Economists versus People

In my rather weighty book on Economics it says that "costs matter" and "an individual (or a firm, or a society) should take action if, and only if, the extra benefits from taking the actions are at least as great as the extra costs. (Franke, Bernake - Principles of Economics 2007). As an aside the Keynesian Model comes in at chapter 26 and what it says there seems to be vastly different that what we hear on TV (I tend to believe the book)

Economists then are about maximising benefits, minimising costs and risks, and working for the benefit of the organisation they are working for or with. I am generalising a bit here but you should get the general idea.

This means that they would recommend class sizes of 200 over 20 in say schools and in general policies that focus on the money not on people. So when an economists says that something is good examine it in light of these basic principles. Economists want the population of Australia to grow rapidly because growth represents more building, more things being purchased and consumed. This increases demand which increases supply which makes more money for suppliers.

Economists do not look at shortages of potable water, the plight of the spotted owl or the amount of pollution in the air except where it affects the bottom lines. I may be that they are so wrapped up in their formulas that they forget about the people. It is nicer to believe this than the other option which is that they simply do not care.

If you are not a producer, or supplier, or organisation that produces services then when an economist speaks they are probably not speaking for you. Remember this next time you hear the word used in a news story.