Economics Is Intended to Use

¶ … Economics" is intended to use practical examples to illustrate the types of concepts that are learned when one studies economics. As Marshall McLuhan said, the medium is the message. The medium here is a piece written in a very casual tone using examples plucked from everyday life to explain some of the fundamental concepts of economics. The overall objective is, ostensibly, to encourage the reader to pick up some of these basic concepts so that they, too, can make the sound economic decisions that are outlined in the article.

The casual tone is intended to make the piece more approachable for the intended audience, which is not an audience that has an economic background. At times, the author forgets the audience and slips into concepts or jargon that have not been properly explained -- discount rates, for example -- and would clearly be unfamiliar to any person who would find this article beneficial. The format by which the author conveys the concepts is based around anecdotes about theoretical transactions.

These anecdotes serve as the basis for the explanation of the common view of the transaction and the explanation of the rational economist's view. For the most part, the economists' view is juxtaposed in this manner to illustrate its superiority. The arguments themselves are overly simple, avoiding any of the externalities that may ultimately factor into the decisions in question. This costs the author some credibility -- by ridiculing certain decisions the author places him/herself in the position of having to build a perfect argument.

In many cases, this does not happen. An early example is the case of the two houses, one for $100,000 and the other for $500,000. The family in the $500,000 is portrayed as having made an irrational decision. Yet, many considerations go into this decision besides the value of the home -- the utility from living in certain locales being one of them. Even from a strictly economic standpoint, the job prospects of each region play an important role, as do the average wages.

Even if the housing decision comes down to a net present value calculation, the author does not portray this choice accurately, and this undermines the strength of the argument. The article attempts to cover a lot of economic ground. The resulting series of vignettes may succeed at this, but at the expense of readability. The point is that economics can be useful to help one make sense of practical applications, therefore one should study economics.

There is no particular need for the article to become an economics lesson in and of itself. The author expends too much time on examples of his concept and this ultimately distracts from the concept. There is simply too many examples and not enough reinforcement of the core message. Each example does have its own value, but a more efficient and cohesive selection of examples would have allowed the author to tie those examples more succinctly back to the main point. That said, the examples are generally sound.

The examples are for the most part realistic, once a few base assumptions are made for the sake of simplicity. Because the examples come from real life, they are easily understood by the audience. Indeed, the audience is apt to making many of the same errors that the author assumes they will make. The concept of juxtaposing financial and economic myths with examples of how a rational economic decision would really be made is strong and is executed well.

Some of the ground covered in the different examples are opportunity cost, sunk costs, the value of utility, the time value of money, games, the value of public information and critical thinking. The author makes mention of potential careers in economics, but also points out how one will use one's economics background even if he or she does not ultimately pursue an economics career. The information that the author presents in this section is realistic and accurate, and includes ways to follow-up on an undergraduate economics education.

It is easy enough to understand these concepts the way they are presented. By no means does the article purport to be a definitive selection of economic concepts, but it does provide a fair overview. Students who find the examples interesting may be compelled to delve a little bit deeper. Yet, it does not take long in one's economic studies to move far beyond issues of mortgages and investments.

Indeed, an example or two about the GDP or another concept in which economic education spends much more time would have been appropriate as well. It would be good to give the students a sense of what they will really be learning -- it's not so boring that it needs to be avoided. In fact, for students attracted to the field, it is fascinating. The last section, "Why Economics is Good Training No Matter What You Do" is perhaps the strongest section of the article conceptually.

Although written a little thinly, this section makes the strongest case for learning economics. The practical examples given make something of a case for learning economics, but this section makes a stronger case. Economics is a relevant discipline precisely because it is the basis for nearly everything we encounter in the world -- from banking and finance, to retirement plans to the interest rates at the bank and the currency exchange when we travel. Economic concepts can be applied widely and broadly, far beyond simply mathematical problems.

If anything, the author should have expanded on this section -- it was intended as a conclusion but it introduced powerful new ideas and presented them well. The sales aspect of the piece is interesting. While the concepts may be introduced in a first year economics course, most economics is not taught.