The sunk cost fallacy: continuing an action because of past investment (time, money, effort), even when the marginal returns no longer justify it. The correct…

The Black Death (1347–1351) killed roughly a third of Europe's population. The economic consequence was paradoxical: real wages for surviving workers rose sharp…

A public good is non-excludable (you can't stop non-payers from using it) and non-rival (one person's use doesn't diminish another's). Classic examples: nationa…

Tversky and Kahneman: people estimate quantities by starting from an initial value (anchor) and adjusting insufficiently. Asked "Is the population of Turkey mo…

Ricardo's comparative advantage is the most counterintuitive result in economics: even if one party is absolutely better at everything, both parties gain from t…

Hardin's "Tragedy of the Commons" (1968): shared resources are overexploited because each user captures the full benefit of their use while sharing the costs wi…

In economics, "the long run" is the time horizon over which all inputs are variable. There are no fixed costs in the long run — you can change factories, labor…

Prices are the most efficient known mechanism for aggregating dispersed information. Hayek's point (1945): no central planner can know what millions of people k…

Many social problems are coordination problems: individually rational behavior produces collectively bad outcomes. The prisoner's dilemma is the canonical form…

Carbon pricing (carbon tax or cap-and-trade) is the most economically efficient instrument for reducing emissions. It prices the externality and lets the market…

Kahneman and Tversky found that losses loom roughly twice as large as equivalent gains — losing $100 feels about as bad as gaining $200 feels good. The evoluti…

Revealed preference theory (Samuelson, 1938): you don't need to know what people say they prefer — observe what they choose, and you've revealed their preferenc…