road.
SMITH: Well, this shows you how the company itself, Uber, is thinking on the margin. You know, in a normal kind of car service situation, I suppose you could order your drivers to go out in the snowstorm and just say, you have to do this, or you're fired. But the genius of Uber and markets like it is that it's thinking about what will it take to influence the marginal decision of the person waiting for a cab, of the driver, you know, who's thinking about going out. It's really trying to affect their, really, next decision.
STEVENSON: The amazing thing about markets is it all works through voluntary exchange. And so it's exactly that. It's using incentives to try to encourage sellers to sell.
WOLFERS: Right. So the snowstorm problem is lots of buyers, very few sellers. We need to solve that. A higher price is attractive to sellers, so it's going to get more cars on the road, and it's unattractive to buyers. Fewer people are going to want to take taxis. That higher price brings the quantity demanded down, the quantity supplied up and brings the market closer to balance.
SMITH: I know people hate this. I hate this when I have to pay more. But once you learn economics, there is a certain joy in watching Uber during a surge. You may not want to pay more, but you can see supply and demand happening in front of your eyes in real time on the app. And this balancing of supply and demand, I mean, this is happening in every market. This is happening inside every business, right?
WOLFERS: It's everywhere, all around us.
SMITH: We just don't see it.
STEVENSON: It's even happening in the dating market.
SMITH: OK.
WOLFERS: Oh, come on. Have you ever been in a nightclub where you noticed that one gender is more numerous than the other?
SMITH: (Laughter) Right. I remember dating. Go with it. Go with it.
WOLFERS: No, I just - I remember this night very well. Betsey took me out dancing in Philadelphia. And we looked around, and there was a lot more sheilas than blokes in the bar. This is a predominately straight bar. And we noticed this, I mean, we'd call it a disequilibrium. The two sides of the market were not in balance. Not everyone was there to dance. And we saw market forces work. Word got out that there was a - let's call it profit opportunity for young men willing to dance at this particular bar. And over the next two hours, we watched equilibrium happen.
SMITH: So there was a surge of men coming into the building.
WOLFERS: There was quite literally a surge. And I saw the supply and the demand of young men and women come into balance over a period of about 2 1/2 hours. It was one of the most extraordinary things.
SMITH: This balance is called a market equilibrium, and that's going to be our last econ-y word of the day. And you can think of the market equilibrium as the point where the blokes meet the sheilas, or in the Uber example - probably better - where the number of people who are willing to pay for the surge price are equal to the number of drivers willing to drive at the surge price.
And so finally, Justin and Betsey, I just want to ask you, like, it doesn't necessarily mean that everyone gets what they want in this situation when we have a market equilibrium, right?
WOLFERS: It doesn't.
SMITH: And there are still people waiting in the snow because they can't afford Uber, because the price is too high to them. There are drivers who are not out on the road.
WOLFERS: This is really important. Equilibrium tells us what's going to happen. It's our ethics that tell us what we think should happen or what we want to happen. They can be really different things, and so a market can be in equilibrium, and there can still be a lot of pretty miserable outcomes.
STEVENSON: It is the case that there are often many market failures and market imperfections that mean that markets will come to rest at a place that's not socially desirable.
SMITH: Our first class, and we're already getting into the messiness of taking intro economics out into the real world, because all the choices we've talked about today have been in a vacuum. Remember; everyone else is also making their optimal choices. And in future classes, PLANET MONEY Summer School will talk about how individual economic choices can have real impacts on your neighbors, your community, on inequality and the future of the world.
All right, class has come to an end, but we should probably go over our vocabulary words. We had opportunity cost, the value of the next best thing you're giving up. We learned to ignore sunk costs. And we spent a lot of time thinking at the margins. What is the cost of one more delicious chicken nugget?
In every episode, we wanted to make sure that we leave you with an assignment that you can think about over the next week and share with us. Justin.
WOLFERS: We talked today a lot about dating, and so my assignment for our listeners is look at some other facet of your life that you may not have thought was fundamentally economic, and look again and see if you can see market forces underpinning the decisions that people are making.
SMITH: Justin, Betsey, everyone in the class, we will gather next week, when we will do supply and demand graphs on the radio using nothing but the power of the human voice and we will find markets in the places you least expect them.
STEVENSON: Those are the most exciting places.
WOLFERS: Can't wait to go looking for them.
SMITH: Summer School class next Wednesday.
(SOUNDBITE OF BRICE MONTESSUIT AND CHARLES CASTE-BALLEREAU'S "LOST SITUATION")
SMITH: Let us know what you came up with from our assignment this week. Take one of our economic concepts and find a strange place where you can see it in your own life. Does opportunity cost factor in your job? Can you think at the margin while you're making dinner? Our email is planetmoney@npr.org. Or you can find us on Facebook, Instagram, Twitter and TikTok. We're watching the hashtag #PMSummerSchool for your questions all summer long. Or you can tag us. We're @planetmoney.
Today's class was produced by Lauren Hodges, with help from Darian Woods, Alexi Horowitz-Ghazi, Nick Fountain, Liza Yeager and sound design from Isaac Rodrigues. It was edited by Alex Goldmark. Betsey Stevenson and Justin Wolfers are professors of economics and public policy at the University of Michigan. And later this summer, they will debut their own new audio course, Think Like an Economist. You can find it on the Himalaya app.
We'll be back next week with a class where pickles and potatoes end up in the wrong place and markets come to the rescue. I'm Robert Smith. This is NPR. Thanks for listening.
(SOUNDBITE OF BRICE MONTESSUIT AND CHARLES CASTE-BALLEREAU'S "LOST SITUATION")
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