Wednesday, October 3, 2007

More Economics Mumbo Jumbo

Today I received the following comment via email:

you have missed your calling...

you truly want to, and should be, an economic theorist and writer for the popular audience....

I am publishing this quote not to stroke my ego, but rather to create a historical record that can be referenced if I ever choose to re-apply to the PhD economics program at the University of Maryland, for the purpose of providing adequate persuasion that a repeat of my first application's ruthless dismissal would be criminally negligent.

To give you some insight into the unusual way that my mind works, this is like one of the best compliments that I could ever receive. Economics studies incentives, and how people respond. The benefit to politics is that if you understand how people will respond, you can pick the incentives that will best accomplish your goal in the most efficient way. I will now answer the two questions that you are thinking in your head:

Yes, the email was sent from someone else and not created by me.
No, the person was not paid for their endorsement.

Moving on, Scott Adams has more to say about economics. I am quickly growing even more fond of his philosophy and humor than I already was, and here is some more of what he has to say:

When you have a working knowledge of economics, it’s like having a mild super power.

"Super power" is apparently Mr. Adams' word for sinus headache.

I use my knowledge of economics to avoid speeding tickets. I assume the local law enforcement agencies have limited funding and can’t be everywhere at the same time. That tells me, fairly reliably, when I can speed without detection and when I can’t.

I can tell you the economists are always making assumptions. Usually they assume that the world works slightly more simply than it really does, because theoretical models are easier to construct if this is the case. But as the joke goes, if you ask an economist how to cross a river, he will tell you to assume there is a bridge.

For example, if I get up before the crack of dawn to go to the airport, I can speed all I want. No police force is going to pay an employee to sit on a road at 5 AM with virtually no traffic and a low accident rate and wait for a speeder. That would be bad economics.

You also never see speed traps on the freeway during rush hour. One reason is probably because it’s more dangerous to pull over people in that much traffic. But the bigger factor is that it would slow traffic during rush hour. That’s a huge economic impact on society for not much return in the way of making society safer. All it would do is make the police less popular, and make people think the police don’t need the funding they already have.

Around here, the police have little portable trailers with radar and a display sign. They leave it unattended on side streets. The radar tracks your car and the display tells you how fast you are going. They’ve discovered that motorists slow down when they realize the device is tracking their speed. This doesn’t work on me. When I see that trailer, I speed up because I know the police won’t put both the trailer and a real policeman in the same neighborhood. It would be a waste of money to have both, since the trailer with the radar slows down everyone but economists.

My reason for majoring in economics in college was to understand how the world works, so I would be more equipped to navigate in it. I think it was a good choice.

Mr. Adams is certainly the funniest economics-related blogger, but if you are having trouble getting to sleep at night, you can also check out some of the following blogs, which are at the forefront of economics theory and application.

-Maringal Revolution (The name of this blog is actually a pun on a pervasive economics concept)
-Greg Mankiw
-The Blog of Diminishing Returns (This is another economics pun. Sorry-economists are not very funny people.)
-Free Exchange (This is written by the staff of The Economist)

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