Why Economics?Its Nature and Functions

Prof. Bryson

Marriott School

Significance of economics Before we got endowments and named

business or management school after rich benefactors, we often named themCollege of Business and Public

Administration orCollege of Economics and BusinessIn Europe you often have Colleges of

Economics and Business and, sometimes,

Universities of Economics

Significance of economics

If you believe economics is important for business, why?

Economics is to business what mathematics and physics are to engineering.

Significance of economics What is the conventional definition of

economics?

“Economics is the study of the allocation of scarce resources for the satisfaction of (unlimited) human wants.”

Alfred Marshall:

“Economics is the study of mankind in the ordinary business of life.”

To you, what is “the ordinary business of life?”

Alfred Marshall: “Economics is the study of mankind in the ordinary business of life.”

“Man’s character has been moulded by his every-day work, and the material resources which he thereby procures, more than by any other influence unless it be that of his religious ideals…religious and economic influences have nowhere been displaced from the front rank even for a time; and they have nearly always been more important than all others put together. Religious motives are more intense than economic, but their direct action seldom extends over so large a part of life.”

Marshall, Principles of Economics,p.1

Why is economics so exciting?

Economics is mathematics and more. It is at the core of most things we are interested in.

Beard’s history, for example. Economics is a language Economics is a system of logic Economics is a method of prediction and forecasting

Great Conceptions of Economics

1. Decision Optimization. Who optimizes?ConsumersFirmsGovernments and NGOs

2. Markets 3. Organizations (the “New Institutional

Economics”)

Consider God’s Gifts as Consider God’s Gifts as ResourcesResources

o Human lifeHuman life

o time for labor time for labor and service,and service,

o scriptures,scriptures,

o templestemples

o Homes, cars, Homes, cars,

o machines and tools,machines and tools,

o human capital, land, human capital, land,

o technologies,technologies,

o productive productive capacitiescapacities

Spiritual Temporal

The Lord has said:

“Wherefore, verily I say unto you that all things unto me are spiritual, and not at any time have I given unto you a law which was temporal. …my commandments are spiritual; they are not natural nor temporal.”

D&C 29: 34, 35.

Consider God’s Gifts as Consider God’s Gifts as ResourcesResources

We are stewards, owning nothing. (Psalms 24:1)“The earth is the Lord’s, and the fullness thereof; the world, and they that dwell therein.”

Consider God’s Gifts as Resources

Our responsibility is to take care of (“to allocate”) these resources well, increasing them for the benefit of God’s children and for building the kingdom.

My Philosophy of Education

1. There are revealed principles of the gospel that are true. “Happy are ye if ye do them.”

2. There are foundation principles of theory. These are of particular interest when they are in harmony with divine principles such as agency, human dignity, regard for human life, etc.

3. There are interpretations of theory’s implications. These suggest how the theory should be applied. These interpretations are influenced by the individual’s preferences, educational background, and experiences.

These interpretations may lead to a political orientation American’s call “liberal.” The philosophy here is concern for the little man and the disadvantaged and often implies

well-financed social programs.

Such interpretations may also lead to a political orientation of conservatism. The philosophy here is concern for personal liberty and independence, with limited government.

I am concerned about items 1 and 2. For this course the emphasis will be on item 2. I want you to understand the theory, but I feel it important that you make your own interpretation.

1. Principles 2.Theory 3. Interpretation

Liberalattitudes

Conservativeattitudes

What about controversial issues?Students would generally prefer

that the instructor Present all sides of the issue, and Let you decide.

That’s a good idea and I supportIt, but…

What about controversial issues?There are potential problems with that: I may not know all sides of the issue. All sides may not be relevant for this

course, and Some sides of the issue may merely be

specious arguments. These I will anticipate merely in presenting a case against them.

Your Responsibility

If you feel strongly about an issue, your responsibility is not to steam in silence.

I am delighted to get alternative viewpoints in class, to give equal time to arguments I don’t subscribe to.

That’s why I generally say before changing subjects or moving on with a discussion, “Are there any questions, comments, or concerns?”

Economics and Belief I want you to understand, not to

believe. Science is the best set of

hypotheses available. These should be accepted skeptically until the hypothesis can be disproved (rejected) or until a better hypothesis comes along.

Economics and Belief

We shall try very hard to aid the student in understanding certain economic models. We shall try not at all to convince him of their truth. Indeed it would be counter to our purposes to instill in the student belief in our models. Belief is appropriate to theology. Science requires understanding of the theoretical system that one employs coupled with skepticism as to its validity. We shall attempt to provide the reader with the understanding. We trust that he will provide himself with the skepticism.

Cliff Lloyd, Microeconomic Analysis

Economics and Abstraction Some students have an

aversion to abstract thinking, failing to see “how this will help me on my job.”

90% of what you now learn that would help you in employment will be obsolete five years from now.

Economics and Abstraction

Why then, do you suppose corporations don’t simply hire people out of high school and give them OJT?

Economics and Abstraction Because learning to think analytically will help

you on your job and in all that you do. Abstraction is the difference between education and vocational or other kinds of training. If you are unable to thank abstractly, you are not an educated person.

Economics and Abstraction

Finally, consider the words of the Lord: 78 Teach ye diligently and my grace shall attend you, that

you may be instructed more perfectly in theory, in principle, in doctrine, in the law of the gospel, in all things that pertain unto the kingdom of God, that are expedient for you to understand; 79 Of things both in heaven and in the earth, and under the earth; things which have been, things which are, things which must shortly come to pass; things which are at home, things which are abroad; the wars and the perplexities of the nations, and the judgments which are on the land; and a knowledge also of countries and of kingdoms— (My emphases) D&C 88: 78, 79.