Demystifying Economics

The study of economics is critical since it weaves through everyone’s life and every aspect of society.

 

By Barbara Melendez

    USF News

 

TAMPA, Fla. (Jan. 11, 2011) – Everyone is hoping for better economic headlines in 2011 but if news about the economy flies over your head or makes you anxious because you barely comprehend what it’s all about, a couple of courses that deal with money matters just might help.

 

They’re not for economics and business majors only.   

 

You don’t need to become an expert to, at the very least, equip yourself with key terms and concepts. To have a fighting chance in a world of powerful economic forces, it certainly can’t hurt to understand the financial dimensions of your life and how you fit into the big economic picture – regardless of your profession. 

 

“Economics affects every area of life, every area of society,” says University of South Florida Department of Economics Chair Kwabena Gyimah-Brempong.  “There is the economics of health care, economics of the environment, economics of developing countries, labor economics, economic history and the  history of economic thought.  The arts have an economic impact.  Even the economics of religion and the economics of politics are being studied. 

 

“If the current global economic crisis that has grown throughout this past year teaches us one thing, it is the need for a strong dose of economic knowledge by policy makers.  Can we predict where the future and where the global economy is headed?  Maybe not, because too many things we cannot control affect the economy.  However, economic knowledge will help us craft a better response to any changes.”

 

He says there are really only two basic concepts to know – the two underlying principles of economics –cost/benefit and incentives. 

 

“Everything you do has a cost and a benefit,” he said.  “It may or may not be money; it could just as easily be time, energy, or whatever. We are all always balancing benefits against the costs. And secondly, incentives matter, whether they are positive or negative incentives.

 

“Consider the economics of marriage.  If both parties bring a lot into a marriage, breaking up becomes costly, so there is an incentive to stay together.  If one party brings little or nothing, breaking up might represent an improvement in status for that party, so there is little incentive to stay.  You can apply this analysis to just about everything.”

 

Gyimah-Brempong recommends looking at the study of economics the way one would approach a cookbook.  There’s science and art to both cooking and understanding economics. 

 

“Economics provides a way of thinking about the world and important social issues,” Gyimah-Brempong said.  “It’s not like accounting, where you have numbers and a balance sheet.  You take what you learn and combine it with everything you know in varying quantities.  Certain principles hold true but there’s an art to applying them.”

 

Armed with basic understandings, just about anyone becomes better able to understand micro-economics, the economic  analysis of individuals’ daily decisions. Macro economics is another matter.  It focuses on the behaviors of the entire economy rather than on analyses of individual behavior.

“What may work at the individual level might not work for the bigger picture in macro economics,” Gyimah-Brempong said.

 

For example, it might be a good thing for individuals to save money, but when everyone saves and no one spends, the economy of a community suffers.

 

“If no one is buying, eventually you can see an economy collapse.  The study of basic economics prepares you to understand the basis of rational choice and makes you a better consumer of economic information and better able to understand public policy debates and decision-making,” he said.

 

Economic news consumers have heard much about the complex mathematical models used to create financial instruments and predict or explain economic behavior.  The complexity makes many run for the cover of not so blissful ignorance.

 

“Economics adopted the methodology of the sciences for a long time but there are things that can’t be modeled in this way,” Gyimah-Brempong said.  “Too much was driven by mechanical equations but things are swinging back.  Economics is really a mixture of the two, art and science.  The key to a stronger understanding of the analytical power of economics is to aim for the right balance between the art and the science.” 

 

While the thought of studying economics might seem daunting to some, Gyimah-Brempong wouldn’t do anything else.

 

“If I were given the choice of coming back as anything in life, I would choose being an economist,” he said.  “There isn’t anything else I would rather do.  This really is a tremendously fascinating field.”

 

The study of economics brings with it learning problem-solving at a level that can be used in any career, but particularly in business and government.  USF students can earn a bachelor of arts in economics through the College of Arts and Sciences or a bachelor of science in economics through the College of Business.  There are different course requirements in the two programs.  A combined five-year bachelor’s and master’s degree program is open to high achieving students who meet that program’s stringent requirements.  The master’s and doctoral programs in economics offer advanced studies that prepare students for careers in academia, business and government.  The USF PhD specializes in health economics and other applied areas of microeconomics.

 

“USF has a very distinguished faculty whose expertise covers health, labor, sports, public economics, urban economics, international economics, industrial organization and development economics,” Gyimah-Brempong said.

Brempong is an expert on economic growth and development. He has contributed articles to various publications including Applied Economics, the African Development Review and has a forthcoming article in the Journal of International Trade and Development on “Aid and Economic Development.”

 

Barbara Melendez can be reached at 813-974-4563.