Economics—Chapter 1 Readings 
                                            New Ideas From Dead                   example, you may derive some satisfaction from 
                                         Economists—An Introduction               whacking your boss on the head with a canoe paddle 
                                            to Modern Economics                   at the annual company picnic.  But the momentary 
                                                   Thought                        burst of utility would presumably be more than 
                                                                                  offset by the disutility of spending many years in a 
                                             By Todd G. Buchholz                  federal prison.  (But those are just my preferences.)  
                                                                                  More seriously, many of our important decisions 
                                                                                  involve balancing the value of consumption now 
                                          “Introduction: The Plight of 
                                             the Economist” pg. 1                 against consumption in the future.  We may spend 
                                                                                  years in graduate school eating ramen noodles 
                                                                                  because it dramatically boosts our standard of living 
                   It’s not easy being an economist. Corporate                    later in life.  Or, conversely, we may use a credit card 
                   executives attack them for not calculating costs and           to purchase a big-screen television today even 
                   benefits with enough precision.  Altruists accuse              though the interest on that credit card debt will 
                   them of being too fussy about costs and benefits. To           lessen the amount that we can consume in the 
                   politicians, economists are party poopers who won’t            future. 
                   let them promise prosperity without sacrifice. Some                     Similarly, we balance work and leisure.  
                   of the wittiest writers have taken time out to insult          Grinding away ninety hours a week as an investment 
                   them. Indeed, it’s been open season on economists              banker will generate a lot of income, but it will also 
                   ever since Carlyle called economics the “dismal                leave less time to enjoy the goods that can be 
                   science.”                                                      purchased with that income.  My twenty-nine-year-
                            Economists feel wrongly accused, however,             old brother is a successful management consultant 
                   for they are usually not the cause of bad news but             whose salary has at least one more digit than mine.  
                   simply the messengers.  And the message is simple:             On the other hand, he works long and sometimes 
                   Human beings must make difficult choices.  We are              inflexible hours.  Last fall, we both excitedly signed 
                   no longer in Eden. The world does not flow with milk           up for an evening film class taught by Roger Ebert.  
                   and honey. We have to choose among cleaner air                 My brother proceeded to miss every single class for 
                   and faster cars, bigger houses and bigger parks,               thirteen weeks. 
                   more work and more play. Economists do not tell us                      However large our paychecks, we can spend 
                   that any of these is bad.  They only tell us that we           them on a staggering array of goods and services.  
                   cannot necessarily have them all-all at once.                  When you bought this book, you implicitly decided 
                   Economics is the study of choice.  It does not tell us         not to spend that money somewhere else.  (Even if 
                   what to choose. It only helps us understand the                you shoplifted the book, you could have stuffed a 
                   consequences of our choices.                                   Scott Turow novel in your jacket instead, which is 
                    
                                             Naked Economics—                     flattering in its own kind of way.)  Meanwhile, time is 
                                           Undressing the Dismal                  one of our most scarce resources.  At the moment, 
                                                   Science                        you are reading instead of working, playing with the 
                                                                                  dog, applying to law school, shopping for groceries, 
                                             By Charles Wheelan                   or having sex.  Life is about trade-offs, and so is 
                                                                                  economics. 
                                                                                           In short, getting out of bed in the morning 
                                        “The Power of Markets” Pgs                and making breakfast involves more complex 
                                                     8-11                         decisions than the average game of chess.  (Will that 
                                                                                  fried egg kill me in twenty-eight years?)  How do we 
                                                                                  manage?  The answer is that each of us implicitly 
                   Why did the chicken cross the road?  Because it                weighs the costs and benefits of everything he or 
                   maximized his utility.                                         she does.  An economist would say that we attempt 
                            Bear in mind that maximizing utility is no            to maximize utility given the resources at our 
                   simple proposition.  Life is complex and uncertain.            disposal; my dad would say that we try to get the 
                   There are an infinite number of things that we could           most bang for our buck.  Bear in mind that the things 
                   be doing at any time.  Indeed, every decision that we          that give us utility do not have to be material goods.  
                   make involves some kind of trade-off.  We may trade            If you are comparing two jobs—teaching junior high 
                   off utility now against utility in the future.  For            school math or marketing Camel cigarettes—the 
                                            Economics—Chapter 1 Readings 
                  latter job would almost certainly pay more while the          office building when it is seventeen degrees outside 
                  former job would offer greater “psychic benefits,”            is now part of the cost of smoking at work. 
                  which is a fancy way of saying that at the end of the                  This broad view of cost can explain some 
                  day you would feel better about what you do.  That            very important social phenomena, one of which is 
                  is a perfectly legitimate benefit to be compared              the plummeting birth rate in the industrialized world.  
                  against the cost of a smaller paycheck.  In the end,          Having a child is more expensive that it was fifty 
                  some people choose to teach math and some people              years ago.  This is not because it is more expensive 
                  choose to market cigarettes.                                  to feed and clothe another little urchin around the 
                           Similarly, the concept of cost is far richer         house.  If anything, those kinds of costs have gone 
                  (pardon the pun) than the dollars and cents you               down, because we have become far more productive 
                  hand over at the cash register.  The real cost of             at making basic consumer goods like food and 
                  something is what you must give up in order to get it,        clothing.  Rather, the primary cost of raising a child 
                  which is almost always more than just cash.  There is         today is the cost of the earning forgone when a 
                  nothing “free: about concert tickets if you have to           parent, still usually mother, quits or cuts back on 
                  stand in line in the rain for six hours in order to get       work in order to look after the child at home.  
                  them.  Taking the bus for $1.50 may not be cheaper            Because women have better professional 
                  than taking a taxi for $7 if you are running late for a       opportunities than ever before, it has grown more 
                  meeting with a peevish client who will pull a $50,000         costly for them to leave the workforce.  My neighbor 
                  account if you keep her waiting.  Shopping at a               was a neurologist until her second child was born, at 
                  discount store saves money but it usually costs time.         which point she decided to stay home.  It’s 
                  I am a writer; I get paid based on what I produce.  I         expensive to quit being a neurologist. 
                  could drive ninety miles to shop at an outlet in                       Meanwhile, most of the economic benefits 
                  Kenosha, Wisconsin, to save $50 on a new pair of              of having a large family have disappeared in the 
                  dress shoes.  Or I could walk into Nordstrom on               industrialized world.  Young children no longer help 
                  Michigan Avenue and buy the shoes while I am out              out on the farm or provide extra income for the 
                  for lunch.  I generally choose the latter; the total cost     family.  We no longer need to have many children in 
                  is $225, fifteen minutes of my time, and some                 order to ensure that some of them live through 
                  hectoring from my mother, who will invariably ask,            childhood or that we have enough dependents to 
                  “Why didn’t you drive to Kenosha?”                            provide for us in retirement.  Even the most dour of 
                           Every aspect of human behavior reacts to             economists would concede that we derive great 
                  cost in some way.  When the cost of something falls,          pleasure from having children.  The point is that it is 
                  it becomes more attractive to us.  You can learn that         now more expensive to have eleven of them than it 
                  by deriving a demand curve, or you can learn it by            used to be.  The data speak to the point: The 
                  shopping the day after Christmas, when people snap            average American women had 3.77 children in 1905; 
                  up things that they weren’t wiling to buy at full price       she now has 2.07—a 45 percent drop.   
                  several days earlier.  Conversely, when the cost of            
                  something goes up, we use less of it.  This is true of                                      Economics—by Example 
                  everything in life, even cigarettes and crack cocaine.                                                   
                  Economists have calculated that a 10 percent                                                 By David A. Anderson 
                  decrease in the street price of cocaine eventually                                                       
                  causes the number of adult cocaine users to grown                                             “What’s to Love about 
                  by about 10 percent.  Similarly, researchers                                              Economics?—Virtues of the 
                  estimated that the first proposed settlement                                              Economic Way of Thinking” 
                  between the tobacco industry and the states                                                              
                  (rejected by the US Senate in 1998) would have                                                       Page 2 
                  raised the price of a pack of cigarettes by 34 percent.                                 
                  In turn, that would have reduced the number of                 
                  teenage smokers by a quarter, leading to 1.3 million          Center College student Adair Howell skipped class 
                  fewer smoking-related premature deaths among the              recently for a Today Show interview as the winner of 
                  generation of Americans seventeen or younger at               the Cosmo Cover Model Contest.  If skipping one 
                  the time.  Of course, society has already raised the          class allows you to launch a new career, like Adair, or 
                  cost of smoking in ways that have nothing to do with          to get treatment for a deadly illness, the substantial 
                  the price of a pack of cigarettes.  Standing outside an       benefit exceeds the limited cost of the first class 
                    Economics—Chapter 1 Readings 
        missed, which might be a few hours of extra reading 
        and not taking and note copying.  The second most 
        important reason to skip class might be that your 
        sports team has a competition.  The third best 
        reason might be that you’re simply not in the mood.  
        As the reasons to skip become more trivial, the costs 
        of additional misses mount.  In running, they say 
        that if you miss 1 day of training, only you know it; if 
        you miss 2 days, the competition knows it; and if you 
        miss 3 days, the crowd knows it.  In education, an 
        analogous story might be that missing 1 day of class 
        affects your conscience; missing 2 days affects your 
        grade; and missing many days affects your future. 
            In order to determine the number of skips 
        that will make you as well off as possible, you should 
        skip until the additional benefit no longer exceeds 
        the additional cost.  (Don’t get the wrong impression; 
        if you’re not interviewing, ill, or bereaved, the 
        optimal number of skips may well be 0.)  With the 
        additional benefit falling and the additional cost 
        rising, any subsequent skips do more harm than 
        good.  Economists call the additional benefit from 1 
        more of something the marginal benefit and the 
        additional cost of 1 more of something the marginal 
        cost.  Thus, you should skip until the marginal cost 
        equals the marginal benefit. 
            You weigh marginal costs against marginal 
        benefits every day.  You know that eating too much 
        pie can make you gain weight, but the first few bites 
        create a lot of pleasure and not a lot of weight.  As 
        your hunger is satisfied, the benefit of each 
        additional bite decreases and its cost (in terms of 
        excessive caloric intake) increases.  Eventually, the 
        marginal cost of another bite of pie will exceed its 
        marginal benefit, and it’s time to stop eating.  If it’s 
        the best pie you’ve ever tasted, the marginal benefit 
        is higher, and you’ll eat more of it.  Sometimes even 
        indigestion is well justified.  In 2005, high marginal 
        benefits led Ted Janus to eat 6 pounds of shoofly pie 
        in one sitting—he won $2000 and fame at the Alka-
        Seltzer U.S. Open of Competitive Eating. 
            The study of where marginal benefit meets 
        marginal cost leads to the efficient outcomes that 
        economists cherish.  How many hours should you 
        spend in the library? How many laps should you 
        swim in the pool? How much time should you spend 
        in the shower? The answer is always the same: Just 
        do it until the marginal benefit equals the marginal 
        cost and you couldn’t do any better.