Mangerial Ecomics and Goblization

In: Business and Management

Submitted By browneye79
Words 3508
Pages 15
CHAPTER 1

APPROACHING THE MATERIAL

It's the first chapter in the text for a course that most of your students wish they did not have to take. My class opens with an admission that I am very aware of this fact, and have a big job responsibility – to explain why it was worthwhile to spend my life working with economics and that it will pay them to learn why.

Chapter 1 is about how economists think, and why they think that way. In my opinion the most important concepts to convey are:

1 Why economists use models instead of collecting facts in an ad hoc manner. The emergency room algorithm seems to work fairly well, possibly because it immediately turns a popular fable (the importance of personalized medical relationships) on its head. The doctor is more likely to make a correct diagnosis when time and information are scarce by treating you as a random sample from the population, asking you questions known to reliably distinguish heart attacks from other conditions, and asking no other questions. That's the same reason you start with supply and demand when faced with a problem in a market you have not encountered before.

2 The most basic ideas of rationality and choice under constraints, plus a refresher on opportunity cost, marginal reasoning, and competition in general.

3 The importance of limited and costly information in models and life. Most students believe that knowledge is power, but only because they have heard it mindlessly repeated by so many authorities. I like the example of the expensive industry newssheet whose value stems in large part from its ability to destroy information that the reader is likely to find irrelevant or false.

4 You should bring up examples of phenomena that economists have problems explaining with a rational choice model like the R-rated movie paradox. It makes you more human to the students and is…...

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