THE ESSENCE OF THE ECONOMIC WAY OF THINKING

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THE ESSENCE OF THE ECONOMIC WAY OF THINKING

• Midwest Conference on Student Learning in
  Economics
• November 4, 2004

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What Is Economics All About?

• Economics is the social science concerned with
  the problem of using or administering scarce
  resources (the means of producing) so as to
  attain the greatest or maximum fulfillment of
  societys unlimited wants (the goal of
  producing).
• McConnell and Brue

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What Is Economics All About?

• The Theory of Economics does not furnish a body
  of settled conclusions immediately applicable to
  policy. It is a method rather than a doctrine,
  an apparatus of the mind, a technique of thinking
  that helps its possessor to draw correct
  conclusions.
• John Maynard Keynes

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What Is Economics All About?

• The economic way of thinkingresembles a
  magicians top hat It seems to be empty but in
  practiced hands it produces a fascinating array
  of surprises. And once youve seen for yourself
  how its done, you can go back home and astonish
  all your friends.
• Paul Heyne and Thomas Johnson

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What Is Economics All About?

• The economic approach does not assume that
  individuals are motivated by selfishness or
  material gain. It is a method of analysis, not
  an assumption about particular motivations

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What Is Economics All About?

• Along with others, I have tried to pry economists
  away from narrow assumptions about self-interest.
  Behavior is driven by a much richer set of
  values and preferences. Individuals maximize
  welfare as they conceive it, whether they be
  selfish, altruistic, loyal, spiteful, or
  masochistic. Their behavior is forward-looking,
  and it is assumed to be consistent over time.
• Gary Becker

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What Is Economics All About?

• I want beginning students to master a set of
  concepts that will help them think more
  coherently and consistently about a wide range of
  social problems that economic theory illuminates.
  The principles of economics make sense out of
  buzzing confusion. They clarify, systematize,
  and correct the daily assertions of newspapers

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What Is Economics All About?

• political figures, ax grinders, and barroom
  pontiffs. And the applicability of the
  economists thought tools is practically
  unlimited. Students should come to appreciate
  all of this in a beginning course.
• Paul Heyne

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What Is Economics All About?

• Here is what I think economics is all about.
  First, it is about observing the world with
  genuine curiosity and admitting it is full of
  mysteries. Second, it is about trying to solve
  those mysteries in ways that are consistent with
  the general proposition that human behavior is
  usually designed to serve a purpose

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What Is Economics All About?

• The goal, always, is to understand our own world.
  There are a lot of good reasons to learn about
  economics, but the reason I have tried to stress
  in this book The Armchair Economist is that
  economics is a tool for solving mysteries, and
  solving mysteries is fun.
• Steven Landsburg

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What Is Economics All About?

• When I see something that makes absolutely no
  sense whatever, I figure there must be a damn
  good reason for it.
• Peter De Vries

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What Is Economics All About?

• Economics is the study of mankind in the ordinary
  business of life.
• Alfred Marshall

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The Essence of EconomicsA Guide to
Economic Reasoning

• There is no such thing as a free lunch.
• Incentives matter.
• People choose for good reasons.
• Voluntary trade creates wealth.
• People earn income by helping others.
• Increases in real income depend on increases in
  real output.

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The Essence of EconomicsA Guide to
Economic Reasoning

• Beware of the law of unintended consequences.
• The invisible hand works better than the visible
  boot.
• The U.S. economy is resilient.
• A President cant fix the economy but can harm it
  in the long run.

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The George W. Bush/John F. Kerry Guide to
Political Reasoning

• Laws are like sausages. It is better not to see
  them being made. Otto Von Bismarck
• Get your facts first, then you can distort them
  as you please. Mark Twain
• A government which robs Peter to pay Paul can
  always count on the support of Paul.
  George Bernard Shaw

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The George W. Bush/John F. Kerry Guide to
Political Reasoning

• In America, anyone can become President. That is
  one of the risks you take. Adlai Stevenson
• An honest politician is one who when he is bought
  will stay bought. Simon Cameron
• Diplomacy is the art of saying nice doggy until
  you can find a rock. Will Rogers

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The George W. Bush/John F. Kerry Guide to
Political Reasoning

• I have come to the conclusion that one useless
  man is called a disgrace, two men are called a
  law firm, and three or more become a Congress.
  John Adams
• The government deficit is the difference between
  the amount of money the government spends and the
  amount it has the nerve to collect. Sam Ewing

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The George W. Bush/John F. Kerry Guide to
Political Reasoning

• A liberal is one who loves the world, but hates
  his neighbors. A conservative is one who
  believes in reform but not now. Mort Sahl
• Liberals feel unworthy of their possessions.
  Conservatives feel they deserve everything
  theyve stolen. Mort Sahl

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The George W. Bush/John F. Kerry Guide to
Political Reasoning

• The reputation of Congress is lower than quail
  crap. Alan Simpson
  

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Why Study Economics?

• Students need to develop economic ways of
  thinking and problem solving that they can use in
  their lives as consumers, savers, entrepreneurs,
  investors, workers, citizens, and participants in
  a global economy.
• Economics creates a more vivid understanding of
  costs and benefits than any other subject.

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Why Study Economics?

• Students who do not appreciate the
  accomplishments of a market economy will not work
  to preserve it.
• Students must understand economics to become
  productive members of the workforce.

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Why Study Economics?

• The case for economic literacy is the case for
  democracy itself. If war is too serious to be
  left to military professionals, economic
  understanding is too important to be left to
  economists.

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Why Study Economics?

• The purpose of studying economics is to keep
  people from being deceived by economists.
• Joan Robinson

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Recent Research

• A Berkeley sociologist found in a study of
  audiences that
• 25 percent listen.
• 25 percent fade in and out.
• 50 percent have sexual fantasies.

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• I hope that you have enjoyed the pleasure of
  learning about economics.