Economics will teach you some fundamental concepts that can be applied across a wide range of scenarios in everyday life. Concepts such as trade-offs, opportunity cost, marginal decision-making, utility, constraints, cognitive biases, cost-benefit analysis, and the difference between correlation and causality. This will build your toolkit to “think like an economist”.
These concepts can help you understand the dynamics of supermarket prices, taxes, the housing market, interest rates, financial markets, budget deficits and surpluses, trade balances, exchange rates and other components of our economy. These tools will help you understand how we can manage our natural resources and deliver essential services to people – such as electricity, hospital services, and internet access – and in a way that is efficient and equitable. These economic tools can also be applied to whole lot of issues that you probably don’t associate with economics – topics like crime, corruption, mental health, addictions, obesity, child development, discrimination, tourism, sports, culture and the arts, even the dynamics of marriage, divorce and relationships.
Now is a exciting time to be studying economics. New fields of economics are evolving, such neuroeconomics, which combines economics with neurosciences, behavioural economics, which combines economics with psychology, and experimental economics, which draws upon tools from medical science, such as laboratory experiments and ‘randomised control trials’, to test out which policy approaches works best.
You may have even heard that the Nobel Prize in Economics in 2019 was awarded to three economists who have been applying ‘experimental economics’ to tackle the issue of poverty. One of these Nobel Prize recipients was Professor Esther Duflo. Esther Duflo is the youngest ever recipient of the Nobel Prize in Economics, and only the second women in economics to receive this honour after Elinor Ostrom was awarded the prize in 2009.
As climate change becomes an increasingly important issue for our world, you’ll discover that many of the tools that can help us mitigate climate change and environmental degradation stem from economics. Concepts such as externalities, public goods, the ‘tragedy of the commons’, and many of the mechanisms of ‘game theory’ are relevant here.
You will hear economists talk about ‘evidence-based policy’. When economists provide policy advice, it is important that their recommendations are not created from personal beliefs or untested ideas. Policy advice needs to be based on a rigorous analysis of what works or not. Therefore, when it comes to designing policy solutions, economists use their mathematical skills, data, and observations of the real world to build an “evidence base” of knowledge. Economists are continually striving to add to this knowledge base through an ongoing process of research, analysis, policy formation and implementation, evaluation, and dissemination of results. Becoming an economist means that you can join in this knowledge-building community.