I believe that one of the most useful aspects of economics is its utility as a framework for thinking about problems. A lot of people get turned off by the abstract, technical, mathematical approach to economics and lose out on the benefits of just using economics as a general way to think. You can get a lot of use from econ without ever considering whether your Slutsky matrix is negative semi-definite (if the last part of that sentence makes no sense to you, I envy you).
I was reminded of the simple power of economics when reading Charles Wheelan's excellent book, Naked Economics. Here's one issue he considers. Why do so many fast food restaurants have signs at their cash registers offering customers a free meal if they don't receive a receipt?
See the comments for the explanation Wheelan offers (hint: think in terms of incentives).
Whose incentives does this affect?
ReplyDeleteFirst, it affects the customers' incentives. With the possibility of a free meal, they are more likely to monitor the cashier to ensure a receipt is produced.
Second, because of the increased monitoring of customers, cashiers now have a bigger incentive to produce a receipt with each order.
Why does the restaurant chain or manager care? Wheelan notes that one of the simplest ways that cashiers can steal from employers is by failing to enter a sale in the register and simply pocketing the money after delivering the customers' food.
The restaurant has outsourced monitoring of its employees to the customer. Brilliant!
I just wanted to say that "think like an economist" was what made me want to become an economics major.
ReplyDeleteNow I want to pursue a PhD, but I find it disheartening that the field is so full of math junkies. I don't mind math, and I know I'll need it to make a decent salary, but whatever happened to literary economists?
Why is it that the great thinkers in economics have all but disappeared from the undergraduate canon?
I guess I'm going to have to recreate the niche during my career. Maybe I'll call it economic philosophy, if that title isn't already taken...