Economics Explains it All
Only in later life have I come to appreciate just how effectively economics explains it all.
I'm serious - economics to me sheds light on the whole world around us.
Recognising this fact transformed my own study of economics. Instead of a fairly abstract and conceptual range of theories and arguments, underpinned by an endless series of definitions, it became an accurate lens through which I could bring some of the madness of life into focus.
Consider for example the economics of attempting to chat somebody up in a night club. I can immediately sense the more "academic" reader distancing herself (or himself) from this blog. However, such readers probably have only a very limited grasp of popular culture in the context of a nightclub anyway. It seems clear to me that the following economic concepts have a direct application in your local nightclub, or indeed pub:
Utility: As potential suitors eye each other up, how do they decide who to target as someone suitable for chatting-up? Surely, the best decisions are based upon accurate estimates of the utility available from each potential partner, and on the utility available to the potential partner from oneself. Utility is the amount of satisfaction or indeed happiness derived from a particualr cause of action. Chat-up lines based upon sublte lifestyle questioning could be considered as ways to quantify the utility available from selecting a potential partner. Lies regarding lifestyle may be simply attempts to maximise one's own perceived utility to others.
Incentive: Now to the tricky task of providing an appropriate range of incentives for the potential partner (or current partner). An incentive is any factor that gives rise to a preference for any particular cause of action. Making such incentives explicit must underpin many aspects of preparing for a night out, and indeed most converstations during the evening.
Asymmetrical Information: A significant cause of market failure, asymmetrical information occurs when one person in a market has less information than another. The nightclub is rife with asymmetrical information - decisions must be based largely on appearance, ability on the dance-floor, drink of choice, friendship group and limited conversation. Little suprise then that many relationships formed in nightclubs don't appear quite as rosy a few days later.
Intervention: Many aspects of the AS and A2 syllabus concerning intervention are visible in the nightclub. At the door, we see the enforcement of a legislative ban on persons under 18 entering the building. We can see that, whilst this type of intervention can be quite targeted and effective, it may bring considerable policing costs - in this case, the costs of a couple of doormen. Inside the building, we may see information campaigns (posters) advising us on the perils of drinking and driving, and may ponder just how expensive and effective they may be.
Price Elasticity of Demand: Ever wondered why drinks prices are so high in nightclubs? PED is the responsiveness of demand to a change in price. In the nightclub, there are no real substutites for the drinks on offer (apart from smuggling in your own). PED for such drinks is highly price inelastic. Increasing prices and holding them high therefore normally leads to an increase in revenue and profit. Witness too the application of price discrimination (charging customers different prices for the same product for reasons not associated with cost) as entry and drinks prices are perhaps increased after 10.00PM.
If you are facing economics examinations this year, and want to make the subject more interesting, just think a little more deeply about the choices you and those around you make. Consider each economics concept you study in the context of your real day to day life and anchor those concepts to the situations in which you find yourself. I promise that economics will be a little more fun if you do so.
Confident in the knowledge that economics really does explain it all, I invite readers to identify any aspect of the AS or A2 syllabus and I shall apply it both to everyday life and, as a bonus, to the context of a children's television programme.
Gavin Hall
I'm serious - economics to me sheds light on the whole world around us.
Recognising this fact transformed my own study of economics. Instead of a fairly abstract and conceptual range of theories and arguments, underpinned by an endless series of definitions, it became an accurate lens through which I could bring some of the madness of life into focus.
Consider for example the economics of attempting to chat somebody up in a night club. I can immediately sense the more "academic" reader distancing herself (or himself) from this blog. However, such readers probably have only a very limited grasp of popular culture in the context of a nightclub anyway. It seems clear to me that the following economic concepts have a direct application in your local nightclub, or indeed pub:
Utility: As potential suitors eye each other up, how do they decide who to target as someone suitable for chatting-up? Surely, the best decisions are based upon accurate estimates of the utility available from each potential partner, and on the utility available to the potential partner from oneself. Utility is the amount of satisfaction or indeed happiness derived from a particualr cause of action. Chat-up lines based upon sublte lifestyle questioning could be considered as ways to quantify the utility available from selecting a potential partner. Lies regarding lifestyle may be simply attempts to maximise one's own perceived utility to others.
Incentive: Now to the tricky task of providing an appropriate range of incentives for the potential partner (or current partner). An incentive is any factor that gives rise to a preference for any particular cause of action. Making such incentives explicit must underpin many aspects of preparing for a night out, and indeed most converstations during the evening.
Asymmetrical Information: A significant cause of market failure, asymmetrical information occurs when one person in a market has less information than another. The nightclub is rife with asymmetrical information - decisions must be based largely on appearance, ability on the dance-floor, drink of choice, friendship group and limited conversation. Little suprise then that many relationships formed in nightclubs don't appear quite as rosy a few days later.
Intervention: Many aspects of the AS and A2 syllabus concerning intervention are visible in the nightclub. At the door, we see the enforcement of a legislative ban on persons under 18 entering the building. We can see that, whilst this type of intervention can be quite targeted and effective, it may bring considerable policing costs - in this case, the costs of a couple of doormen. Inside the building, we may see information campaigns (posters) advising us on the perils of drinking and driving, and may ponder just how expensive and effective they may be.
Price Elasticity of Demand: Ever wondered why drinks prices are so high in nightclubs? PED is the responsiveness of demand to a change in price. In the nightclub, there are no real substutites for the drinks on offer (apart from smuggling in your own). PED for such drinks is highly price inelastic. Increasing prices and holding them high therefore normally leads to an increase in revenue and profit. Witness too the application of price discrimination (charging customers different prices for the same product for reasons not associated with cost) as entry and drinks prices are perhaps increased after 10.00PM.
If you are facing economics examinations this year, and want to make the subject more interesting, just think a little more deeply about the choices you and those around you make. Consider each economics concept you study in the context of your real day to day life and anchor those concepts to the situations in which you find yourself. I promise that economics will be a little more fun if you do so.
Confident in the knowledge that economics really does explain it all, I invite readers to identify any aspect of the AS or A2 syllabus and I shall apply it both to everyday life and, as a bonus, to the context of a children's television programme.
Gavin Hall
