"Understanding people in the ordinary business of
- Lord Alfred Marshall
Microeconomics is indeed a
study of the ordinary. It is also ruthlessly commonsensical. As economist Frank Knight once observed, "It ain't [sic] what
people don't know that does the most damage. It's that they know so
danged much that just ain't [sic] so."
To be successful students must be open to the possibility of
surrendering cherished but unexamined beliefs about the way the world
works. (See note.) Economics demands that everything
be examined in light of our core understanding of opportunity costs.
People make decisions after weighing the costs of those decisions.
Consequently people respond to incentives.
Microeconomics is the study of individual decision making units. People
are such units, but so are corporations and other organizations. So this
class will focus on individuals and organizations. [Macroeconomics, in
contrast, is the study of the behavior of national economies. That will
not be our focus.]
Economics is a fascinating
discipline and beginning students are often enlivened at seeing the
world through fresh eyes. So welcome, students and parents, to our
class! Enjoy it.
here for a table of contents. [This is useful if the navigation
links, above, are not appearing in your browser.]
Nothing in the above should be read as meaning that beliefs about
fundamental truth are the realm of economics. They're not. That's the
business of epistemology and theology. But those branches of knowledge
are important to us as economists because they guide and inform the
decisions that people make. We cannot understand the way the world works
without understanding how real people understand the world.
©2002 by Gary Nelson. All rights reserved.