Fools are the ones who think Economics is none of their business. Of course it’s everyone’s business. In high school, the first thing I was taught is that “most of our acts are economic acts”. I though they were exaggerating on this one. Later, I came to realize they were right. If you are not convinced, I am then going to tell you about my day.
I wake up everyday at 6.30 am. Every morning I wish to have more 5 minutes in bed but my alarm just seems to say: “don’t forget about your time constraint”. Here comes the first economic term, constraint. Even though most people tend to focus only on the money constraint, meaning we have a fixed budget to spend on the millions of things we like, there are other important constraints and time is definitely one of them. Unfortunately, I only have 24 hours per day and I have to maximize my happiness or utility facing that binding constraint. The rest of the day can also be easily described by a cost-benefit analysis and other economic concepts. When deciding if I should have breakfast or not at home, on the one hand, my benefit angel says I will save more money because it is obviously cheaper, in monetary terms to do so; however, my cost devil reminds me about the huge costs implied. People tend to forget about implicit or non-monetary costs. If I had breakfast at home, it would take me a lot to leave it and traffic would be a nightmare. I would arrive very late to class and the opportunity cost associated, in terms of lost contents in class, especially at Nova, is very high. Also, by driving a few minutes later, in rush hour, I would certainly be imposing a negative externality on other drivers since I would be making their travel longer and vice-versa, not to mention the enormous gas costs but those ones are explicit, more obvious. When deciding whether to take the bus or drive by car to a certain place, most people think only about their own benefits and costs, leaving room for the arise of negative externalities imposed on other citizens.
After arriving at school, the goal is to focus on class and now the topic that emerges is to think not only about my benefits and costs but also on imposed externalities. However, this time we are talking about positive externalities. The knowledge I am acquiring will have enormous benefits not only for me but also for people surrounding me since my future job will certainly help them live their lives, although in a still unknown manner. Also, the decision of studying Economics again in the Masters and specialize in this field will add more to society since there are gains from a deeper understanding of only one subject instead of trying to know them all and not fully understand any of them. Now comes the time for lunch. As in any other school, we have the lower cost but lower quality cafeteria and the higher quality, higher cost one. So, everyday, students are faced with a quality-cost trade-off, bearing in mind their budget.The day proceeds in a cost-benefit, trade-off analysis about studying or resting, which is a constant topic in every student’s mind and the decision will obviously depend on preferences, a topic loved by Behavioral Economists. Finally, my day ends in the same way as it started, having in mind the time constraint: should I go to sleep or spend the next hour doing my second best alternative? Notice here that economists only think at the margin, meaning that they think about what to do with the next hour, what to do with this extra euro and so on. For now that is all. Do not miss a possible future episode of a Day in the Life of an Economist.