I love economics. I began studying economics when I was 13 and I haven’t stopped yet. Economics really has changed my life and the whole way I see the world. What’s so powerful about discipline is just how much it shapes how you understand everything around you. But perhaps you’re asking, what’s my incentive to learn economics? Well, that’s a great question.
You’ve already hit on a key economic insight, incentives. For example, why is the service at a local restaurant typically so much better than at the cable company? – Or why do laws which supposedly protect endangered species, sometimes end up with more of those animals being killed? – Or why do big toy companies sometimes advocate for regulations that raise their costs? Incentives are the key.
Another example might help us explain. Way back in 1787, the British government hired sea captains to ship convicted felons to Australia. Conditions on those ships were just awful. On one voyage, more than one-third of the men died and the rest arrived beaten, starved, and sick. The public was outraged, newspapers called for better conditions, the clergy appealed to the captains’ sense of humanity, and the British Parliament passed regulations requiring better treatment of these prisoners. Unfortunately, those attempted solutions simply didn’t work. The death rate remained shockingly high.
So, as a good economist, how would you solve this problem? – Well, there was one economist at the time who came up with a novel solution. It was implemented and it basically worked. Instead of paying the captains for each prisoner who embarked to Australia, the government would pay the captains only for the prisoners who arrived alive.
Overnight, the incentives of the sea captains changed. The survival rate of the prisoners shot up to 99%. As one observer put it, the economy beat sentiment and benevolence. So, what’s your incentive to learn economics? People hear the word economist, and they think about financiers who manage money. And economics does have some lessons for investing in the stock market, but economics is much broader than that.
It’s the study of human action, how people make choices, and how they should make choices under scarcity. Economics will help you with your choices, whether picking a career, parenting a child, or deciding how much education is a truly worthwhile investment. Overall, economics will give you a deeper understanding of the key issues of our time. Economics can be hard. Retraining your brain to look at the world in a different way isn’t always easy. But the reward is a new set of eyes to see the world.