First Lecture: Thinking like an Economist!

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So yesterday I gave the opening lecture to my maco econ class at Bay Path College. If you follow me in any capacity via social media then you probably saw that I couldn’t shut-up about it. I can’t help it I am just so excited! All the students were amazing and unique – and I know once we get rolling into the semester it will truly be an amazing experience for everyone. OK, now that all the mushy stuff is out of the way I wanted to share with you what we talked about that class. We talked about the 10 Principles of Economics from the first chapter of the newest Mankiw text. Now before your eyes get all hazy and glossed over one me let me explain. It’s just a list of things to think about to help new students (or anyone really) to start to think objectively about what goes on the business world. It gets to the core of relationships and trade-offs aiding to create a new way to look at commerce.  In my un-biased opinion (un-biased is just another way to say very biased right) I think it would benefit everyone to think a little more like an “economist” – I’ll even allow the arm chair variety : )

Hope you enjoy a snippet of what we talked about!

Principle 1: People Face Trade-Offs – This one’s kind of easy and that old adage that there’s no such thing as a free lunch fits quite nicely. In everything that we do and every choice that we make we are always giving up something to get something.

Principle 2: The Cost Of Something Is What You Give Up to Get It – When you’re making decisions you should think about the costs and benefits to it. Are there upfront costs, costs that incur over the long run and are the perceived benefits really worth it to you? Costs can be monetary or the time you give up to get what you want.  Are there any opportunity costs associated

Principle 3: Rational People Think At The Margin – Economists like to think that everyone thinks rationally and by that I mean they do the things that will bring them the greatest amount of utility. Businesses are the same way they want to operate at a point where they are generating max profits.

Principle 4: People Respond to Incentives – Everyone likes a good incentive to get motivated right. Incentives even have the power to change the way a previous decision was made based on the new or added perceived benefit over the costs. Want that free gym bag! All you have to do is sign up for another credit card – oh and we’ll tell you the details about what you signed for later.

Principle 5: Trade Can Make Everyone Better Off – You can’t do it all nor should you by yourself. Producing and consuming things in communities and economies is what makes the world go round.

Principle 6: Markets Are Usually A Good Way To Organize Economic Activity – When markets are allowed to set prices then the quality of the production is insured. To attract consumer dollars producer need to provide the best quality and utility possible that their lowest prices can support. Ohhh R&D dollars make the world a better place.

Principle 7: Governments Can Sometimes Improve Market Outcomes – Or save them in the case of the Federal Reserve as of late.

Principle 8: A Country’s Standard Of Living Depends On Its Ability To Produce Good and Services – You can find huge difference in the standard of living in countries all over the globe. How you measure that is in productivity – the more you produce the more money comes into your country – the better chance at an increased standard of living.

Principle 9: Prices Rise When The Government Prints Too Much Money – Ohh how I do enjoy a good conversation about inflation. And lucky for all of you there are already a few posts about it here so I guess I can spare you on this one.

Principle 10: Society Faces Short Run Trade-Offs With Unemployment And Inflation – It just so happens that I have a post all about the Phillips Curve too. Oh you guys are in luck!

I hope you enjoyed seeing the points we went over in class. I really think it's a good foundation to anyone to be aware of when you're out there in the world having your adventures.

Let me know what you thought of your Econ Prof's past or present.

Are there anythings you think I should avoid or do to make the class as entertaining and engaging as possible?



Comments

[Khaleef @ KNS Financial]

I think it would benefit everyone to think a little more like an “economist” - this is something that I say all the time! Although, having a Master's in Economics probably makes me biased as well.

Understanding the concepts that you outline here can help all of us make better choices - whether financial or otherwise!

[Nunzio Bruno]

I can't agree with you more Khaleef! Very well said and I'm glad you can appreciate the point of view - says the armchair economist that I am :)