Tuesday, 27 March 2007

Tuesday Bog Roll Readings

Donald J. Boudreaux’s latest Economics in Many Lessons on Pittsburgh Tribune-Review, on how DIY economics could lead to bad policies. Our policy-makers should take note.

Consistent Common Sense
By Donald J. Boudreaux
Tuesday, March 27, 2007

Every semester I emphasize to my freshman economics students that "economics is little more than common sense, consistently applied." Although I say this to them in the hope of easing any anxiety they might bring to a subject boasting such an imposing name, I'm also sincere.

Economics is common sense, consistently applied. Unfortunately, people do not commonly apply their common sense consistently. It is this inconsistent application of common sense -- rather than lack of common sense -- that makes economics so startling to people when they first encounter it.

Also, John Kay’s latest Financial Times column on (the inevitability of) making decisions that requires balancing the value of human lives and the costs of doing business. Good read.

Lastly, Slate’s latest slide show Smokey Bear Nation – an interesting historical take on the usage of animal characters in teaching children. Check out that video in the middle.



Anonymous said...

haha..and I thought only my golf swings are so consistently inconsistent !!


zcer said...

Hmm, the DIY economics article does better to illustrate how common sense reasoning can lead to false conclusions. I don't think applying common sense consistently is of any use in economics. Common sense is common. It is a set of separate intuitive ideas we have about the world as we commonly experience it. It is mostly consistent in ordinary life because the separate intuitions we have for separate domains usually are separate.

As John Kay said "there are rarely clear connections between causes and effects". In complex systems such as the economy, we have no choice but to carefully follow the systems of cause and effect no matter our intuitions.

However both articles managed to explain how common sense is sometimes wrong. So it is not impossible for lay people to understand some economics. They just have to refrain from applying common sense to complex phenomena.

Elanor said...

1. Economics is very very loosely based on what happens collectively when everyone do things in a commonsensical way.

2. For Don's article, the key point is "consistently", which basically means everyone, everywhere, and all the time. Just common sense is not enough.

zcer said...

I think we are experiencing some confusion among levels of reasoning here. Thinking about common sense, and common sense itself, are two very different things.

Common sense being the subject of our study we cannot think about common sense in a commonsensical way because common sense doesn't deal with dealing with common sense.

It doesn't help for him to tell students that economics is simply common sense consistently applied. It is more like thinking non-commonsensically about common sense, assuming it is consistently applied.

The problem with DIY economists is not that they don't assume common sense to be consistently applied. They don't think about it at all! They are merely using common sense.

zcer said...

Economics is hard precisely because it is not amenable to common sense.

Anonymous said...

to me economic skills are never simple.

as an eg., in any proposal, the board wants the technical team to focus on performance goals and ask things like, in the case of car manufacturer, can they build cars that cater to specific target areas like car safety, power greatness, fuel consumption, whatever..

from the economics POV, the board will want answers which include assessment of things like what are the financial concerns of the proposal ie. is the proposal viable and relate it to acceptable risk-taking decisions .

then, from both the technical and economic POV, the doubts the board want answered will be "is the proposal cost effective " ?

POV ( point of view :)