Making Econ Sexy

September 28, 2008

In one of my numerous dinner-party debates, I managed to stumble upon whether economics is of any use as a discipline. My opponent’s charge was that economics is “a step above witchcraft” in terms of its scientific usefulness. This echoes the old challenge to name an economic insight that is not 1. Obvious or 2. Trivial.

This kind of challenge poses a real problem for economists, because a lot of the best stuff that economics has to offer really is obvious. That is, the best stuff is obvious in that it can be easily explained and understood, even by non-economists. The problem is that, having accepted what economists say and acknowledged that the economic aspects of a situation are clear, people go ahead and do whatever darn fool thing they were going to do anyway. Economics is so obvious you forget to use it.

Take price gouging (…please!). It’s obvious that people are willing to buy less of something when the price goes up. It’s also obvious that producers are interested in supplying more of something when the price goes up. The much-derided “invisible hand” is the mechanism ensuring that when you go to the store for bread or to the gas station for gasoline, there’s always bread and gasoline available for sale. If you try to set the price of bread or gasoline at some level lower than the equilibrium price, there won’t be as much of these products available for sale people are willing to buy. I can feel your eyes glaze over as you read this. My eyes are practically glazing over as I write this. It’s just so darn obvious!

So someone explain why anyone thinks the following law is a good idea, announced in South Carolina as of September 12, 2008:

[A]s of this notice, price gouging for gasoline and other commodities constitutes an unfair trade practice and a criminal misdemeanor. “Price gouging” requires the charging of an “unconscionable price” not attributed to additional costs or market fluctuations. An unfair trade practice violation carries a civil penalty of up to $5,000 per violation 39-5-110. In addition, the criminal penalty is a fine of up to $1,000 and imprisonment of no more than 30 days 39-5-145(K).

Being bitter about the situation is cheap and easy. The real challenge is to make economics seem interesting enough and applicable enough that you won’t hear people say, in response to the simple economics of supply and demand, “Yeah, yeah, econ man. I know that already. bo-ring. Now back to what I was saying: The gas companies are trying to screw over consumers…”


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