There is a well-known anecdote suggesting that, aside from comparative advantage in trade, virtually all ideas in the social sciences are either false or trivial. After teaching principles of economics to smart master’s students for more than a decade, I would like to propose eight additional economic propositions that are both true and non-trivial.

These are common ideas taught in many basic economics courses. Therefore, one might argue that any sufficiently intelligent person would grasp these ideas without being taught them explicitly—that is, that they are trivial—but I would counter that many smart individuals, including policymakers, routinely fail to incorporate these principles into their decisions. Feel free to disagree (and also suggest other ideas that I may be missing).

#1 Decisions should factor in opportunity cost

When deciding whether to do something or buy something, one should always compare it to the next-best use of that time or money. This principle is often ignored: people treat some options as if they are costless, not recognizing that every choice excludes some other use of that resource. For example, a beach house may feel “free” to use if you already own it, but staying there for a week is costly if the alternative is renting it out. Likewise, the cost of an advanced degree involves more than tuition because pursuing graduate education often requires giving up the salary you could otherwise earn. The same logic applies to public policy: increasing government spending on one program necessarily means forgoing another initiative or raising additional revenue.

#2 Sunk costs should not influence current decisions

Once time, money, or other resources have been spent and cannot be recovered, they should not affect what we do next. But people often feel pressure to continue something simply because they have already invested time or money in it. A company may keep funding a failing product because it has already spent millions developing it. A homeowner might keep repairing an unreliable car because they have “put so much into it already.” But a helpful test is to imagine starting fresh: if we were not already involved, would we choose to work on this project today? If the answer is no, then the past expenses are irrelevant, and continuing only adds to the loss.

#3 When decisions are not all-or-nothing, think on the margin

People tend to think in terms of averages—average cost, average benefit, average results. But good decisions often depend on what happens with the next unit: the next hour you work, the next product you produce, or the next dollar a government spends. For example, a program might look successful on average, yet expanding it could still be a bad idea if the extra dollar spent now produces very little additional benefit.

#4 People and firms respond to incentives

When rules change, behavior changes with them—often in ways policymakers and those calling for the policy do not expect. People and firms respond to the incentives they face, not the intentions behind a policy. If incentives are misaligned, outcomes suffer. Rent caps meant to make housing more affordable can prompt landlords to convert units to condos, skip maintenance, or exit the rental market, reducing supply and harming some of the very renters the policy aimed to help. Subsidized flood insurance can encourage rebuilding in high-risk zones, increasing future losses. But well-designed incentives can improve outcomes: congestion pricing, for example, reduces traffic by nudging drivers to carpool, shift schedules, or use transit. In every case, results follow incentives, not aspirations.

#5 Economic incidence differs from legal incidence

Requiring firms or consumers to pay a tax or fee does not shift the burden of that tax to that group. The true incidence depends on how easily each side can adjust. For example, even if foreign producers were made responsible for paying tariffs, consumers may well bear most of their burden. The side with fewer alternatives will absorb more of the cost, regardless of where the law nominally assigns responsibility.

#6 Taxes often outperform mandates in addressing externalities

Activities with external costs—such as pollution or traffic congestion—are often tempting targets for mandates. But mandates often eliminate both low- and high-value uses, while a tax preserves choice and encourages reduction only when the activity is not especially valuable to the individual or firm engaging in it. Properly calibrated taxes align private and social costs at the margin and usually produce fewer undesirable consequences than one-size-fits all regulation.

#7 Price discrimination can increase total welfare

Charging different prices to different consumers is often viewed as unfair, yet it can expand overall surplus by enabling more people to access a product. Student discounts, off-peak pricing, and tiered plans all operate on this principle. If such pricing were prohibited, a firm would rarely respond by offering the lowest price to everyone. Most likely, it would set a price that’s between the highest and lowest prices it used to charge, which can mean sharply higher prices for groups that previously benefited from discounts.

#8 Stock markets are unpredictable by nature

People are often disappointed when economists say we cannot predict where the stock market will go next, but this is not ignorance—it is exactly what we should expect from a well-functioning market. Stock prices already incorporate all publicly available information: earnings reports, interest rates, and the latest news. What moves prices are the surprises investors did not see coming, and surprises, by definition, cannot be forecast. Professionals devote significant effort to interpreting signals better than others, but one has to have special (and rare) talent to consistently outperform the market. If there were an easy, reliable way to beat the market, it would quickly vanish. That is what it means for markets to be efficient.