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- [Tyler] Now Socrates -- I actually disagree with him --
he said the only true wisdom is in knowing that you know nothing.
So I'm an economist.
I'm not a philosopher.
So what does the economist say?
The economist does not say that he or she knows nothing.
The economist says "I know one thing --
maybe it's only one thing, but it's one thing."
And that one thing is
that the demand curve slopes downward.
(audience laughing)
And I know some of you are thinking
what about Giffen goods?
But there are no Giffen goods,
certainly not in wealthy, modern, contemporary America.
We have at least one thing to teach and in my imaginary lesson
or I just have someone, and they're paying attention.
First thing I tell them is the demand curve slopes downward,
and then I would discuss for awhile, how many applications of economics
are really instances or generalizations of this principle.
If something becomes more expensive, you do less of it.
So I just came here from Montreal, and originally my wife and I were
going to spend the weekend in Montreal
before what I was doing there, my event there.
She went to Orbitz and she saw that the price
of flying to Montreal was about $800,
and I said, "Oh, come on, go anyway."
Her demand curve sloped downwards.
It's very, very simple.
So that's like what we do know,
and what we don't know is
well, the world changes in many ways.
There are a lot of effects going on that are not just price effects.
People may change their tastes or their expectations, right?
Then you're not always sure how the law of demand applies there
in a simple way.
Another set of things we don't know --
we don't always know what is the real price?
So if you go to the store --
say, you need to buy ping pong balls.
You know the price, right?
They're pretty cheap.
It's not really a very ambiguous decision.
You buy the ping pong balls or you don't -- the price is clear.
Economic theory applies very well to this kind of circumstance.
But say you're dealing with one of your children