Monday, 18 January 2010

Are economists cheapskates?

Happy new year to everybody!

Economists are widely regarded as heartless bastards. It is assumed that we only care about money and profits and that we disregard ethics and morals. That, as with all clich├ęs, contains a small element of truth. Surveys and experiments have shown that it is not that economists are bad people, it is just that they care more about efficiency. Given that, as you should know, efficiency and equity are frequently in conflict with each other, economists may look stingy and cold. Economic training is to "blame" for this. Economics students learn concepts like opportunity cost or learn to think strategically by studying game theory. When taken seriously and when applied to everyday life, these ideas can make a person behave in apparently bizarre and cheap ways.

This is the topic of this very nice article, kindly contributed by our student Ankita Patnaik. It is a comprehensive overview of the reasons behind our apparent coldness. To some extent it is true that we are less averse to put a price to things like time. But on the other hand, as we have argued elsewhere in this blog, being a "bastard", that is, caring about efficiency and being realistic about people's motivations can often be the best way to improve their welfare and make the world a better place.

A final question for you students: Do you feel that your "dark side" is growing as as your economic studies progress?

1 comment:

  1. I'm not quite sure if it is my economics-dark side or my student side that has lead me to strive to get bargains, but economics does seem to creep into my mind when shopping for sure.

    After reading the final paragraph in the 'very nice article' I would also add that my attitude to risk in some circumstances has been affected. In economics we regularly assume risk-aversion to characterise the majority of the public. A little less than a year ago I found myself with two coupons of £5 to bet at a roulette table. My former self would have liked to chance it, but I bet one on red and the other on black, and walked away with my £5 winning. Has economics dampened my entrapeneurial side?...probably not, just made me more sensible.