Economics at Work Lessons in Economics
Economicsat Work: Lessons in Economics
Studyingeconomics has been an incredible experience of life. Many people vieweconomists as overly theoretical people with a flurry of assumptionsin everything they say and do. Anyone joining an economics for thefirst time would probably come across many topics and concepts thatlook and sound very abstract to conceive. However, the knowledge Ihave gained from Economics as a course and in interacting withpracticing economists have liberated me from the earlier notion thateconomics is too abstract. The vital way to understand economics froma practical perspective is to find out how the concepts taught areapplied in real world market situations.
Firstly,it is true that economics is a subject of many assumptions. However,the assumptions are not fixed. In fact, assumptions are the best wayto understand the real world situation. They help in depictingeconomic problems as manageable scenarios. Assumptions simplifycomplex economics problems into solvable issues (Boud, David, andJohn Garrick 6). For instance, I learned in my ‘markets` class thatassumptions characterize the nature of markets. A competitive markethas certain assumptions that differentiate it from other markets suchas monopolies and monopolistic competition. A real market is aproduct of relaxing some of the assumptions in a competitive market.When some assumptions cannot be relaxed then they are simplyacknowledged. It has been interesting visit different organizationsto have a realistic view of how economics entities run their affairsin their attempt to achieve optimal efficiency (Page 34). Myassessment revealed very interesting facts about the operations ofmarket agents. They do exactly what I learned in microeconomic byallocating resources in manner that they would maximize the profits,maximize the value of the firm, maximize shareholder`s wealth whileminimizing costs.
Interactingand listening to scholars who studied economics with a longexperience in managing economic agents was another learning point. Bylistening to reputable economists such as John Sweetland, thechairman of Winsford Corporation in Los Angeles, one realizes thatmanagement is purely economics in practical terms especially in thecapacity of Chief Executive Officer. Economists do not just stop atwhat they learn in class but they device ways of making theirknowledge authentic in real life. For instance, Mr. Sweetlandmentions the difficult economic conditions that made it difficult forhim and another partner to start a new cement company in the mid70`s. He described the 1981 scenario where the chairman of theFederal Reserve, Mr. Paul Volker decided to use aggressive fiscal andmonetary policies to contain inflationary pressures that had shakenthe economy. The decision caused a sudden rise in interest rates ofabout 20%. The most affected were construction loans whose interestrates shot up to 25%. Mortgage rates also spiraled to high digitsthat made it inconceivable to invest in a new cement company.Interestingly, Mr. Sweetland and his other promoters of the PacificCoast Cement Corporation had to find a drastic solution. They had tosell the shares of the Phillip brothers who were part of thecorporation to another investor due to its gross mismanagement andhuge losses. In all only two years, the corporation turned out to bethe most profitable operation in the country.
Economicsis a great social science with which persons can manage life on amicro and macro scale. The discipline has its own limits. Onediscovers that the subject has grown from being a value creationdiscipline to one that also finds the most efficient ways to allocatethe value. Though the discipline talks little about the morality ofallocating resources, it emphasizes on the need to allocate wealthefficiently so that the society can maximize on wealth, utilitythrough the trade-offs involved.
Boud,David, and John Garrick.Understandinglearning at work.London: Routledge, 1999. Print.
Page,William Roberts. Economicsat work.London: Cassell, 1968. Print.