Why there is no free lunch
Everyone makes decisions every day. If ordinary people make mistakes in their decision-making, it will only affect their personal gains and losses. However, improper public decision-making not only affects individuals, but also has a negative impact on the entire society.

The formulation of laws and policies is the most important public decision-making in today's society. The Road Traffic Safety Law, which came into effect on May 1, 2004, is an important law. Article 76, paragraph 1, item 2 of the law stipulates: Traffic accidents between motor vehicles and non-motor vehicle drivers and pedestrians If there is any violation, the motor vehicle party shall bear the responsibility; however, if there is evidence that the non-motor vehicle driver or pedestrian violated road traffic safety laws and regulations, and the motor vehicle driver has taken necessary measures, the liability of the motor vehicle party shall be reduced.

Obviously, this provision reflects the legislative intention to focus on protecting non-motor vehicle drivers and pedestrians. This is understandable in terms of compensating the victim afterwards. But legislators may not realize that any law is an incentive mechanism that induces people's ex ante behavior. A good law should induce all stakeholders to choose reasonable behaviors, rather than restricting the behavior of only some people. The probability of a traffic accident and the extent of the damage caused by the accident depend not only on the behavior of motor vehicle drivers, but also on the behavior of non-motor vehicle drivers and pedestrians. Increasing the driver's responsibility can certainly make drivers drive more cautiously, but it will also cause other people to drive less cautiously. The final result may not be a reduction but an increase in traffic accidents and victims' losses.

A series of problems exposed after the implementation of the road traffic law, including some non-motor vehicle drivers and pedestrians deliberately causing traffic accidents to obtain compensation, reflect the lack of consideration of the incentive mechanism of this law. The resulting reaction and result was the National People's Congress's revision of the law. The revised Road Traffic Law stipulates that if a traffic accident occurs between a motor vehicle and a non-motor vehicle driver or pedestrian, and the motor vehicle party is not at fault, it shall bear no more than 10% of the liability for compensation; if the loss of the traffic accident is caused by a non-motor vehicle If a driver or pedestrian intentionally collides, the motor vehicle party will not be liable for compensation. Compared with the original regulations, this new regulation increases the responsibilities of non-motor vehicle drivers and pedestrians, which is obviously more conducive to reducing traffic accidents and promoting social harmony.
The revolution in economics textbooks

The revised "Road Traffic Safety Law" will be implemented on May 1, 2008, a full four years from the original implementation time of the Road Traffic Law. During this period, society has to pay additional additional costs for this, and the direct cost for the people of the country to amend this law is not a small number.

I've been thinking that if our legislators and the general public were a little more knowledgeable about economics, such tuition could be reduced or avoided.
Economics is the science that studies rational decision-making. It may not do much to guide our personal decisions, but it is valuable for public decision-making. This is because the formulation of public decision-making is a political process, and people’s different views on public policies may stem from their level of understanding or considerations of their own interests. In terms of awareness, it not only depends on the awareness of legislators and government officials on relevant issues, but also on the awareness of the general public. This is especially true in a democratized society. The way of thinking in economics helps us understand the consequences of laws and policies, so as to avoid formulating public policies that backfire; in terms of interests, the way of thinking in economics also helps people see clearly those hidden behind "public interest" Self-interest motives, thereby reducing the possibility of public policy being captured by interest groups.

What is the economic way of thinking? In my opinion, the way of thinking in economics can be summed up in one sentence: There is no free lunch in the world. Everything has a cost, and we can only weigh different options. There are trade-offs in individual choices, as well as in the development of public policy and legal systems. Why is there no free lunch? Because human behavior is basically rational. Public policy must be based on the assumption of rational people, otherwise it will backfire and cause losses to the entire society. The planned economic system is a good example: it is incompatible with individual rationality, so it must fail.

In reality, people always like free lunches, not because they are irrational, but because rational people always want others to pay for their lunches, unless institutional rules make it impossible for them to do so. For example, when some people want the government to control prices, their real intention is to pay less for the same thing, rather than for the real public interest; similarly, when some people advocate that the government should restrict certain industries When entering the market, their true intention is to protect their monopoly position rather than to maintain market order. If we forget this and constantly meet their demands, society will fall into a "prisoner's dilemma": everyone chooses to eat the free lunch, and the end result is that everyone has to pay a much higher fee than they would otherwise.

The way of thinking in economics helps us establish a system that escapes the "prisoner's dilemma". This system is a market economy. Prices, profits, and entrepreneurs are the core of the market economic system.

The tremendous achievements China has made in the past 30 years of economic reform have demonstrated the power of the market economy in creating wealth and improving people's livelihood. But now, anti-market public opinion is very popular. The market economy does have many shortcomings, the biggest of which is: when you can enjoy its benefits, all you may see are its shortcomings; when you have no chance to enjoy its benefits, it has no solution Tell you what its advantages are. Especially when inappropriate intervention by the government or some kind of power destroys the normal operation of the market economy and causes the market economy to behave as a pathological market economy, people often think that this is its own fault. Learning a little bit about economics can help us understand the root causes of the problems we face and find the right solutions.